<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1998
REGISTRATION NO. [ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MOLL INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3089 62-1427775
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
1111 NORTHSHORE DRIVE, SUITE N-600
KNOXVILLE, TN 37919-4048
(423) 450-5300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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PHYLLIS C. BEST
CHIEF FINANCIAL OFFICER
MOLL INDUSTRIES, INC.
1111 NORTHSHORE DRIVE, SUITE N-600
KNOXVILLE, TN 37919-4048
(423) 450-5300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
ROBERT M. CHILSTROM, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NY 10022
(212) 735-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration 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 effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) OFFERING PRICE PER NOTE PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
10 1/2% Senior Subordinated
Notes due 2008.............. $130,000,000 100% $130,000,000 $38,350
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. 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 JURISDICTION IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH JURISDICTION.
SUBJECT TO COMPLETION DATED AUGUST 7, 1998
PROSPECTUS
OFFER FOR ALL OUTSTANDING 10 1/2% SENIOR SUBORDINATED NOTES DUE 2008
IN EXCHANGE FOR 10 1/2% SENIOR SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OF
[MOLL INDUSTRIES LOGO]
THE EXCHANGE OFFER WILL EXPIRE AT P.M., NEW YORK CITY TIME ON , 1998,
UNLESS EXTENDED.
Moll Industries, Inc., a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together constitute
the "Exchange Offer"), to exchange an aggregate principal amount of up to
$130,000,000 of its 10 1/2% Senior Subordinated Notes due 2008 (the "New
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a like principal amount of its issued and
outstanding 10 1/2% Senior Subordinated Notes due 2008 (the "Old Notes" and,
together with the New Notes, the "Notes") from the holders thereof. The terms of
the New Notes are identical in all material respects to the Old Notes, except
for certain transfer restrictions and registration rights relating to the Old
Notes and except for certain provisions providing for an increase in the
interest rate on the Old Notes under certain circumstances relating to the
timing of the Exchange Offer, which rights will terminate upon termination of
the Exchange Offer.
On June 26, 1998, the Company issued $130,000,000 aggregate principal amount
of Old Notes pursuant to an offering (the "Offering") which was exempt from the
registration requirements of the Securities Act and applicable state securities
laws.
Interest on the Notes is payable semi-annually on January 1 and July 1 of
each year, commencing January 1, 1999. The Notes will be redeemable at the
option of the Company, in whole or in part, at any time on or after July 1, 2003
in cash at the redemption prices set forth herein, plus accrued and unpaid
interest and Liquidated Damages (as defined), if any, thereon to the date of
redemption. In addition, at any time prior to July 1, 2001, the Company may on
any one or more occasions redeem up to 35% of the aggregate principal amount of
Notes originally issued at a redemption price equal to 110.5% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net cash proceeds of one or more Public
Equity Offerings (as defined); provided that at least 65% of the aggregate
principal amount of Notes originally issued remains outstanding immediately
after the occurrence of any such redemption. See "Description of Notes--Optional
Redemption." In addition, upon the occurrence of a Change of Control (as
defined), each holder of Notes will have the right to require the Company to
repurchase all or any part of such holder's Notes at an offer price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase. See
"Description of Notes--Repurchase at the Option of Holders--Change of Control."
There can be no assurance that, in the event of a Change of Control, the Company
would have sufficient funds to purchase all Notes tendered. See "Risk
Factors--Limitations on Ability to Make Change of Control Payment."
The Old Notes are, and the New Notes will be, general unsecured obligations
of the Company, and the Old Notes rank, and the New Notes will rank, subordinate
in right of payment to all Senior Debt (as defined) and the Old Notes rank, and
the New Notes will rank, senior or pari passu in right of payment to all
existing and future subordinated indebtedness of the Company. The Old Notes are,
and the New Notes will be, effectively subordinated to all liabilities,
including trade payables, of the Company's subsidiaries. As of March 31, 1998,
on a pro forma basis after giving effect to the Transactions, the Notes would
have been subordinated to $122.4 million of Senior Debt and effectively
subordinated to $31.8 million of liabilities of the Company's subsidiaries
(other than Senior Debt). Subject to certain conditions, approximately $48.8
million of capacity is available for borrowing under the Revolving Credit
Facility (as defined).
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from June 26, 1998. Accordingly, if the relevant record date for
interest payment occurs after the consummation of the Exchange Offer, registered
holders of New Notes on such record date will receive interest accruing from the
most recent date to which interest has been paid or, if no interest has been
paid, from June 26, 1998. If, however, the relevant record date for interest
payment occurs prior to the consummation of the Exchange Offer, registered
holders of Old Notes on such record date will receive interest accruing from the
most recent date to which interest has been paid or, if no interest has been
paid, from June 26, 1998. Old Notes accepted for exchange will cease to accrue
interest from and after the date of the consummation of the Exchange Offer,
except as set forth in the immediately preceding sentence. Holders of Old Notes
whose Old Notes are accepted for exchange will not receive any payment in
respect of interest on such Old Notes otherwise payable on any interest payment
date the record date for which occurs on or after consummation of the Exchange
Offer.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
June 26, 1998 among the Company and the other signatories thereto (the
"Registration Rights Agreement"). Based on interpretations by the staff of the
Securities and Exchange Commission (the "Commission") as set forth in no-action
letters issued to third parties, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by holders thereof (other than any such
holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and such
holder has no arrangement with any person to participate in the distribution of
such New Notes. However, the Company does not intend to request the Commission
to consider, and the Commission has not considered, the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder (including, without
limitation, any Holder that is a broker-dealer) must acknowledge that (A) it is
not an Affiliate (as defined in Rule 144 of the Securities Act), (B) it is not
engaged in, and does not intend to engage in, a distribution of New Notes and
has no arrangement or understanding to participate in a distribution of New
Notes, and (C) it is acquiring the New Notes in its ordinary course of business.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The Company
has agreed that, during the Prospectus Delivery Period (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. In the event the Company terminates the Exchange Offer and does
not accept for exchange any Old Notes, the Company will promptly return the Old
Notes to the holders thereof. See "The Exchange Offer."
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes, or the
ability of holders of the New Notes to sell their New Notes or the price at
which such holders may be able to sell their New Notes. Donaldson, Lufkin, &
Jenrette Securities Corporation and NationsBanc Montgomery Securities LLC
(together, the "Initial Purchasers") have advised the Company that they
currently intend to make a market in the New Notes. The Initial Purchasers are
not obligated to do so, however, and any market-making with respect to the New
Notes may be discontinued at any time without notice. The Company does not
intend to apply for listing or quotation of the New Notes on any securities
exchange or stock market.
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SEE "RISK FACTORS" COMMENCING ON PAGE 11 OF THIS PROSPECTUS FOR A
DESCRIPTION OF CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD
NOTES IN THE EXCHANGE OFFER.
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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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The date of this Prospectus is , 1998.
<PAGE> 3
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute "forward-looking statements"
as that term is defined under the Private Securities Litigation Reform Act of
1995. When used in this Prospectus, the words, "believe", "anticipate,"
"should," "intend," "plan," "will," "expects," "estimates," "projects,"
"positioned," "strategy," and similar expressions identify such forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from those contemplated or projected, forecast, estimated or budgeted in or
expressed or implied by such forward-looking statements. Such factors include,
among others, the risk and other factors set forth under "Risk Factors" as well
as the following: general economic and business conditions, industry trends, the
loss of major customers or suppliers, the timing of orders received from
customers, cost and availability of raw materials, changes in business strategy
or development plans, availability and quality of management, and availability,
terms and deployment of capital.
AVAILABLE INFORMATION
Anchor Holdings, Inc., the direct parent of the Company ("Anchor
Holdings"), and the Company, are currently subject to the periodic reporting and
other informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith file periodic reports
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information can be inspected and copied at
the Public Reference Room maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices at 7 World Trade Center, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of
the Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. The Commission maintains a Web site (http://www.sec.gov) that
contains reports and information statements and other information regarding
registrants, such as Anchor Holdings and the Company, that file electronically
with the Commission.
The Company has agreed that, whether or not it is required to do so by the
rules and regulations of the Commission, for so long as any of the Notes remain
outstanding, it will furnish to the holders of the Notes and file with the
Commission (unless the Commission will not accept such a filing) (i) all
quarterly and annual financial information that would be required to be
contained in such a filing with the Commission on Forms 10-Q and 10-K if the
Company was required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's certified
independent public accountants and (ii) all reports that would be required to be
filed with the Commission on Form 8-K if the Company was required to file such
reports. In addition, for so long as any of the Notes remain outstanding, the
Company has agreed to make available to any prospective purchaser of the Notes
or beneficial owner of the Notes in connection with any sale thereof, the
information required by Rule 144A(d)(4) under the Securities Act. This
Prospectus constitutes a part of a Registration Statement on Form S-4 filed by
the Company with the Commission under the Securities Act. This Prospectus omits
certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the New
Notes offered hereby. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and, in each instance, reference
is made to such copy filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference. The Registration Statement and the exhibits thereto
may be inspected without charge at the office of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies thereof may be
obtained from the Commission at prescribed rates.
----------------------------------------
UNTIL 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) DEALERS
AFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN THE
EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS OBLIGATION 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.
i
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless the
context otherwise indicates, the term (i) "Company" refers to Moll Industries,
Inc., the surviving entity of the merger (the "Merger") of Anchor and Moll (each
as defined below), and its direct and indirect subsidiaries, and to the business
formerly conducted by each of Anchor and Moll, (ii) "Anchor" refers to Anchor
Advanced Products, Inc., and its direct and indirect subsidiaries, prior to the
Merger, (iii) "Moll" refers to Moll PlastiCrafters Limited Partnership, and its
direct and indirect subsidiaries, prior to the Merger, (iv) "Anchor Holdings"
refers to Anchor Holdings, Inc., the direct parent of the Company, (v)
"Holdings" refers to AMM Holdings, Inc., the indirect parent of the Company and
the direct parent of Anchor Holdings, and (vi) "Gemini Plastic" refers to Gemini
Plastic Services, Inc. The Company's fiscal year ends on December 31 of each
year. Unless otherwise indicated, all references to pro forma information give
effect to the Transactions. See "The Transactions." Certain market data used in
this Prospectus reflect management estimates; while such estimates are believed
by the Company to be reliable, no assurance can be given that such data is
accurate in all material respects.
THE COMPANY
OVERVIEW
The Company is a leading full service manufacturer and designer of custom
molded and assembled plastic components for a broad variety of customers and end
markets throughout North America and Europe. The Company serves over 450
customers, including leading multinational companies such as Abbott
Laboratories, Colgate-Palmolive, Kimberly-Clark, L'Oreal, Maybelline, Motorola,
Procter & Gamble, Renault, Revlon, Siemens, Whirlpool and Xerox. Products using
the Company's plastic components are sold in a wide range of end markets,
including end markets for consumer products, telecommunications/business
equipment, household appliances, automobiles and medical devices. The Company
believes that the diversity of its customers, markets and geographic regions
creates a stable revenue base and reduces the Company's exposure to particular
market or regional economic cycles. On a pro forma basis after giving effect to
the Transactions, the Company generated 1997 net sales and EBITDA of $414.6
million and $54.8 million, respectively, making it the sixth largest
non-automotive plastic injection molding company in North America and one of the
largest plastic component suppliers in Europe.
The Company has 27 manufacturing facilities, with approximately 680 molding
machines throughout North America and Europe, including France, Germany, the
United Kingdom and Portugal. The Company is capable of providing its customers
with integrated design and prototype development, mold design and manufacturing,
advanced plastic injection molding capabilities, and value-added finishing
services, such as hot stamping, pad printing, assembly and complete product
testing, all of which enable it to provide "one-stop" shopping to customers
seeking a wide range of services. The Company's technologically advanced
manufacturing facilities and equipment enable it to provide customized solutions
to highly demanding customer specifications. For 1997, approximately 45% of the
Company's sales of molded products were covered by long term purchase and sale
contracts which stipulate anticipated volume requirements and pricing terms.
Management believes that few competitors offer the scale, expertise, reputation
and range of services that the Company provides.
According to industry sources, demand for injection molded plastics in the
United States is projected to grow at 3.3% annually. Such growth is expected to
result from a number of key factors, including: (i) improved resins and
processing capabilities; (ii) versatility of the injection molding process; and
(iii) cost and performance advantages of plastic over substitute materials.
Despite the expected increase in demand for plastic injection molded products,
the U.S. molding industry remains highly fragmented, with over 2,500 injection
molders operating more than 10,000 plant locations. In addition to the growth
projected for the plastics industry as a whole, growth for full service,
multiple plant injection molders such as the Company is driven by industry
consolidation and the trend among customers to outsource their injection molding
needs.
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Management believes that larger injection molders such as the Company will
benefit from continued industry consolidation and the trend by original
equipment manufacturers ("OEMs") to outsource their injection molding needs to
larger, full-service independent molders that are able to provide total project
management.
Concurrently with the Offering, the Company was formed through the merger
of two leading plastic injection molders, Moll PlastiCrafters Limited
Partnership and Anchor Advanced Products, Inc., which were each controlled by
Mr. George Votis. Immediately prior to the Merger, Moll and Anchor were
independently operated entities. Mr. Votis acquired Moll's predecessor in 1989
and has since completed seven acquisitions, increasing Moll's revenues from
approximately $8 million in 1989 to approximately $232.4 million in 1997 on a
pro forma basis, excluding the acquisition of Anchor. Such acquisitions included
the acquisition in August 1997 of Hanning, a leading supplier of injection
molded plastic components for use in digital photocopiers with manufacturing
facilities located in the United States, the United Kingdom and Germany, which
had 1997 revenues of $49.6 million, and the acquisition in January 1998 of
Somomeca, a French injection molder which had 1997 revenues of $88.5 million. In
March 1998, Mr. Votis acquired Anchor, which had 1997 revenues of $161.2
million. See "The Company."
The Company has been formed to combine the manufacturing, marketing and
management resources of Moll and Anchor to create further opportunities for
growth and development. As a result of the Transactions, management believes
that the Company has become better positioned to benefit from the growth and
consolidation of the plastics industry. The Company also believes that
consummation of the Transactions has significantly enhanced its future growth
prospects and revenue stability by broadening its customer base, manufacturing
capabilities and geographic presence. Moreover, the Company expects to benefit
from its increased scale, ability to centralize certain key logistical functions
and attendant cost savings opportunities. Since March 1998, the Company has
eliminated approximately $2.8 million in annualized costs by reducing
duplicative administrative expenses, eliminating less profitable business lines
and streamlining manufacturing processes.
MARKETS
The Company serves the following end markets:
CONSUMER PRODUCTS--The Company designs, manufactures and packages a broad
array of plastic components used for consumer end-products such as mascara
packages and lipstick containers for leading cosmetics manufacturers such as
L'Oreal, Maybelline, Revlon and Estee Lauder, and toothbrushes for
Colgate-Palmolive, Procter & Gamble, Cheseborough-Ponds and SmithKline Beecham.
The Company derived 27.6% of 1997 pro forma net sales from this end market.
TELECOMMUNICATIONS/BUSINESS EQUIPMENT--The Company is a leading
manufacturer of various plastic components and accessories for cellular phones,
photocopiers, computers and printers for telecommunications and business
equipment manufacturers such as Siemens, Motorola, 3M and Xerox. The Company
derived 18.9% of 1997 pro forma net sales from this end market.
HOUSEHOLD APPLIANCES--The Company designs and manufactures plastic parts
for a wide variety of household appliances, including refrigerators (primarily
high end side-by-side refrigerators), ranges, room air conditioners, counter-top
appliances and televisions made by Whirlpool, Tefal, Electrolux and Daewoo. The
Company derived 17.6% of 1997 pro forma net sales from this end market.
AUTOMOTIVE--The Company designs and manufactures plastic parts such as door
handles, gear shift knobs, sunvisors and wheel covers for automobiles and light
trucks manufactured by major foreign and domestic automobile manufacturers,
including General Motors, Renault, BMW, Audi and Saab. The Company derived 12.3%
of 1997 pro forma net sales from this end market.
MEDICAL DEVICES--The Company manufactures various plastic medical devices,
including blood filtration devices, angiographic syringes, intravenous equipment
and in-vitro diagnostic kits for major medical product manufacturers, including
Abbott Laboratories, Johnson & Johnson, Baxter, Pfizer and 3M. The Company
derived 8.1% of 1997 pro forma net sales from this end market.
2
<PAGE> 6
PACKAGING AND OTHER--The Company manufactures and assembles a broad range
of plastic components and end-products such as soap dispensing equipment and
packaging materials and closures for a number of large manufacturers, including
Kimberly-Clark, Electrolux, Seaquist and Tetrapak. The Company derived 15.5% of
1997 pro forma net sales from this end market.
COMPETITIVE STRENGTHS
Management believes that the Company has achieved its current position as a
market leader because of the following competitive strengths:
BROAD GEOGRAPHIC PRESENCE. The Company's multiple plant locations
throughout North America and Europe enable it to (i) compete effectively for
contracts that require large volume runs and multiple distribution points, (ii)
offer its customers multiple production locations and (iii) allocate production
to the facility best suited for a job in view of its relative capabilities and
proximity to the customer. As a result, the Company is able to provide its
customers with a broad range of manufacturing capabilities, improved
responsiveness, timely delivery, and reduced freight costs. In addition, by
operating geographically diverse plants, the Company can mitigate customer
sourcing risks associated with single facility production.
FULL SERVICE CAPABILITIES. The Company provides its customers with
comprehensive services ranging from product design, product development,
prototyping and mold making to molding, painting and other value-added services.
As a result, management believes that the Company is one of a limited number of
full service plastic injection molders in North America and Europe that is well
positioned to benefit from the trend of customers outsourcing total project
management to full service multiple plant suppliers.
STRONG CUSTOMER RELATIONSHIPS. The Company believes that its ability to
attract and retain customers is in part attributable to the high level of
customer service it provides. The Company also believes that frequent
interaction with its customers in the product development process helps it to
develop long-term relationships. Of the Company's top ten customers in 1997, two
have been with the Company for over fifty years, three have been with the
Company for over ten years and the remainder have been with the Company for over
four years. For many of its key customers, the Company is the sole supplier for
specific parts. The Company's emphasis on customer partnerships and its
long-standing customer relationships provide it with a significant competitive
advantage.
MANUFACTURING CAPABILITIES. The Company utilizes a wide range of advanced
manufacturing processes, such as gas assist molding, co-injection and two-shot
molding, automated assembly and testing, in-mold decorating, thin-wall molding
and in-mold bristling. The Company's manufacturing capabilities enable it to
provide innovative solutions and supply components in an integrated process. For
example, the Company worked closely with Renault to produce dashboard grilles
using a newly developed co-injection molding technology.
SUPERIOR PRODUCT QUALITY. The Company uses quality systems and operations
management techniques to meet the highest standards and to reduce costs. The
Company continually invests in technology and training to monitor and improve
quality. Included among such investments are effective management systems to
ensure real-time information and control, statistical process control systems,
failure mode and effect analysis systems, microprocessor-controlled molding
machines and automated assembly equipment. In addition, the Company has material
and product testing equipment that monitor product reliability to meet exacting
quality standards.
BUSINESS STRATEGY
The Company seeks to further strengthen its leadership position in the
plastic molding industry and to maximize its financial performance by employing
the following strategies:
CAPITALIZE ON CROSS-SELLING OPPORTUNITIES. The Company believes that the
Merger creates new opportunities to cross-sell products and services between
each of Anchor's and Moll's customer bases. For example, while Anchor's
operations prior to the Merger were confined to North America, many of its
customers are multinational firms with significant European operations.
Management believes that offering
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such customers access to the Company's European operations, operated by Moll
prior to the Merger, is a significant growth opportunity. The Company has hired
a new Senior Vice President, Marketing to target and capitalize on such
opportunities.
CENTRALIZE SALES AND MARKETING. The Company plans to centralize management
of its sales and marketing efforts to improve communication with customers,
better cross-sell services to customers and ensure uniform pricing and sales
strategies. While local sales and management staff will maintain direct
relationships with customers and production facilities, a centralized sales and
marketing effort will enable the Company to serve national and international
accounts more effectively and to pursue customers located outside an individual
plant's geographic service area. The Company's centralized sales and marketing
group will be responsible for identifying market trends and assisting customers
with new product ideas as well as promoting the Company through customer
presentations, advertising and trade shows.
EXPAND GLOBALLY. The Company believes that it is one of the largest North
American plastic injection molders with a significant European presence. Such
capabilities allow the Company to (i) penetrate new geographic regions with its
existing multinational customers, such as L'Oreal, Siemens, Whirlpool and Xerox,
and (ii) acquire complementary manufacturing facilities in strategic locations.
Continuing to pursue this strategy will enable the Company to effectively
provide a complete and integrated range of molding, manufacturing and
value-added services on a global basis.
REDUCE COSTS. The Company continually aims to improve its cost
effectiveness by increasing productivity and implementing operational
improvements. Since March 1998, the Company has eliminated approximately $2.8
million in annualized costs by reducing duplicative administrative expenses,
eliminating less profitable business lines and streamlining manufacturing
processes. Management believes that the combination of Anchor, Moll and Gemini
Plastic will result in additional opportunities to reduce costs by: (i) reducing
overhead expenses through optimization of labor and equipment resources at each
of the Company's facilities; (ii) divesting or discontinuing less profitable
business lines; (iii) eliminating redundant administrative operations and
related personnel; and (iv) where appropriate, moving key management personnel
on-site to the Company's manufacturing plants in order to oversee expansion
and/or execution of cost control measures.
CONTINUE STRATEGIC ACQUISITIONS. Strategic acquisitions have been, and
management believes will continue to be, an important element in the Company's
growth and in its efforts to capitalize on favorable industry trends. The
Company will consider future acquisition opportunities that are attractively
priced and which the Company believes will strengthen its customer base, broaden
its geographic presence, enhance its production capabilities and provide
significant operating synergies. While the Company routinely enters into
discussions with potential acquisition candidates, no such discussions have
progressed beyond the preliminary stages.
THE TRANSACTIONS
Concurrently with the consummation of the Offering, the following
transactions were consummated: (i) the Merger; (ii) the acquisition of Gemini
Plastic; (iii) the distribution of Moll's 69% limited partnership interest in
Reliance Products Limited Partnership, a Delaware limited partnership doing
business in Canada ("Reliance Products"), to certain of Moll's limited partners;
(iv) the entering into the Revolving Credit Facility and (v) the Holdings Notes
Offering (as defined). The Company consummated the acquisition of Gemini Plastic
on June 30, 1998. See "The Transactions."
------------------------------------------
The Company's principal executives offices are located at 1111 Northshore
Drive, Suite N-600, Knoxville, Tennessee 37919-4048, and its telephone number is
(423) 450-5300.
4
<PAGE> 8
THE EXCHANGE OFFER
SECURITIES OFFERED............ Up to $130,000,000 principal amount of 10 1/2%
Senior Subordinated Notes Due 2008, which have
been registered under the Securities Act. The
terms of the New Notes and the Old Notes are
identical in all material respects, except for
certain transfer restrictions and registration
rights relating to the Old Notes and except for
certain interest provisions relating to the Old
Notes described below under "--Summary
Description of the New Notes."
THE EXCHANGE OFFER............ The New Notes are being offered in exchange for
a like principal amount of Old Notes. The
issuance of the New Notes is intended to
satisfy obligations of the Company contained in
the Registration Rights Agreement. For
procedures for tendering, see "The Exchange
Offer".
TENDERS, EXPIRATION DATE;
WITHDRAWAL.................. The Exchange Offer will expire at [--] p.m.,
New York City time, on , 1998 or
such later date and time to which it is
extended. The tender of Old Notes pursuant to
the Exchange Offer may be withdrawn at any time
prior to the Expiration Date. Any Old Note not
accepted for exchange for any reason will be
returned without expense to the tendering
Holder thereof as promptly as practicable after
the expiration or termination of the Exchange
Offer.
CERTAIN CONDITIONS TO
EXCHANGE OFFER.............. The Company shall not be required to accept for
exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend
the Exchange Offer if at any time before the
acceptance of the Old Notes for exchange or the
exchange of the New Notes for such Old Notes
certain events have occurred, which, in the
reasonable judgment of the Company, make it
inadvisable to proceed with the Exchange Offer
and/or with such acceptance for exchange or
with such exchange. Such events include (i) any
threatened, instituted or pending action
seeking to restrain or prohibit the Exchange
Offer, (ii) a general suspension of trading in
securities on any national securities exchange
or in the over-the-counter market, (iii) a
general banking moratorium, (iv) the
commencement of a war or armed hostilities
involving the United States and (v) a material
adverse change or development involving a
prospective material adverse change in the
Company's business, properties, assets,
liabilities, financial condition, operations,
results of operations or prospects that may
affect the value of the Old Notes or the New
Notes. In addition, the Company will not accept
for exchange any Old Notes tendered, and no New
Notes will be issued in exchange for any such
Old Notes, at any such time as any stop order
shall be threatened or in effect with respect
to the Registration Statement of which this
Prospectus constitutes a part or the
qualification of the Indentures under the Trust
Indenture Act of 1939. See "The Exchange
Offer -- Certain Conditions to the Exchange
Offer."
5
<PAGE> 9
FEDERAL INCOME TAX
CONSEQUENCES................ The exchange pursuant to the Exchange Offer
should not result in any income, gain or loss
to the holders or the Company for federal
income tax purposes. See "Certain Federal
Income Tax Considerations."
USE OF PROCEEDS............... There will be no proceeds to the Company from
the Exchange Offer.
EXCHANGE AGENT................ State Street Bank and Trust Company is serving
as Exchange Agent in connection with the
Exchange Offer.
SHELF REGISTRATION
STATEMENT..................... Under certain circumstances, certain holders of
Notes (including holders who are not permitted
to participate in the Exchange Offer or who may
not freely resell New Notes received in the
Exchange Offer) may require the Company to file
and cause to become effective, a shelf
registration statement under the Securities
Act, which would cover resales of Notes by such
holders. See "Description of the Notes,
Registration Rights; Liquidated Damages."
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register Old Notes under the Securities Act. See "Description of the
Notes--Registration Rights; Liquidated Damages." Based on interpretations by the
staff of the Commission, as set forth in no-action letters issued to third
parties, the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such New
Notes. However, the Company does not intend to request the Commission to
consider, and the Commission has not considered, the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder (including, without
limitation, any Holder that is a broker-dealer) must acknowledge that (A) it is
not an Affiliate (as defined in Rule 144 of the Securities Act), (B) it is not
engaged in, and does not intend to engage in, a distribution of New Notes and
has no arrangement or understanding to participate in a distribution of New
Notes, and (C) it is acquiring the New Notes in its ordinary course of business.
As a condition to its participation in the Exchange Offer each Holder using the
Exchange Offer to participate in a distribution of the New Notes shall
acknowledge and agree that, if the resales are of New Notes obtained by such
Holder in exchange for Old Notes acquired directly from the Company or an
Affiliate thereof, it (i) could not rely on the applicable interpretations of
the staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction and that such a secondary resale transaction must
be covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K under the Securities Act. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will
6
<PAGE> 10
deliver a prospectus in connection with any resale of such New Notes. See "Plan
of Distribution." In addition, to comply with state securities laws, the New
Notes may not be offered or sold in any state unless they have been registered
or qualified for sale in such state or an exemption from registration or
qualification is available and is complied with. The Company currently does not
intend to register or qualify the sale of the New Notes in any state where an
exemption from registration or qualification is required and not available.
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and except for certain provisions providing for an
increase in the interest rates on the Old Notes under certain circumstances
relating to timing of the Exchange Offer, which rights will terminate upon
consummation of the Exchange Offer. The New Notes will bear interest from the
most recent date to which interest has been paid on the Old Notes or, if no
interest has been paid on the Old Notes, from June 26, 1998. Accordingly, if the
relevant record date for interest payment occurs after the consummation of the
Exchange Offer registered holders of New Notes on such record date will receive
interest accruing from the most recent date to which interest has been paid or,
if no interest has been paid, from June 26, 1998. If, however, the relevant
record date for interest payment occurs prior to the consummation of the
Exchange Offer, registered holders of Old Notes on such record date will receive
interest accruing from the most recent date to which interest has been paid or,
if no interest has been paid, from June 26, 1998. Old Notes accepted for
exchange will cease to accrue interest from and after the date of consummation
of the Exchange Offer, except as set forth in the immediately preceding
sentence. Holders of Old Notes whose Old Notes are accepted for exchange will
not receive any payment in respect of interest on such Old Notes otherwise
payable on any interest payment date the record date for which occurs on or
after consummation of the Exchange Offer.
SECURITIES OFFERED............ Up to $130.0 million in aggregate principal
amount of 10 1/2% Senior Subordinated Notes due
2008, which have been registered under the
Securities Act.
MATURITY DATE................. July 1, 2008
INTEREST RATE................. The Notes will bear interest at the rate of
10 1/2% per annum, payable semi-annually in
arrears on January 1 and July 1 of each year,
commencing January 1, 1999.
SUBORDINATION................. The Old Notes are, and the New Notes will be,
general unsecured obligations of the Company,
and the Old Notes rank, and the New Notes will
rank, subordinate in right of payment to all
Senior Debt and the Old Notes rank, and the New
Notes will rank, senior or pari passu in right
of payment to all existing and future
subordinated indebtedness of the Company. The
Old Notes are, and the New Notes will be,
effectively subordinated to all liabilities,
including trade payables, of the Company's
subsidiaries. As of March 31, 1998, on a pro
forma basis after giving effect to the
Transactions, the Notes would have been
subordinated to $122.4 million of Senior Debt
and effectively subordinated to $31.8 million
of liabilities of the Company's subsidiaries
(other than Senior Debt). Subject to certain
conditions, approximately $48.8 million of
capacity is available for borrowing under the
Revolving Credit Facility.
OPTIONAL REDEMPTION........... The Notes will be redeemable at the option of
the Company, in whole or in part, at any time
on or after July 1, 2003 in cash at the
redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated
Damages, if any, thereon to the redemption
date. In addition, at any time prior to July 1,
2001, the Company may on any one or more
occasions redeem up to 35% of the aggregate
7
<PAGE> 11
principal amount of Notes originally issued at
a redemption price equal to 110.5% of the
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net
cash proceeds of one or more Public Equity
Offerings (as defined); provided that at least
65% of the aggregate principal amount of Notes
originally issued remains outstanding
immediately after the occurrence of any such
redemption.
CHANGE OF CONTROL............. Upon the occurrence of a Change of Control,
each holder of Notes will have the right to
require the Company to repurchase all or any
part of such holder's Notes at an offer price
in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase. See
"Description of Notes--Repurchase at the Option
of Holders--Change of Control." There can be no
assurance that, in the event of a Change of
Control, the Company would have sufficient
funds to purchase all Notes tendered. See "Risk
Factors--Limitations on Ability to Make Change
of Control Payment."
CERTAIN COVENANTS............. The Indenture contains certain covenants that
limit, among other things, the ability of the
Company to: (i) pay dividends, redeem capital
stock or make certain other restricted payments
or investments, (ii) incur additional
indebtedness or issue preferred equity
interests, (iii) merge, consolidate or sell all
or substantially all of its assets, (iv) create
liens on assets and (v) enter into certain
transactions with affiliates or related
persons. See "Description of Notes--Certain
Covenants."
USE OF PROCEEDS............... The Company will not receive any proceeds from
the Exchange Offer. The net proceeds from the
sale of the Old Notes were estimated to be
approximately $122.5 million (after deducting
discounts and commissions and estimated
expenses of the Offering) and were used by the
Company to refinance certain indebtedness of
the Company and to consummate the Transactions.
See "Use of Proceeds" and "The Transactions."
EXCHANGE OFFER; REGISTRATION
RIGHTS........................ Holders of New Notes (other than as set forth
below) are not entitled to any registration
rights with respect to the New Notes. Pursuant
to the Registration Rights Agreement, the
Company agreed, for the benefit of the Holders
of Old Notes, to file an Exchange Offer
Registration Statement (as defined). The
Registration Statement of which this Prospectus
is a part constitutes the Exchange Offer
Registration Statement. Under certain
circumstances, certain Holders of Notes
(including Holders who may not participate in
the Exchange Offer or who may not freely resell
New Notes received in the Exchange Offer) may
require the Company to file, and cause to
become effective, a shelf registration
statement under the Securities Act, which would
cover resales of Notes by such Holders. See
"Description of the Notes--Registration Rights;
Liquidated Damage."
RISK FACTORS
PROSPECTIVE HOLDERS OF NEW NOTES SHOULD CONSIDER CAREFULLY ALL OF THE
INFORMATION SET FORTH IN THIS PROSPECTUS AND, IN PARTICULAR, SHOULD EVALUATE THE
SPECIFIC FACTORS SET FORTH UNDER "RISK FACTORS" BEFORE MAKING A DECISION TO
TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
8
<PAGE> 12
SUMMARY UNAUDITED PRO FORMA AND HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth summary pro forma data for the Company, as
well as summary historical financial data of each of Anchor Holdings, Moll and
Somomeca for the periods indicated. The summary historical financial data for
the years ended 1995, 1996 and 1997 for Anchor Holdings and Moll were derived
from the audited consolidated financial statements contained elsewhere in this
Prospectus. The summary historical data for the years ended 1996 and 1997 for
Somomeca were derived from unaudited financial statements prepared by
management. The unaudited summary financial data for the first quarter of 1997
and 1998 were derived from unaudited financial statements contained elsewhere in
this Prospectus. These unaudited financial statements were prepared on the same
basis as the annual financial statements and, in the opinion of management,
reflect all adjustments (consisting of normal recurring adjustments) necessary
for a fair presentation. The unaudited pro forma data were derived from the
unaudited pro forma financial statements contained elsewhere in this Prospectus
and reflect the Transactions as if they had occurred at the beginning of the
period presented. Neither the summary historical consolidated financial data nor
the summary pro forma consolidated financial data are necessarily indicative of
either the future results of operations or the results of operations that would
have occurred if the Transactions had been consummated on any date. The
following table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the historical
consolidated financial statements of each of Anchor Holdings, Moll and Somomeca,
as well as the unaudited pro forma financial statements of the Company,
including accompanying notes thereto, included elsewhere in this Prospectus.
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED FIRST QUARTER
DECEMBER 31, 1997 1998
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales................................................... $414,630 $100,739
Gross profit................................................ 60,048 16,410
Selling, general and administrative expenses................ 29,390 7,716
Operating income............................................ 30,458 8,644
Interest expense, net....................................... 27,006 6,895
Income before taxes and extraordinary items................. 4,321 1,571
Income before extraordinary item............................ 727 524
OTHER DATA:
EBITDA(1)................................................... $ 54,807 $ 13,315
Depreciation and amortization............................... 23,480 4,849
Capital expenditures........................................ 15,559 3,827
Cash interest expense, net(2)............................... 25,932 6,559
Ratio of EBITDA to cash interest expense, net............... 2.1x NA
Ratio of net debt to EBITDA(3).............................. 4.1x NA
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1998
<S> <C>
BALANCE SHEET DATA:
Cash........................................................ $ 25,599
Working capital............................................. 86,519
Total assets................................................ 329,817
Total debt.................................................. 252,359
Stockholders' equity........................................ 194
</TABLE>
9
<PAGE> 13
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FIRST QUARTER
-------------------------------- ------------------
ANCHOR HOLDINGS, INC.(4) 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales....................................... $149,366 $156,858 $161,161 $41,546 $39,303
Gross profit.................................... 24,338 27,637 25,187 6,893 6,608
Selling, general and administrative............. 9,409 11,358 10,979 2,615 3,014
Income from operations.......................... 13,267 14,749 12,510 3,935 3,168
Interest expense, net........................... 8,616 8,124 11,165 2,072 2,967
Income before taxes and extraordinary items..... 3,677 6,217 1,632 1,837 159
Income before extraordinary item................ 2,438 3,626 838 1,058 81
OTHER DATA:
EBITDA(1)....................................... $ 21,742 $ 23,627 $ 22,370 $ 6,238 $ 5,784
Depreciation and amortization................... 9,449 9,286 9,573 2,329 2,658
Capital expenditures............................ 6,932 8,028 8,413 1,973 580
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FIRST QUARTER
MOLL PLASTICRAFTERS LIMITED ------------------------------ ------------------
PARTNERSHIP 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales......................................... $90,876 $89,464 $116,947 $25,632 $60,105
Gross profit...................................... 16,966 16,502 19,861 5,557 9,367
Selling, general and administrative expenses...... 8,301 7,190 10,758 2,462 4,817
Operating income.................................. 9,019 8,574 8,186 3,054 4,168
Interest expense, net............................. 2,414 2,518 3,405 676 2,337
Income before taxes and extraordinary items....... 6,485 6,037 4,645 2,169 1,449
Income before extraordinary item.................. 6,485 6,037 4,563 2,169 1,357
OTHER DATA:
EBITDA(1)......................................... $13,317 $12,703 $ 13,450 $ 4,079 $ 5,925
Depreciation and amortization..................... 4,418 4,148 5,400 1,234 2,139
Capital expenditures.............................. 2,776 1,387 6,562 335 3,204
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
SOMOMECA INDUSTRIES 1996 1997
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales......................................... $89,003 $ 88,502
Gross profit...................................... 12,055 10,559
Income from operations............................ 5,104 5,090
Interest expense, net............................. 2,436 2,391
Income before taxes............................... 2,214 2,474
Net income........................................ 1,006 1,438
OTHER DATA:
EBITDA(1)......................................... $12,218 $ 10,923
Depreciation and amortization..................... 7,568 6,058
Capital expenditures.............................. 9,638 5,097
</TABLE>
- ------------------------------
(1) EBITDA represents income before taxes plus interest expense, net,
depreciation and amortization. While EBITDA should not be construed as a
substitute for operating income, net income or cash flows from operating
activities in analyzing the referenced company's operating performance,
financial position or cash flows, the referenced company has included EBITDA
because it is commonly used by certain investors and analysts to analyze and
compare companies on the basis of operating performance, leverage and
liquidity and to determine a company's ability to service debt.
(2) Cash interest expense, net represents interest expense minus amortization of
debt issuance costs.
(3) Net debt, as used in calculating this ratio, represents total debt at March
31, 1998 of $252,359 minus cash of $25,599. EBITDA, as used in this
calculation, represents EBITDA for the year ended December 31, 1997.
(4) The consolidated financial statements of Anchor Holdings do not differ
significantly from those of Anchor. See Note 16 to the historical
consolidated financial statements of Anchor Holdings.
10
<PAGE> 14
RISK FACTORS
Prospective holders of New Notes should consider carefully all of the
information set forth in this Prospectus and, in particular, should evaluate the
following risks before tendering their Old Notes in the Exchange Offer, although
the risk factors set forth below (other than "--Consequences of Failure to
Exchange") are generally applicable to the Old Notes as well as the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act or under any applicable
state securities laws. See "The Exchange Offer--Consequences of Exchanging or
Failing to Exchange Old Notes."
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
The Company has substantial indebtedness and incurred additional
indebtedness in connection with the Offering. As of March 31, 1998, on a pro
forma basis after giving effect to the Transactions, the Company's total
indebtedness would have been $252.4 million, and the Company would have had,
subject to certain conditions, an additional $48.8 million of capacity available
for borrowing under the Revolving Credit Facility. For 1997, on a pro forma
basis, the Company's ratio of earnings to fixed charges would have been 1.2 to
1.
The degree to which the Company is leveraged could have important
consequences for the Company, including the following: (i) the ability of the
Company to obtain additional financing for working capital, capital
expenditures, acquisitions, debt service requirements or other purposes may be
impaired; (ii) a substantial portion of the Company's cash flow from operations
will be required to pay the Company's interest expense and principal repayment
obligations and will not be available for its general corporate needs; (iii) the
substantial indebtedness incurred by the Company coupled with the restrictive
covenants to which the Company is subject may reduce the Company's flexibility
to adjust to changing market conditions, and its ability to compete against its
less highly leveraged competitors; (iv) the Company may be more vulnerable in
the event of a downturn in its business; and (v) to the extent that the Company
incurs borrowings under the Revolving Credit Facility at variable rates, it will
be vulnerable to increases in interest rates.
The Company's ability to pay interest on the Notes, and its obligation
under the Revolving Credit Facility, will depend on its future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, many of which are beyond its control.
Although the Company believes it will be able to pay its obligations as they
come due, there can be no assurance that it will generate earnings in any future
period sufficient to cover its debt service requirements. However, all or a
portion of the principal payment at maturity of the Notes may require
refinancing. Each of the Revolving Credit Facility and the Indenture contains
covenants that restrict the Company's ability to take certain of the foregoing
actions, including selling assets and using the proceeds therefrom. There can be
no assurance as to the timing of such actions, the ability of the Company to
consummate such actions under its existing financing agreements or the proceeds
that the Company could realize therefrom, and there can be no assurance that any
such transactions would be feasible at the time or that such proceeds would be
adequate to meet the obligations then due. Furthermore, a failure to comply with
the obligations contained in the Revolving Credit Facility or any agreements
with respect to any future indebtedness could result in an event of default
under such agreements and the acceleration of the related debt. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," "Description of Certain
Indebtedness" and "Description of Notes."
11
<PAGE> 15
SUBORDINATION
The Old Notes are, and the New Notes will be, general unsecured obligations
of the Company, and the Old Notes rank, and the New Notes will rank, subordinate
in right of payment to all Senior Debt and the Old Notes rank, and the New Notes
will rank, senior or pari passu in right of payment to all existing and future
subordinated indebtedness of the Company. As of March 31, 1998, on a pro forma
basis after giving effect to the Transactions, the Company would have had
outstanding $122.4 million of Senior Debt. In the event of a bankruptcy,
liquidation, reorganization or other winding up of the Company, the assets of
the Company will be available to pay obligations on the Notes only after all
Senior Debt of the Company has been paid in full, and, as a result, there may
not be sufficient assets remaining to pay amounts due on the Notes. In the event
of a payment default with respect to any Senior Debt of the Company, no payments
may be made on account of principal, premium, if any, or interest on the Notes
until such default has been cured or waived, except holders of Notes may receive
Permitted Junior Securities (as defined). In addition, under certain
circumstances, no payments may be made for a specified period with respect to
principal, premium, if any, or interest on the Notes if certain non-payment
defaults exist with respect to certain Senior Debt of the Company, except
holders of Notes may receive Permitted Junior Securities. See "Description of
Notes--Subordination." In addition, the Company operates certain of its
businesses through its subsidiaries, particularly in Europe. Accordingly, the
Old Notes are, and the New Notes will be, effectively subordinated to all
liabilities of the Company's subsidiaries, including trade payables. At March
31, 1998, on a pro forma basis after giving effect to the Transactions, the
subsidiaries of the Company had $31.8 million of liabilities (other than Senior
Debt).
UNSECURED STATUS OF THE NOTES; ABSENCE OF GUARANTEES
The Old Notes are, and the New Notes will be, unsecured obligations of the
Company. The Indenture permits the Company to incur certain secured
indebtedness, including indebtedness under the Revolving Credit Facility, which
is secured by a lien on substantially all the assets of the Company. The holders
of any secured indebtedness will have a claim prior to the holders of the Notes
with respect to any assets pledged by the Company as security for such
indebtedness. Upon an event of default under the Revolving Credit Facility, the
lenders thereunder would be entitled to foreclose on the assets of the Company.
In such event, the assets of the Company remaining after repayment of such
secured indebtedness may be insufficient to satisfy the obligations of the
Company with respect to the Notes. Additionally, the Company's obligations under
the Senior Notes are guaranteed by Anchor Holdings and certain Restricted
Subsidiaries (as defined in the Senior Notes Indenture (defined below)) of the
Company while the Company's obligations under the Notes and the Revolving Credit
Facility are not guaranteed by Anchor Holdings and such subsidiaries. See
"Description of Certain Indebtedness--Revolving Credit Facility."
RELIANCE ON MAJOR CUSTOMERS
Approximately 55% of the Company's pro forma net sales in 1997 were derived
from its ten largest customers. Additionally, approximately 10.7% and 10.3% of
the Company's pro forma net sales in 1997 were derived from L'Oreal and
Whirlpool, respectively. The Company expects that it will continue to be
dependent upon a limited number of customers for a significant portion of its
net sales for future periods. Although the Company has ongoing supply
relationships with its principal customers, there can be no assurance that sales
to such customers will continue at the same level. As a result of this customer
concentration, the Company's businesses, operating results and financial
condition could be materially adversely affected by (i) the failure of
anticipated orders to materialize, (ii) deferrals or cancellations of orders or
(iii) increases by its largest customers of their in-house production of the
Company's products or selecting other manufacturers from whom to buy products.
There can be no assurance that in future periods the revenues from these
customers will be maintained at historic levels. In addition, certain of the
Company's agreements to produce parts are tied to specific models or product
lines of its customers. Accordingly, the Company's business, and estimates for
future business, are dependent upon consumer demand for the specific models and
product lines that incorporate parts manufactured by the Company. While
management believes that the Company's relationships with its customers are
mutually satisfactory, if any of these customers were to reduce substantially or
discontinue purchases from the Company, or if consumer demand for products
incorporating plastic parts
12
<PAGE> 16
manufactured by the Company were to significantly decrease, the financial
condition and results of operations of the Company would be materially adversely
affected.
COMPETITION
The markets in which the Company operates are highly competitive. The
Company competes with a significant number of companies of varying sizes,
including divisions or subsidiaries of larger companies, on the basis of price,
service, quality and the ability to supply products to customers in a timely
manner. Some of these competitors have, and new competitors may have, greater
financial and other resources than the Company. Additionally, each of Reliance
Products (which is controlled by the principal stockholders of the Company) and
the Company are engaged in the injection molded plastics business. The products
manufactured, and the markets served, by each of Reliance Products and the
Company are different, and Reliance Products and the Company have not competed,
and do not compete, with each other. However, no assurance can be given that
Reliance Products and the Company will not compete for the same business
opportunities in the future, which may present conflicts of interest.
Competitive pressures or other factors, including the vertical integration by
certain of the Company's major customers of manufacturing processes
traditionally outsourced to the Company, could cause the Company to lose market
share or could result in a significant price erosion with respect to the
Company's products, either of which could have a material adverse effect on the
Company's results of operations. Furthermore, the Company's customers operate in
highly competitive markets. To the extent the Company's major customers lose
market share in their respective markets, the Company's results of operations
and financial condition could be materially adversely affected. See
"Business--Competition."
MANAGING INTEGRATION AND GROWTH
The Company's ability to implement its growth strategy depends, in part, on
its success in integrating its acquisitions, into the Company's operations. The
Company has grown significantly over the past 15 months through acquisitions
that represent a substantial increase in the scope of the Company's business.
The pursuit and integration of acquisitions, including the integration of Anchor
and Moll as part of the Transactions, will require substantial attention from
the Company's senior management, which will limit the amount of time these
individuals will have available to devote to the Company's existing operations.
Successful integration of each of their operations will depend primarily on the
Company's ability to manage such operations and to integrate their respective
managements. There can be no assurance that the Company can successfully
integrate such acquisitions into its business or implement its plans without
delay or substantial cost. In addition, future acquisitions by the Company could
result in the incurrence of debt and contingent liabilities which could have a
material adverse effect upon the Company's financial condition and results of
operations. Any failure or any inability to effectively manage and integrate
growth may have a material adverse effect on the Company's financial condition
and results of operations. See "The Company."
RAW MATERIALS
The Company's primary raw materials are various plastic resins, nylon and
packaging materials. Raw material prices are subject to cyclical price
fluctuations, including those arising from supply shortages and as a result of
changes in the prices of natural gas, crude oil and other petrochemical
intermediates from which resin is derived. Accordingly, the Company's financial
performance is directly linked to its ability to pass along increased raw
material costs to its customers. Although the Company has historically been able
to pass on increased costs to its customers, there can be no assurance that it
will be able to do so in the future or that a significant price increase in raw
materials would not have a material adverse effect on the Company's financial
condition and results of operations. Although most of the raw materials used by
the Company are available from several suppliers, several of such raw materials
are currently obtained from single sources. The Company has no reason to believe
that there will not be an ample supply of its raw materials at prices
commercially acceptable to the Company for the reasonably foreseeable future,
but the Company cannot make any prediction as to the future price of such raw
materials. See "Business--Raw Materials."
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<PAGE> 17
INTERNATIONAL OPERATIONS
The Company derived approximately 33% of its 1997 pro forma net sales from
its operations in Europe. The Company's international operations are subject to
risks inherent in international business activities, including, in particular,
compliance with a variety of foreign laws and regulations, unexpected changes in
regulatory requirements, overlap of different tax structures, foreign currency
exchange rate fluctuations and general economic conditions.
The Company prices its products and incurs operating expenses in Europe in
the currency of the country in which the product is manufactured and sold and,
in the United States, in United States dollars. To the extent that costs and
prices are in the currency of the country in which the products are manufactured
and sold, the costs and prices of such products in dollars will vary as the
value of the dollar fluctuates against such currencies. There can be no
assurance that there will not be increases in the value of the dollar against
such currencies that will reduce the dollar return to the Company on the sale of
its products in such countries.
COMMON EUROPEAN CURRENCY
The Treaty on European Economic and Monetary Union provides for the
introduction of a single European currency, the Euro, in substitution for the
national currencies of the member states of the European Union that adopt the
Euro. In May 1998, the European Council determined (i) the 11 member states that
met the requirements for Monetary Union, and (ii) the currency exchange rates
among the currencies of the member states joining the Monetary Union. The
transitory period for the Monetary Union starts on January 1, 1999. According to
Council Resolution of July 7, 1997, the introduction of the Euro will be made in
three steps: (i) a transitory period from January 1, 1999 to December 31, 2001
in which current accounts may be opened and financial statements may be drawn in
Euros, and local currencies and Euros will coexist; (ii) from January 1, 2002 to
June 30, 2002, in which local currencies will be exchanged for Euros; and (iii)
from July 1, 2002 in which local currencies will disappear. Although there can
be no assurance that a single European currency will be adopted or, if adopted,
on what time schedule and with what success, substantial transition costs could
result as the Company redesigns its software systems to reflect the adoption of
the new currency. In addition, no assurance can be given as to the effect of the
adoption of the Euro on the Company's payment obligations under loan agreements
for borrowings in currencies to be replaced by the Euro or on the Company's
commercial agreements in such currencies.
CONCENTRATION OF CONTROL
AMM Holdings, LLC, a Delaware limited liability company ("AMM Holdings,
LLC") owns all the capital stock of Holdings, which owns all the capital stock
of Anchor Holdings, which owns all the Company's outstanding capital stock. Moll
PlastiCrafters, Inc. (Del), a Delaware corporation ("MPI"), owns 75.6% of the
outstanding Capital Units (as defined) and 69.3% of the outstanding Profit Units
(as defined) of AMM Holdings, LLC. George T. Votis owns all the outstanding
capital stock of MPI as well as 4.8% of the outstanding Capital Units and 10.8%
of the outstanding Profit Units of AMM Holdings, LLC. Mr. Votis is the manager
of AMM Holdings, LLC and, pursuant to the Limited Liability Company Agreement,
dated as of June 26, 1998 (the "LLC Agreement") of AMM Holdings, LLC, has
exclusive power to manage the business and affairs of AMM Holdings, LLC.
Therefore, Mr. Votis will be able to indirectly control the business, policies
and affairs of the Company, including the election of directors and managers and
major corporate transactions of the Company. Circumstances may occur in which
the interests of Mr. Votis could be in conflict with the interests of the
holders of the Notes. For example, if the Company encounters financial
difficulties or is unable to pay certain of its debts as they mature, the
interests of Mr. Votis might conflict with those of the holders of the Company's
indebtedness, including the Notes. In addition, Mr. Votis may have an interest
in pursuing acquisitions, divestitures or other transactions that, in its
judgment, could enhance its equity investment, even though such transactions
might involve risks to the holders of the Company's indebtedness, including the
Notes. See "Certain Beneficial Owners."
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<PAGE> 18
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends in large part on the Company's senior
management and its ability to attract and retain other highly qualified
management personnel. The Company faces competition for such personnel from
other companies and other organizations. There can be no assurance that the
Company will be successful in hiring or retaining key personnel. In particular,
the Company believes that it has benefitted substantially from the leadership of
Mr. George T. Votis, the Company's Chairman and Chief Executive Officer. The
loss of the services of Mr. Votis or other key personnel of the Company could
have a material adverse effect on the Company's business and its future
operations. Mr. Votis and Mr. Charles B. Schiele, the Company's President,
devote a portion of their business time to other companies, including Reliance
Products. There can be no assurance that the inability of either Mr. Votis or
Mr. Schiele to devote their full time and resources to the Company will not
adversely affect the Company's business, financial condition and results of
operations. See "Management."
ENVIRONMENTAL MATTERS
Federal, state, local and foreign governments could enact laws or
regulations concerning environmental matters that increase the cost of
producing, or otherwise adversely affect the demand for, plastic products. The
Company is aware that certain local governments have adopted ordinances
prohibiting or restricting the use or disposal of certain plastic products that
are among the types of products produced by the Company. If such prohibitions or
restrictions were widely adopted, such regulatory and environmental measures or
a decline in consumer preference for plastic products due to environmental
considerations could have a material adverse effect upon the Company. In
addition, certain of the Company's operations are subject to Federal, state,
local and foreign environmental laws and regulations that impose limitations on
the discharge of pollutants into the air and water and establish standards for
the treatment, storage and disposal of solid and hazardous wastes. While the
Company has not been required historically to make significant capital
expenditures in order to comply with applicable environmental laws and
regulations, the Company cannot predict with any certainty its future capital
expenditure requirements because of continually changing compliance standards
and environmental technology. The Company does not have insurance coverage for
environmental liabilities and does not anticipate obtaining such coverage in the
future. See "Business--Environmental Matters."
FRAUDULENT CONVEYANCE
The Company believes that the indebtedness represented by the Notes has
been incurred for proper purposes and in good faith, and that, based on present
forecasts, asset valuations and other financial information, after the
consummation of the Transactions, the Company is solvent, has sufficient capital
for carrying on its business and will be able to pay its debts as they mature.
See, however, "--Substantial Leverage; Ability to Service Debt." Notwithstanding
the Company's belief, however, under federal or state fraudulent transfer laws,
if a court of competent jurisdiction in a suit by an unpaid creditor or a
representative of creditors (such as a trustee in bankruptcy or a
debtor-in-possession) were to find that, at the time of the incurrence of such
indebtedness, the Company was insolvent, was rendered insolvent by reason of
such occurrence, was engaged in a business or transaction for which its
remaining assets constituted unreasonably small capital, intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as they
matured, or intended to hinder, delay or defraud its creditors, and that the
indebtedness was incurred for less than reasonably equivalent value, then such
court could, among other things, (a) void all or a portion of the Company's
obligations to the Holders of the Notes, the effect of which would be that the
Holders of the Notes might not be repaid in full and/or (b) subordinate the
Company's obligations to the Holders of the Notes to other existing and future
indebtedness of the Company to a greater extent than would otherwise be the
case, the effect of which would be to entitle such other creditors to which the
Notes were not previously subordinated to be paid in full before any payment
could be made on the Notes.
LIMITATIONS ON THE ABILITY TO MAKE CHANGE OF CONTROL PAYMENT
Pursuant to the Indenture, upon a Change of Control, the Company is
obligated to make an offer to purchase all outstanding Notes at a price equal to
101% of the principal amount of the Notes, plus accrued
15
<PAGE> 19
interest thereon. In addition, any Change of Control under the Indenture would
also constitute a Change of Control under the indenture (the "Senior Notes
Indenture") governing the 11 3/4% Senior Notes due 2004 of Anchor (the "Senior
Notes"). The Revolving Credit Facility prohibits the Company from purchasing any
Notes and also provides that the occurrence of certain Change of Control events
with respect to the Company would constitute a default thereunder. In the event
of a Change of Control, the Company would be required to repay all borrowings
under the Revolving Credit Facility or obtain the consent of its lenders under
the Revolving Credit Facility to make the purchase of the Notes. If the Company
does not obtain such consent or repay such borrowings, the Company will remain
prohibited from purchasing the Notes or the Senior Notes. In such case, the
Company's failure to purchase tendered Notes or Senior Notes, as the case may
be, would constitute a default under the Indenture or the Senior Notes
Indenture, respectively, which, in turn, would constitute a default under the
Revolving Credit Facility. Furthermore, there can be no assurance that the
Company will have the financial ability to purchase the Notes upon the
occurrence of a Change of Control. See "Description of Notes--Change of
Control."
YEAR 2000
Many computer systems experience problems handling dates beyond the year
1999. Therefore, some computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The Company is assessing
both the internal readiness of its computer systems and the compliance of the
computer systems of certain significant customers and vendors for handling the
year 2000. The Company expects to implement successfully the systems and
programming changes necessary to address year 2000 issues, and does not believe
that the cost of such actions will have a material adverse effect on the
Company. There can be no assurance, however, that there will not be a delay in,
or increased costs associated with, the implementation of such changes, and the
Company's inability to implement such changes could have an adverse effect on
the Company. In addition, the failure of certain of the Company's significant
customers and vendors to address the year 2000 issue could have a material
adverse effect on the Company.
LACK OF PUBLIC MARKET FOR THE NOTES
The New Notes are being offered to the holders of the Old Notes. The Old
Notes were issued on June 26, 1998 to a small number of institutional investors
and institutional accredited investors and are eligible for trading in the
Private Offering, Resale and Trading through Automated Linkages (PORTAL) Market,
the National Association of Securities Dealers' screenbased, automated market
for trading of securities eligible for resale under Rule 144A. To the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for the remaining untendered Old Notes could be adversely affected. There
is no existing trading market for the New Notes, and there can be no assurance
regarding the future development of a market for the New Notes, or the ability
of holders of the New Notes to sell their New Notes or the price at which such
holders may be able to sell their New Notes. Although the Initial Purchasers
have informed the Company that they currently intend to make a market in the New
Notes, they are not obligated to do so, and any such market-making may be
discontinued at any time without notice. As a result, the market price of the
New Notes could be adversely affected. The Company does not intend to apply for
listing or quotation of the New Notes on any securities exchange or stock
market.
16
<PAGE> 20
THE COMPANY
OVERVIEW
The Company is a leading full service manufacturer and designer of custom
molded and assembled plastic components for a broad variety of customers and end
markets throughout North America and Europe. The Company's products are sold to
a wide range of end-markets, including end markets for consumer products,
telecommunications/business equipment, household appliances, automobiles and
medical devices. On a pro forma basis after giving effect to the Transactions,
the Company generated 1997 net sales and EBITDA of $414.6 million and $54.8
million, respectively, making it the sixth largest non-automotive plastic
injection molding company in North America and one of the largest plastic
component suppliers in Europe.
HISTORY
Anchor
Anchor began operations in 1941 as a manufacturer of cosmetic brushes for
Maybelline and, in 1958, began producing Pepsodent(R) toothbrushes for Lever
Brothers Company, Inc. Anchor was acquired in 1990 by affiliates of the Thomas
H. Lee Company and management. Since such acquisition, Anchor has pursued a
growth strategy designed to increase sales while diversifying its revenue base.
In the pursuit of this strategy, Anchor acquired Mid-State Plastics, Inc.
("Mid-State") in 1994, which served to expand Anchor's business into the medical
device and computer components markets. In March 1997, Anchor completed a
recapitalization and in connection therewith issued the Senior Notes. In March
1998, Mr. Votis, who controls Moll, acquired Anchor from affiliates of the
Thomas H. Lee Company. Since such time, Anchor has eliminated approximately $2.8
million in annualized costs by reducing duplicative administrative expenses,
eliminating less profitable business lines and streamlining manufacturing
processes.
Moll
In July 1991, certain entities controlled by Mr. Votis and his partners
were merged to form Moll. Since 1991, Moll has grown significantly through
several strategic acquisitions in North America and Europe:
Textek Plastics, Inc. In December 1992, Moll acquired Textek Plastics,
Inc. ("Textek"), a plastic injection molding manufacturer with one facility in
each of San Antonio and Round Rock, Texas. Textek specialized in manufacturing
plastic components and end-products for the telecommunications and business
products markets. Textek had revenues of $14.2 million in 1992.
Advanced Custom Molders. In July 1993, Moll acquired Advanced Custom
Molders ("ACM"), based in Georgetown and El Paso, Texas. The acquisition of ACM
added two additional plants. ACM had revenues of $15.5 million in 1993.
Quality Plastics Company. In October 1994, Moll acquired Quality Plastics
Company, Inc. ("Quality"), based in Newberg, Oregon. The acquisition of Quality
added manufacturing capacity in the Pacific Northwest. Quality had revenues of
$13.3 million in 1994.
Hanning. In August 1997, Moll acquired the Hanning group of companies
("Hanning"), with manufacturing facilities located in the United States, the
United Kingdom and Germany. Hanning is a leading supplier of injection molded
plastic components for use in digital photocopiers. The acquisition of Hanning:
(i) established the Company's geographic presence in Europe; and (ii) broadened
the Company's product offerings to include precision plastic components for the
business equipment and automotive markets. Hanning had revenues of $49.6 million
in 1997.
Somomeca Industries. In January 1998, Moll acquired Somomeca Industries
S.A.R.L. and its subsidiaries ("Somomeca"), a major French supplier of injection
molded plastic components and plastic injection molds. Somomeca has seven
operating facilities in France and one operating facility in Portugal. The
acquisition of Somomeca: (i) expanded the Company's geographic presence in
Europe, (ii) established the Company's mold-making capabilities, and (iii)
expanded the Company's presence in the automotive sector. Somomeca had revenues
of $88.5 million in 1997.
Gemini Plastic. The Company consummated the acquisition of Gemini Plastic
on June 30, 1998. Gemini Plastic had revenues of approximately $21 million in
1997.
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<PAGE> 21
THE TRANSACTIONS
Concurrently with the consummation of the Offering, the following
transactions were consummated: (i) the Merger; (ii) the acquisition of Gemini
Plastic; (iii) the distribution of Moll's 69% limited partnership interest in
Reliance Products, a Delaware limited partnership doing business in Canada, to
certain of Moll's limited partners; (iv) the entering into the Revolving Credit
Facility and (v) the Holdings Notes Offering. All of the foregoing transactions,
including the Offering and the Holdings Notes Offering, are hereinafter
collectively referred to as the "Transactions."
THE MERGER
The Company was formed through the merger of Moll and Anchor. Immediately
before and as a condition precedent to the issuance of the Holdings Notes and
the Notes, and as part of the Merger, the Company succeeded to all the assets of
Moll. Such assets included all of the equity interests in Moll's foreign
subsidiaries, which operate in France, Germany, the United Kingdom and Portugal.
As a result of the Merger, all of the U.S. operating assets of Moll and Anchor
are held by the Company. As the successor corporation in the Merger, the Company
also succeeded to the debt and other obligations of Anchor and Moll, including
the Senior Notes. See the unaudited pro forma consolidated financial statements
of the Company for a discussion of the accounting treatment of the Merger.
[ORGANIZATIONAL CHART]
Note: Certain subsidiaries of Moll Industries, Inc. are held through one or
more intermediate holding companies for certain corporate and tax
considerations. However, such holding companies have not been
reflected on this chart.
ACQUISITION OF GEMINI PLASTIC
The Company consummated the acquisition of Gemini Plastic on June 30, 1998.
Gemini Plastic had revenues of approximately $21 million in 1997.
DISTRIBUTION OF MOLL'S INTEREST IN RELIANCE PRODUCTS
In 1996, Moll acquired Reliance Products, a Delaware limited partnership
doing business in Canada, which manufactures a proprietary line of camping
equipment and bulk storage containers. Immediately prior
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<PAGE> 22
to the Merger, Moll distributed its 69% Class B limited partnership interest in
Reliance Products to certain of Moll's limited partners. Reliance Products had
revenues of $17.4 million in 1997.
REVOLVING CREDIT FACILITY
General. Concurrently with the Offering, the Company amended its then
existing credit facility (as amended, the "Revolving Credit Facility") with
NationsBank, N.A., as Agent and sole lender. The Revolving Credit Facility
provides for revolving loans to the Company in an aggregate amount not to exceed
$50.0 million, with a $10.0 million sublimit for the issuance of standby and
commercial letters of credit. Additionally, Anchor Holdings has guaranteed the
Company's obligations under the Revolving Credit Facility. It is anticipated
that the Revolving Credit Facility will be syndicated.
Availability. Borrowings under the Revolving Credit Facility are subject
to a borrowing base equal to the sum of (a) 85% of "eligible receivables," (b)
50% of "eligible inventory" and (c) the lesser of $5,000,000 and 25% of
"eligible inventory" which is work in progress (as such terms are defined in the
Revolving Credit Facility), valued at the lesser of book value or fair market
value.
Security. The Revolving Credit Facility is secured by (i) a first priority
perfected security interest in (a) 100% of the equity interests in all domestic
subsidiaries of the Company, (b) in the event that any foreign subsidiary of the
Company which is a direct foreign subsidiary of the Company or any of its
domestic subsidiaries shall have 5% or more of consolidated total assets or
consolidated EBITDA, 65% of the equity interests in such foreign subsidiary, and
(c) all of the inventory, trademarks, trademark licenses, accounts receivable,
cash and cash equivalents maintained on deposit with the Agent and books and
records relating to the foregoing, of the Company and its domestic subsidiaries,
which assets shall not be subject to any other lien or encumbrance, except for
liens permitted under the Revolving Credit Facility, and (ii) a negative pledge
(subject to certain carve-outs) upon all other present and future assets and
properties of the Company and all of the domestic and foreign subsidiaries of
the Company (including, without limitation, accounts receivable, inventory, real
property, machinery, equipment, contracts, trademarks, copyrights, patents,
license agreements, and general intangibles).
The foregoing security shall ratably secure the Revolving Credit Facility
and any interest rate swap/foreign currency swap or similar agreements with a
lender (or any affiliate of a lender) under the Revolving Credit Facility.
Maturity. The Revolving Credit Facility will mature on June 30, 2003.
Interest Rate. The Revolving Credit Facility bears interest at a rate
equal to IBOR plus an applicable margin, which initially is 200 basis points or
the Base Rate (defined as the higher of (i) the prime rate of NationsBank N.A.
and (ii) the Federal Funds rate plus 1/2%) plus an applicable margin, which
initially is 100 basis points. The Company may select interest periods of one,
two, three or six months for IBOR loans, subject to availability. A penalty rate
shall apply on all loans in the event of default at a rate per annum of 2% above
the applicable interest rate.
Covenants. The Revolving Credit Facility contains covenants customary for
working capital financings, including, without limitation: (i) maximum leverage
and interest coverage ratios and minimum net worth; (ii) restrictions on capital
expenditures, incurrence of additional indebtedness, dividends and redemptions;
and (iii) restrictions of mergers, acquisitions and sales of assets.
Events of Default. The Revolving Credit Facility contains events of
default customary for working capital financings, including, without limitation:
(i) nonpayment of principal, interest, fees or other amounts, (ii) violation of
covenants, and (iii) inaccuracy of representations and warranties.
HOLDINGS NOTES OFFERING
Concurrently with the Offering, Holdings consummated an offering (the
"Holdings Notes Offering") of approximately $35.3 million aggregate gross
proceeds of its 13 1/2% Senior Discount Notes due 2009 (the "Holdings Notes").
Approximately $2 million of the proceeds of the Holdings Notes Offering were
contributed to the Company.
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<PAGE> 23
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds to the Company from the Offering were approximately $122.5 million. The
Company used the net proceeds of the Offering to (i) refinance approximately
$89.6 million of existing debt of the Company; (ii) finance the acquisition of
Gemini Plastic and (iii) pay certain fees and expenses. The Company consummated
the acquisition of Gemini Plastic on June 30, 1998. See "The Transactions" and
"Plan of Distribution."
<TABLE>
<S> <C>
Sources of Funds:
Notes sold................................................ $130,000,000
============
Uses of Funds:
Refinance Moll's bank debt................................ $ 82,976,000
Refinance Anchor acquisition debt......................... 6,600,000
Acquisition of Gemini Plastic............................. 16,200,000
Estimated fees and expenses............................... 7,550,000
Excess cash............................................... 16,674,000
------------
$130,000,000
============
</TABLE>
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<PAGE> 24
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the actual cash and cash equivalents and
capitalization of Moll and Anchor Holdings at March 31, 1998, and the
capitalization of the Company at such date, as adjusted to give pro forma effect
to the Transactions. See "Use of Proceeds," "The Transactions," and the
unaudited pro forma consolidated financial statements of the Company. This table
should be read in conjunction with the historical consolidated financial
statements of each of Anchor Holdings and Moll, including the notes thereto, and
the unaudited pro forma financial statements of the Company, including the notes
thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1998
---------------------------------------
PRO FORMA
MOLL ANCHOR(1) AS ADJUSTED(2)
<S> <C> <C> <C>
Cash.................................................... $ 7,141 $ 144 $ 25,599
======== ======== ========
Total debt (including current maturities):
Revolving credit facility(3).......................... $ 7,100 $ -- $ --
Somomeca revolving credit facility.................... 16,626 -- --
Term loans............................................ 59,250 -- --
11 3/4% Senior Notes.................................. -- 100,000 100,000
Senior Subordinated Notes............................. -- -- 130,000
Other Somomeca long-term obligations.................. 13,258 -- 13,258
Reliance debt......................................... 6,400 -- --
Mortgage payable...................................... 2,877 -- 2,877
Payables to former owners............................. 1,500 -- 1,500
Other debt............................................ 978 1,765 4,724
-------- -------- --------
Total long-term debt.......................... 107,989 101,765 252,359
-------- -------- --------
Partners' capital/Stockholders' equity (deficit)........ 4,145 (2,758) 194
-------- -------- --------
Total capitalization.......................... $112,134 $ 99,007 $252,553
======== ======== ========
</TABLE>
- ------------------------------
(1) Capitalization of Anchor Holdings is taken from Anchor Holdings' April 4,
1998 unaudited consolidated financial statements.
(2) The pro forma as adjusted amounts do not reflect the effects of the Holdings
Notes Offering, except for the $2.0 million capital contribution from
Holdings.
(3) Subject to certain conditions, approximately $48.8 million of capacity is
available for borrowing under the Revolving Credit Facility. See
"Description of Certain Indebtedness--Revolving Credit Facility."
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<PAGE> 25
SELECTED UNAUDITED PRO FORMA AND HISTORICAL
CONSOLIDATED FINANCIAL DATA
The following table sets forth selected unaudited pro forma data for the
Company, as well as selected historical financial data of Anchor Holdings and
Moll for the periods indicated. The selected historical financial data for the
years ended 1995, 1996 and 1997 were derived from the audited consolidated
financial statements of each of Anchor Holdings and Moll contained elsewhere in
this Prospectus. The selected historical financial data for 1993 and 1994 were
derived from the audited consolidated financial statements of each company not
contained herein. The unaudited selected financial data for the first quarter of
1997 and 1998 were derived from unaudited financial statements contained
elsewhere in this Prospectus. These unaudited financial statements were prepared
on the same basis as the annual financial statements and, in the opinion of
management, reflect all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation. The unaudited pro forma data were derived
from the unaudited pro forma financial statements contained elsewhere in the
Prospectus and reflect the Transactions as if they had occurred at the beginning
of the period presented. Neither the selected historical consolidated financial
data nor the selected pro forma consolidated financial data are necessarily
indicative of either the future results of operations or the results of
operations that would have occurred if the Transactions had been consummated on
any date. The following table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the historical consolidated financial statements of each of Anchor Holdings and
Moll, as well as the unaudited pro forma financial statements of the Company,
including accompanying notes thereto, included elsewhere in this Prospectus.
SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED FIRST QUARTER
DECEMBER 31, 1997 1998
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales................................................... $414,630 $100,739
Gross profit................................................ 60,048 16,410
Selling, general and administrative expenses................ 29,390 7,716
Operating income............................................ 30,458 8,644
Interest expense, net....................................... 27,006 6,895
Income before taxes and extraordinary items................. 4,321 1,571
Income before extraordinary item............................ 727 524
OTHER DATA:
EBITDA(1)................................................... $ 54,807 $ 13,315
Depreciation and amortization............................... 23,480 4,849
Capital expenditures........................................ 15,559 3,827
Cash interest expense, net(2)............................... 25,932 6,559
Ratio of EBITDA to cash interest expense, net............... 2.1x NA
Ratio of net debt to EBITDA(3).............................. 4.1x NA
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1998
<S> <C>
BALANCE SHEET DATA:
Cash........................................................ $ 25,599
Working capital............................................. 86,519
Total assets................................................ 329,817
Total debt.................................................. 252,359
Stockholders' equity........................................ 194
</TABLE>
22
<PAGE> 26
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
ANCHOR HOLDINGS, INC.(4)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FIRST QUARTER
---------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net sales.................. $118,047 $118,267 $149,366 $156,858 $161,161 $41,546 $39,303
Gross profit............... 20,778 18,208 24,338 27,637 25,187 6,893 6,608
Selling, general and
administrative........... 9,096 7,634 9,409 11,358 10,979 2,615 3,014
Amortization............... 577 1,712 1,662 1,530 1,698 343 426
Income from operations..... 11,105 8,862 13,267 14,749 12,510 3,935 3,168
Other (income) expense..... (110) (739) 974 408 (287) 26 42
Interest expense, net...... 5,385 5,984 8,616 8,124 11,165 2,072 2,967
Income before taxes and
extraordinary items...... 5,830 3,617 3,677 6,217 1,632 1,837 159
Provision for income
taxes.................... 1,606 1,507 1,239 2,591 794 779 78
Extraordinary item(5)...... -- 334 -- -- (1,210) -- --
Net income (loss).......... 4,224 1,776 2,438 3,626 (372) 1,058 81
OTHER DATA:
EBITDA(6).................. $ 17,881 $ 18,439 $ 21,742 $ 23,627 $ 22,370 $ 6,238 $ 5,784
Depreciation and
amortization............. 6,666 8,838 9,449 9,286 9,573 2,329 2,658
Capital expenditures....... 6,729 5,724 6,932 8,028 8,413 1,973 580
Ratio of earnings to fixed
charges(7)............... 2.1x 1.6x 1.4x 1.7x 1.1x 1.8x 1.1x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------- AT APRIL 4,
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................... $79,227 $115,065 $116,529 $115,263 $120,839 $116,828
Long-term debt obligations..... 50,444 80,387 78,133 74,468 101,939 101,765
</TABLE>
23
<PAGE> 27
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FIRST QUARTER
---------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net sales.................. $ 56,116 $ 78,066 $ 90,876 $ 89,464 $116,947 $25,632 $60,105
Gross profit............... 9,685 15,218 16,966 16,502 19,861 5,557 9,367
Selling, general and
administrative
expenses................. 5,602 6,804 8,301 7,190 10,758 2,462 4,817
Operating income........... 4,083 8,414 9,019 8,574 8,186 3,054 4,168
Other (income) expense..... -- -- 120 50 (299) (111) 144
Interest expense, net...... 1,613 1,941 2,414 2,518 3,405 676 2,337
Income before taxes and
extraordinary items...... 2,470 6,473 6,485 6,037 4,645 2,169 1,449
Provision for income
taxes.................... -- -- -- -- 83 -- 92
Extraordinary item(5)...... -- -- -- -- -- -- 736
Net income................. 2,470 6,473 6,485 6,037 4,563 2,169 621
OTHER DATA:
EBITDA(6).................. $ 6,537 $ 11,932 $ 13,317 $ 12,703 $ 13,450 $ 4,079 $ 5,925
Depreciation and
amortization............. 2,454 3,518 4,418 4,148 5,400 1,234 2,139
Capital expenditures....... 747 2,766 2,776 1,387 6,562 335 3,204
Ratio of earnings to fixed
charges(7)............... 2.3x 3.8x 3.3x 2.9x 2.1x 3.5x 1.6x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------- AT MARCH 31,
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................. $ 33,067 $ 47,288 $ 51,287 $ 53,901 $86,925 $172,413
Long-term debt obligations... 13,777 19,739 30,466 33,640 47,932 84,262
</TABLE>
- ------------------------------
(1) EBITDA represents income before taxes plus interest expense, net,
depreciation and amortization. While EBITDA should not be construed as a
substitute for operating income, net income or cash flows from operating
activities in analyzing the referenced company's operating performance,
financial position or cash flows, the referenced company has included EBITDA
because it is commonly used by certain investors and analysts to analyze and
compare companies on the basis of operating performance, leverage and
liquidity and to determine a company's ability to service debt.
(2) Cash interest expense, net represents interest expense minus amortization of
debt issuance costs.
(3) Net debt, as used in calculating this ratio, represents total debt at March
31, 1998 of $252,359 minus cash of $25,599. EBITDA, as used in this
calculation, represents EBITDA for the year ended December 31, 1997.
(4) The consolidated financial statements of Anchor Holdings do not differ
significantly from those of Anchor. See Note 16 to the historical
consolidated financial statements of Anchor Holdings.
(5) With respect to Anchor Holdings in 1997, amount represents loss on
extinguishment of debt net of tax. With respect to Moll in the first quarter
of 1998, amount represents loss on extinguishment of debt.
(6) EBITDA represents income before taxes plus interest expense, net,
depreciation and amortization. While EBITDA should not be construed as a
substitute for operating income, net income or cash flows from operating
activities in analyzing the referenced company's operating performance,
financial position or cash flows, the referenced company has included EBITDA
because it is commonly used by certain investors and analysts to analyze and
compare companies on the basis of operating performance, leverage and
liquidity and to determine a company's ability to service debt.
(7) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of income before income taxes and extraordinary item, plus fixed
charges. "Fixed charges" consist of interest expense, net, which includes
the amortization of deferred financing costs, and that portion of rental
expense representative of interest (deemed to be one-third of rental
expense).
24
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations includes forward-looking statements with respect to
the Company's future financial performance. These forward-looking statements are
subject to various risks and uncertainties, including the factors described
under "Risk Factors" and elsewhere in this Prospectus, that could cause actual
results to differ materially from historical results or those currently
anticipated.
THE COMPANY
OVERVIEW
The Company is a leading full service manufacturer and designer of custom
molded and assembled plastic components for a broad variety of customers and end
markets throughout North America and Europe. The Company's products are sold to
a wide range of end-markets, including end markets for consumer products,
telecommunications/business equipment, household appliances, automobiles and
medical devices. On a pro forma basis after giving effect to the Transactions,
the Company generated 1997 net sales and EBITDA of $414.6 million and $54.8
million, respectively, making it the sixth largest non-automotive plastic
injection molding company in North America and one of the largest plastic
component suppliers in Europe.
Approximately 45% of the Company's 1997 pro forma net sales of molded
products was covered by long term purchase and sale contracts which stipulate
anticipated volume requirements and pricing terms. The remainder of the
Company's sales of molded products was sold on a short-term basis with
components ordered by customers to meet their pending production requirements.
See "Risk Factors--Reliance on Major Customers."
The Company typically charges its customers a fixed price for each
component it manufactures, which component may consist of single or multiple
parts. Prices are quoted based on (i) the type of product, (ii) the type of
services provided (design, prototyping, molding, and other value-added
services), (iii) the complexity of manufacturing processes involved, and (iv)
the Company's estimates of part weight, resin costs, machine requirements and
parts produced per hour (cycle time). In many cases, the Company purchases the
raw materials on behalf of its customers. In such instances, the Company's
arrangements with most of its customers provide that price changes in such raw
materials are passed through to the customer by changes in the component prices
charged by the Company. As customers generally seek price reductions during the
product life cycle, the Company's ability to improve operating performance is
generally dependent on increasing manufacturing efficiency through improved
process control, increased automation, engineering changes to molds and reduced
operating and labor expenses. See "Business Strategy -- Reduce Costs."
During the product life cycle, components are ordered by the Company's
customers to meet their just-in-time production requirements. Typical lead times
range from two to six weeks. Traditionally, once a mold is awarded to a
particular supplier and is in production, it is rarely moved to a competitor. As
of December 31, 1997, the Company maintained approximately 2,700 active molds
for its customers. A majority of such molds are owned by the customer but the
Company is responsible for the general maintenance and safe storage of the mold
during its lifetime. Costs for maintenance of the mold are expensed as incurred.
Major tool modifications and renovations are charged to the customer.
The Company has been formed by a number of acquisitions that have been
integrated through consolidation of manufacturing facilities, logistical
optimization and reduction of overhead. See "Business Strategy--Continue
Strategic Acquisitions." In July 1991, certain entities controlled by Mr. Votis
and his partners were merged to form Moll. Since 1991, Moll has grown
significantly through several strategic acquisitions in North America and
Europe. In December 1992, Moll acquired Textek, based in San Antonio and Round
Rock, Texas. In July 1993, Moll acquired ACM, based in Georgetown and El Paso,
Texas. In October 1994, Moll acquired Quality, based in Newberg, Oregon. See
"The Company."
25
<PAGE> 29
In 1996, Moll acquired Reliance Products, a Delaware limited partnership
doing business in Canada, which manufactures a proprietary line of camping
equipment and bulk storage containers. Immediately prior to the Merger, Moll
distributed its 69% Class B limited partnership interest in Reliance Products to
certain of Moll's limited partners. In August 1997, Moll acquired Hanning, a
leading supplier of injection molded plastic components for use in digital
photocopiers, with manufacturing facilities located in the United States, the
United Kingdom and Germany. In January 1998, Moll acquired Somomeca, a major
French supplier of injection molded plastic components and plastic injection
molds. In March 1998, Mr. Votis, who controlled Moll, acquired Anchor from
affiliates of the Thomas H. Lee Company.
Concurrently with the Offering, the Company was formed through the merger
of two leading plastic injection molders, Moll and Anchor, which were each
controlled by Mr. George Votis. Immediately prior to the Merger, Moll and Anchor
were independently operated entities. The Company consummated the acquisition of
Gemini Plastic on June 30, 1998. See "The Company" and "The Transactions."
Since 1995, the Company has generally experienced strong, growing net sales
from its Cosmetics Division and Medical Products Division despite anticipated
declines in toothbrush net sales associated with the decision of certain
customers to move production "in-house." In early 1998, the Company made a
strategic decision to discontinue production of certain business product
components at its Round Rock facility in favor of producing medical end products
and components which the Company believed to be more profitable, stable and
faster growing business. Since March 1998, the Company has eliminated
approximately $2.8 million in annualized costs by reducing duplicative
administrative expenses, eliminating less profitable business lines and
streamlining manufacturing processes.
Over the past three years, Moll experienced growth in net sales through
several strategic acquisitions and the addition of manufacturing facilities.
However, in 1997, such increases were offset by operating inefficiencies related
to such acquisitions, especially the Hanning acquisition and the closing of
Moll's El Paso facility. As a result of the acquisition of Somomeca which had
generated approximately $88.5 million of European sales in 1997, Moll enhanced
its international manufacturing capabilities.
26
<PAGE> 30
RESULTS OF OPERATIONS
ANCHOR HOLDINGS, INC.
The following financial information presents certain historical financial
information of Anchor Holdings, expressed as a percentage of net sales, for
1995, 1996 and 1997 and for the first quarters of 1997 and 1998.
<TABLE>
<CAPTION>
YEAR ENDED FIRST QUARTER
----------------------- --------------
1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit....................................... 16.3 17.6 15.6 16.6 16.8
Selling, general and administrative................ 6.3 7.2 6.8 6.3 7.7
Amortization....................................... 1.1 1.0 1.1 0.8 1.0
Operating income................................... 8.9 9.4 7.8 9.5 8.1
Other (income) expense............................. 0.7 0.3 (0.2) 0.1 0.1
Interest expense, net.............................. 5.8 5.2 6.9 5.0 7.6
Income before taxes and extraordinary items........ 2.5 3.9 1.0 4.4 0.4
Provision for income taxes......................... 0.8 1.7 0.5 1.9 0.2
Extraordinary item................................. -- -- -- -- --
Net income (loss).................................. 1.6 2.3 (0.2) 2.5 0.2
OTHER DATA:
EBITDA(1).......................................... 14.6% 15.1% 13.9% 15.0% 14.7%
Depreciation and amortization...................... 6.3 5.9 5.9 5.6 6.8
Capital expenditures............................... 4.6 5.1 5.2 4.7 1.5
</TABLE>
- ------------------------------
(1) EBITDA represents income before taxes plus interest expense, net,
depreciation and amortization. While EBITDA should not be construed as a
substitute for operating income, net income or cash flows from operating
activities in analyzing Anchor Holdings' operating performance, financial
position or cash flows, Anchor Holdings has included EBITDA because it is
commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance, leverage and liquidity and
to determine a company's ability to service debt.
13 Weeks Ended April 4, 1998 ("Interim 1998") Compared to 13 Weeks Ended March
31, 1997 ("Interim 1997")
Net Sales. Net sales decreased by $2.2 million, or 5.3%, to $39.3 million
for Interim 1998 from $41.5 million for Interim 1997. The net sales decrease
resulted primarily from lower toothbrush sales to Colgate-Palmolive and was
partially offset by increased sales to Anchor's Cosmetics Division customers.
Gross Profit. Gross profit decreased by $0.3 million, or 4.3%, to $6.6
million for Interim 1998 from $6.9 million for Interim 1997. Lower gross profit
primarily resulting from lower toothbrush sales to Colgate-Palmolive was largely
offset by efficiency improvements in the Mid-State division and increased
margins associated with strong sales to Anchor's Cosmetics Division customers.
Selling, General and Administrative. Selling, general and administrative
("SG&A") expenses increased by $0.4 million, or 15.4%, to $3.0 million for
Interim 1998 from $2.6 million for Interim 1997 primarily due to selling expense
associated with increased sales to Anchor's Cosmetics Division customers and to
salary and benefit increases for 1998.
Amortization. Amortization expense increased by $0.1 million, or 33.3%, to
$0.4 million for Interim 1998 from $0.3 million for Interim 1997 due to the
write-off of additional capitalized fees associated with the issuance of the
Senior Notes in April 1997.
27
<PAGE> 31
Operating Income. Operating income decreased by $0.7 million, or 17.9%, to
$3.2 million for Interim 1998 from $3.9 million for Interim 1997 for the reasons
listed above.
Net Interest Expense. Net interest expense increased by $0.9 million, or
42.9%, to $3.0 million for Interim 1998 from $2.1 million for Interim 1997 due
to the issuance of the Senior Notes in April 1997. Such increase was partially
offset by the retirement of bank debt of $50.7 million and $21.0 million of
subordinated debt.
Income Taxes. Income taxes decreased $0.7 million, or 87.5%, to $0.1
million for Interim 1998 from $0.8 million for Interim 1997 as a result of
decreased operating income for Interim 1998.
Net Income. Net income decreased $0.9 million, or 90.9%, to $0.1 million
for Interim 1998 from $1.0 million for Interim 1997 as a result of the factors
listed above.
EBITDA. EBITDA decreased by $0.4 million, or 6.5%, to $5.8 million for
Interim 1998 from $6.2 million for Interim 1997 as a result of the factors
listed above.
Fiscal 1997 Versus Fiscal 1996
Net Sales. Net sales increased by $4.3 million, or 2.7%, to $161.2 million
for fiscal 1997 from $156.9 million for fiscal 1996, primarily due to the
continued strong sales to Anchor's Cosmetics Division customers and the
increased sales of medical devices. Such increase was partially offset by the
drop in sales of toothbrushes to Colgate-Palmolive as a result of in-house
manufacturing by Colgate-Palmolive.
Gross Profit. Gross profit decreased by $2.4 million, or 8.7%, to $25.2
million for fiscal 1997 from $27.6 million for fiscal 1996, resulting from the
decline in sales of toothbrushes to Colgate-Palmolive, lower than expected
production volumes in the Round Rock facility, the addition of lower gross
margin Compaq sales, and a $0.6 million charge taken in the second quarter of
1997 for renegotiation of a Mexican labor contract.
Selling, General and Administrative. SG&A expenses decreased $0.4 million,
or 3.5%, to $11.0 million for fiscal 1997 from $11.4 million for fiscal 1996,
reflecting effective cost control measures.
Amortization. Goodwill and capitalized fees amortization increased by $0.2
million, or 13.3%, to $1.7 million for fiscal 1997 from $1.5 million for fiscal
1996, as a result of transaction fees incurred during the issuance of the Senior
Notes in April 1997.
Operating Income. Operating income decreased by $2.2 million, or 15.0%, to
$12.5 million for fiscal 1997 from $14.7 million for fiscal 1996 for the reasons
listed above.
Other Expense. Other expense decreased by $0.7 million, or 175.0%, to $0.3
million income for fiscal 1997 from $1.0 million expense for fiscal 1996
reflecting income from a one time legal settlement during the fourth quarter of
1997.
Net Interest Expense. Net interest expense increased by $3.1 million, or
38.3%, to $11.2 million for fiscal 1997 from $8.1 million for fiscal 1996 due to
the issuance of the Senior Notes in April 1997. Such increase was partially
offset by the retirement of bank debt of $51.5 million and $21.0 million of
subordinated debt.
Income Taxes. Income taxes decreased by $1.8 million, or 69.2%, to $0.8
million for fiscal 1997 from $2.6 million for fiscal 1996 as a result of
decreased operating income.
Extraordinary Item. Extraordinary item of $1.2 million, net of taxes, for
fiscal 1997 resulted from the writeoff of $0.4 million in bank fees, and a $0.8
million prepayment penalty associated with the retirement of bank debt and
subordinated debt.
Net Income. Net income decreased $4.0 million, or 111.1%, to $0.4 million
loss for fiscal 1997 from $3.6 million income for fiscal 1996 as a result of the
above factors.
EBITDA. EBITDA decreased $1.2 million, or 5.1%, to $22.4 million for
fiscal 1997, from $23.6 million for fiscal 1996 for the reasons listed above.
28
<PAGE> 32
Fiscal 1996 Versus Fiscal 1995
Net Sales. Net sales increased by $7.5 million, or 5.0%, to $156.9 million
for fiscal 1996 from $149.4 million for fiscal 1995, principally as a result of
inclusion of the first full year of point-of-purchase ("POP") display sales and
an increase in computer component sales. Such increase was partially offset by a
decrease in unit sales for toothbrushes.
Gross Profit. Gross profit increased by $3.3 million, or 13.6%, to $27.6
million for fiscal 1996 from $24.3 million for fiscal 1995, principally as a
result of increased net sales in the POP display and computer component markets
as well as higher gross margins. Such increase was partially offset by a decline
in gross profit for toothbrush sales. Gross margin increased to 17.6% for fiscal
1996 from 16.3% in fiscal 1995, primarily due to the realization of a full year
of efficiency gains in the Matamoros, Mexico manufacturing facility. Such
increase was partially offset by inefficiencies related to the start-up of the
manufacturing facility in Round Rock, Texas.
Selling, General and Administrative. SG&A expenses increased by $2.0
million, or 20.7%, to $11.4 million for fiscal 1996 from $9.4 million for fiscal
1995, principally as a result of professional expenses incurred in connection
with the formation of a possible joint venture in China, and costs associated
with a management information systems upgrade.
Amortization. Amortization expense decreased by $0.2 million, or 7.9%, to
$1.5 million for fiscal 1996 from $1.7 million for fiscal 1995, principally as a
result of the expiration of certain amortized fees and expenses incurred in the
1990 acquisition of Anchor by affiliates of the Thomas H. Lee Company.
Operating Income. Operating income increased by $1.4 million, or 11.2%, to
$14.7 million for fiscal 1996 from $13.3 million for fiscal 1995 as a result of
the items discussed above.
Other Expense. Other expense decreased by $0.6 million, or 58.1%, to $0.4
million for fiscal 1996 from $1.0 million for fiscal 1995, principally as a
result of expenses related to the relocation of the Matamoros, Mexico facility
in 1995 which were not repeated in 1996.
Net Interest Expense. Net interest expense decreased by $0.5 million, or
5.7%, to $8.1 million for fiscal 1996 from $8.6 million for fiscal 1995,
principally as a result of a $5.0 million pay down on a certain term loan
facility and greater use of LIBOR rates under such agreement.
Income Taxes. Income tax expense increased by $1.4 million, or 109.1%, to
$2.6 million for fiscal 1996 from $1.2 million for fiscal 1995.
Net Income. Net income increased by $1.2 million, or 48.7%, to $3.6
million for fiscal 1996 from $2.4 million for fiscal 1995 as a result of the
above factors.
EBITDA. EBITDA increased by $1.9 million, or 8.7%, to $23.6 million for
fiscal 1996 from $21.7 million for fiscal 1995 as a result of the above factors.
29
<PAGE> 33
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP
The following financial information presents certain historical financial
information of Moll expressed as a percentage of net sales, for 1995, 1996 and
1997 and for the first quarters of 1997 and 1998.
<TABLE>
<CAPTION>
YEAR ENDED FIRST QUARTER
----------------------- --------------
1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit....................................... 18.7 18.4 17.0 21.7 15.6
Selling, general and administrative expenses....... 9.1 8.0 9.2 9.6 8.0
Tooling income, net................................ 1.9 0.8 1.6 1.4 0.1
Management fee..................................... 1.5 1.6 1.4 1.6 1.3
Loss incurred on closure of facility............... -- -- 1.0 -- --
Operating income................................... 9.9 9.6 7.0 11.9 6.9
Other (income) expense............................. 0.1 -- (0.3) (0.4) 0.3
Interest expense, net.............................. 2.7 2.8 2.9 2.6 3.9
Income before taxes and extraordinary items........ 7.1 6.7 4.0 8.5 2.4
Provision for income taxes......................... -- -- 0.1 -- 0.2
Extraordinary item................................. -- -- -- -- 1.2
Net income......................................... 7.1 6.7 3.9 8.5 1.0
OTHER DATA:
EBITDA(1).......................................... 14.7% 14.2% 11.5% 15.9% 9.9%
Depreciation and amortization...................... 4.9 4.6 4.6 4.8 3.6
Capital expenditures............................... 3.1 1.6 5.6 1.3 5.3
</TABLE>
- ------------------------------
(1) EBITDA represents income before taxes plus interest expense, net,
depreciation and amortization. While EBITDA should not be construed as a
substitute for operating income, net income or cash flows from operating
activities in analyzing Moll's operating performance, financial position or
cash flows, Moll has included EBITDA because it is commonly used by certain
investors and analysts to analyze and compare companies on the basis of
operating performance, leverage and liquidity and to determine a company's
ability to service debt.
First Quarter 1998 Versus First Quarter 1997
Net Sales. Net sales increased $34.5 million, or 134.0%, in the 1998 first
quarter to $60.1 million, from $25.6 million in the 1997 first quarter,
primarily due to the acquisitions of Hanning and Somomeca which contributed net
sales of $32.3 million, as well as increased production volume in Moll's Austin,
Fort Smith, Nashville and San Antonio locations, offset by a decrease resulting
from the closing of Moll's El Paso facility in September 1997.
Gross Profit. Gross profit increased $3.8 million, or 68.6%, in the 1998
first quarter to $9.4 million from $5.6 million in the 1997 first quarter,
primarily due to the acquisitions of Hanning and Somomeca which contributed
gross profit of $3.6 million, as well as production efficiencies at Moll's Fort
Smith, Nashville and San Antonio facilities. Gross margin declined to 15.6% in
1998 from 21.7% in 1997 due to operating inefficiencies in the acquired Hanning
facilities.
Selling, General and Administrative Expenses. SG&A increased $2.3 million,
or 95.7%, in the 1998 first quarter to $4.8 million from $2.5 million in the
1997 first quarter, primarily due to the acquisitions of Hanning and Somomeca
which incurred expenses of $2.4 million, as well as costs incurred related to a
new year 2000 compliant application software and increased staffing in a new
facility in Austin, Texas.
30
<PAGE> 34
Tooling Income, Net. Tooling income, net remained stable at $0.4 million
for each of the 1997 and 1998 first quarters. The majority of the tooling
income, net in the 1998 first quarter was generated in the acquired companies,
as U.S. operations did not complete any significant tooling projects in this
period.
Management Fee. Management fee increased $0.4 million, or 91.7%, in the
1998 first quarter to $0.8 million from $0.4 million in the 1997 first quarter,
primarily due to an increase in net sales.
Operating Income. Operating income increased $1.1 million, or 36.5%, in
the 1998 first quarter to $4.2 million from $3.1 million in the 1997 first
quarter, primarily due to the acquisitions discussed above.
Interest Expense. Interest expense increased $1.6 million, or 245.7%, from
$0.7 million in the 1997 first quarter to $2.3 million in the 1998 first
quarter, due to the borrowings associated with the acquisitions discussed above.
Provision for Income Taxes. The provision for income taxes in the 1998
first quarter represents foreign income taxes recorded in connection with the
new corporate subsidiaries in Germany and the United Kingdom.
Extraordinary Item. The extraordinary item in the 1998 first quarter
represents loss on the extinguishment of debt.
Net Income. Net income decreased by $1.6 million, or 71.4% in the 1998
first quarter, to $0.6 million from $2.2 million in the 1997 first quarter as a
result of the above factors.
EBITDA. EBITDA increased $1.8 million, or 45.3% in the 1998 first quarter,
to $5.9 million from $4.1 million in the 1997 first quarter as a result of the
above factors.
Fiscal 1997 Versus Fiscal 1996
Net Sales. Net sales increased $27.4 million, or 30.7%, in fiscal 1997 to
$116.9 million from $89.5 million in fiscal 1996, primarily due to the
inclusion, in fiscal 1997 results, of a full year of Reliance Products results,
and Hanning results since August 7, 1997. Such increases were partially offset
by a decrease of $3.3 million in net sales due to the closing of Moll's El Paso
facility and a decrease of $4.8 million in net sales resulting from raw material
price adjustments and lower volumes of certain components.
Gross Profit. Gross profit increased $3.4 million, or 20.4%, in fiscal
1997 to $19.9 million from $16.5 million in fiscal 1996 primarily due to the
inclusion, in fiscal 1997 results, of a full year of Reliance Products results.
Such increase was partially offset by operating inefficiencies encountered in
the acquired Hanning facilities, which was also responsible for the gross margin
decline to 17.0%, in 1997 from 18.4% in 1996.
Selling, General and Administrative Expenses. SG&A expenses increased $3.6
million, or 49.6% in fiscal 1997 to $10.8 million from $7.2 million in fiscal
1996 primarily due to the inclusion, in fiscal 1997 results, of a full year of
Reliance Products results, and Hanning results since August 7, 1997.
Tooling Income, Net. Tooling income, net, increased $1.2 million, or
170.4%, in fiscal 1997 to $1.9 million from $0.7 million in fiscal 1996
primarily due to the completion of several projects completed by the acquired
Hanning companies.
Management Fee. Management fee increased $0.3 million, or 14.3%, in fiscal
1997 to $1.7 million from $1.4 million in fiscal 1996 primarily due to the
increase in net sales.
Operating Income. Operating income decreased $0.4 million, or 4.5%, in
fiscal 1997 to $8.2 million from $8.6 million in fiscal 1996 due to the loss
incurred on the closure of Moll's El Paso facility offset by factors listed
above.
Interest Expense. Interest expense increased $0.9 million, or 35.2%, in
fiscal 1997 to $3.4 million from $2.5 million in fiscal 1996 primarily due to
the debt acquired in connection with the acquisition of Reliance Products and an
increase in debt to complete the Hanning acquisition.
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Provision for Income Taxes. The provision for income taxes in 1997
represents foreign income taxes recorded in connection with the new corporate
subsidiaries in Germany and the United Kingdom.
Net Income. Net income decreased $1.4 million, or 24.4% in fiscal 1997 to
$4.6 million from $6.0 million in fiscal 1996 as a result of the items discussed
above.
EBITDA. EBITDA increased $0.7 million, or 5.9%, to $13.4 million for
fiscal 1997 from $12.7 million for fiscal 1996 as a result of the above factors.
Fiscal 1996 Versus Fiscal 1995
Net Sales. Net sales for fiscal 1996 decreased by $1.4 million, or 1.6%,
to $89.5 million from $90.9 million for fiscal 1995, primarily due to raw
material price adjustments on certain components and the discontinuation of the
production of certain keyboard components at Moll's El Paso facility. Such
decrease was partially offset by increases in sales at Moll's other facilities.
Gross Profit. Gross profit for fiscal 1996 decreased by $0.5 million, or
2.7%, to $16.5 million from $17.0 million for fiscal 1995 primarily due to
unrecovered fixed costs incurred at Moll's El Paso facility.
Selling, General and Administrative Expenses. SG&A expenses decreased $1.1
million, or 13.4% to $7.2 million in fiscal 1996 from $8.3 million in fiscal
1995, primarily due to the integration of the Quality acquisition and staff
reductions in Moll's El Paso facility.
Tooling Income, Net. Tooling income, net decreased $1.0 million, or 58.8%,
in fiscal 1996 to $0.7 million from $1.7 million in fiscal 1995 primarily due to
the completion in 1995 of major tooling programs for two large customers. Such
programs are cyclical by nature.
Management Fee. Management fee remained relatively stable at $1.4 million
in fiscal 1996 and 1995 due to the relatively constant net sales.
Operating Income. Operating income decreased $0.4 million, or 4.9%, to
$8.6 million for fiscal 1996 from $9.0 million in fiscal 1995 due to the factors
listed above.
Interest Expense. Interest expense for fiscal 1996 increased by $0.1
million, or 4.3%, to $2.5 million from $2.4 million for fiscal 1995, primarily
due to increased debt issued in connection with the recapitalization of Moll in
September 1995.
Net Income. Net income for fiscal 1996 decreased by $0.5 million, or 6.9%,
to $6.0 million from $6.5 million for fiscal 1995 as a result of the items
listed above.
EBITDA. EBITDA decreased $0.6 million, or 4.6%, to $12.7 million in fiscal
1996 from $13.3 million for fiscal 1995 as a result of the above factors.
LIQUIDITY AND CAPITAL RESOURCES
Moll
Historically, Moll funded its business with cash generated from operations
and borrowings under its revolving credit agreement and its term loan facility
with Bank of America, as Agent. In 1995, 1996 and 1997, Moll generated cash from
operating activities of $9.7 million, $10.8 million, and $5.5 million,
respectively. The decrease in cash from operating activities in 1997 resulted
from a substantial increase in accounts receivable due to a change in credit
terms with a large customer. Moll's capital expenditures for 1995, 1996 and 1997
were $2.8 million, $1.4 million and $6.6 million, respectively, principally for
additions to maintain or improve Moll's manufacturing capacity and efficiency.
The increase in capital expenditures in 1997 was primarily due to the
construction of a new facility in Austin, Texas. In 1996, Moll spent $10.2
million to purchase the assets of the Reliance division of Lawson Mardon
Packaging, Inc., and in 1997, Moll spent $7.2 million to purchase the Hanning
companies. In 1995, Moll received proceeds from the issuance of long-term debt
of $14.3 million to fund a recapitalization of Moll.
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Anchor Holdings
Anchor's liquidity requirements consisted primarily of working capital
needs and capital expenditures, required payments of principal and interest on
any borrowings under the Revolving Credit Facility (as it existed prior to the
Merger) and required payments of interest on the Senior Notes and principal at
maturity. The Revolving Credit Facility, prior to the Merger, provided for
revolving loans to, and the issuance of letters of credit on behalf of, Anchor
in an aggregate amount not to exceed $15.0 million, $13.8 of which was available
under the revolving loans, and $1.2 million of which was reserved under the
letters of credit, at December 31, 1997.
Cash generated by operations in 1997 was used to fund $13.0 million
purchases of property, plant and equipment, and other long-term assets. Anchor's
cash grew by $5.3 million to $6.9 million for 1997 from $1.6 million for 1996.
On April 2, 1997 Anchor issued the Senior Notes. Cash from this financing
activity allowed Anchor to retire $50.7 million in borrowings under a certain
revolving credit and term loan agreement, to redeem $21.0 million of certain
subordinated notes, and to pay $22.8 million of a $29.5 million dividend on the
common stock of Anchor Holdings, Inc.
Following the Transactions
The Company's liquidity requirements consist primarily of working capital
needs and capital expenditures, required payments of principal and interest on
any borrowings under the Revolving Credit Facility and required payments of
interest on the Notes and the Senior Notes. The Company estimates that its
capital expenditures in 1998 will total approximately $12 million.
The Revolving Credit Facility provides for revolving loans to, and the
issuance of letters of credit on behalf of, the Company, in an aggregate amount
not to exceed $50.0 million, $48.8 million of which is available for borrowing,
subject to certain conditions. The Revolving Credit Facility will mature in 2003
and contains certain covenants customary for working capital financings
(including restrictions on: capital expenditures, incurrence of additional
indebtedness, dividends and redemptions, and mergers, acquisitions and sales of
assets). See "Description of Certain Indebtedness--Revolving Credit Facility."
The Company believes that cash flows from operating activities and its
ability to borrow under the Revolving Credit Facility will be adequate to meet
the Company's debt service obligations, working capital needs, and planned
capital expenditures at least through December 31, 1998. See "Risk
Factors -- Substantial Leverage; Ability to Service Debt."
While the Company routinely enters into discussions with potential
acquisition candidates, no such discussions have progressed beyond the
preliminary stages. The Company expects that funding for future acquisitions may
come from a variety of sources, depending on the size and nature of any such
acquisition. Potential sources of capital include cash generated from
operations, borrowings under the Revolving Credit Facility, additional equity
investments or other external debt or equity financings. There can be no
assurance that such additional capital sources will be available to the Company
on terms that the Company finds acceptable, or at all.
YEAR 2000
Many computer systems experience problems handling dates beyond the year
1999. Therefore, some computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The Company is assessing
both the internal readiness of its computer systems and the compliance of the
computer systems of certain significant customers and vendors for handling the
year 2000. The Company expects to implement successfully the systems and
programming changes necessary to address year 2000 issues, and does not believe
that the cost of such actions will have a material adverse effect on the
Company. There can be no assurance, however, that there will not be a delay in,
or increased costs associated with, the implementation of such changes, and the
Company's inability to implement such changes could have an adverse effect on
the Company. In addition, the failure of certain of the Company's significant
customers and
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vendors to address the year 2000 issue could have a material adverse effect on
the Company. See "Risk Factors--Year 2000."
COMMON EUROPEAN CURRENCY
The Treaty on European Economic and Monetary Union provides for the
introduction of a single European currency, the Euro, in substitution for the
national currencies of the member states of the European Union that adopt the
Euro. In May 1998, the European Council determined (i) the 11 member states that
met the requirements for Monetary Union, and (ii) the currency exchange rates
among the currencies of the member states joining the Monetary Union. The
transitory period for the Monetary Union starts on January 1, 1999. According to
Council Resolution of July 7, 1997, the introduction of the Euro will be made in
three steps: (i) a transitory period from January 1, 1999 to December 31, 2001
in which current accounts may be opened and financial statements may be drawn in
Euros, and local currencies and Euros will coexist; (ii) from January 1, 2002 to
June 30, 2002, in which local currencies will be exchanged for Euros; and (iii)
from July 1, 2002 in which local currencies will disappear. Although there can
be no assurance that a single European currency will be adopted or, if adopted,
on what time schedule and with what success, substantial transition costs could
result as the Company redesigns its software systems to reflect the adoption of
the new currency. In addition, no assurance can be given as to the effect of the
adoption of the Euro on the Company's payment obligations under loan agreements
for borrowings in currencies to be replaced by the Euro or on the Company's
commercial agreements in such currencies. See "Risk Factors--Common European
Currency."
SEASONALITY
Historically, shipments of the Company's components have been higher in the
first, second and third quarters as a result of increased demands for the
products manufactured by the Company's customers during such periods. As a
result, sales may vary from period to period solely dictated by the demand for
the products manufactured by the Company's customers. Also, many manufacturing
facilities in Europe, including those belonging to the Company, shut down during
certain parts of the months of August and December for the holidays, and as a
result there is no production at such facilities during such periods.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means p.m., New
York City time, on , 1998; provided, however, that if the
Company, in its sole discretion, has extended the period of time for which the
Exchange Offer is open, the term "Expiration Date" means the latest time and
date to which the Exchange Offer is extended.
As of the date of this Prospectus, $130,000,000 aggregate principal amount
of the Old Notes was outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1998, to all
holders of Old Notes known to the Company. The Company's obligation to accept
Old Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth below under "--Certain Conditions to the Exchange
Offer."
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders thereof as described below.
During any such extension, all Old Notes previously tendered will remain subject
to the Exchange Offer and may be accepted for exchange by the Company. Any Old
Notes not accepted for exchange for any reason will be returned without expense
to the tendering holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not therefore accepted for
exchange, upon the occurrence of any of the events specified below under
"--Certain Conditions to the Exchange Offer." The Company will give oral or
written notice of any extension, amendment, non-acceptance or termination to the
holders of the Old Notes as promptly as practicable, such notice in the case of
any extension to be issued by means of a press release or other public
announcement no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit either (i) a
properly completed and duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to State Street Bank and Trust
Company, as Exchange Agent, at the address set forth below under "--Exchange
Agent" on or prior to the Expiration Date, or (ii) if such Old Notes are
tendered pursuant to the procedures for book-entry transfer set forth below, a
holder tendering Old Notes may transmit an Agent's Message (as defined herein)
to the Exchange Agent in lieu of the Letter of Transmittal on or prior to the
Expiration Date. In addition, either (i) certificates for such Old Notes must be
received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, along with
the Letter of Transmittal or an Agent's Message, as the case may be, must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the holder
must comply with the guaranteed delivery procedures described below. The term
"Agent's Message" means a message, transmitted to the Book-Entry
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Transfer Facility and received by the Exchange Agent and forming a part of the
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the tendering Participant (as defined
herein) that such Participant has received and agrees to be bound by the Letter
of Transmittal and the Company may enforce the Letter of Transmittal against
such Participant. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL OR
AGENT'S MESSAGES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined herein). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than a
signer of the Letter of Transmittal, the Old Notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by, the registered Holder with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Old Notes, such Old Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered holder or holders that appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the holder, and that neither the holder nor such
other person has any arrangement or understanding with any person to participate
in the distribution of the New Notes. As a condition to its participation in the
Exchange Offer each Holder using the Exchange Offer to participate in a
distribution of the New Notes shall acknowledge and agree that, if the resales
are of
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New Notes obtained by such Holder in exchange for Old Notes acquired directly
from the Company or an Affiliate thereof, (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction and that such a secondary
resale transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507 or 508,
as applicable, of Regulation S-K under the Securities Act. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the terms and conditions to the
Exchange Offer, the Company will accept, promptly after the Expiration Date, all
Old Notes properly tendered and will issue the New Notes promptly after
acceptance of the Old Notes. See "--Certain Conditions to the Exchange Offer."
For purposes of the Exchange Offer, the Company shall be deemed to have accepted
properly tendered Old Notes for exchange when, as and if the Company has given
oral or written notice thereof to the Exchange Agent, with written confirmation
of any oral notice to be given promptly thereafter.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. Interest on the New Notes will accrue from June 26, 1998,
the date of original issuance of the Old Notes.
The Registration Rights Agreement provides that (i) if the Company fails to
file an Exchange Offer Registration Statement with the Commission on or prior to
the 45th day after the Closing Date, (ii) if the Exchange Offer Registration
Statement is not declared effective by the Commission on or prior to the 180th
day after the Closing Date, (iii) if the Exchange Offer is not consummated on or
before the 30th business day after the Exchange Offer Registration Statement is
declared effective, (iv) if obligated to file the Shelf Registration Statement
and the Company fails to file the Shelf Registration Statement with the
Commission on or prior to the 60th day after such filing obligation arises, (v)
if obligated to file a Shelf Registration Statement and the Shelf Registration
Statement is not declared effective on or prior to the 90th day after the
obligation to file a Shelf Registration Statement arises, or (vi) if the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, is declared effective but thereafter ceases to be effective or
useable in connection with resales of the Old Notes, for such time of
non-effectiveness or non-usability (each, a "Registration Default"), the Company
agrees to pay to each Holder of Old Notes affected thereby liquidated damages
("Liquidated Damages") in an amount equal to $0.05 per week per $1,000 in
principal amount of Old Notes held by such Holder for each week or portion
thereof that the Registration Default continues for the first 90 day period
immediately following the occurrence of such Registration Default. The amount of
the Liquidated Damages shall increase by an additional $0.05 per week per $1,000
in principal amount of Old Notes with respect to each subsequent 90 day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $0.50 per week per $1,000 in principal amount of Old
Notes. The Company shall not be required to pay Liquidated Damages for more than
one Registration Default at any given time. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents or, in the case of a Book-Entry
Confirmation, an Agent's Message in lieu thereof. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount than
the holder desired to exchange, such unaccepted or non-exchanged Old Notes will
be returned without expense to the tendering holder thereof (or,
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in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
procedures described below, such non-exchanged Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees, or an Agent's Message in lieu of a
Letter of Transmittal, and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at one of the addresses set
forth below under "--Exchange Agent" on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of Old Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be, and
any other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent, and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal, are received by the Exchange Agent within three NYSE trading
days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"--Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes are registered, if different from that of the withdrawing holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company,
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whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "--Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order of decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (ii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of
the Old Notes pursuant to the Exchange Offer; or any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of
the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the reasonable judgment of
the Company might directly or indirectly result in any of the consequences
referred to in clauses (i) or (ii) above or, in the reasonable judgment of
the Company, might result in the holders of New Notes having obligations
with respect to resales and transfers of New Notes which are greater than
those described in the interpretation of the Commission referred to on the
cover page of this Prospectus, or would otherwise make it inadvisable to
proceed with the Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
reasonable judgment of the Company, is or may be adverse to the Company, or
the Company shall have become aware of facts that, in the reasonable
judgment of the Company, have or may have adverse significance with respect
to the value of the Old Notes or the New Notes;
which in the reasonable judgment of the Company in any case, and regardless of
the circumstances (including any action by the Company) giving rise to any event
described above, makes it inadvisable to proceed with the Exchange Offer and/or
with such acceptance for exchange or with such exchange.
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<PAGE> 43
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indentures under the Trust Indenture Act of 1939 (the
"TIA").
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal and Agent's
Messages should be directed to the Exchange Agent at one of the addresses set
forth below. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal or Agent's Message and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
DELIVERY TO: STATE STREET BANK AND TRUST COMPANY, Exchange Agent
<TABLE>
<S> <C>
By Mail: By Overnight Courier or Hand:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
Kellie Mullen Kellie Mullen
</TABLE>
By Facsimile Transmission
(for Eligible Institutions only):
(617) 664-5290
Attention: Corporate Trust Department
Confirm by Telephone:
(617) 664-5587
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
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<PAGE> 44
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
$[ ].
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register Old Notes under the Securities Act. See "Description of the
Notes--Registration Rights; Liquidated Damages." Based on interpretations by the
staff of the Commission, as set forth in no-action letters issued to third
parties, the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such New
Notes. However, the Company does not intend to request the Commission to
consider, and the Commission has not considered, the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder (including, without
limitation, any Holder that is a broker-dealer) must acknowledge that (A) it is
not an Affiliate (as defined in Rule 144 of the Securities Act), (B) it is not
engaged in, and does not intend to engage in, a distribution of New Notes and
has no arrangement or understanding to participate in a distribution of New
Notes, and (C) it is acquiring the New Notes in its ordinary course of business.
As a condition to its participation in the Exchange Offer each Holder using the
Exchange Offer to participate in a distribution of the New Notes shall
acknowledge and agree that, if the resales are of New Notes obtained by such
Holder in exchange for Old Notes acquired directly from the Company or an
Affiliate thereof, it (i) could not rely on the applicable interpretations of
the staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction and that such a secondary resale transaction must
be covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K under the Securities Act. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution." In
addition, to comply with state securities laws, the New Notes may not be offered
or sold in any state unless they have been registered or qualified for sale in
such state or an exemption from registration or qualification is available and
is complied with. The Company currently does not intend to register or qualify
the sale of the New Notes in any state where an exemption from registration or
qualification is required and not available.
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<PAGE> 45
BUSINESS
OVERVIEW
The Company is a leading full service manufacturer and designer of custom
molded and assembled plastic components for a broad variety of customers and end
markets throughout North America and Europe. The Company serves over 450
customers, including leading multinational companies such as Abbott
Laboratories, Colgate-Palmolive, Kimberly-Clark, L'Oreal, Maybelline, Motorola,
Procter & Gamble, Renault, Revlon, Siemens, Whirlpool and Xerox. Products
utilizing the Company's plastic components are sold in a wide range of end
markets, including end markets for consumer products,
telecommunications/business equipment, household appliances, automobiles and
medical devices. The Company believes that the diversity of its customers,
markets and geographic regions creates a stable revenue base and reduces the
Company's exposure to particular market or regional economic cycles. On a pro
forma basis after giving effect to the Transactions, the Company generated 1997
net sales and EBITDA of $414.6 million and $54.8 million, respectively, making
it the sixth largest non-automotive plastic injection molding company in North
America and one of the largest plastic component suppliers in Europe.
The Company has 27 manufacturing facilities with approximately 680 molding
machines throughout North America and Europe, including France, Germany, the
United Kingdom and Portugal. The Company is capable of providing its customers
with integrated design and prototype development, mold design and manufacturing,
advanced plastic injection molding capabilities, and value-added finishing
services, such as hot stamping, pad printing, assembly and complete product
testing, all of which enable it to provide "one-stop" shopping to customers
seeking a wide range of services. The Company's technologically advanced
manufacturing facilities and equipment enable it to provide customized solutions
to highly demanding customer specifications. For 1997, approximately 45% of the
Company's sales of molded products were covered by long term purchase and sale
contracts which stipulate anticipated volume requirements and pricing terms.
Management believes that few competitors offer the scale, expertise, reputation
and range of services that the Company provides.
The Company was formed through the merger of two leading plastic injection
molders, Moll PlastiCrafters Limited Partnership and Anchor Advanced Products,
Inc., which were each controlled by Mr. George Votis. Immediately prior to the
Merger, Moll and Anchor were independently operated entities. Mr. Votis acquired
Moll's predecessor in 1989 and has since completed seven acquisitions increasing
Moll's revenues from approximately $8 million in 1989 to $232.4 million in 1997
on a pro forma basis excluding the acquisition of Anchor. Concurrently with the
Offering, Holdings consummated the Holdings Notes Offering. In March 1998, Mr.
Votis acquired Anchor which had revenues of $161 million in 1997. On June 30,
1998, the Company consummated the acquisition of Gemini Plastic, a specialty
medical and telecommunications product plastic molding company with
approximately $21 million of revenues in 1997. See "The Transactions."
The Company has been formed to combine the manufacturing, marketing and
management resources of Moll and Anchor to create further opportunities for
growth and development. As a result of the Transactions, the Company will become
better positioned to benefit from the growth and consolidation of the plastics
industry. The Company also believes that the consummation of the Transactions
has significantly enhanced its future growth prospects and revenue stability by
broadening its customer base, manufacturing capabilities and geographic
presence. Moreover, the Company expects to benefit from its increased scale,
ability to centralize certain key logistical functions and attendant cost
savings opportunities. Since March 1998, the Company has eliminated
approximately $2.8 million in annualized costs by reducing duplicative
administrative expenses, eliminating less profitable business lines and
streamlining manufacturing processes.
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<PAGE> 46
COMPETITIVE STRENGTHS
Management believes that the Company has achieved its current position as a
market leader because of the following competitive strengths:
BROAD GEOGRAPHIC PRESENCE. The Company's multiple plant locations
throughout North America and Europe enable it to (i) compete effectively for
contracts that require large volume runs and multiple distribution points, (ii)
offer its customers multiple production locations and (iii) allocate production
to the facility best suited for a job in view of its relative capabilities and
proximity to the customer. As a result, the Company is able to provide its
customers with a broad range of manufacturing capabilities, improved
responsiveness, timely delivery, and reduced freight costs. In addition, by
operating geographically diverse plants, the Company can mitigate customer
sourcing risks associated with single facility production.
FULL SERVICE CAPABILITIES. The Company provides its customers with
comprehensive services ranging from product design, product development,
prototyping and mold making to molding, painting and other value-added services.
As a result, management believes that the Company is one of a limited number of
full service plastic injection molders in North America and Europe that is well
positioned to benefit from the trend of customers outsourcing total project
management to full service multiple plant suppliers.
STRONG CUSTOMER RELATIONSHIPS. The Company believes that its ability to
attract and retain customers is in part attributable to the high level of
customer service it provides. The Company also believes that frequent
interaction with its customers in the product development process helps it to
develop long-term relationships. Of the Company's top ten customers in 1997, two
have been with the Company for over fifty years, three have been with the
Company for over ten years and the remainder have been with the Company for over
four years. For many of its key customers, the Company is the sole supplier for
specific parts. The Company's emphasis on customer partnerships and its
long-standing customer relationships provide it with a significant competitive
advantage.
MANUFACTURING CAPABILITIES. The Company utilizes a wide range of advanced
manufacturing processes, such as gas assist molding, co-injection and two-shot
molding, automated assembly and testing, in-mold decorating, thin-wall molding
and in-mold bristling. The Company's manufacturing capabilities enable it to
provide innovative solutions and supply components in an integrated process. For
example, the Company worked closely with Renault to produce dashboard grilles
using a newly developed co-injection molding technology.
SUPERIOR PRODUCT QUALITY. The Company uses quality systems and operations
management techniques to meet the highest standards and to reduce costs. The
Company continually invests in technology and training to monitor and improve
quality. Included among such investments are effective management systems to
ensure real-time information and control, statistical process control systems,
failure mode and effect analysis systems, microprocessor-controlled molding
machines and automated assembly equipment. In addition, the Company has material
and product testing equipment that monitor product reliability to meet exacting
quality standards.
BUSINESS STRATEGY
The Company seeks to further strengthen its leadership position in the
plastic molding industry and to maximize its financial performance by employing
the following strategies:
CAPITALIZE ON CROSS-SELLING OPPORTUNITIES. The Company believes that the
Merger creates new opportunities to cross-sell products and services between
each of Anchor's and Moll's customer bases. For example, while Anchor's
operations prior to the Merger were confined to North America, many of its
customers are multinational firms with significant European operations.
Management believes that offering such customers access to the Company's
European operations, operated by Moll prior to the Merger, is a significant
growth opportunity. The Company has hired a new Senior Vice President, Marketing
to target and capitalize on such opportunities.
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<PAGE> 47
CENTRALIZE SALES AND MARKETING. The Company plans to centralize management
of its sales and marketing efforts to improve communication with customers,
better cross-sell services to customers and ensure uniform pricing and sales
strategies. While local sales and management staff will maintain direct
relationships with customers and production facilities, a centralized sales and
marketing effort will enable the Company to serve national and international
accounts more effectively and to pursue customers located outside an individual
plant's geographic service area. The Company's centralized sales and marketing
group will be responsible for identifying market trends and assisting customers
with new product ideas as well as promoting the Company through customer
presentations, advertising and trade shows.
EXPAND GLOBALLY. The Company believes that it is one of the largest North
American plastic injection molders with a significant European presence. Such
capabilities allow the Company to (i) penetrate new geographic regions with its
existing multinational customers, such as L'Oreal, Siemens, Whirlpool and Xerox,
and (ii) acquire complementary manufacturing facilities in strategic locations.
Continuing to pursue this strategy will enable the Company to effectively
provide a complete and integrated range of molding, manufacturing and
value-added services on a global basis.
REDUCE COSTS. The Company continually aims to improve its cost
effectiveness by increasing productivity and implementing operational
improvements. Since March 1998, the Company has eliminated approximately $2.8
million in annualized costs by reducing duplicative administrative expenses,
eliminating less profitable business lines and streamlining manufacturing
processes. Management believes that the combination of Anchor, Moll and Gemini
Plastic will result in additional opportunities to reduce costs by: (i) reducing
overhead expenses through optimization of labor and equipment resources at each
of the Company's facilities; (ii) divesting or discontinuing less profitable
business lines; (iii) eliminating redundant administrative operations and
related personnel; and (iv) where appropriate, moving key management personnel
on-site to the Company's manufacturing plants in order to oversee expansion
and/or execution of cost control measures.
CONTINUE STRATEGIC ACQUISITIONS. Strategic acquisitions have been, and
management believes will continue to be, an important element in the Company's
growth and in its efforts to capitalize on favorable industry trends. The
Company will consider future acquisition opportunities that are attractively
priced and which the Company believes will strengthen its customer base, broaden
its geographic presence, enhance its production capabilities and provide
significant operating synergies. While the Company routinely enters into
discussions with potential acquisition candidates, no such discussions have
progressed beyond the preliminary stages.
INDUSTRY OVERVIEW AND TRENDS
Injection molding is one of the most widely used plastic processing methods
in the world due to the high-quality properties of the finished product and its
cost effectiveness. According to industry sources, demand for injection molded
plastics in the United States is projected to grow at 3.3% annually. Such growth
is expected to result from a number of key factors including: (i) improved
resins and processing capabilities; (ii) versatility of the injection molding
process; and (iii) cost and performance advantages of plastic over substitute
materials. Despite the expected increase in demand for plastic injection molded
products, the U.S. molding industry remains highly fragmented with over 2,500
injection molders operating more than 10,000 plant locations. The capabilities
of these molders vary widely, as do their end markets.
In recent years, plastic injection molders have benefited from technology
improvements that have enabled plastic to replace other materials (most notably
metal, glass and paper) in a variety of applications. Plastic has been
substituted for these materials primarily because of its disposability, ease of
manufacture, durability, aesthetic appeal, flexibility of form and weight.
Additionally, plastic often provides significant cost savings over other
materials due to design and fabrication and raw material cost advantages. By
successfully substituting plastic for other materials, manufacturers can
significantly reduce the amount of necessary parts, manufacturing steps, labor
costs, energy costs and transportation expenses associated with producing their
products. As a result, management believes that substantial growth potential
exists for plastics through further materials substitution.
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In addition to the growth projected for the plastics industry as a whole,
growth for larger injection molders such as the Company is driven by industry
consolidation and the trend among customers to outsource their injection molding
needs. Management believes that the consolidation of the highly fragmented
plastics injection molding industry has accelerated in recent years as a result
of customer preferences toward larger, full-service independent molders that are
able to provide total project management. As customers place increasing emphasis
on minimizing the "time to market" for their new products and ensuring that
their requirements for production, quality and timely delivery are satisfied,
they are increasingly relying on one full-service supplier for each new product
launch. Given that molders in these relationships are involved in many decisions
that affect cost and prevent complications in production, they are better able
to preserve attractive margins.
The trend toward customer consolidation of suppliers has created
significant opportunities for injection molders such as the Company who possess
full-service capabilities. Given the capital investment required to successfully
compete as a full-service injection molder, management believes that an
increasingly limited number of injection molders will be capable of providing
the quality and breadth of services demanded by high volume customers.
Furthermore, management believes that the trend among customers to develop
closer relationships with full-service injection molders mitigates the potential
threat of out-of-market competition. Inconsistent product quality, weak tooling
capabilities and significant distance from customers' manufacturing locations
have traditionally hindered limited service or out-of-market competitors from
competing effectively for projects that require full-service capabilities,
outstanding quality and quick response time.
MARKETS AND PRODUCTS
MARKETS
The following table sets forth the percentages of the Company's total net
sales for the periods presented that were derived from sales to its different
end markets:
<TABLE>
<CAPTION>
1996(1) 1997(1)
<S> <C> <C>
Consumer Products........................................... 26.6% 27.6%
Telecommunications/Business Equipment....................... 17.3 18.9
Household Appliances........................................ 16.2 17.6
Automotive.................................................. 15.2 12.3
Medical Devices............................................. 7.2 8.1
Packaging and Other......................................... 17.5 15.5
---- ----
Total............................................. 100% 100%
</TABLE>
- ------------------------------
(1) The information for 1996 and 1997 gives effect to the Transactions as if
they had occurred on the beginning of the periods presented.
CONSUMER PRODUCTS
Within the consumer products market, the Company has particular strength in
the cosmetics and oral care sectors. The Company manufactures and supplies
plastic components to the cosmetics industry in five major product categories:
mascara, nail applicators, compacts, closures and lipstick containers which
collectively account for more than 220 different mascara packages and 19
different lipstick containers. The Company enjoys substantial business with the
leading cosmetics companies, including Estee Lauder, L'Oreal, Maybelline, Mary
Kay, Revlon, Amway and Aveda, which produce products marketed under the brand
names Great Lash(R), Clinique and many others. The Company manufactures
toothbrushes for Colgate-Palmolive, Procter & Gamble, Cheseborough-Ponds and
SmithKline Beecham, under such well-known brand names as Crest(R), Colgate(R),
Pepsodent(R) and Flexosaurus(R), and electric toothbrush heads for Teledyne
Water Pik, a division of Teledyne Industries, Inc. The Company also manufactures
and assembles POP displays for Maybelline. Approximately 10.7% of the Company's
pro forma net sales in 1997 were derived from L'Oreal.
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The Company serves the eye and lip preparation and nail polish segments of
the domestic cosmetics market. Management estimates that in 1996, eye make-up,
lip make-up and nail care products accounted for approximately 24% ($662
million), 22% ($611 million), and 11% ($318 million), respectively, of the total
U.S. cosmetics market, which management estimates totaled $2.8 billion in 1996.
The Company is also a leading independent designer, manufacturer and packager of
toothbrushes in the United States with an estimated 1997 market share of
approximately 27% of all toothbrush manufacturing. Management estimates that the
domestic market for toothbrushes was 676 million units in 1996.
Management believes that the consumer products market is largest segment of
the injection molded plastic industry. In 1996, market demand for this end
market was approximately 35.8% of the total plastic injection market.
TELECOMMUNICATIONS/BUSINESS EQUIPMENT
The Company designs and manufactures plastic components for
telecommunications and business equipment in North America and Europe, including
complete multi-component assemblies for business telephones and cellular
telephone handsets manufactured by Siemens and Motorola, and electronic
telecommunications equipment and cellular tower construction hardware
manufactured by the 3M Corporation and Specialty Teleconstructers. The Company
also manufactures plastic components used in business equipment such as (i)
photocopiers and digital imaging systems manufactured by Xerox, (ii) printers
and computer assemblies manufactured by Tektronix, Ogden Atlantic, Lexmark and
Sequent and (iii) custom casings and assemblies for computers manufactured by
Compaq and IBM.
Management believes that this end market offers attractive growth
opportunities due to growth currently being experienced in the
telecommunications market, particularly with respect to cellular telephones and
other personal communications devices. In addition, many multinational business
equipment manufacturers have also enjoyed strong and steady market growth
through international expansion as international sales continue to strengthen
profits. Based on industry sources, management believes that computer and office
equipment shipments will grow at over 6% annually (in real inflation-adjusted
terms through the year 2001) from $135 billion in 1996 to $182 billion in 2001.
HOUSEHOLD APPLIANCES
The Company is a leading independent designer and manufacturer of plastic
components used in household appliances including (i) refrigerators (primarily
high end side-by-side refrigerators), room air conditioning systems and free
standing and built-in ranges manufactured by Whirlpool, (ii) countertop
appliances manufactured by Tefal, (iii) laundry washers and dryers manufactured
by Electrolux and (iv) televisions manufactured by Daewoo. Approximately 10.3%
of the Company's pro forma net sales in 1997 were derived from Whirlpool.
Management believes that this market offers attractive growth opportunities
due to steady growth in the household appliance market. Based on industry
sources, management believes that home appliance shipments will grow at over
2.3% annually (in real inflation-adjusted terms through the year 2001) from $223
billion in 1996 to $250 billion in 2001 driven by replacement demand as
appliances purchased in the 1980's are replaced with new products.
AUTOMOTIVE
The Company designs and manufactures plastic automotive components which
include (i) door handles, sun visors, wheel covers, intake grill manifolds for
Renault, (ii) gear shift knobs used in buses and trucks manufactured by General
Motors, (iii) motor scooter components for Peugeot, (iv) plastic components used
in turn signal and cruise control systems manufactured by Delphi, (v) interior
components used in vehicles manufactured by Audi, BMW and Freightliner and (vi)
insulating battery cases for Lydall.
Management believes that this market offers favorable growth opportunities
due to the steady growth in the automobile market in North America and Europe.
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MEDICAL DEVICES
The Company manufactures products for the U.S. medical device market. The
Company manufactures various plastic medical devices, including blood filtration
devices, angiographic syringes, intravenous equipment, in-vitro diagnostic kits,
medical scrub brushes and cardiotomy reservoirs, as well as various internal and
external plastic components used in medical and dental equipment manufactured by
Adec, Acquson, Abbott Hospital Products Division and Alcon Medical.
Plastics are becoming more widely used in medical devices as the medical
field realizes the value of reduced breakage, the ability to manufacture
extremely consistent parts in a cost effective manner and the infection control
benefits of disposable products. Management believes that the medical device
market offers attractive growth opportunities.
PACKAGING AND OTHER
The Company manufactures and assembles a broad range of commercial and
industrial soap dispensing equipment for Kimberly-Clark. The Company also
manufactures hatch covers used in recreational boats manufactured by Tempress,
and plastic lawn and garden equipment for Electrolux Consumer Products. In
addition, the Company manufactures resealable "living hinge" plastic closures
for Tetrapak and dispensing closures for Seaquist.
GEOGRAPHIC MARKETS
The Company is a leading full service manufacturer and designer of custom
molded and assembled plastic components for a broad variety of customers and end
markets throughout North America and Europe. The Company has 27 manufacturing
facilities with approximately 680 molding machines throughout North America and
Europe, including France, Germany, the United Kingdom and Portugal. The Company
derived approximately 67% and 33% of its fiscal 1997 pro forma net sales in
North America and Europe, respectively. Through its recent acquisitions, the
Company's geographic presence has been strategically expanded into new regional,
national and international markets. While the Company believes its increased
global presence allows it to better service its numerous multinational
customers, the Company views its markets in North America and Europe as distinct
in terms of customer base and product requirements. Within each of these
markets, the Company places great emphasis on serving individual regional and
national markets separately from international markets and customers because
such regional and national customers often have specific requirements and
preferences. Overall, the Company believes that its expanded global presence has
improved international market penetration while facilitating more customized and
expedient service at the local and regional market level through proximity to
its customers.
PRODUCTION
The Company utilizes a broad range of manufacturing processes and tool
making capabilities to service the needs of its diverse customer base. Using
such processes and capabilities, the Company can manufacture products ranging
from simple plastic parts to highly complex multi-component assemblies. The
Company's automated, high volume assembly and on-site testing capabilities
further broaden its manufacturing capabilities and provide it with a competitive
edge in obtaining and maintaining preferred supplier status with its customers.
The process for producing a plastic component can be divided into two
functions: (i) design and tooling and (ii) molding. These different functions
often are not performed by one supplier. Many customers have "in-house" design
departments for their plastic components. To manufacture the molds to design
specifications, such departments frequently use tooling companies that are
specialists in mold manufacturing but are not manufacturers of plastic
components. Such molds are owned by the customer who then provides them to the
suppliers for the purpose of manufacturing plastic components from such molds.
Unlike numerous plastic component manufacturers, the Company has the capability
to design and produce plastic components as well as the molds used to
manufacture such plastic components.
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<PAGE> 51
DESIGN AND TOOLING
The Company has three tooling facilities in the United States, three such
facilities in France and one such facility in Portugal.
The Company produces prototypes and molds to make plastic components for
customers without in-house tooling capabilities. The Company also sells
prototypes and molds to other plastic component manufacturers, as well as
manufacturing them for some of its own operations. The Company performs, or
expects to perform, the injection molding for a majority of the products for
which it makes molds. Plastic products for which the Company builds the mold but
which are not injection molded by the Company are typically molded in-house by
the customer.
The Company produces a broad range of injection mold prototypes and molds
weighing from 1,100 pounds to 88,000 pounds. Injection molds are used for the
mass production of plastic parts in amounts that can vary considerably depending
on the application, but that usually exceed one million parts over the life of
the mold. Each of the Company's mold making facilities offers a full range of
services, including conceptual part and tool design, building and testing, and
is staffed with engineers skilled in mold design and manufacture. The primary
areas of focus include product design, process improvement, enhancement of
product performance and maximization of aesthetics. Such engineers incorporate,
on an experimental basis, the expertise that is derived from having the
capabilities to design, build and run molds that incorporate the strategies of
the operating unit. Management views the Company's mold designing and building
operations primarily as supportive of its manufacturing business, and also as an
independent profit center.
MOLDING
The Company has 12 plants for manufacturing plastic components in the
United States, five such plants in France and one such plant in each of Mexico,
the United Kingdom and Germany. See "--Properties."
The Company manufactures a majority of its plastic components utilizing the
injection molding process of thermoplastic materials. This process requires
sophisticated injection molding machines and ancillary equipment and produces a
high quality engineered product at relatively high speed. In this process,
thermoplastic materials created from plastic resins and other raw materials are
specially prepared and treated, melted to a defined temperature, injected into a
mold under high pressure at relatively high speed, cooled by channels conveying
water throughout the mold and transformed into a plastic part that is
automatically removed when the mold opens. In some cases, additional finishing
operations are performed on the plastic part. The typical molding cycle falls
into a range of 8 to 60 seconds and is dependent upon the material type, part
design, mold design, and the dimensional and aesthetic requirements established
by the customer.
In addition to relatively common and established technology for injection
molding, the Company utilizes other newer technologies that employ advanced
manufacturing processes such as gas-assist molding, co-injection, two-shot
molding, insert molding and in-mold decorating.
While the Company has developed proprietary techniques and manufacturing
expertise for the manufacture of injection-molded plastic components, the
Company has no patents for these proprietary techniques and chooses to rely on
trade secret protection. The Company believes that although its proprietary
techniques and expertise are subject to misappropriation or obsolescence,
development of improved methods and processes and new techniques by the Company
will continue on an ongoing basis as dictated by the technological needs of the
business.
VALUE-ADDED SERVICES
The Company offers a broad range of value-added services, including
finishing and automated assembly services. These services include hot stamping,
painting, pad printing, silkscreening, ultrasonic welding and insertion, heat
staking, solvent bonding, painting and impulse welding. At a customer's request,
the Company also outsources additional value-added services such as
electromagnetic and radio frequency interference shielding.
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<PAGE> 52
The Company also provides a wide range of inventory management services and
logistical support to its customers. Moving beyond just-in-time delivery, the
Company assists its customers with planning and managing production
requirements; routing inventory to in-process, intermediate and final
distribution points; and adjusting to customers' inventory requirements on a
real time basis through the alignment of the Company's production capabilities
with a customer's production requirements through electronic data interchange.
RAW MATERIALS
The Company's primary raw materials are various plastic resins, nylon and
packaging materials. Raw material prices are subject to cyclical price
fluctuations, including those arising from supply shortages and as a result of
changes in the prices of natural gas, crude oil and other petrochemical
intermediates from which resin is derived. Accordingly, the Company's financial
performance is directly linked to its ability to pass along increased raw
material costs to its customers. Although the Company has historically been able
to pass on increased costs to its customers, there can be no assurance that it
will be able to do so in the future or that a significant price increase in raw
materials would not have a material adverse effect on the Company's financial
condition and results of operations. Although most of the raw materials used by
the Company are available from several suppliers, several of such raw materials
are currently obtained from single sources. The Company has no reason to believe
that there will not be an ample supply of its raw materials at prices
commercially acceptable to the Company for the reasonably foreseeable future,
but the Company cannot make any prediction as to the future price of such raw
materials. See "Risk Factors--Raw Materials."
MARKETING AND SALES
The Company seeks to increase its sales through cross-selling to its
existing customer base and by attracting new customers. The Company's primary
marketing strategy is to develop and maintain close working relationships with
the engineering, procurement, quality, tooling and manufacturing departments of
its customers. Several of the Company's largest customers are serviced by a
dedicated sales agent. These relationships help ensure close cooperation in
product design and help the Company in gaining repeat and new business with its
existing customer base. The Company believes that its design, engineering and
tooling expertise, together with its ability to service and cross sell to
customers from multiple locations on a worldwide basis, have enabled it to
broaden its product lines, further penetrate its existing customer base and
attract new customers.
COMPETITION
The markets in which the Company operates are highly competitive. The
Company competes with a significant number of companies of varying sizes,
including divisions or subsidiaries of larger companies and the in-house
departments of potential customers, on the basis of price, service, quality and
the ability to supply products to customers in a timely manner. Some of these
competitors have, and new competitors may have, greater financial and other
resources than the Company. Additionally, each of Reliance Products (which is
controlled by the principal stockholders of the Company) and the Company are
engaged in the injection molded plastics business. The products manufactured,
and the markets served, by each of Reliance Products and the Company are
different, and Reliance Products and the Company have not, and do not, compete
with each other. However, no assurance can be given that Reliance Products and
the Company will not compete for the same business opportunities in the future,
which may present conflicts of interest. Competitive pressures or other factors,
including the vertical integration by certain of the Company's major customers
of manufacturing processes traditionally outsourced to the Company, could cause
the Company to lose market share or could result in a significant price erosion
with respect to the Company's products, either of which could have a material
adverse effect on the Company's results of operations. Furthermore, the
Company's customers operate in highly competitive markets. To the extent the
Company's major customers lose market share in their respective markets, the
Company's results of operations and financial condition could be materially and
adversely affected. See "Risk Factors--Competition."
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<PAGE> 53
ENVIRONMENTAL MATTERS
Federal, state, local and foreign governments could enact laws or
regulations concerning environmental matters that increase the cost of
producing, or otherwise adversely affect the demand for, plastic products. The
Company is aware that certain local governments have adopted ordinances
prohibiting or restricting the use or disposal of certain plastic products that
are among the types of products produced by the Company. If such prohibitions or
restrictions were widely adopted, such regulatory and environmental measures or
a decline in consumer preference for plastic products due to environmental
considerations could have a material adverse effect upon the Company. In
addition, certain of the Company's operations are subject to Federal, state,
local and foreign environmental laws and regulations that impose limitations on
the discharge of pollutants into the air and water and establish standards for
the treatment, storage and disposal of solid and hazardous wastes. While the
Company has not been required historically to make significant capital
expenditures in order to comply with applicable environmental laws and
regulations, the Company cannot predict with any certainty its future capital
expenditure requirements because of continually changing compliance standards
and environmental technology. The Company does not have insurance coverage for
environmental liabilities and does not anticipate obtaining such coverage in the
future. See "Risk Factors--Environmental Matters."
EMPLOYEES
As of December 31, 1997, the Company had 3,776 employees, and approximately
40% of such employees were covered by collective bargaining agreements. The
Company's employees in the United States and the United Kingdom are neither
represented by a union nor covered by any collective bargaining agreement. In
Germany, the Company's plant workers are represented by a union, however, the
Company is not liable for any severance costs associated with any workforce
reductions at its German facilities. The Company's employees in Mexico are
covered by a collective bargaining agreement. The Company's employees in France
are covered by national and regional collective agreements for the plastics
industry and the steel and metal industry. Such collective agreements were not
negotiated between the Company and its employees, but rather were concluded by
representatives of all employers and employees in such industries. Some of the
collective agreements covering the Company and its employees have been extended
by the French Labor Ministry to have nationwide scope, while others apply
regionally only. Such collective agreements do not expire until the employers'
or employees' representatives give the other party prior notice.
The Company has historically enjoyed good employee relations.
PROPERTIES
As of March 31, 1998, the Company owned or leased 15 production facilities
in the United States, seven production facilities in France and one production
facility in each of Mexico, the United Kingdom, Germany and Portugal. The
Company believes that its facilities are well maintained and in good operating
condition and anticipates that, although substantial capital expenditures will
be required to meet the production requirements for new and developing product
lines, the facilities themselves will be sufficient to meet the Company's needs
for the next several years. There can be no assurance, however, that
unanticipated developments will not occur that would require the Company to add
or eliminate production facilities sooner than expected. The following table
indicates as at the date hereof the locations, the area, nature of ownership,
and principal use of the Company's land and related facilities.
<TABLE>
<CAPTION>
LOCATION AREA (SQ. FT.) OWNERSHIP USE
<S> <C> <C> <C>
North America
Austin, Texas............................ 79,000 Owned Manufacturing
Elk Grove, Illinois...................... 10,000 Leased Mold Shop/engineering
Evansville, Indiana...................... 5,000 Leased Engineering office
Fort Lauderdale, Florida................. 85,000 Leased Manufacturing
Fort Smith, Arkansas..................... 143,000 Owned Manufacturing
Harlingen, Texas......................... 45,000 Leased Warehouse
</TABLE>
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<PAGE> 54
<TABLE>
<CAPTION>
LOCATION AREA (SQ. FT.) OWNERSHIP USE
<S> <C> <C> <C>
Knoxville, Tennessee..................... 12,000 Leased Office
Matamoros, Mexico........................ 118,000 Owned Manufacturing
Morristown, Tennessee.................... 90,000 Leased Warehouse
Morristown, Tennessee, Plant B........... 180,000 Owned Manufacturing
Morristown, Tennessee, Plant C........... 120,000 Owned Manufacturing
Nashville, Tennessee..................... 121,000 Owned Manufacturing
Newberg, Oregon.......................... 108,000 Owned Manufacturing
Rochester, New York...................... 79,000 Owned Manufacturing
Round Rock, Texas........................ 71,300 Owned Manufacturing
San Antonio, Texas....................... 62,000 Leased Manufacturing
Sanford, North Carolina.................. 12,500 Owned Mold Shop
Seagrove, North Carolina................. 31,700 Leased Warehouse
Seagrove, North Carolina................. 133,200 Owned Manufacturing
Waterbury, Connecticut................... 120,000 Owned Manufacturing
Europe
Blanzy, France........................... 57,750 Leased Manufacturing
35,400 Leased Warehouse
Bonneval, France......................... 19,800 Owned Manufacturing
26,080 Leased Mold shop/engineering
Chalon, France........................... 23,400 Owned Mold shop/engineering
16,200 Leased Mold shop
21,175 Leased Manufacturing
Marinha Grande, Portugal................. 81,850 Owned Mold shop
Mitcheldean, United Kingdom.............. 15,000 Leased Manufacturing
Paderborn, Germany....................... 160,000 Leased Manufacturing
Rouvray, France.......................... 109,000 Leased Manufacturing
Saint-Vit, France........................ 12,320 Owned Mold shop
12,000 Leased Mold shop
Villers-La-Montagne, France.............. 111,000 Owned Manufacturing
</TABLE>
To the extent any such properties are leased, the Company expects to be
able to renew such leases or lease comparable facilities on terms commercially
acceptable to the Company. Management believes that the Company's facilities are
suitable for its operations and provide sufficient capacity to meet the
Company's requirements for the foreseeable future.
LEGAL PROCEEDINGS
The Company believes that it is not presently a party to, or threatened
with, any litigation the outcome of which would have a material adverse effect
on its financial condition or results of operation.
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<PAGE> 55
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The current directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
George T. Votis.............................. 36 Chairman and Chief Executive Officer
Charles B. Schiele........................... 56 President and Director
Phyllis C. Best.............................. 51 Chief Financial Officer
Michael N. Red............................... 51 Senior Vice President, Marketing
T. Michael Bauer............................. 48 Executive Vice President, Eastern Operations
and U.K.
Walter J. Masnyk............................. 46 Executive Vice President, Western Operations
Geoffrey A. de Rohan......................... 41 Executive Vice President, Cosmetics
Robert T. Parkey............................. 61 Executive Vice President, Oral Care
Jean-Jacques de Boissieu..................... 40 Executive Vice President, France and Portugal
Mogens Andersen.............................. 47 Vice President, Germany
</TABLE>
George T. Votis. Mr. Votis serves as Chairman and Chief Executive Officer
of the Company and as Chairman and Chief Executive Officer of Galt Industries
which he founded in 1988. Prior to 1988, Mr. Votis was a Vice President and
Principal at Carlisle Capital in Boston, Massachusetts.
Charles B. Schiele. Mr. Schiele joined Anchor in March 1998 as President.
Prior to joining Anchor, Mr. Schiele served as Executive Vice President of
Alcoa's Closure Systems International Division, a global packaging company since
1994. Mr. Schiele served as President of HC Industries; Regional Manager for the
Americas, and Global Manager, Plastic Closures from 1984 to 1993.
Phyllis C. Best. Prior to becoming Chief Financial Officer of the Company,
Ms. Best was Senior Vice President, Finance and Controller of Anchor since 1995
and Vice President and Controller of Anchor since 1990.
Michael N. Red. Mr. Red joined Anchor in May 1998 as Senior Vice
President, Marketing. Mr. Red has more than 10 years of experience in the
plastic industry, including seven years with Closure Systems International as
Vice President Global Sales since 1992 and two years with Soft Alloy Extrusion
Division, Tifton, Georgia, as Vice President of Sales and Marketing.
T. Michael Bauer. Mr. Bauer joined Moll in October 1988 as General Manager
of the Company's Fort Smith division. Mr. Bauer has more than 23 years of
experience in plastics industry, including three years with Michigan Plastics
Company as Vice President of Manufacturing, one year with Grote Manufacturing
Company as Manager of Manufacturing Engineering Services and ten years with
Kusan Manufacturing Company.
Walter J. Masnyk. Mr. Masnyk is an Executive Vice President, Western
Operations of the Company. Mr. Masnyk joined Moll in September 1995 as General
Manager of Moll's Newberg, Oregon facility. Mr. Masnyk has more than 15 years
experience in the plastics industry, serving as General Manager of Consumer
Products and Vice President of Operations for various companies.
Geoffrey A. de Rohan. Prior to becoming Executive Vice President,
Cosmetics of the Company, Mr. de Rohan was a Director of Anchor and General
Manager of the Mid-State Plastics Division of Anchor since 1996 and Executive
Vice President of Anchor and General Manager of the Cosmetics Division of Anchor
since 1995. Prior to joining Anchor, Mr. de Rohan served as Vice President and
General Manager of Wheaton Injection Molding, President of Wheaton Plastic
Products, and Vice President of Development Health Care Market at Wheaton, Inc.
from 1986 to 1995.
Robert T. Parkey. Prior to becoming Executive Vice President, Oral Care of
the Company, Mr. Parkey was a Director and Executive Vice President of Anchor
and General Manager of the Brush Division of Anchor
52
<PAGE> 56
since 1992 and was Senior Vice President of Anchor from 1990 to 1992. Mr. Parkey
joined Anchor in 1975 and was promoted to Vice President, Healthcare Division in
1978. Prior to joining Anchor, he was Vice President, Sales Manager with Husky
Industries, a division of Husky Oil Company.
Jean-Jacques de Boissieu. Mr. de Boissieu joined Moll as Executive Vice
President, France and Portugal in January 1998. Prior to joining Moll, Mr. de
Boissieu was a consultant at C.N.P.A. since 1996. Prior to such time, Mr. de
Boissieu served as Managing Director and General Manager US Filter Water
Treatment France, and was Automotive Development Engineer General Electric
Plastics France, Product Manager Europe General Electric Plastics Netherlands,
Managing Director of General Electric Silicones France, Spain and Portugal and
Manager Europe of General Electric Silicones building and construction,
Netherlands.
Mogens Andersen. Mr. Andersen is a Vice President, Germany of the Company.
Mr. Andersen joined Moll in August 1997. Prior to joining Moll, Mr. Andersen was
most recently employed by Alcoa Closure Systems International Europe where he
was controller.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to (i) the Company's Chairman and Chief Executive Officer during 1997, (ii)
and each of the Company's four most highly compensated executive officers (other
than the Chairman and Chief Executive Officer), and (iii) up to two additional
individuals, if any, for whom disclosures would have been provided pursuant to
clause (ii) above but for the fact that the individual was not serving as an
executive officer of the Company at the end of the last completed fiscal year
(the "Named Executive Officers") for 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- ------------
OTHER ANNUAL PAYOUTS(4) ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY BONUS COMPENSATION LTIP PAYOUTS COMPENSATION
---------------------------- -------- -------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
George T. Votis................... $ 0 $ 0 $1,300,000(2) $ 0 $ 0
Chairman and Chief Executive
Officer(1)
T. Michael Bauer.................. 142,133 122,000 0 -- 267(5)
Executive Vice President
Robert T. Parkey.................. 167,175 71,300 19,823(3) 540,168 0
Executive Vice President
Geoffrey A. de Rohan.............. 162,916 68,400 9,268(3) -- 0
Executive Vice President
Richard P. Fackler................ 578,655 560,000 1,650,000(2) 0 167,589(5)
Francis H. Olmstead, Jr.(6)....... 259,896 380,000 38,821(3) 760,800 0
</TABLE>
- ------------------------------
(1) Mr. Votis has never received any salary or bonus from the Company. However,
in 1997, the Company paid approximately $650,000 and approximately $742,000
in management fees to Galt Management, Inc. and Galt Industries, Inc.,
respectively, each of which is a Delaware corporation wholly owned by Mr.
Votis. On a going forward basis he will receive an annual salary and will be
part of a bonus plan to be established for the senior management of the
Company.
(2) Amounts represent tax distributions paid due to the flow through tax status
of Moll prior to the Transactions.
(3) Amounts consisted of Company reimbursements of certain taxes paid by the
Named Executive Officers shown above (except Messrs. Votis, Fackler and
Bauer), which were as follows: Mr. Olmstead, $38,821; Mr. Parkey, $19,823;
and Mr. de Rohan, $9,268.
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<PAGE> 57
(4) Amounts represent (i) dividends on 28,400 shares of restricted stock of
Anchor Holdings that were purchased pursuant to an option by Mr. Parkey and
(ii) dividends on 40,000 shares of restricted stock of Anchor Holdings that
were purchased pursuant to an option by Mr. Olmstead.
(5) Consist of insurance premiums with respect to term life insurance.
(6) Mr. Olmstead retired from the Company in connection with the acquisition of
Holdings in March 1998 by Anchor Acquisition Co.
AGGREGATED OPTIONS EXERCISED IN FISCAL YEAR 1997
AND 1997 FISCAL YEAR OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 1997 YEAR END AT 1997 YEAR END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Francis H. Olmstead, Jr..... 40,000 $740,000 0 0 0 0
Robert T. Parkey............ 28,400 525,400 0 0 0 0
Geoffrey A. de Rohan........ 0 0 0 10,000(2) 0 0
</TABLE>
- ------------------------------
(1) None of Holdings' capital stock is publicly traded. Market value of the
options was calculated on the basis of the fair market value of the
underlying securities at December 31, 1997 of $4.00 per share as determined
by Holdings' Board of Directors.
(2) Such options were cancelled in conjunction with the acquisition of Holdings
in March 1998 by Anchor Acquisition Co.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements, effective as of April 1,
1996 (the "Agreements"), with each of Robert T. Parkey, Geoffrey A. de Rohan and
Phyllis C. Best (each an "Employee" and, collectively, the "Employees").
The initial employment terms, the base salaries and maximum bonus amounts
(as a percentage of base salary) are set forth below:
<TABLE>
<CAPTION>
MAXIMUM
EMPLOYEE INITIAL TERM BASE SALARY BONUS(1)
-------- ------------ ----------- --------
<S> <C> <C> <C>
Robert T. Parkey.................................. 12/31/98 $161,000 40.0%
Geoffrey A. de Rohan.............................. 12/31/98 $145,000 40.0%
Phyllis C. Best................................... 12/31/98 $125,000 40.0%
</TABLE>
- ------------------------------
(1) The bonus will be computed on the Company's financial and other results and
the overall performance of the Employee as determined in the sole discretion
of the Board of Directors. The bonus will be paid, if at all, in the year
following the year in which it is earned.
Upon a termination of employment due to death or disability of the
Employee, the Employee, or his estate, as the case may be, shall be entitled to
one year's base salary plus the amount of the last full-year bonus, pro-rated to
the effective date of termination. Upon a termination of employment by the
Employee for Cause (as defined in the Agreements) or termination by the Company
without Cause, the Employee shall be entitled to an amount equal to base salary
and bonus (the amount of the last full-year bonus), both computed to the end of
the term. Upon a termination of employment by the Employee without Cause or
termination by the Company with Cause, the Company may pay, at its sole
discretion, one-half of one year's base salary as consideration for a one-year
non-competition agreement with the Employee. Upon a termination of employment
due to expiration of the term of employment the Company may pay, at its sole
discretion, one year's base salary as consideration for a one-year
non-competition agreement with the Employee. All severance payments pursuant to
this paragraph will be paid in quarterly installments. Further, if the Employee
obtains other employment during the period in which the Company is obligated to
make severance payments,
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<PAGE> 58
the Company's obligation to make such payments will be reduced by an amount
equal to 75% of the total earnings such Employee makes from such other
employment.
SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFITS AGREEMENTS
Each of the persons listed above as parties to Employment Agreements is
also party to a Supplemental Executive Retirement Benefits Agreement (the "SERB
Agreements") with the Company. Under these agreements, the above-mentioned
Employees are, upon retirement (as defined in the SERB Agreements), entitled to
a life-time annual retirement benefit (distributed monthly) calculated based
upon the higher of two separate formulas (see note (3) below). The annual
retirement benefits under one of these formulas calculated based upon years of
credited service (as defined in the SERB Agreements) and earnings (as defined in
the SERB Agreements) is set forth in the table below. The annual retirement
benefits are subject to a reduction for the employee's vested accrued benefit
under the North American Philips Plan and any defined benefit plan maintained by
the Company. The SERB Agreements also provide for spousal survival benefit
options and for death benefits under certain circumstances. Lastly, in the event
of the sale or exchange of substantially all the assets of the Company or a
merger, reorganization, consolidation or a change of control, the Employee is
entitled to a lump sum payment in an amount equal to the actuarial equivalent of
the Employee's normal retirement benefit unless the successor entity or
resulting controlling entity expressly assumes in writing the obligations under
the SERB Agreements.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
------------------------------------------------------
EARNINGS 15 20 25 30 35
-------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000.............................. $ 20,625 $ 27,500 $ 34,375 41,250 48,125
150,000.............................. 24,750 33,000 41,250 49,500 57,750
175,000.............................. 28,875 38,500 48,125 57,750 67,375
200,000.............................. 33,000 44,000 55,000 66,000 77,000
250,000.............................. 41,250 55,000 68,750 82,500 96,250
300,000.............................. 49,500 66,000 82,500 99,000 115,500
400,000.............................. 66,000 88,000 110,000 132,000 154,000
450,000.............................. 74,250 99,000 123,750 148,500 173,250
500,000.............................. 82,500 110,000 137,500 165,000 192,500
</TABLE>
- ------------------------------
(1) The compensation covered by this plan is the average of the employee's
highest five years, selected from the last ten calendar years, of earnings,
which are defined under this plan as the total cash compensation paid to the
employee during a calendar year includible in the employee's gross income
under the Internal Revenue Code, excluding any expense reimbursements,
deferred compensation payments, lump sum severance payments, stock options,
or any distributions from any long-term incentive plan, or any long-term key
employee compensation program.
(2) The credited years of service under this plan for each of the following
persons as of June 1998 (except for Messrs. Votis, Fackler and Bauer) are as
follows: Mr. Olmstead, 14.5833; Mr. Parkey, 13; Mr. de Rohan, 3.5; Ms. Best,
18.6667.
(3) The annual retirement benefit is the higher of (i) the product of (a) the
average of employee's highest five years of earnings; (b) years of credited
service under the plan (to a maximum of 43); and (c) 1.1% and (ii) the sum
of (a) the product of (1) the average of employee's highest five years of
earnings; (2) years of credited service under the plan (to a maximum of 43);
and (3) 1.0%; and (b) the product of (1) the amount by which the average of
employee's highest five years of earnings exceeds the Average Social
Security Taxable Wage Base; (2) years of credited service under the plan (to
a maximum of 35); and (3) 0.6%. For purposes of this plan, the "Average
Social Security Taxable Wage Base" is the average of the maximum limitation
on wages subject to social security tax for the preceding 35 calendar years.
55
<PAGE> 59
CERTAIN BENEFICIAL OWNERS
AMM Holdings, LLC owns all the outstanding capital stock of Holdings, which
owns all the outstanding capital stock of Anchor Holdings, which owns all the
outstanding capital stock of the Company. The following sets forth certain
information regarding the beneficial ownership of the membership interests of
AMM Holdings, LLC, which consist of Capital Units and Profit Units (each as
defined in the LLC Agreement and, together the "Units") as of July 31, 1998 by
(i) each person who, to the knowledge of Holdings, beneficially owns more than
5% of each of the outstanding Capital Units and the outstanding Profit Units;
(ii) the directors of Holdings; (iii) certain executive officers of Holdings;
and (iv) all directors and executive officers of Holdings as a group. None of
the Capital Units and the Profit Units are presently listed or traded on any
securities exchange or securities market. The principal business address of
Anchor Holdings is 1111 Northshore Drive, Suite N-600, Knoxville, Tennessee
37919-4048, and its telephone number is (423) 450-5300.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
OUTSTANDING OUTSTANDING
NUMBER OF CAPITAL CAPITAL UNITS NUMBER OF PROFIT PROFIT UNITS
UNITS BENEFICIALLY BENEFICIALLY UNITS BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED OWNED OWNED OWNED
<S> <C> <C> <C> <C>
George T. Votis(1)........ 475 4.7% 1,075 10.8%
MPI(2).................... 7,564 75.6 6,934 69.3
Charles B. Schiele........ 2 0.02 250 2.5
Richard P. Fackler........ 600 6.0 600 6.0
Montero, Inc. ............ 1,355 13.5 531 5.3
Directors and Officers of
Holdings as a group (10
persons)................ 479 4.7 1,325 13.3
</TABLE>
- ------------------------------
(1) Subject to the provisions of Section 15 of the LLC Agreement ("Section 15")
(discussed below), under Section 11 of the LLC Agreement each Member (as
defined in the LLC Agreement) has agreed, at Mr. Votis' request, to
transfer, pursuant to a bona fide sale to a person or entity, other than Mr.
Votis or an Affiliate (as defined in the LLC Agreement) or member of the
immediate family of Mr. Votis, the same proportion of its holdings of each
class, series or type of interests in AMH Holdings, LLC as Mr. Votis
transfers of his holdings of each class, series or type of interests in AMM
Holdings, LLC in such transaction. Subject to the provisions of Section 15,
under Section 10 of the LLC Agreement, if Mr. Votis determines to transfer,
all or a portion of his interests in AMM Holdings, LLC, other than, among
other things, a transfer after which Mr. Votis will continue to hold
beneficially a majority of the outstanding Units, each Member has the right
to include in such transfer the same proportion of its holdings of each
class, series or type of interests in AMM Holdings, LLC as Mr. Votis
transfers of his holdings of each class, series or type of interests in AMM
Holdings, LLC in such transaction. Section 15 provides that, except as
provided in, inter alia, Sections 10 and 11 of the LLC Agreement, other than
Permitted Transfers (as defined in the LLC Agreement), no Member may sell,
assign, give, pledge, hypothecate, encumber or otherwise transfer,
including, without limitation, any assignment or transfer by operation of
law or by order of court, such Member's interest in AMM Holdings, LLC or any
part thereof, or in all or any part of the assets of AMM Holdings, LLC,
without the consent of the Manager (currently Mr. Votis), which consent may
be given or withheld in the Manager's sole discretion, and any purported
assignment without such consent shall be null and void and of no effect
whatsoever. As a result of the foregoing provisions of the LLC Agreement,
Mr. Votis may be deemed to beneficially own the Units owned by the other
Members. However, Mr. Votis disclaims beneficial ownership of such Units,
other than the Units owned by MPI.
(2) George T. Votis owns all the outstanding capital stock of MPI and,
therefore, beneficially owns all the Capital Units and Profit Units owned by
MPI.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At December 31, 1997, Moll had a note receivable of $390,000 from an
individual with ownership interest in certain entities that were partners of
Moll. The note is payable in three equal annual installments beginning February
1, 1999 and bears interest at 9%.
Moll paid management fees to certain related companies which are limited in
amount under Moll's debt agreements. Management fee expense was approximately
$1,363,000, $1,346,000 and $1,553,000 for 1995, 1996 and 1997, respectively. Of
this amount, approximately $150,000 was recorded as an accrued liability at
December 31, 1997.
The Company leases land and buildings in Germany from an entity owned by
certain entities that were partners of Moll. The lease expires on August 7,
1998, contains three automatic one year extensions and accrues rent at a rate of
790,000 Deutsche Marks ($439,000 per year based on the December 31, 1997
exchange rate). The Company recognized rent expense of $176,000 in 1997, which
is included in accounts payable at December 31, 1997.
From time to time, the Company leases warehouse space from Jack C. Lail, a
former Director and Executive Vice President of Anchor, near its facilities in
Seagrove, North Carolina. The Company paid a total of $64,000 for such warehouse
space in 1997.
Immediately prior to the Merger, Moll distributed its 69% Class B limited
partnership interest in Reliance Products to certain of Moll's limited partners.
NationsBanc Montgomery Securities LLC is an affiliate of NationsBank, N.A.,
which is Agent and a lender to the Company under the Revolving Credit Facility.
As a lender under the Company's Revolving Credit Facility which was refinanced
in connection with the Transactions, NationsBank, N.A. received a portion of the
proceeds from the Offering. See "Plan of Distribution."
In connection with the acquisition by Mr. Votis of Anchor, Mr. Geoffrey A.
de Rohan was granted a discretionary bonus of $400,000 by the Company in April
1998, $150,000 of which was paid to Mr. de Rohan in April 1998 and the remainder
of which is expected to be paid over 12 months starting April 1998.
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DESCRIPTION OF NOTES
GENERAL
The New Notes will be issued pursuant to an Indenture (the "Indenture")
between the Company and State Street Bank and Trust Company, as trustee (the
"Trustee") copies of which are filed as exhibits to the Registration Statement
of which this Prospectus constitutes a part. The New Notes are identical in all
material respects to the terms of the Old Notes, except for certain transfer
restrictions and registration rights relating to the Old Notes and except for
certain provisions providing for an increase in the interest rate on the Old
Notes under certain circumstances relating to the timing of the Exchange Offer.
See "-- Registration Rights; Liquidated Damages." The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the Trust Indenture Act for a statement thereof. The following summary of
the material provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. Copies of the Indenture and
Registration Rights Agreement are available as set forth below under
"--Additional Information." The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions." For
purposes of this summary, the term "Company" refers only to Moll Industries,
Inc. and not to any of its Subsidiaries.
The Old Notes are, and the New Notes will be, general unsecured obligations
of the Company, the Old Notes rank and the New Notes will rank, subordinate in
right of payment to all Senior Debt and the Old Notes rank and the New Notes
will rank, senior or pari passu in right of payment to all existing and future
subordinated indebtedness of the Company. The Old Notes are, and the New Notes
will be, effectively subordinated to all liabilities, including trade payables,
of the Company's subsidiaries. As of March 31, 1998, on a pro forma basis, after
giving effect to the Transactions, the Notes would have been subordinated to
$122.4 million of Senior Debt and effectively subordinated to $31.8 million of
liabilities of the Company's subsidiaries (other than Senior Debt). Subject to
certain conditions, approximately $48.8 million of capacity is available for
borrowing under the Revolving Credit Facility.
Any Old Notes that remain outstanding after the consummation of the
Exchange Offer, together with the New Notes issued in connection with the
Exchange Offer, will be treated as a single class of securities under the
Indenture.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. As of the date of the Indenture, all of the Company's subsidiaries are
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $200.0 million,
of which $130.0 million of Old Notes were issued in the Offering, and will
mature on July 1, 2008. Interest on the Notes will accrue at the rate of 10 1/2%
per annum and will be payable semi-annually in arrears on January 1 and July 1,
commencing on January 1, 1999, to Holders of record on the immediately preceding
December 15 and June 15. Additional Notes may be issued from time to time after
the Offering, subject to the provisions of the Indenture described below under
the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock." The Notes and any additional Notes subsequently issued under
the Indenture would be treated as a single class for all purposes under the
Indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase. Interest on the Notes will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from the date
of original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium and Liquidated Damages, if
any, and interest on the Notes will be payable at the office or agency of the
Company maintained for such purpose within the City and State of New York or, at
the option of the Company,
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payment of interest may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
provided that all payments of principal, premium and Liquidated Damages, if any,
and interest with respect to Notes the Holders of which have given wire transfer
instructions to the Company will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Until otherwise designated by the Company, the Company's office or agency in New
York will be the office of the Trustee maintained for such purpose. The Notes
will be issued in denominations of $1,000 and integral multiples thereof.
SUBORDINATION
The payment of principal of, premium and Liquidated Damages, if any, and
interest on the Old Note are, and the New Notes will be, subordinated in right
of payment, as set forth in the Indenture, to the prior payment in full of all
Senior Debt, whether outstanding on the date of the Indenture or thereafter
incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt whether or not such interest is allowed as a claim in
such proceeding) before the Holders of Notes will be entitled to receive any
payment with respect to the Notes, and until all Obligations with respect to
Senior Debt are paid in full, any distribution to which the Holders of Notes
would be entitled shall be made to the holders of Senior Debt (except that
Holders of Notes may receive and retain Permitted Junior Securities and payments
made from the trust described under "--Legal Defeasance and Covenant
Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(a "Payment Blockage") (except in Permitted Junior Securities or from the trust
described under "--Legal Defeasance and Covenant Defeasance") if (i) a default
in the payment of the principal of, premium, if any, or interest on, or other
Obligation with respect to, Designated Senior Debt occurs and is continuing
beyond any applicable period of grace or (ii) any other default occurs and is
continuing with respect to Designated Senior Debt that permits holders of the
Designated Senior Debt as to which such default relates to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment Blockage
Notice") from the holders of any Designated Senior Debt. Payments on the Notes
may and shall be resumed (a) in the case of a payment default, upon the date on
which such default is cured or waived and (b) in case of a nonpayment default,
the earlier of the date on which such nonpayment default is cured or waived or
179 days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of any Designated Senior Debt has been
accelerated. No new period of Payment Blockage may be commenced unless and until
(i) 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice and (ii) all scheduled payments of principal, premium,
if any, and interest on the Notes that have come due have been paid in full in
cash. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default. As a result of the subordination provisions described above, in the
event of a liquidation or insolvency, Holders of Notes may recover less ratably
than creditors of the Company who are holders of Senior Debt.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to July 1,
2003. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages,
if any, thereon to the applicable
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redemption date, if redeemed during the twelve-month period beginning on July 1
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003........................................................ 105.25%
2004........................................................ 103.50%
2005........................................................ 101.75%
2006 and thereafter......................................... 100.00%
</TABLE>
Notwithstanding the foregoing, at any time prior to July 1, 2001, the
Company may on any one or more occasions redeem up to 35% of the aggregate
principal amount of Notes originally issued in the Offering at a redemption
price of 110.5% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net cash proceeds of one or more Public Equity Offerings; provided that at
least 65% of the original aggregate principal amount of Notes remains
outstanding immediately after the occurrence of each such redemption (excluding
Notes held by the Company and its subsidiaries); and provided, further, that
each such redemption shall occur within 90 days of the date of the closing of
such Public Equity Offering.
SELECTION AND NOTICE
If less than all the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 in principal amount or less shall be redeemed in part.
Notices of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase (the
"Change of Control Payment"). The Indenture provides that prior to the mailing
of the notice referred to below, but in any event within 90 days following a
Change of Control, the Company will covenant to either repay in full all
outstanding Senior Debt or obtain the requisite consents, if any, under the
agreements governing outstanding Senior Debt to permit the repurchase of Notes
as provided below. The Company shall first comply with the covenant in the
immediate preceding sentence before it shall be required to repurchase Notes
pursuant to the provisions described below. The Company's failure to comply with
this covenant shall constitute an Event of Default described in clause (iv) and
not in clause (iii) under "--Events of Default" below.
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Within 30 calendar days following any Change of Control, the Company will
mail a notice to each Holder stating: (i) that the Change of Control Offer is
being made pursuant to the covenant entitled "Change of Control" and that all
Notes tendered will be accepted for payment; (ii) the purchase price and the
purchase date, which will be no earlier than 30 calendar days nor later than 60
calendar days from the date such notice is mailed (the "Change of Control
Payment Date"); (iii) that any Note not tendered will continue to accrue
interest; (iv) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest after the Change of Control Payment
Date; (v) that Holders electing to have any Notes purchased pursuant to a Change
of Control Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their election if the Paying
Agent receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing such Holder's election to have such Notes purchased; and (vii) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered,
which unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof. The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction. Finally, the Company's ability to pay cash to the Holders
of Notes upon a repurchase may be limited by the Company's then existing
financial resources. See "Risk Factors--Limitations on Ability to Make Change of
Control Payment."
The Revolving Credit Facility prohibits the Company from purchasing any
Notes prior to repaying all borrowings under the Revolving Credit Facility, and
also provides that certain change of control events with respect to the Company
would constitute a default thereunder. Any future credit agreements or other
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
occurs at a time when the Company is prohibited from purchasing Notes, the
Company could seek the consent of its lenders to the purchase of Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing Notes. In such case, the Company's
failure to purchase tendered Notes would constitute an Event of Default under
the Indenture which would, in turn, constitute a default under the Revolving
Credit Facility. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of Notes.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the
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requirements set forth in the Indenture applicable to a Change of Control Offer
made by the Company and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
"Change of Control" means the occurrence of any of the following: (i) (a)
any transaction (including a merger or consolidation) the result of which is
that any "person" or "group" (each within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of more than 50% of the total voting
power of all Capital Stock of the Company, Holdings or a successor entity
normally entitled to vote in the election of directors, managers or trustees, as
applicable, calculated on a fully diluted basis, and (b) as a result of the
consummation of such transaction, any "person" or "group" (each as defined
above) becomes the "beneficial owner" (as defined above), directly or
indirectly, of more of the voting stock of the Company or Holdings than is at
the time "beneficially owned" (as defined above) by the Principals, or (ii) the
first day on which a majority of the members of the Board of Directors are not
Continuing Directors, or (iii) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole or Holdings and its Subsidiaries
taken as a whole, in each case, to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than the Principals or their Related
Parties. For purposes of this definition, any transfer of an Equity Interest of
an entity that was formed for the purpose of acquiring voting stock of the
Company or Holdings shall be deemed to be a transfer of such percentage of such
voting stock as corresponds to the percentage of the equity of such entity that
has been so transferred.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole or Holdings
and its Subsidiaries taken as a whole. Although there is a developing body of
case law interpreting the phrase "substantially all," there is no precise
established definition of the phrase under applicable law. Accordingly, the
ability of a Holder of Notes to require the Company to repurchase such Notes as
a result of a sale, lease, transfer, conveyance or other disposition of less
than all of the assets of the Company and its Subsidiaries taken as a whole or
Holdings and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors who (i) was a member of such Board of Directors on the
date of the Indenture or (ii) was nominated for election or elected to such
Board of Directors with the approval of either (a) a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election or (b) a majority in interest of the Principals. For
purposes of the foregoing, a "majority in interest of the Principals" shall mean
any group of Principals who beneficially own in the aggregate more than 50% of
the Capital Stock of Holdings held by all of the Principals.
"Principals" means Mr. George T. Votis and Mr. Anastasios Votis.
"Related Party" with respect to any Principal means (i) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (ii) any trust
(including any related trustee), corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of such Principal and/or such
other Persons referred to in the immediately preceding clause (i).
Asset Sales
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee with respect to any Asset Sale
involving in excess of $1.0 million) of the assets or Equity Interests issued or
sold or otherwise disposed of and (ii) at least 75% of the consideration
therefor received by the Company or such Restricted Subsidiary is in the form of
cash or Cash Equivalents; provided that the amount of (x) any liabilities (as
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shown on the Company's or such Restricted Subsidiary's most recent balance
sheet) of the Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes or
any guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any securities, notes or
other obligations received by the Company or any such Restricted Subsidiary from
such transferee that are immediately converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or its Restricted Subsidiary, as the case may be, may apply such Net
Proceeds from such Asset Sale to permanently reduce Senior Debt either in
accordance with its terms, if applicable, or on terms more favorable to the
Company than such terms or, to the extent not required to be applied thereunder,
may, at its option, apply such Net Proceeds to repayment of Indebtedness of a
Restricted Subsidiary (in the case of Net Proceeds from an Asset Sale effected
by a Restricted Subsidiary) or to an investment in a Restricted Subsidiary or in
another business or capital expenditure or other long-term/tangible assets, in
each case, in the same or a similar line of business as the Company or any of
its Restricted Subsidiaries were engaged in on the date of the Indenture or in
businesses reasonably related thereto. Pending the final application of any such
Net Proceeds, the Company may temporarily reduce Indebtedness under the
Revolving Credit Facility or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company will be required to make an
offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the date of purchase, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the Company's or
any of its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or such Restricted Subsidiary or dividends or
distributions payable to the Company or any Restricted Subsidiary of the
Company); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Affiliate of the Company that is not a
Subsidiary (other than any such Equity Interests owned by the Company or any
Wholly Owned Restricted Subsidiary of the Company); (iii) make any principal
payment on or with respect to, or purchase, redeem, defease or otherwise acquire
or retire for value prior to a scheduled mandatory sinking fund payment date or
final maturity date any Indebtedness that is pari passu with or subordinated to
the Notes (other than the Notes); or (iv) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
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(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clause (ii) of the next succeeding paragraph), is less than
the sum of (i) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the first full fiscal quarter
after the date of the Indenture to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus (ii) 100% of
the aggregate net cash proceeds received by the Company from the issue or
sale since the date of the Indenture of Equity Interests of the Company
(other than Disqualified Stock) or of Disqualified Stock or debt securities
of the Company that have been converted into such Equity Interests (other
than Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Restricted Subsidiary of the Company and other than
Disqualified Stock or convertible debt securities that have been converted
into Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was made after the date of the Indenture is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost
of disposition, if any) and (B) the initial amount of such Restricted
Investment.
The foregoing provisions will not prohibit (i) the payment of any dividend
or distribution within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Equity Interests of the Company in exchange for, or out of
the net cash proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of, other Equity Interests of the Company
(other than any Disqualified Stock); provided that the amount of any such net
cash proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (c) (ii) of the
preceding paragraph; (iii) the defeasance, redemption, repurchase or other
acquisition of pari passu or subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness or the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of Equity Interests of the Company (other than Disqualified Stock);
(iv) the purchase, redemption or other acquisition prior to the stated maturity
thereof of Indebtedness that is subordinated to the Notes in exchange for or out
of the net cash proceeds of a substantially concurrent issue and sale (other
than to the Company or any of its Restricted Subsidiaries) of new Indebtedness;
provided that (x) the principal amount of such new Indebtedness shall not exceed
the principal amount of Indebtedness so refinanced (plus the amount of such
reasonable expenses incurred in connection therewith), (y) such new Indebtedness
shall have a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being refinanced, and (z)
the new Indebtedness shall be subordinate in right of payment to the Notes; (v)
the repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of Holdings or the Company held by any member of Holdings' or
the Company's (or any of their Restricted Subsidiaries') management pursuant to
any management equity subscription agreement or stock option agreement or in
connection with the termination of employment of any employees or management of
Holdings or the Company or their Restricted Subsidiaries; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $2.0 million in the aggregate plus the
aggregate cash proceeds received by Holdings or the Company after the date of
the Indenture from any reissuance of Equity Interests by Holdings or the Company
to members of management of Holdings or the Company and their Restricted
Subsidiaries and no Default or Event of Default shall have occurred and be
continuing immediately after any such transaction; (vi) Investments received by
the Company and its Restricted Subsidiaries as non-cash consideration from Asset
Sales to the extent permitted by the covenant described under the caption
"--Repurchase at the Option of Holders--Asset Sales;" (vii) the payment of any
dividend or distribution by a Subsidiary of the Company to the holders of its
Common Equity
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Interests on a pro rata basis; (viii) payments to Holdings pursuant to the Tax
Sharing Agreement; (ix) the payment of any dividend or distribution by the
Company to Holdings in an aggregate amount not to exceed the Capital
Contribution, provided that the Capital Contribution shall be excluded from
clause (c)(ii) of the preceding paragraph, (x) other Restricted Payments not to
exceed $3.0 million in the aggregate, and (xi) distributions to the former
partners of Moll for tax liabilities of such partners for periods prior to the
date of the Indenture in an amount not to exceed the product of (A) the taxable
income of Moll for the related period and (B) the maximum combined federal,
state and local income tax rates applicable to a resident of New York City.
The amount of all Restricted Payments (other than cash or Cash Equivalents)
shall be the fair market value (evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee) on the
date of the Restricted Payment of the asset(s) proposed to be transferred or
issued by the Company or such Restricted Subsidiary, as the case may be,
pursuant to the Restricted Payment. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2.0 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness under the Revolving Credit Facility; provided that the
aggregate principal amount of all revolving credit Indebtedness and letters
of credit of the Company and its Subsidiaries outstanding under all Credit
Facilities after giving effect to such incurrence (with letters of credit
being deemed to have a principal amount equal to the maximum potential
liability of the Company and its Subsidiaries thereunder) does not exceed
the greater of (x) $50.0 million or (y) the amount of the Borrowing Base as
of the date of such incurrence;
(ii) Guarantees of the Indebtedness under the Revolving Credit
Facility required by the Revolving Credit Facility and Guarantees permitted
under or required by the Indenture;
(iii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness represented by (a)
the Notes and the Indenture and the incurrence by Restricted Subsidiaries
of Guarantees required or permitted to be incurred under the Indenture and
(b) the Senior Notes and the indenture governing the Senior Notes and the
incurrence by Restricted Subsidiaries of Guarantees required or permitted
to be incurred under such indenture;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Capital Lease Obligations, mortgage financings or purchase
money obligations, in each case incurred for the purpose of financing all
or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Subsidiary, in an aggregate principal amount not to exceed $10.0 million at
any time outstanding;
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(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of assets
or a new Subsidiary; provided that such Indebtedness was incurred by the
prior owner of such assets or such Subsidiary prior to such acquisition by
the Company or one of its Restricted Subsidiaries and was not incurred in
connection with, or in contemplation of, such acquisition by the Company or
one of its Restricted Subsidiaries; and provided, further that the
principal amount (or accreted value, as applicable) of such Indebtedness,
together with any other outstanding Indebtedness incurred pursuant to this
clause (vi), does not exceed $5.0 million;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
that was permitted by the Indenture to be incurred;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Wholly Owned Restricted Subsidiaries; provided, however, that
(i) if the Company is the obligor on such Indebtedness, such Indebtedness
is expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes and (ii)(A) any subsequent issuance
or transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Wholly Owned Restricted
Subsidiary and (B) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Wholly Owned Restricted
Subsidiary shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Restricted Subsidiary, as the case
may be;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of Revolving Credit Facility or
the Indenture to be outstanding; and
(x) the Guarantee by the Company of Indebtedness of a Restricted
Subsidiary of the Company that was permitted to be incurred by another
provision of this covenant.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories described in clauses (i) through (x) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be treated as
having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof. Accrual of interest, the accretion of accreted value and
the payment of interest in the form of additional Indebtedness will not be
deemed to be an incurrence of Indebtedness for purposes of this covenant.
No Senior Subordinated Debt
The Indenture provides that the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes provided, however, that no Indebtedness
of the Company shall be deemed to be contractually subordinated to any other
Indebtedness of the Company solely by virtue of being unsecured.
Liens
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien (other than Permitted Liens) upon any of their
property or assets, now owned or hereafter acquired, unless all payments due
under the Indenture and the Notes are secured on an equal and ratable basis with
the obligations so secured until such time as such obligations are no longer
secured by a Lien.
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Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to: (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the Revolving Credit
Facility as in effect as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Revolving
Credit Facility as in effect on the date of the Indenture, (c) the Indenture and
the Notes, (d) applicable law, (e) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred; (f) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (g) purchase money obligations or Capital Lease Obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired, (h)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced, (i) customary restrictions imposed on the transfer of
copyrighted or patented materials and customary provisions in agreements that
restrict the assignees of such agreements or any rights thereunder; (j)
restrictions with respect to a Subsidiary of the Company imposed pursuant to a
binding agreement which has been entered into for the sale or disposition of all
or substantially all of the Capital Stock or assets of such Subsidiary; or (k)
any restriction on the ability of the Company or any Restricted Subsidiary to
transfer any property or assets on account of a Permitted Lien.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Notes and the
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
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above under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock." The Indenture also provides that the Company may not, directly or
indirectly, lease all or substantially all of its properties or assets, in one
or more related transactions, to any other Person. The provisions of this
covenant will not be applicable to a sale, assignment, transfer, conveyance or
other disposition of assets between or among the Company and its Wholly Owned
Subsidiaries.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to or enter into any
other transaction with, or for the benefit of, any Affiliate of the Company
(each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; provided that (v) any leases
relating to real property in Germany between the Company and any of the
Principals, as in effect on the date of the Indenture, (w) any employment
agreement entered into by the Company or any of its Restricted Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Restricted Subsidiary, (x) transactions between or among the
Company and/or its Restricted Subsidiaries, (y) investment banking and
management fees in an aggregate amount no greater than $200,000 per annum plus
reimbursement of expenses to be paid by the Company to Galt Industries, Inc. or
its successors and assigns, and (z) Restricted Payments that are permitted by
the provisions of the Indenture described above under the caption "--Restricted
Payments," in each case, shall not be deemed Affiliate Transactions.
Limitation on Issuances and Sales of Capital Stock of Wholly Owned Restricted
Subsidiaries
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Restricted Subsidiary of the Company to, transfer, convey,
sell, lease or otherwise dispose of any Capital Stock of any Wholly Owned
Restricted Subsidiary of the Company to any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of such
Wholly Owned Restricted Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with the covenant described above under the caption "--Asset Sales," and (ii)
will not permit any Wholly Owned Restricted Subsidiary of the Company to issue
any of its Equity Interests (other than, if necessary, shares of its Capital
Stock constituting directors' qualifying shares) to any Person other than to the
Company or a Wholly Owned Restricted Subsidiary of the Company.
Limitations on Guarantees of Company Indebtedness by Restricted Subsidiaries
The Indenture provides that in the event that any Restricted Subsidiary,
directly or indirectly, guarantees any Indebtedness of the Company other than
the Notes (the "Other Indebtedness"), the Company shall cause such Restricted
Subsidiary to deliver to the Trustee a supplemental indenture pursuant to which
such Restricted Subsidiary shall concurrently guarantee the Company's
Obligations under the Indenture and the Notes to the same extent that such
Restricted Subsidiary guaranteed the Company's Obligations under the Other
Indebtedness (including waiver of subrogation, if any) and such Additional
Guarantee shall be on the same terms and subject to the same conditions as the
initial Guarantee given by Holdings under the Indenture unless such Other
Indebtedness is Senior Debt, in which case the Guarantee of the Notes may be
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subordinated to the Guarantee of such Senior Debt to the same extent as the
Notes are subordinated to such Senior Debt. Each Additional Guarantee shall by
its terms provide that the Additional Guarantor making such Additional Guarantee
will be automatically and unconditionally released and discharged from its
obligations under such Additional Guarantee upon the release or discharge of the
guarantee of the Other Indebtedness that resulted in the creation of such
Additional Guarantee, except a discharge or release by, or as a result of, any
payment under the guarantee of such Other Indebtedness by such Additional
Guarantor.
Additional Guarantees
The Indenture provides that (i) if the Company or any of its Restricted
Subsidiaries shall, after the date of the Indenture, transfer or cause to be
transferred, including by way of any Investment, in one or a series of
transactions (whether or not related), any assets, businesses, divisions, real
property or equipment having an aggregate fair market value (as determined in
good faith by the Board of Directors) in excess of $1.0 million to any
Restricted Subsidiary that is not a Guarantor, (ii) if the Company or any of its
Restricted Subsidiaries shall acquire another Restricted Subsidiary having total
assets with a fair market value (as determined in good faith by the Board of
Directors) in excess of $1.0 million, or (iii) if any Restricted Subsidiary
shall incur Acquired Debt, then the Company shall, at the time of such transfer,
acquisition or incurrence, (i) cause such transferee, acquired Restricted
Subsidiary or Restricted Subsidiary incurring Acquired Debt (if not then a
Guarantor) to execute a Guarantee (which by its terms will be subordinated to
the Senior Debt of such Guarantor on the same basis as the Notes are
subordinated to Senior Debt of the Company) of the Obligations of the Company
under the Notes and the Indenture in the form set forth in the Indenture and
(ii) deliver to the Trustee an Opinion of Counsel, in form reasonably
satisfactory to the Trustee, that such Guarantee is a valid, binding and
enforceable obligation of such transferee, acquired Restricted Subsidiary or
Restricted Subsidiary incurring Acquired Debt, subject to customary exceptions
for bankruptcy and equitable principles. Notwithstanding the foregoing, the
Company or any of its Restricted Subsidiaries may make a Restricted Investment
in any Wholly Owned Restricted Subsidiary of the Company without compliance with
this covenant provided that such Restricted Investment is permitted by the
covenant described under the caption, "Restricted Payments."
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company were required to file
such reports. In addition, whether or not required by the rules and regulations
of the Commission, the Company will file a copy of all such information and
reports with the Commission for public availability (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on the
Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by the subordination provisions of
the Indenture); (iii) failure by the Company to comply with the provisions
described under the captions "--Change of Control," "--Asset Sales,"
"--Restricted Payments" or "--Incurrence of Indebtedness and Issuance of
Preferred Stock" (whether or not prohibited by the subordination provisions of
the Indenture); (iv) failure by the Company for 60 days after notice to comply
with any of its other agreements in the Indenture or the Notes; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or
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evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, if such (a) default
results in the acceleration of such Indebtedness prior to its express maturity
or shall constitute a default in the payment of such Indebtedness at final
maturity of such Indebtedness, and (b) the principal amount of any such
Indebtedness that has been accelerated or not paid at maturity, when added to
the aggregate principal amount of all other Indebtedness that has been
accelerated or not paid at maturity, exceeds $5.0 million; (vi) failure by the
Company or any of its Restricted Subsidiaries to pay final judgments aggregating
in excess of $5.0 million, which judgments are not paid, discharged or stayed
for a period of 60 days; (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Restricted Subsidiaries; and (viii) except
as permitted by the Indenture, if any Note Guarantee is issued by a Restricted
Subsidiary, such Note Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor or any Person acting on behalf of any Guarantor shall
deny or disaffirm its obligations under its Note Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately; provided, that so long
as any Indebtedness permitted to be incurred pursuant to the Revolving Credit
Facility shall be outstanding, such acceleration shall not be effective until
the earlier of (i) an acceleration of any such Indebtedness under the Revolving
Credit Facility or (ii) five business days after receipt by the Company of
written notice of such acceleration. Notwithstanding the foregoing, in the case
of an Event of Default arising from certain events of bankruptcy or insolvency,
with respect to the Company or any Restricted Subsidiary that is a Significant
Subsidiary, the principal of, and premium and Liquidated Damages, if any, and
any accrued and unpaid interest on all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
the Indenture or the Notes except as provided in the Indenture. In the event of
a declaration of acceleration of the Notes because an Event of Default has
occurred and is continuing as a result of the acceleration of any Indebtedness
described in clause (v) of the preceding paragraph, the declaration of
acceleration of the Notes shall be automatically annulled if the holders of any
Indebtedness described in clause (v) have rescinded the declaration of
acceleration in respect of such Indebtedness within 30 days of the date of such
declaration and if (a) the annulment of the acceleration of the Notes would not
conflict with any judgment or decree of a court of competent jurisdiction, and
(b) all existing Events of Default, except nonpayment of principal or interest
on the Notes that became due solely because of the acceleration of the Notes,
have been cured or waived.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to July
1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then the premium specified in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, premium, if any, or interest on the Notes.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
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The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes or the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws, and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due from the trust referred to below, (ii)
the Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Cash
Equivalents, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the case may be,
and the Company must specify whether the Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
con-firming that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party
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or by which the Company or any of its Subsidiaries is bound; (vi) the Company
must have delivered to the Trustee an opinion of counsel to the effect that
after the 91st day following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; (vii) the Company must deliver to
the Trustee an Officers' Certificate stating that the deposit was not made by
the Company with the intent of preferring the Holders of Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents, and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders"), or (viii) make any change in
the foregoing amendment and waiver provisions. In addition, (a) any amendment to
the provisions of Article 10 of the Indenture (which relate to subordination)
will require the consent of the Holders of at least 75% in aggregate principal
amount of the Notes then outstanding if such amendment would adversely affect
the rights of Holders of Notes, and (b) any amendment to the provisions of
Article 10 of the Indenture or to a requirement that no legal defeasance or
covenant defeasant shall be permitted that would constitute a default under any
material agreement shall not be permitted without the consent of the holders of
the Designated Senior Debt.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make
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any change that would provide any additional rights or benefits to the Holders
of Notes (including providing for additional Note Guarantees pursuant to the
covenant entitled "Limitations on Guarantees of Company Indebtedness by
Restricted Subsidiaries" and "Additional Guarantees") or that does not adversely
affect the legal rights under the Indenture of any such Holder, or to comply
with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company or any Affiliate of the Company, to
obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. The Trustee will
be permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to Moll Industries, Inc., 1111 Northshore Drive, Suite
N-600, Knoxville, Tennessee 37919, Attention: Chief Financial Officer.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the Notes will initially be issued in the form
of one or more registered Notes in global form without coupons (each a "Global
Note"). Each Global Note will be deposited with, or on behalf of, DTC and
registered in the name of Cede & Co., as nominee of DTC, or will remain in the
custody of the Trustee pursuant to the FAST Balance Certificate Agreement
between DTC and the Trustee.
DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a member of the Federal
Reserve System, (iii) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (iv) a "Clearing Agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participation (collectively, the "Participants") and facilitates the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes to the accounts of its Participants, thereby
eliminating the need for physical transfer and delivery of certificates. DTC's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies (collectively, the "Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Holders who are not Participants may
beneficially own securities held by or on behalf of the Depository only through
Participants or Indirect Participants.
The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the Global Notes, DTC will credit the accounts of Participants
designated by the Initial Purchasers with an interest in the Global Note and
(ii) ownership of the Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC (with respect
to the interest of Participants), the Participants and the Indirect
Participants. The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own and that security
interest in negotiable instruments can
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only be perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer Notes or to pledge the Notes as collateral
will be limited to such extent.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or holder
of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of certificated securities (the "Certificated Securities"), and will
not be considered the owners or Holders thereof under the Indenture for any
purpose, including with respect to giving of any directions, instruction or
approval to the Trustee thereunder. As a result, the ability of a person having
a beneficial interest in Notes represented by a Global Note to pledge or
transfer such interest to persons or entities that do not participate in DTC's
system or to otherwise take action with respect to such interest, may be
affected by the lack of a physical certificate evidencing such interest.
Accordingly, each holder owning a beneficial interest in a Global Note must
rely on the procedures of DTC and, if such holder is not a Participant or an
Indirect Participant, on the procedures of the Participant through which such
holder owns its interest, to exercise any rights of a holder of Notes under the
Indenture or such Global Note. The Company understands that under existing
industry practice, in the event the Company requests any action of holders of
Notes or a holder that is an owner of a beneficial interest in a Global Note
desires to take any action that DTC, as the holder of such Global Note, is
entitled to take, DTC would authorize the Participants to take such action and
the Participant would authorize holders owning through such Participants to take
such action or would otherwise act upon the instruction of such holders. Neither
the Company nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of Notes by DTC,
or for maintaining, supervising or reviewing any records of DTC relating to such
Notes.
Payments with respect to the principal of, premium, if any, and interest
on, any Notes represented by a Global Note registered in the name of DTC or its
nominee on the applicable record date will be payable by the Trustee to or at
the direction of DTC or its nominee in its capacity as the registered holder of
the Global Note representing such Notes under the Indenture. Under the terms of
the Indenture, the Company and the Trustee may treat the persons in whose names
the Notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving such payment and for any and all other purposes
whatsoever. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of interest in the Global Note (including principal, premium, if any, and
interest), or to immediately credit the accounts of the relevant Participants
with such payment, in amounts proportionate to their respective holdings in
principal amount of beneficial interest in the Global Note as shown on the
records of DTC. Payments by the Participants and the Indirect Participants to
the beneficial owners of interests in the Global Note will be governed by
standing instructions and customary practice and will be the responsibility of
the Participants or the Indirect Participants and DTC.
Certificated Securities
If (i) DTC notifies the Company in writing that it is no longer willing or
able to act as a depository or DTC ceases to be registered as a clearing agency
under the Exchange Act and the Company is unable to locate a qualified successor
within 90 days, (ii) the Company, at its option, notifies the Trustee in writing
that it elects to cause the issuance of Notes in definitive form under the
Indenture or (iii) upon the occurrence of certain other events, then, upon
surrender by DTC of its Global Notes, Certificated Securities will be issued to
each person that DTC identifies as the beneficial owner of the Notes represented
by the Global Notes. Upon any such issuance, the Trustee is required to register
such Certificated Securities in the name of such person or persons (or the
nominee of any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).
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Same Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available same day
funds to the accounts specified by the holder of interests in such Global Note.
With respect to Certificated Notes, the Company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available same day funds to the accounts specified by
the holders thereof or, if no such account is specified, by mailing a check to
each such holder's registered address. The Company expects that secondary
trading in the Certificated Notes will also be settled in immediately available
funds.
Registration Rights; Liquidated Damages
The Company and the Initial Purchasers entered into the Registration Rights
Agreement on the Closing Date. In the Registration Rights Agreement, the Company
has agreed to file the Exchange Offer Registration Statement with the Commission
within 45 days of the Closing Date, and use its best efforts to have it declared
effective at the earliest possible time. The Company has also agreed to use its
best efforts to cause the Exchange Offer Registration Statement to be effective
continuously, to keep the Exchange Offer open for a period of not less than 20
business days and cause the Exchange Offer to be consummated no later than the
30th business day after it is declared effective by the Commission. Pursuant to
the Exchange Offer, certain Holders of Notes which constitute Transfer
Restricted Securities (as defined below) may exchange their Transfer Restricted
Securities for registered Exchange Notes. To participate in the Exchange Offer,
each Holder must represent that it is not an affiliate of the Company, it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the Exchange
Notes that are issued in the Exchange Offer, and that it is acquiring the
Exchange Notes in the Exchange Offer in its ordinary course of business.
If (i) the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any Holder of Notes which are Transfer Restricted Securities
notifies the Company prior to the 20th business day following the consummation
of the Exchange Offer that (a) it is prohibited by law or Commission policy from
participating in the Exchange Offer, (b) it may not resell the Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus, and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by it, or (c) it is a
broker-dealer and holds Notes acquired directly from the Company or any of the
Company's affiliates, the Company will file with the Commission a Shelf
Registration Statement to register for public resale the Transfer Restricted
Securities held by any such Holder who provide, the Company with certain
information for inclusion in the Shelf Registration Statement.
For the purposes of the Registration Rights Agreement, "Transfer Restricted
Securities" means each (A) Note, until the earliest to occur of (i) the date on
which such Note is exchanged in the Exchange Offer for an Exchange Note which is
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Securities Act, (ii) the date on
which such Note has been disposed of in accordance with a Shelf Registration
Statement (and purchasers thereof have been issued Exchange Notes) or (iii) the
date on which such Note is distributed to the public pursuant to Rule 144 under
the Securities Act and each (B) Exchange note held by a Broker Dealer until the
date on which such Exchange Note is disposed of by a Broker Dealer pursuant to
the "Plan of Distribution" contemplated by the Exchange Offer Registration
Statement (including the delivery of the Prospectus contained therein).
The Registration Rights Agreement provides that (i) if the Company fails to
file an Exchange Offer Registration Statement with the Commission on or prior to
the 45th day after the Closing Date, (ii) if the Exchange Offer Registration
Statement is not declared effective by the Commission on or prior to the 180th
day after the Closing Date, (iii) if the Exchange Offer is not consummated on or
before the 30th business day after the Exchange Offer Registration Statement is
declared effective (iv) if obligated to file the Shelf Registration Statement
and the Company fails to file the Shelf Registration Statement with the
Commission on or prior to the 60th day after such filing obligation arises, (v)
if obligated to file a Shelf Registration
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Statement and the Shelf Registration Statement is not declared effective on or
prior to the 90th day after the obligation to file a Shelf Registration
Statement arises, or (vi) if the Exchange Offer Registration Statement or the
Shelf Registration Statement, as the case may be, is declared effective but
thereafter ceases to be effective or useable in connection with resales of the
Transfer Restricted Securities, for such time of non-effectiveness or
non-usability (each such event being a Registration Default), the Company agrees
to pay to each Holder of Transfer Restricted Securities affected thereby
Liquidated Damages in an amount equal to $0.05 per week per $1,000 in principal
amount of Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues for the first 90 day
period immediately following the occurrence of such Registration Default. The
amount of the Liquidated Damages shall increase by an additional $0.05 per week
per $1,000 in principal amount of Transfer Restricted Securities with respect to
each subsequent 90 day period until all Registration Defaults have been cured,
up to a maximum amount of Liquidated Damages of $0.50 per week per $1,000 in
principal amount of Transfer Restricted Securities. The Company shall not be
required to pay Liquidated Damages for more than one Registration Default at any
given time. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
All accrued Liquidated Damages shall be paid by the Company to Holders
entitled thereto by wire transfer to the accounts specified by them or by
mailing checks to their registered address if no such accounts have been
specified
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Guarantee" means any guarantee of the Company's obligations
under the Indenture and the Notes issued after the Issue Date as described in
"--Certain Covenants--Limitations on Guarantees of Company Indebtedness by
Restricted Subsidiaries" and "--Certain Covenants--Additional Guarantees."
"Additional Guarantor" means any Subsidiary of the Company that guarantees
the Company's obligations under the Indenture and the Notes issued after the
Issue Date as described in "--Certain Covenants--Limitations on Guarantees of
Company Indebtedness by Restricted Subsidiaries" and "--Certain
Covenants--Additional Guarantees."
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control'
(including, with correlative meanings, the terms "controlling," "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 or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "--Change of Control" and/or the
provisions described above under the caption "--Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Company or any of its Restricted Subsidiaries of Equity
Interests of any of the Company's Subsidiaries, in the case of either clause (i)
or (ii), whether in a
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single transaction or a series of related transactions (a) that have a fair
market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, (ii)
an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to the
Company or to another Wholly Owned Restricted Subsidiary, and (iii) a Restricted
Payment that is permitted by the covenant described above under the caption
"--Restricted Payments" will not be deemed to be Asset Sales.
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
85% of the face amount of all accounts receivable owned by the Company and its
Restricted Subsidiaries as of such date that are not more than 90 days past due,
plus (b) 50% of the book value of all inventory (excluding work in progress)
owned by the Company and its Restricted Subsidiaries as of such date, plus (c)
25% of the book value of all inventory owned by the Company and its Restricted
Subsidiaries as of such date that is work in progress, all calculated on a
consolidated basis and in accordance with GAAP. To the extent that information
is not available as to the amount of accounts receivable or inventory or trade
payables as of a specific date, the Company may utilize the most recent
available information for purposes of calculating the Borrowing Base.
"Business Day" means any day that is not a Legal Holiday.
"Capital Contribution" means the contribution (including the purchase of
Capital Stock that is not Disqualified Stock) by Holdings to the Company of up
to all of the gross proceeds from the sale by Holdings of its 13 1/2% Senior
Discount Notes due 2009.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation, a division of the McGraw-Hill Companies, Inc., and in each case
maturing within six months after the date of acquisition.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, without
duplication, (i) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income), plus (ii) provision for
taxes based on income or profits of such Person and its Restricted Subsidiaries
for such period, to the extent that such provision for taxes was included in
computing such Consolidated Net Income, plus (iii) consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to
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the extent that any such expense was deducted in computing such Consolidated Net
Income, plus (iv) depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period and deferred finance charges) and other non-cash
charges of such Person and its Restricted Subsidiaries for such period
(excluding any such non-cash charges to the extent that it represents an accrual
of or reserve for cash charges in any future period or amortization of a prepaid
cash charges that was paid in a prior period) to the extent that such
depreciation, amortization and other non-cash charges were deducted in computing
such Consolidated Net Income. Notwithstanding the foregoing, the provision for
taxes on the income or profits of, and the depreciation and amortization and
other non-cash charges of, a Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
that a corresponding amount would be permitted at the date of determination to
be dividended to the Company by such Subsidiary without prior governmental
approval (that has not been obtained), and without direct or indirect
restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Restricted Subsidiary
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
Company or any of its Wholly Owned Restricted Subsidiaries, (ii) the Net Income
of any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Restricted Subsidiary of such
Person, (y) all investments as of such date in unconsolidated Restricted
Subsidiaries and in Persons that are not Restricted Subsidiaries (except, in
each case, Permitted Investments), and (z) all unamortized debt discount and
expense and unamortized deferred charges as of such date, all of the foregoing
determined in accordance with GAAP.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Revolving Credit Facility) or
commercial paper facilities, in each case with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Revolving Credit Facility and (ii) after the Revolving Credit Facility has been
terminated, any other Senior Debt permitted under the
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Indenture the principal amount of which is $25 million or more and that has been
designated by the Company in writing to the Trustee as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Existing Indebtedness" means up to $21.7 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Revolving Credit Facility) in existence on the date of
the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon)
and (iv) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
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"GAAP" means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means each Subsidiary of the Company, if any, that executes a
Guarantee of the obligations of the Company under the Indenture and the Notes in
accordance with the covenants described under the captions "--Certain
Covenants--Limitations on Guarantees of Company Indebtedness by Restricted
Subsidiaries" and "--Certain Covenants--Additional Guarantees," and their
successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holdings" means AMM Holdings, Inc., a Delaware corporation, and any
successor thereto.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any Indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness. Indebtedness shall include interest accruing after the filing of
any bankruptcy petition whether or not the claim for such interest is admitted
as a claim after such filing in such proceeding.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment. If the Company or any
Restricted Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Restricted 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 Equity Interests of such Restricted Subsidiary not sold
or disposed of in an amount determined as provided in the final paragraph of the
covenant described above under the caption "--Restricted Payments."
"Legal Holiday" means a Saturday, a Sunday or a day on which commercial
banks in the City of New York or at a place of payment are authorized or
required by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
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"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means the additional amounts (if any) payable by the
Company in the event of a Registration Default under, and as defined in, the
Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the Revolving Credit Facility) secured by a Lien
on the asset or assets that were the subject of such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities (including any
amounts payable in respect of obligations to register securities of the Company
under the Securities Act) payable under the documentation governing any
Indebtedness.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer, or the principal
accounting officer of the Company, that meets the requirements of the Indenture.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of the Indenture. The
counsel may be an employee of or counsel to the Company (or any Guarantor, if
applicable), any Subsidiary of the Company or the Trustee.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company that is engaged in the same or a similar
line of business as the Company and its Restricted Subsidiaries were engaged in
on the date of the Indenture; (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of such Investment (i) such Person becomes a Restricted
Subsidiary of the Company that is engaged in the same or a similar line of
business as the Company and its Subsidiaries were engaged in on the date of the
Indenture or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all
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of its assets to, or is liquidated into, the Company or a Restricted Subsidiary
of the Company that is engaged in the same or a similar line of business as the
Company and its Restricted Subsidiaries were engaged in on the date of the
Indenture; (d) any Restricted Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--Repurchase at
the Option of Holders--Asset Sales"; (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock) of
the Company; and (f) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (f) that are at the time
outstanding, not to exceed $5.0 million.
"Permitted Junior Securities" means Equity Interests in the Company or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to a
greater extent than, the Notes are subordinated to Senior Debt pursuant to
Article 10 of the Indenture.
"Permitted Liens" means
(i) any Lien existing on property of the Company or any Subsidiary on
the date of the Indenture securing Indebtedness outstanding on such date;
(ii) any Lien securing obligations under Senior Debt and any Guarantee
thereof, which obligations or Guarantee are permitted by the terms of the
Indenture to be incurred and outstanding;
(iii) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or which are
being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP are being maintained;
(iv) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of
business which are not delinquent or which are being contested in good
faith and by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;
(v) Liens (other than any Lien imposed by ERISA) consisting of pledges
or deposits required in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other social security
legislation;
(vi) Liens on property of the Company or any Subsidiary securing (a)
the non-delinquent performance of bids, trade contracts (other than for
borrowed money), leases and statutory obligations, (b) surety bonds
(excluding appeal bonds and bonds posted in connection with court
proceedings or judgments) and (c) other non-delinquent obligations of a
like nature, including pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security legislation, in each case, incurred in
the ordinary course of business;
(vii) Liens consisting of judgment or judicial attachment Liens and
Liens securing contingent obligations on appeal bonds and other bonds
posted in connection with court proceedings or judgments; provided that the
enforcement of such Liens is effectively stayed and all such Liens in the
aggregate at any time outstanding for the Company and its Subsidiaries do
not exceed $3.0 million;
(viii) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the businesses of the Company and
its Subsidiaries taken as a whole;
(ix) purchase money security interests on any property acquired by the
Company or any Subsidiary in the ordinary course of business, securing
Indebtedness incurred or assumed for the purpose of financing all or any
part of the cost of acquiring such property; provided that (a) any such
Lien attaches to such property concurrently with or within 90 days after
the acquisition thereof, (b) such Lien attaches solely to
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the property so acquired in such transaction, (c) the principal amount of
the Indebtedness secured thereby does not exceed 100% of the cost of such
property and (d) the principal amount of the Indebtedness secured by all
such purchase money security interests shall not at any time exceed $5.0
million;
(x) Liens securing obligations in respect of Capital Lease Obligations
on assets subject to such leases, provided that such Capital Lease
Obligations are otherwise permitted hereunder;
(xi) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of setoff or similar rights
and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; provided that (a) such deposit account is
not a dedicated cash collateral account and is not subject to restrictions
against access by the Company in excess of those set forth by regulations
promulgated by the Federal Reserve Board, and (b) such deposit account is
not intended by the Company or any Subsidiary to provide collateral to the
depository institution;
(xii) Liens in favor of the Company or any Wholly Owned Restricted
Subsidiary;
(xiii) Liens on property of a Person existing at the time such Person
becomes a Restricted Subsidiary or such Person is merged into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of
such merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with the Company;
(xiv) Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company; provided that such
Liens were in existence prior to the contemplation of such acquisition;
(xv) extensions, renewals and replacements of Liens referred to in
clauses (i) through (xiv) above; provided that any such extension, renewal
or replacement Lien is limited to the property or assets covered by the
Lien extended, renewed or replaced and does not secure any Indebtedness in
addition to that secured immediately prior to such extension, renewal or
replacement; and
(xvi) Liens securing other Indebtedness of the Company and its
Subsidiaries not expressly permitted by clauses (i) through (xv) above;
provided that the aggregate amount of the Indebtedness secured by Liens
permitted pursuant to this clause (xvi) does not exceed $3.0 million in the
aggregate and provided, further, that such Indebtedness was permitted to be
incurred by the terms of the Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness outstanding or available to be borrowed of the Company or any of
its Restricted Subsidiaries; provided that: (i) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness outstanding or available to be borrowed so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness outstanding or
available to be borrowed being extended, refinanced, renewed, replaced, defeased
or refunded; (iii) if the Indebtedness outstanding or available to be borrowed
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness outstanding or available to be borrowed being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or by the Restricted Subsidiary
who is the obligor on the Indebtedness outstanding or available to be borrowed
being extended, refinanced, renewed, replaced, defeased or refunded.
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"Public Equity Offering" means a public offering of Equity Interests (other
than Disqualified Stock) of (i) the Company or (ii) Holdings, to the extent the
net proceeds thereof are contributed to the Company as a capital contribution to
capital stock, in each case, resulting in cash proceeds to the Company of at
least $25 million.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any subsidiary of the Company on the date of
this Indenture that is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the credit facility among the Company,
Anchor Holdings, the lenders party thereto in their capacities as lenders
thereunder and NationsBank, N.A., as agent, 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 by the covenant described under "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock") 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.
"Senior Debt" means (i) all Indebtedness outstanding under the Revolving
Credit Facility and all Hedging Obligations with respect thereto, (ii) any other
Indebtedness permitted to be incurred by the Company or any Restricted
Subsidiary under the terms of the Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes or any Guarantee of the Notes by a
Restricted Subsidiary and (iii) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will not
include (w) any liability for federal, state, local or other taxes owed or owing
by the Company, (x) any Indebtedness of the Company to any of its Subsidiaries
or other Affiliates, (y) any trade payables or (z) any Indebtedness that is
incurred in violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution,
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary of the
Company than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; and (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
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foregoing conditions and was permitted by the covenant described under the
caption "--Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," the
Company shall be in default of such covenant). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under the covenant described
under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Preferred Stock," and (ii) no Default or Event of Default would be in
existence following such designation.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax Sharing Agreement" means any tax allocation agreement between the
Company or any of its Restricted Subsidiaries with the Company or any direct or
indirect shareholder of the Company with respect to consolidated or combined tax
returns including the Company or any of its Restricted Subsidiaries, but, in
each case, only to the extent that amounts payable from time to time by the
Company or any such Restricted Subsidiary under any such agreement do not exceed
the corresponding tax payments that the Company or such Restricted Subsidiary
would have been required to make to any relevant taxing authority had the
Company or such Restricted Subsidiary not joined in such consolidated or
combined returns, but instead had filed returns including only the Company and
its Restricted Subsidiaries.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such
Person.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of certain indebtedness of the Company is subject to
and qualified in its entirety by reference to the detailed provisions of the
agreements and instruments to which the summary relates. Copies of such
agreements and instruments are available upon request.
SENIOR NOTES
On March 27,1997, Anchor issued $100 million principal amount of 11 3/4%
Senior Notes due 2004 (the "Original Senior Notes") pursuant to exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. Anchor consummated an
exchange offer registered under the Securities Act to exchange the Original
Senior Notes for the Senior Notes, which have terms substantially identical in
all material respects to the Original Senior Notes. Interest is payable
semiannually on each April 1 and October 1. Immediately after the consummation
of the Merger, the Senior Notes have become unsecured obligations of the Company
senior to all subordinated debt of the Company and rank pari passu with all
other existing and future senior debt of the Company and mature on April 1,
2004. The Senior Notes are guaranteed on a senior basis (the "Senior Note
Guarantee") by Anchor Holdings (the "Senior Notes Guarantor"). The Senior Note
Guarantee is an unconditional obligation of the Senior Notes Guarantor. Pursuant
to the Senior Notes Indenture, the Senior Notes have also been guaranteed by
certain Restricted Subsidiaries (as defined in the Senior Notes Indenture) of
the Company. Such guarantees are unconditional obligations of such Restricted
Subsidiaries.
The Senior Notes may be redeemed at the option of the Company in whole or
in part at any time on or after April 1, 2001 in cash at the redemption prices
set forth in the Senior Notes Indenture, plus accrued and unpaid interest and
Liquidated Damages (as defined in the Senior Notes Indenture), if any, thereon
to the date of redemption. In addition, at any time prior to April 1, 2000, the
Company may on any one or more occasions redeem up to 35% of the initially
outstanding aggregate principal amount of the Senior Notes at a redemption price
equal to 110.75% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net proceeds of one or more Public Equity Offerings (as defined in the
Senior Notes Indenture); provided that, in each case, at least 65% of the
initially outstanding aggregate principal amount of the Senior Notes remains
outstanding immediately after the occurrence of any such redemption.
The Senior Notes Indenture contains various restrictive covenants that
limit, among other things, the ability of the Company to: (i) pay dividends,
redeem capital stock or make certain other restricted payments or investments,
(ii) incur additional indebtedness or issue preferred equity interests, (iii)
merge, consolidate or sell all or substantially all of its assets, (iv) create
liens on assets and (v) enter into certain transactions with affiliates or
related persons.
Events of default under the Senior Notes Indenture include, among other
things, (i) default for 30 days in the payment when due of interest on the
Senior Notes; (ii) default in payment when due of the principal of or premium,
if any, on the Senior Notes; (iii) failure by the Company to comply with the
covenants contained in the Senior Notes Indenture, subject in certain instances
to grace periods; (iv) failure by the Company or the Senior Notes Guarantor for
60 days after notice to comply with any of its other agreements in the Senior
Notes Indenture, the Senior Notes or the Senior Note Guarantee; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness (as defined in the
Senior Notes Indenture) for money borrowed by the Company or any of its
Restricted Subsidiaries (as defined in the Senior Notes Indenture) (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Senior Notes Indenture, if such (a) default results in the
acceleration of such Indebtedness prior to its express maturity or shall
constitute a default in the payment of such Indebtedness at final maturity of
such Indebtedness, and (b) the principal amount of any such Indebtedness that
has been accelerated or not paid at maturity, when added to the aggregate
principal amount of all other Indebtedness that has been accelerated or not paid
at maturity, exceeds $5.0 million; (vi) failure by the Company or any of its
Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are
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<PAGE> 90
not paid, discharged or stayed for a period of 60 days; (vii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Restricted
Subsidiaries; and (viii) except as permitted by the Senior Notes Indenture, any
Senior Note Guarantee issued by a Senior Notes Guarantor shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Senior Notes Guarantor or any Person
acting on behalf of any Senior Notes Guarantor shall deny or disaffirm its
obligations under its Senior Note Guarantee.
CONNECTICUT NOTES AND GRANT
The Company has issued a series of notes (the "Connecticut Notes") to the
Connecticut Development Authority in the aggregate principal amount of $605,000.
Each such note has a maturity of six years and bears interest at a rate of 5%
per annum. The Company has also received a grant of $1,000,000 from the State of
Connecticut, Department of Economic Development. Such grant is subject to
certain requirements, among other things, that the Company: (i) retain
operations in Connecticut for no less than 10 years and (ii) fund at least 50%
of the entire project. Failure to meet these conditions would require immediate
repayment of all amounts advanced to the Company ($1,479,928 as of December 31,
1997) and further, such failure would constitute an event of default under the
Connecticut Notes.
REVOLVING CREDIT FACILITY
General. Concurrently with the Offering, the Company amended its then
existing credit facility (as amended, the "Revolving Credit Facility") with
NationsBank, N.A., as Agent and sole lender. The Revolving Credit Facility
provides for revolving loans to the Company in an aggregate amount not to exceed
$50.0 million, with a $10.0 million sublimit for the issuance of standby and
commercial letters of credit. Additionally, Anchor Holdings has guaranteed the
Company's obligations under the Revolving Credit Facility. It is anticipated
that the Revolving Credit Facility will be syndicated.
Availability. Borrowings under the Revolving Credit Facility are subject
to a borrowing base equal to the sum of (a) 85% of "eligible receivables", (b)
50% of "eligible inventory" and (c) the lesser of $5,000,000 and 25% of
"eligible inventory" which is work in progress (as such terms are defined in the
Revolving Credit Facility), valued at the lesser of book value or fair market
value.
Security. The Revolving Credit Facility is secured by (i) a first priority
perfected security interest in (a) 100% of the equity interests in all domestic
subsidiaries of the Company, (b) in the event that any foreign subsidiary of the
Company which is a direct foreign subsidiary of the Company or any of its
domestic subsidiaries shall have 5% or more of consolidated total assets or
consolidated EBITDA, 65% of the equity interests in such foreign subsidiary, and
(c) all of the inventory, trademarks, trademark licenses, accounts receivable,
cash and cash equivalents maintained on deposit with the Agent and books and
records relating to the foregoing, of the Company and its domestic subsidiaries,
which assets shall not be subject to any other lien or encumbrance, except for
liens permitted under the Revolving Credit Facility, and (ii) a negative pledge
(subject to certain carve-outs) upon all other present and future assets and
properties of the Company and all of the domestic and foreign subsidiaries of
the Company (including, without limitation, accounts receivable, inventory, real
property, machinery, equipment, contracts, trademarks, copyrights, patents,
license agreements, and general intangibles).
The foregoing security shall ratably secure the Revolving Credit Facility
and any interest rate swap/foreign currency swap or similar agreements with a
lender (or any affiliate of a lender) under the Revolving Credit Facility.
Maturity. The Revolving Credit Facility will mature on June 30, 2003.
Interest Rate. The Revolving Credit Facility bears interest at a rate
equal to IBOR plus an applicable margin, which initially is 200 basis points or
the Base Rate (defined as the higher of (i) the prime rate of NationsBank, N.A.
and (ii) the Federal Funds rate plus 1/2%) plus an applicable margin, which
initially is 100 basis points. The Company may select interest periods of one,
two, three or six months for IBOR loans,
87
<PAGE> 91
subject to availability. A penalty rate shall apply on all loans in the event of
default at a rate per annum of 2% above the applicable interest rate.
Covenants. The Revolving Credit Facility contains covenants customary for
working capital financings, including, without limitation: (i) maximum leverage
and interest coverage ratios and minimum net worth; (ii) restrictions on capital
expenditures, incurrence of additional indebtedness, dividends and redemptions;
and (iii) restrictions of mergers, acquisitions and sales of assets.
Events of Default. The Revolving Credit Facility contains events of
default customary for working capital financings, including, without limitation:
(i) non payment of principal, interest, fees or other amounts, (ii) violation of
covenants, and (iii) inaccuracy of representations and warranties.
88
<PAGE> 92
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States Federal income tax
consequences relevant to the purchase, ownership, and disposition of Notes by an
initial purchaser of Notes that, for United States Federal income tax purposes,
is not a "United States person" as defined below (a "Non-U.S. Holder"). This
summary is based upon existing United States Federal income tax law, which is
subject to change, possibly retroactively. This summary does not discuss all
aspects of United States Federal income taxation which may be important to
particular Non-U.S. Holders in light of their individual investment
circumstances, such as Notes held by investors subject to special tax rules
(e.g., financial institutions, insurance companies, broker-dealers, and tax-
exempt organizations) or to persons that will hold the Notes as a part of a
straddle, hedge, or synthetic security transaction for United States Federal
income tax purposes or that have a functional currency other than the United
States dollar, all of whom may be subject to tax rules that differ significantly
from those summarized below. In addition, this summary does not discuss any
foreign, state, or local tax considerations. This summary assumes that investors
will hold their Notes as "capital assets" (generally, property held for
investment) under the United States Internal Revenue Code of 1986, as amended
(the "Code"). Prospective investors are urged to consult their tax advisors
regarding the United States Federal, state, local, and foreign income and other
tax considerations of the purchase, ownership, and disposition of the Notes.
For purposes of this summary, a "United States person" is (i) an individual
who is a citizen or resident of the United States, (ii) a corporation,
partnership, or other entity created or organized under the laws of the United
States or any state or political subdivision thereof, (iii) an estate that is
subject to United States Federal income taxation without regard to the source of
its income, or (iv) a trust whose administration is subject to the primary
supervision of a United States court and which has one or more United States
persons who have the authority to control all substantial decisions of the
trust.
PAYMENTS OF INTEREST
Interest paid by the Company to Non-U.S. Holders will not be subject to
United States Federal income or withholding tax if the requirements of section
871(h) or 881(c) of the Code are satisfied as described below under the heading
"Owners Statement Requirement," and provided that (i) such holder does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote, and (ii) such holder is
not a controlled foreign corporation that is related to the Company through
stock ownership, a foreign tax-exempt organization or foreign private foundation
for United States Federal income tax purposes. Notwithstanding the above, a
Non-U.S. Holder that is engaged in the conduct of a United States trade or
business will be subject to (i) United States Federal income tax on interest
that is effectively connected with the conduct of such trade or business and
(ii) if the Non-U.S. Holder is a corporation, a United States branch profits tax
equal to 30% of its "effectively connected earnings and profits" as adjusted for
the taxable year, unless the holder qualifies for an exemption from such tax or
a lower tax rate under an applicable treaty.
GAIN ON DISPOSITION
A Non-U.S. Holder will generally not be subject to United States Federal
income tax on gain recognized on a sale, redemption, or other disposition of a
Note unless (i) the gain is effectively connected with the conduct of a trade or
business within the United States by the Non-U.S. Holder or (ii) in the case of
a Non-U.S. Holder who is a nonresident alien individual, such holder is present
in the United States for 183 or more days during the taxable year and certain
other requirements are met. Any such gain that is effectively connected with the
conduct of a United States trade or business by a Non-U.S. Holder will be
subject to United States Federal income tax on a net income basis in the same
manner as if such holder were a United States person and, if such Non-U.S.
Holder is a corporation, such gain may also be subject to the 30% United States
branch profits tax described above.
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<PAGE> 93
FEDERAL ESTATE TAXES
A Note held by an individual who at the time of death is not a citizen or
resident of the United States will not be subject to United States Federal
estate tax as a result of such individual's death, provided that (i) the
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to vote
and (ii) the interest accrued on the Note was not effectively connected with the
conduct of a United States trade or business.
OWNER'S STATEMENT REQUIREMENT
Sections 871(h) and 881(c) of the Code require that either the beneficial
owner of a Note or a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business (a "Financial Institution") and that holds a Note on behalf of such
owner file a statement with the Company or its agent to the effect that the
beneficial owner is not a United States person in order to avoid withholding of
United States Federal income tax. Under current regulations, this requirement
will be satisfied if the Company or its agent receives (i) a statement (an
"Owner's Statement") from the beneficial owner of a Note in which such owner
certifies, under penalties of perjury, that such owner is not a United States
person and provides such owner's name and address or (ii) a statement from the
Financial Institution holding the Note on behalf of the beneficial owner in
which the Financial Institution certifies, under penalties of perjury, that it
has received the Owner's Statement together with a copy of the Owner's
Statement. The beneficial owner must inform the Company or its agent (or, in the
case of a statement described in clause (ii) of the immediately preceding
sentence, the Financial Institution) within 30 days of any change in information
on the Owner's Statement. The foregoing certifications may be made on Internal
Revenue Service Form W-8.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Current United States Federal income tax law provides that in the case of
payments of interest to Non-U.S. Holders, the 31% backup withholding tax will
not apply to payments made outside the United States by the Company or a paying
agent on a Note if an Owner's Statement is received or an exemption has
otherwise been established; provided in each case that the Company or the paying
agent, as the case may be, does not have actual knowledge that the payee is a
United States person.
Under current Treasury Regulations, payments of the proceeds of the sale of
a Note to or through a foreign office of a "broker" will not be subject to
backup withholding but will be subject to information reporting if the broker is
a United States person, a controlled foreign corporation for United States
Federal income tax purposes, or a foreign person 50% or more of whose gross
income is from a United States trade or business for a specified three-year
period, unless the broker has in its records documentary evidence that the
holder is not a United States person and certain conditions are met or the
holder otherwise establishes an exemption. Payment of the proceeds of a sale to
or through the United States office of a broker is subject to backup withholding
and information reporting unless the holder certifies its non-United States
status under penalties of perjury or otherwise establishes an exemption.
Recently, the Treasury Department has promulgated final regulations (the
"Final Regulations") regarding the withholding and information reporting rules
discussed above. In general, the Final Regulations do not significantly alter
the substantive withholding and information reporting requirements but unify
current certification procedures and forms and clarify reliance standards. Under
the Final Regulations, special rules apply which permit the shifting of primary
responsibility for withholding to certain financial intermediaries acting on
behalf of beneficial owners. The Final Regulations are generally effective for
payments made after December 31, 1998, subject to certain transition rules.
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<PAGE> 94
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of one year from
the Consummation Deadline (as defined in the Registration Rights Agreement) or
such shorter period as will terminate when all Old Notes covered by the
Registration Statement of which this Prospectus forms a part have been said
pursuant thereto (such period being hereinafter referred to as the "Prospectus
Delivery Period"), it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
During the Prospectus Delivery Period, the Company will promptly send
additional copies of the Prospectus and any amendment or supplement to this
Prospectus to any broker-dealer that requests such document. The Company has
agreed to pay all expenses incident to the Exchange Offer other than commissions
or concessions of any brokers or dealers and will indemnify the holders of the
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
New Notes will be passed upon for the Company by Skadden, Arps, Slate, Meagher &
Flom LLP, New York, New York, which has acted as counsel for the Company in
connection with the Exchange Offer.
EXPERTS
The audited consolidated financial statements included in this Prospectus
and elsewhere in the Registration Statement of which this Prospectus forms a
part of Anchor Holdings, Inc. for the years ended December 31, 1995, 1996 and
1997, have been audited by PricewaterhouseCoopers LLP, independent accountants,
as stated in their report with respect thereto, and are being included herein in
reliance upon authority of said firm as experts in giving said reports.
The audited consolidated financial statements included in the Prospectus
and elsewhere in the Registration Statement of which this Prospectus forms a
part of Moll PlastiCrafters Limited Partnership for the years ended December 31,
1995, 1996 and 1997, and the audited combined financial statements included in
the Prospectus and elsewhere in the Registration Statement of which this
Prospectus forms a part of The Hanning Companies for the years ended December
31, 1995 and 1996, have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their reports with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
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<PAGE> 95
The audited consolidated financial statements included in this Prospectus
and elsewhere in the Registration Statement of which this Prospectus forms a
part of Somomeca Industries for the years ended August 31, 1995, 1996 and 1997
and the four month period ended December 31, 1997, have been audited by Barbier,
Frinault & Associes, Member Firm of Andersen Worldwide, independent public
accountants, as stated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
Change in Accountants
On July 6, 1998, the Company appointed Arthur Andersen LLP ("Andersen") to
replace PricewaterhouseCoopers LLP ("PwC") as independent auditors of the
Company, and PwC was dismissed as the Company's auditor on the same date.
Andersen was serving as the independent auditors of Moll at the time of the
Merger. Moll is considered the accounting acquiror in the Merger.
The report of PwC on the Company's consolidated financial statements for
the years ended December 31, 1997 and 1996 contained no adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principle.
The decision to engage Andersen as the Company's independent auditors was
approved by the Company's board of directors.
In connection with the audits for the years ended December 31, 1997 and
1996, and through the interim period ended July 6, 1998, there were no
disagreements or "reportable events" with PwC as described in Items
304(a)(1)(iv) and (v) of Regulation S-K under the Securities Act ("Regulation
S-K") on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PwC would have caused it to make reference thereto in its
report on the consolidated financial statements for 1997 and 1996.
PwC has been authorized by the Company to respond to any and all inquiries
by the successor auditors and PwC has provided to the Company a letter addressed
to the Securities and Exchange Commission stating that it has reviewed the
disclosure provided in this Registration Statement and has no disagreement with
the relevant portions of this disclosure, pursuant to the requirements of Item
304(a)(3) of Regulation S-K. A copy of such letter, dated August 3, 1998, is
filed as Exhibit 16.1 to this Registration Statement.
Andersen, serving in its existing capacity as independent auditor to Moll
has provided advice to the Company and Moll regarding the accounting for the
Merger, the acquisitions of Hanning, Somomeca and Gemini Plastic and the
Offering.
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<PAGE> 96
INDEX TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Basis of Presentation....................................... P-2
Unaudited Pro Forma Consolidated Balance Sheet as of March
31, 1998.................................................. P-3
Unaudited Pro Forma Consolidated Statement of Income for the
Year Ended December 31, 1997.............................. P-4
Unaudited Pro Forma Consolidated Statement of Income for the
Three Months Ended March 31, 1998......................... P-5
Notes to Unaudited Pro Forma Consolidated Financial
Statements................................................ P-6
</TABLE>
P-1
<PAGE> 97
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma consolidated financial statements of the
Company give effect to the contribution of the interests in Moll PlastiCrafters
Limited Partnership ("Moll") to AMM Holdings, Inc. ("AMM Holdings") in exchange
for common shares of AMM Holdings, and the subsequent merger of Moll into Anchor
Advanced Products, Inc. ("Anchor") (the "Merger"). AMM Holdings is the indirect
parent and Anchor Holdings, Inc. ("Anchor Holdings") is the direct parent of
Anchor. Anchor Advanced Products, Inc. was renamed Moll Industries, Inc. upon
completion of the Merger. The Merger occurred immediately prior to the
consummation of the offering of Moll Industries, Inc. senior subordinated notes
(the "Offering"). As the partners of Moll own a majority of the outstanding
shares of AMM Holdings subsequent to the Merger, Moll is considered the
accounting acquiror in the Merger and will utilize purchase accounting to
account for the Merger.
In addition, the unaudited pro forma consolidated financial statements of
the Company also give effect to the following:
- the August 1997 purchase acquisition of the Hanning companies ("Hanning")
by Moll,
- the January 1998 purchase acquisition of Somomeca Industries ("Somomeca")
by Moll,
- the distribution of Moll's investment in Reliance Products, L.P.
("Reliance"), to certain of Moll's limited partners, and
- the purchase acquisition of Gemini Plastic Services, Inc. ("Gemini") by
the Company.
Collectively, these acquisitions are referred to as the "Acquisitions" and
the combined companies are referred to as the "Company".
Concurrently with the Offering, AMM Holdings offered approximately $35.3
million aggregate gross proceeds of its 13 1/2% Senior Discount Notes due 2009.
The unaudited pro forma consolidated financial statements of the Company do not
reflect the offering of these notes by AMM Holdings. A portion of the proceeds
from the AMM Holdings offering was used by AMM Holdings to make a capital
contribution to the Company (the "Capital Contribution"). The Capital
Contribution has been reflected in the unaudited pro forma consolidated
financial statements of the Company.
The unaudited pro forma consolidated balance sheet of the Company gives
effect to the Merger, the Acquisitions, the Capital Contribution and the
Offering and the application of the proceeds therefrom as if they had occurred
on March 31, 1998. The unaudited pro forma consolidated statement of income of
the Company for the year ended December 31, 1997 gives effect to these
transactions as if they had occurred on January 1, 1997. The unaudited pro forma
consolidated statement of income of the Company for the three months ended March
31, 1998 gives effect to these transactions as if they had occurred on January
1, 1998.
The Company has identified certain savings which are expected to occur as a
result of the Merger. These savings have been reflected in the unaudited pro
forma consolidated financial statements of the Company. The Company has
preliminarily analyzed certain additional savings that it expects to be realized
by consolidating other operational and general and administrative functions as a
result of the Merger. The Company has not and cannot quantify these savings
until completion of the Merger. Accordingly, these additional anticipated
savings have not been included in the unaudited pro forma consolidated financial
statements of the Company.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. The pro forma financial data does not purport to represent
what the Company's financial position or results of operations would actually
have been if such transactions in fact had occurred on those dates or to project
the Company's financial position or results of operations for any future period.
Since the combined companies were not under common control or management,
historical combined results may not be comparable to, or indicative of, future
performance. The unaudited pro forma consolidated financial statements should be
read in conjunction with the other financial statements and notes thereto
included elsewhere in this Prospectus. See "Risk Factors" included elsewhere
herein.
P-2
<PAGE> 98
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31,1998
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------------------------------------------------
MOLL ANCHOR(a) GEMINI(b) RELIANCE(c)
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash.................................. $ 7,140,808 $ 144,000 $ 692,922 $ (1,052,805) $ 16,674,000 (l)
2,000,000 (m)
Accounts receivable, net.............. 53,369,599 15,559,000 2,030,140 (3,233,816)
Inventories........................... 24,621,674 26,379,000 1,686,550 (3,630,734)
Deposits on tooling................... 7,767,926 -- -- --
Other current assets.................. 2,877,548 3,123,000 59,557 (34,812)
------------ ------------ ----------- ------------
Total current assets.......... 95,777,555 45,205,000 4,469,169 (7,952,167)
------------ ------------ ----------- ------------
Property, plant and equipment......... 78,276,002 94,392,000 5,720,830 (7,641,390) 7,806,428 (h)
(45,728,258) (h)
Accumulated depreciation.............. (15,548,145) (42,695,000) (3,033,258) 1,471,221 45,728,258 (h)
------------ ------------ ----------- ------------
62,727,857 51,697,000 2,687,572 (6,170,169)
------------ ------------ ----------- ------------
Goodwill, net......................... 8,722,000 9,363,000 -- -- 17,981,659 (i)
Intangible and other assets, net...... 4,722,984 8,414,000 54,213 -- 7,550,000 (l)
(2,149,420) (i)
(2,375,022) (k)
Receivable from affiliates............ 462,646 2,149,000 -- --
------------ ------------ ----------- ------------
Total other assets............ 13,907,630 19,926,000 54,213 --
------------ ------------ ----------- ------------
$172,413,042 $116,828,000 $ 7,210,954 $(14,122,336)
============ ============ =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Checks drawn in excess of cash on
deposit............................. $ 1,507,268 $ 929,000 $ -- $ -- $
Short-term borrowings................. 23,726,000 -- -- -- (23,726,000) (l)
Current portion of long-term
obligations......................... 10,275,742 1,075,000 379,262 -- (5,400,000) (l)
Customer deposits on tooling.......... 8,078,415 -- -- --
Accounts payable...................... 32,411,988 4,950,000 1,413,021 (1,690,525) 118,306 (g)
Accrued liabilities................... 11,304,203 4,328,000 360,760 (646,236)
Due to affiliates..................... 260,574 -- -- --
------------ ------------ ----------- ------------
Total current liabilities..... 87,564,190 11,282,000 2,153,043 (2,336,761)
------------ ------------ ----------- ------------
Long-term obligations:
Term loans.......................... 53,850,000 -- -- -- (53,850,000) (l)
11 3/4% Senior Notes................ -- 100,000,000 -- --
Senior Subordinated Notes........... -- -- -- -- 130,000,000 (l)
Other............................... 20,136,638 -- 1,964,078 (6,399,887) 22,438,000 (j)
(22,800,000) (l)
------------ ------------ ----------- ------------ ------------
73,986,638 100,000,000 1,964,078 (6,399,887)
Deferred income taxes................. 3,175,593 1,595,000 420,500 -- 1,637,000 (h)
Deferred gain......................... 1,092,459 -- -- --
Minority interest..................... 2,449,561 -- -- -- (2,449,561) (g)
Other................................. -- 6,709,000 -- --
------------ ------------ ----------- ------------
80,704,251 108,304,000 2,384,578 (6,399,887)
------------ ------------ ----------- ------------
Stock................................. -- 15,000 1,781 -- 15,000 (n)
(16,781) (f)
Additional paid-in capital............ -- -- 1,915,962 (4,408,199) (1,915,962) (f)
4,408,199 (g)
2,000,000 (m)
Undistributed profits................. 4,723,076 (2,242,000) 755,590 (1,182,379) (3,054,433) (g)
1,182,379 (g)
(2,375,022) (k)
1,486,410 (f)
(15,000) (n)
Treasury stock........................ -- (10,000) -- -- 10,000 (f)
Accumulated other comprehensive
income.............................. -- (521,000) -- --
Exchange rate translation
adjustment.......................... (578,475) -- -- 204,890 (204,890) (g)
------------ ------------ ----------- ------------
4,144,601 (2,758,000) 2,673,333 (5,385,688)
------------ ------------ ----------- ------------
$172,413,042 $116,828,000 $ 7,210,954 $(14,122,336)
============ ============ =========== ============
<CAPTION>
PRO FORMA
MOLL INDUSTRIES, INC.
---------------------
<S> <C>
ASSETS
Cash.................................. $ 25,598,925
Accounts receivable, net.............. 67,724,923
Inventories........................... 49,056,490
Deposits on tooling................... 7,767,926
Other current assets.................. 6,025,293
------------
Total current assets.......... 156,173,557
------------
Property, plant and equipment......... 132,825,612
Accumulated depreciation.............. (14,076,924)
------------
118,748,688
------------
Goodwill, net......................... 36,066,659
Intangible and other assets, net...... 16,216,755
Receivable from affiliates............ 2,611,646
------------
Total other assets............ 54,895,060
------------
$329,817,305
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Checks drawn in excess of cash on
deposit............................. $ 2,436,268
Short-term borrowings................. --
Current portion of long-term
obligations......................... 6,330,004
Customer deposits on tooling.......... 8,078,415
Accounts payable...................... 37,202,790
Accrued liabilities................... 15,346,727
Due to affiliates..................... 260,574
------------
Total current liabilities..... 69,654,778
------------
Long-term obligations:
Term loans.......................... --
11 3/4% Senior Notes................ 100,000,000
Senior Subordinated Notes........... 130,000,000
Other............................... 15,338,829
------------
245,338,829
Deferred income taxes................. 6,828,093
Deferred gain......................... 1,092,459
Minority interest..................... --
Other................................. 6,709,000
------------
259,968,381
------------
Stock................................. 15,000
Additional paid-in capital............ 2,000,000
Undistributed profits................. (721,379)
Treasury stock........................ --
Accumulated other comprehensive
income.............................. (521,000)
Exchange rate translation
adjustment.......................... (578,475)
------------
194,146
------------
$329,817,305
============
</TABLE>
P-3
<PAGE> 99
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------------------------------
MOLL ANCHOR(a) GEMINI(b) SOMOMECA(d) HANNING(e)
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales............................... $116,947,000 $161,161,000 $20,980,374 $88,502,000 $29,640,348
Cost of sales........................... 97,086,199 135,974,000 16,237,263 77,943,000 28,342,440
------------ ------------ ----------- ----------- -----------
Gross profit........................... 19,860,801 25,187,000 4,743,111 10,559,000 1,297,908
Selling, general and administrative
expenses............................... 10,757,773 12,497,000 3,580,361 5,469,000 2,596,750
Management fee to related parties....... 1,652,933 180,000 -- -- 126,662
Tooling income, net..................... (1,911,871) -- -- -- (1,113,673)
Loss on closure of facility............. 1,176,172 -- -- -- --
------------ ------------ ----------- ----------- -----------
Operating income........................ 8,185,794 12,510,000 1,162,750 5,090,000 (311,831)
Interest expense........................ 3,430,505 11,165,000 221,579 2,654,000 290,623
Interest income......................... (25,119) -- (11,237) (263,000) (61,490)
Other (income) expense.................. (299,338) (287,000) 11,374 320,000 (293,432)
Minority interest in income (loss) of
subsidiary............................. 434,555 -- -- (95,000) --
------------ ------------ ----------- ----------- -----------
Income before taxes and extraordinary
item................................... 4,645,191 1,632,000 941,034 2,474,000 (247,532)
Income tax expense...................... 82,622 794,000 371,400 1,036,000 382,192
------------ ------------ ----------- ----------- -----------
Income before extraordinary item........ $ 4,562,569 $ 838,000 $ 569,634 $ 1,438,000 $ (629,724)
============ ============ =========== =========== ===========
EBITDA(1)...............................
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------- PRO FORMA
RELIANCE(c) MOLL INDUSTRIES, INC.
-------------- ---------------------
<S> <C> <C> <C> <C>
Net sales............................... $(17,383,250) $(4,116,000) (o) $414,630,111
18,898,639 (u)
Cost of sales........................... (13,293,572) 15,976,085 (u) 354,582,415
808,000 (v)
(547,000) (s)
(4,193,000) (o)
249,000 (w)
------------ ----------------- ---------------------
Gross profit........................... (4,089,678) 60,047,696
Selling, general and administrative
expenses............................... (2,277,814) 655,000 (x) 29,390,070
(2,429,000) (q)
(1,103,000) (r)
(356,000) (o)
Management fee to related parties....... (260,749) (1,498,846) (t) 200,000
Tooling income, net..................... -- 2,922,544 (u) --
103,000 (o)
Loss on closure of facility............. -- (1,176,172) (p) --
------------ ----------- --- ------------
Operating income........................ (1,551,115) 30,457,626
Interest expense........................ (509,511) 5,254,000 (z) 27,367,196
4,861,000 (aa)
Interest income......................... -- (360,846)
Other (income) expense.................. (149,762) (172,000) (o) (870,158)
Minority interest in income (loss) of
subsidiary............................. -- (339,555) (y) --
------------ ------------
Income before taxes and extraordinary
item................................... (891,842) 4,321,434
Income tax expense...................... -- 928,000 (bb) 3,594,214
------------ ------------
Income before extraordinary item........ $ (891,842) $ 727,220
============ ============
EBITDA(1)............................... $ 54,807,000
============
</TABLE>
P-4
<PAGE> 100
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------------------------------- PRO FORMA
MOLL ANCHOR(a) GEMINI(b) RELIANCE(c) MOLL INDUSTRIES, INC.
----------- ----------- ----------- ----------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $60,105,303 $39,303,000 $5,270,616 $(5,288,277) $1,348,276 (u) $100,738,918
Cost of sales.......... 50,738,439 32,695,000 4,042,166 (4,074,899) 105,000 (v) 84,328,863
(137,000) (s)
960,157 (u)
----------- ----------- ---------- ----------- ------------
Gross profit....... 9,366,864 6,608,000 1,228,450 (1,213,378) 16,410,055
Selling, general and
administrative
expenses............. 4,816,651 3,440,000 815,873 (610,939) 138,000 (x) 7,715,585
(608,000) (q)
(276,000) (r)
Management fee to
related parties...... 770,681 -- -- (79,324) (641,357) (t) 50,000
Tooling income, net.... (388,119) -- -- -- 388,119 (u) --
----------- ----------- ---------- ----------- ------------
Operating income....... 4,167,651 3,168,000 412,577 (523,115) 8,644,470
Interest expense....... 2,348,996 2,967,000 65,337 (97,876) 559,000 (z) 6,900,457
1,058,000 (aa)
Interest income........ (12,301) -- (5,014) 12,301 (5,014)
Other (income)
expense.............. 144,395 42,000 5,013 (13,128) 178,280
Minority interest in
income (loss) of
subsidiary........... 236,912 -- -- -- (236,912) (y) --
----------- ----------- ---------- ----------- ------------
Income before taxes and
extraordinary item... 1,449,649 159,000 347,241 (424,412) 1,570,747
Income tax expense..... 92,411 78,000 -- -- 876,000 (bb) 1,046,411
----------- ----------- ---------- ----------- ------------
Income before
extraordinary item... $ 1,357,238 $ 81,000 $ 347,241 $ (424,412) $ 524,336
=========== =========== ========== =========== ============
EBITDA(1).............. $ 13,315,000
============
</TABLE>
P-5
<PAGE> 101
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------
(1) EBITDA represents income before taxes plus interest expense, net,
depreciation and amortization. While EBITDA should not be construed as a
substitute for operating income, net income or cash flows from operating
activities in analyzing the Company's operating performance, financial
position or cash flows, the Company has included EBITDA because it is
commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance, leverage and liquidity and
to determine a company's ability to service debt.
Pro Forma Adjustments
<TABLE>
<S> <C>
(a) Adjustment to include the Anchor Holdings historical cost
balances and operating activity for the respective periods
in the unaudited pro forma financial statements.
(b) Adjustment to include the Gemini historical cost balances
and operating activity for the respective periods in the
unaudited pro forma financial statements.
(c) Adjustment to eliminate the Reliance balances and operating
activity for the respective periods from the unaudited pro
forma financial statements.
(d) Adjustment to include the Somomeca historical operating
activity for the period of January 1 through December 31,
1997 in the unaudited pro forma financial statements.
(e) Adjustment to include the Hanning historical operating
activity for the period of January 1 through August 7, 1997
in the unaudited pro forma financial statements.
(f) Adjustment to eliminate the historical equity of Anchor
Holdings and Gemini which was accumulated prior to their
acquisition by the Company.
(g) Adjustment to eliminate Reliance's equity and associated
minority interest and to record the distribution of the
investment in Reliance to the owners of Moll.
(h) Adjustment to record the property, plant and equipment of
AMM Holdings and Gemini at their fair value and to record
the associated deferred tax liability.
(i) Adjustment to record goodwill of $9,254,000 and $8,728,000
for Moll's purchase of AMM Holdings and Gemini,
respectively.
(j) Adjustment to record debt of $6,600,000 and $15,838,000
incurred in connection with the acquisition of AMM Holdings
and Gemini, respectively.
(k) Adjustment to write-off unamortized cost of $2,375,000
related to debt repaid with the proceeds of the Offering.
</TABLE>
P-6
<PAGE> 102
<TABLE>
<S> <C>
(l) Adjustment to record the proceeds and uses of the Offering,
as follows:
</TABLE>
<TABLE>
<S> <C> <C>
Proceeds............................................. $130,000,000
Uses:
Revolving credit facility....................... (7,100,000)
Somomeca revolving credit facility.............. (16,626,000)
-----------
(23,726,000)
Current portion of term debt.................... (5,400,000)
Long-term portion of term debt.................. (53,850,000)
Anchor acquisition debt......................... (6,600,000)
Gemini acquisition.............................. (13,038,000)
Gemini property debt............................ (2,800,000)
Other Gemini debt............................... (362,000)
-----------
(76,650,000)
------------
Total debt repayment....................... (105,776,000)
Expenses of the Offering........................ (7,550,000)
------------
Total uses................................. (113,326,000)
------------
Net cash proceeds from the Offering............. $ 16,674,000
============
</TABLE>
<TABLE>
<S> <C>
(m) Adjustment to record the capital contribution from AMM
Holdings.
(n) Adjustment to reclassify Moll's equity to match the legal
equity structure of AMM Holdings.
(o) Adjustment to eliminate the operating results of the El Paso
facility, as it was closed in September 1997.
(p) Adjustment to eliminate non-recurring costs, consisting
primarily of future rental payments and losses on equipment
and inventory, incurred by Moll in the September 1997
closure of its El Paso facility.
(q) Adjustment to record the reduction of personnel at AMM
Holdings and Gemini. The reductions were made in executive
management and certain overhead functions at AMM Holdings
and management of Gemini.
(r) Adjustment to reflect the freezing by the Company of certain
AMM Holdings retirement plans which occurred on June 3,
1998. The estimated savings were based on historical costs
as compared to anticipated future costs which were
actuarially determined.
(s) Adjustment to eliminate the rent expense associated with the
building which houses the Gemini operation as the Company
purchased the building.
(t) Adjustment to reflect the future management fee of $200,000
per year.
(u) Adjustment to conform accounting policies regarding the
classification of revenues and expenses for tooling built
for and sold to consumers.
(v) Adjustment to record depreciation expense (i) for the
adjustment of property, plant and equipment to fair market
value in the acquisitions of Hanning, Somomeca, AMM Holdings
and Gemini, and (ii) the purchase of the Gemini building.
(w) Adjustment to reflect rent expense for the period of January
1 through August 7, 1997 to be paid on land and buildings in
Germany distributed to the owners of Moll in August 1997.
(x) Adjustment to record amortization of additional goodwill
generated in the acquisitions of Somomeca, AMM Holdings and
Gemini. The goodwill is being amortized over 20 years.
(y) Adjustment to eliminate the minority interest's portion of
the earnings of Somomeca and Reliance as the minority
interest of Somomeca was purchased in connection with Moll's
purchase of Somomeca and Reliance is no longer reflected as
a consolidated subsidiary of the Company.
</TABLE>
P-7
<PAGE> 103
<TABLE>
<S> <C>
(z) Adjustment to record interest expense incurred on the
increase in debt resulting from the acquisitions of Hanning,
Somomeca, AMM Holdings and Gemini.
(aa) Adjustment to reflect interest on the net additional debt
incurred in connection with the Offering and to reflect the
difference in interest rates between the current debt
instruments and the Notes to be sold pursuant to the
Offering.
(bb) Adjustment to reflect the tax impact of the pro forma
adjustments and to reflect Moll as a taxable entity using an
estimated effective tax rate of 40%.
</TABLE>
P-8
<PAGE> 104
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets as of December 31, 1996 and
1997, and April 4, 1998................................ F-3
Consolidated Statements of Operations for the Three Years
Ended December 31, 1997, and the Thirteen Weeks Ended
March 29, 1997 and April 4, 1998....................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the Three Years Ended December 31, 1997............ F-5
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1997 and the Thirteen Weeks Ended
March 29, 1997 and April 4, 1998....................... F-6
Notes to Consolidated Financial Statements................ F-7
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
Report of Independent Public Accountants.................. F-22
Consolidated Balance Sheets as of December 31, 1996 and
1997, and March 31, 1998............................... F-23
Consolidated Statements of Income for the Three Years
Ended December 31, 1997, and the Three Months Ended
March 31, 1997 and 1998................................ F-24
Consolidated Statements of Partners' Capital for the Three
Years Ended December 31, 1997.......................... F-25
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1997, and the Three Months Ended
March 31, 1997 and 1998................................ F-26
Notes to Consolidated Financial Statements................ F-28
SOMOMECA INDUSTRIES AND SUBSIDIARIES
Report of Independent Public Accountants.................. F-40
Consolidated Balance Sheets as of August 31, 1996 and 1997
and as of December 31, 1997............................ F-41
Consolidated Statements of Operations for the Three Years
Ended August 31, 1997 and the Four Month Period Ended
December 31, 1997...................................... F-42
Consolidated Statements of Stockholders' Equity for the
Three Years Ended August 31, 1997 and the Four Month
Period Ended December 31, 1997......................... F-43
Consolidated Statements of Cash Flows for the Three Years
Ended August 31, 1997 and the Four Month Period Ended
December 31, 1997...................................... F-44
Notes to Consolidated Financial Statements................ F-45
THE HANNING COMPANIES
Report of Independent Public Accountants.................. F-55
Combined Balance Sheets as of December 31, 1995 and
1996................................................... F-56
Combined Statements of Operations for the Years Ended
December 31, 1995 and 1996 and the Seven Months and
Seven Days Ended August 7, 1996 and 1997............... F-57
Combined Statements of Equity (Deficit) for the Years
Ended December 31, 1995 and 1996....................... F-58
Combined Statements of Cash Flows for the Years Ended
December 31, 1995 and 1996 and the Seven Months and
Seven Days Ended August 7, 1996 and 1997............... F-59
Notes to Financial Statements............................. F-60
</TABLE>
F-1
<PAGE> 105
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
Anchor Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Anchor
Holdings, Inc. and Subsidiaries as of December 31, 1996 and 1997, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Anchor
Holdings, Inc. and Subsidiaries as of December 31, 1996 and 1997, and the
consolidated 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.
COOPERS & LYBRAND L.L.P.
Knoxville, Tennessee
February 20, 1998
F-2
<PAGE> 106
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- APRIL 4,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 1,578 $ 6,914 $ 144
Accounts receivable, less allowance for doubtful accounts,
allowances, and returns of $998 in 1996 and $900 in
1997................................................... 21,400 15,574 15,559
Inventories............................................... 20,411 23,292 26,379
Prepaid expenses and other assets......................... 198 195 315
Refundable federal income taxes........................... 448 1,232 --
Deferred income taxes..................................... 2,023 2,080 2,808
-------- -------- --------
Total current assets.............................. 46,058 49,287 45,205
Property, plant, and equipment, net......................... 52,723 53,202 51,697
Goodwill, net............................................... 10,395 9,569 9,363
Other assets, net........................................... 6,087 8,781 10,563
-------- -------- --------
$115,263 $120,839 $116,828
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term liabilities............... $ 6,000 $ 832 $ 731
Current maturities of obligations under capital leases.... 480 382 344
Accounts payable.......................................... 6,120 6,119 4,950
Other accrued expenses and current liabilities............ 5,995 8,059 5,257
-------- -------- --------
Total current liabilities......................... 18,595 15,392 11,282
Long-term debt, less current maturities..................... 44,702 100,000 100,000
Related party long-term debt................................ 21,000 -- --
Accrued pension liability................................... 4,957 6,019 6,019
Deferred income taxes....................................... 2,906 1,542 1,595
Other long-term liabilities................................. 2,286 725 690
-------- -------- --------
Total liabilities................................. 94,446 123,678 119,586
-------- -------- --------
Commitments and contingencies (Notes 6, 7, 10, and 12)
Stockholders' equity (deficit):
Common stock--par value $.01 per share; authorized 2,000
shares; shares issued 1,018 and 1,551, respectively.... 10 15 15
Additional paid-in capital................................ 10,240 -- --
Retained earnings (deficit)............................... 11,145 (2,323) (2,242)
Additional pension liability, net of tax of $348 in 1996
and $319 in 1997....................................... (568) (521) (521)
Treasury stock at cost.................................... (10) (10) (10)
-------- -------- --------
Total stockholders' equity (deficit).............. 20,817 (2,839) (2,758)
-------- -------- --------
$115,263 $120,839 $116,828
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 107
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THIRTEEN WEEKS ENDED
-------------------------------- MARCH 29, APRIL 4,
1995 1996 1997 1997 1998
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales......................... $149,366 $156,858 $161,161 $41,546 $39,303
Cost of goods sold................ 125,028 129,221 135,974 34,653 32,695
-------- -------- -------- ------- -------
Gross profit...................... 24,338 27,637 25,187 6,893 6,608
Amortization expense.............. 1,662 1,530 1,698 343 426
Selling, general and
administrative expense.......... 9,409 11,358 10,979 2,615 3,014
-------- -------- -------- ------- -------
Operating income.................. 13,267 14,749 12,510 3,935 3,168
-------- -------- -------- ------- -------
Other income (expense):
Gain (loss) on disposal of fixed
assets....................... 23 (123) (62) (9) (26)
Interest expense, net........... (5,463) (4,931) (10,098) (1,271) (2 ,967)
Interest expense, related
party........................ (3,153) (3,193) (1,067) (801) --
Other, net...................... (997) (285) 349 (17) (16)
-------- -------- -------- ------- -------
Total other expense,
net................... (9,590) (8,532) (10,878) (2,098) (3,009)
-------- -------- -------- ------- -------
Income before income taxes and
extraordinary item.............. 3,677 6,217 1,632 1,837 159
Provision for income taxes........ 1,239 2,591 794 779 78
-------- -------- -------- ------- -------
Income before extraordinary
item............................ 2,438 3,626 838 1,058 81
Extraordinary item--loss on early
extinguishment of debt, net of
tax benefit of $742............. -- -- (1,210) -- --
-------- -------- -------- ------- -------
Net income (loss)............ $ 2,438 $ 3,626 $ (372) $ 1,058 $ 81
======== ======== ======== ======= =======
Earnings per share:
Basic Income before
extraordinary item........... $ 2.39 $ 3.56 $ 0.59 $ 1.04 $ .05
Extraordinary item........... 0.00 0.00 (0.85) -- --
-------- -------- -------- ------- -------
Income (loss)................ $ 2.39 $ 3.56 $ (0.26) $ 1.04 $ .05
======== ======== ======== ======= =======
Weighted average common
shares outstanding......... 1,018 1,018 1,418 1,018 1,551
======== ======== ======== ======= =======
Diluted Income (loss) before
extraordinary item........... $ 1.87 $ 2.65 $ 0.59 $ .77 $ .05
Extraordinary item........... 0.00 0.00 (0.85) -- --
-------- -------- -------- ------- -------
Income (loss)................ $ 1.87 $ 2.65 $ (0.26) $ .77 $ .05
======== ======== ======== ======= =======
Weighted average common shares
and assumed conversions
outstanding.................. 1,306 1,370 1,418 1,370 1,551
======== ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 108
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- ADDITIONAL RETAINED ADDITIONAL
SHARES PAID-IN EARNINGS TREASURY PENSION
ISSUED AMOUNT CAPITAL (DEFICIT) STOCK LIABILITY TOTAL
------ ------ ---------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994...... 1,018 $10 $ 10,240 $ 5,081 $ -- $(400) $ 14,931
Net income.................... -- -- -- 2,438 -- -- 2,438
Additional pension
liability.................. -- -- -- -- -- (96) (96)
Treasury stock acquired,
242.13 shares.............. -- -- -- -- (10) -- (10)
----- --- -------- -------- ---- ----- --------
BALANCE, December 31, 1995...... 1,018 10 10,240 7,519 (10) (496) 17,263
Net income.................... -- -- -- 3,626 -- -- 3,626
Additional pension
liability.................. -- -- -- -- -- (72) (72)
----- --- -------- -------- ---- ----- --------
BALANCE, December 31, 1996...... 1,018 10 10,240 11,145 (10) (568) 20,817
Net loss...................... -- -- -- (372) -- -- (372)
Exercise of warrants and
options.................... 533 5 5,061 -- -- -- 5,066
Dividend paid................. -- -- (15,301) (14,203) -- -- (29,504)
Tax benefit of exercise of
warrants and options....... -- -- -- 1,107 -- -- 1,107
Reduction of pension
liability.................. -- -- -- -- -- 47 47
----- --- -------- -------- ---- ----- --------
BALANCE, December 31, 1997...... 1,551 $15 $ -- $ (2,323) $(10) $(521) $ (2,839)
===== === ======== ======== ==== ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 109
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDING
YEARS ENDED DECEMBER 31, -------------------------
------------------------------ MARCH 29, APRIL 4,
1995 1996 1997 1997 1998
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................ $ 2,438 $ 3,626 $ (372) $1,058 $ 81
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Deferred income taxes................. 60 296 (1,421) 266 54
Depreciation and amortization......... 9,768 9,605 10,592 2,329 2,658
Provision for doubtful accounts....... 356 20 (98) -- 32
Provision for inventory
obsolescence........................ 450 (266) 287 87 81
(Gain) loss from disposal of fixed
assets.............................. (23) 123 62 9 --
Changes in assets and liabilities:
Accounts receivable................. (1,361) 337 5,924 (3,757) (17)
Inventories......................... (3,909) 794 (3,169) (1,274) (3,168)
Prepaid and other assets............ (1,634) (1,798) 3 1,265 384
Refundable federal income taxes..... 154 (32) (784)
Accounts payable, accrued expense
and other liabilities............ 2,523 371 5,013 (208) (4,900)
-------- -------- -------- ------ -------
Net cash provided by (used in)
operating activities........... 8,822 13,076 16,037 (225) (4,795)
-------- -------- -------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and
equipment............................. (6,932) (8,028) (8,413) (1,973) (580)
Proceeds from sale of fixed assets....... 479 14 -- -- --
Purchase of other long-term assets....... -- -- (434) -- --
Payments Made for Parent Company......... -- -- -- -- 2,149
-------- -------- -------- ------ -------
Net cash used in investing
activities..................... (6,453) (8,014) (8,847) (1,973) (2,729)
-------- -------- -------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt............. 9,886 8,647 101,529 -- --
Principal payments on long-term debt..... (12,569) (12,435) (73,231) (1,938) (101)
Principal payments on capital lease
obligations........................... (588) (480) (623) (142) (38)
Exercise of options and warrants......... -- -- 5,066 -- --
Payments of dividends.................... -- -- (29,504) -- --
Proceeds (payments) from other long-term
liabilities........................... 1,016 -- (939) -- --
Shares acquired in treasury.............. (10) -- -- -- --
Payment of bond issue costs.............. -- -- (4,152) -- --
Checks written in excess of bank
balances.............................. 2,808 929
Payments on other liabilities............ -- -- -- -- (36)
-------- -------- -------- ------ -------
Net cash (used in) provided by
financing activities........... (2,265) (4,268) (1,854) 728 754
NET INCREASE (DECREASE) IN CASH............ 104 794 5,336 (1,470) (6,770)
CASH AT BEGINNING OF PERIOD................ 680 784 1,578 1,578 6,914
-------- -------- -------- ------ -------
CASH AT END OF PERIOD...................... $ 784 $ 1,578 $ 6,914 $ 108 $ 144
======== ======== ======== ====== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid........................ $ 1,243 $ 1,945 $ 661 $ -- $ --
Interest paid............................ $ 8,172 $ 7,799 $ 9,701 $1,993 $ 2,818
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 110
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
Anchor Holdings, Inc. (the "Company") was incorporated March 9, 1990, under
the laws of the State of Delaware. The Company's subsidiaries manufacture and
sell: brushes used in medical and dental applications; plastic and metal
packaging for the cosmetics industry; and molded plastics products, including
assembly of plastic parts and construction of molds used in the injection
molding business. Substantially all sales are made on credit without collateral.
The Company manufactures dental products in the Morristown, Tennessee facility
and cosmetics products in three facilities: Matamoros, Mexico; Morristown,
Tennessee; and Waterbury, Connecticut. The majority of the cosmetics goods are
produced in a Matamoros facility. Molded plastics products are produced in four
separate plants in Seagrove, North Carolina as well as in a facility in Round
Rock, Texas. In addition to the manufacturing facilities, the Company operates
mold technology centers in Elk Grove, Illinois and Sanford, North Carolina.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company and its
subsidiaries in the presentation of their consolidated financial statements are
summarized below:
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of Anchor Holdings, Inc. the
parent holding company, its wholly owned subsidiaries Anchor Advanced Products
Foreign Sales Corporation and Anchor Advanced Products, Inc., and its Mexican
subsidiary, Cepillos de Matamoros, S.A. de C.V. All significant intercompany
balances and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers investments with a maturity 90 days or less when
purchased to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using standard costs which approximate the first-in, first-out method. Valuation
allowances are provided for adjustments related to carrying costs in excess of
estimated market value and potential obsolescence.
PROPERTY, PLANT, EQUIPMENT, AND DEPRECIATION
Property, plant, and equipment are recorded at cost. Assets under capital
leases are stated at the present value of minimum lease payments at the
inception of the lease. Depreciation and amortization are provided on the
straight-line basis over the estimated useful lives of the various properties as
follows:
<TABLE>
<S> <C>
Building and improvements....................... 30 years
Machinery and equipment......................... 10 years
Furniture and fixtures.......................... 10 years
Other........................................... 4-6 years
</TABLE>
INTANGIBLE ASSETS AND AMORTIZATION
Intangible assets represent goodwill, organizational expenses, loan costs,
and costs allocated to noncompete agreements arising principally from the
acquisition of the Company in 1990, and the acquisition of the assets of
Mid-State Plastics, Inc. in 1994. These assets are carried at cost and amortized
on a straight-line basis over their estimated useful lives ranging between two
and fifteen years.
F-7
<PAGE> 111
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PENSION PLANS
Pension costs for defined benefit plans are determined in accordance with
Statement of Financial Accounting Standard No. 87, and include current costs
plus the amortization of transition assets over a period of 21 years. The
Company funds pension costs in accordance with the plans and legal requirements.
The Company also has a defined contribution savings plan for all domestic
employees for which it matches one-half of employee contributions up to six
percent of employee compensation.
INCOME TAXES
Deferred tax liabilities and assets are determined based on the difference
between the financial statements and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse.
EARNINGS (LOSS) PER SHARE
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share. The standard replaces the
presentation of primary EPS with a presentation of basic EPS and replaces the
presentation of fully diluted EPS with diluted EPS. Basic income per share is
computed by dividing net income by the weighted average number of shares of
common stock outstanding. Diluted income per share is computed by dividing net
income by the weighted average number of shares of common stock and, dilutive
securities outstanding during the respective periods. Dilutive securities
represented by options and warrants outstanding have been included in the
computation. The Company uses the treasury stock method for calculating the
dilutive effect of options and warrants.
RECLASSIFICATIONS
Reclassifications have been made to certain previously reported amounts in
order to conform with the current year's presentations.
SIGNIFICANT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Significant estimates of the Company include the allowance
for doubtful accounts, inventory obsolescence reserves and certain self-insured
retained risks. Actual results could differ from these estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company follows Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of, which i) requires that long-lived assets to be held and used be
reviewed for impairment whenever events or circumstances indicate that the
carrying value of an asset may not be recoverable, ii) requires that long-lived
assets to be disposed of be reported at the lower of the carrying amount or the
fair value less costs to sell, and iii) provides guidelines and procedures for
measuring impairment losses that are different from previously existing
guidelines and procedures.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective December 31, 1997, the Company implemented Statement of Financial
Accounting Standards No. 129, Disclosure of Information about Capital Structure.
The Statement consolidates disclosures required
F-8
<PAGE> 112
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
by several existing pronouncements regarding an entity's capital structure. The
Company's disclosures are already in compliance with such pronouncements and,
accordingly, SFAS No. 129 does not require any change to existing disclosures.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures About Segments of an
Enterprise and Related Information. This Statement establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Statement is
effective for fiscal years beginning after December 31, 1997. In the initial
year of application, comparative information for earlier years is to be
restated. The Company is evaluating SFAS No. 131 to determine the impact, if
any, on its reporting and disclosure requirements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income. The
Statement establishes standards for reporting comprehensive income and its
components in a full set of financial statements. The Statement is effective for
fiscal years beginning after December 15, 1997. The Company currently reports
one item in stockholders' equity that would be classified as other comprehensive
income.
During February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits. The Statement revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. The Statement is effective
for fiscal years beginning after December 15, 1997. Restatement of disclosures
for earlier periods for comparative purposes is required. The Company is
evaluating SFAS No. 132 to determine the impact on its reporting and disclosure
requirements.
2. INVENTORIES
Inventories at December 31, 1996 and 1997 consist of:
<TABLE>
<CAPTION>
APRIL 4,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials............................... $ 9,508 $12,026 $10,240
Work in process............................. 6,254 6,306 7,241
Finished goods.............................. 5,954 6,553 10,572
------- ------- -------
21,716 24,885 28,053
Less valuation allowances................... (1,305) (1,593) (1,674)
------- ------- -------
$20,411 $23,292 $26,379
======= ======= =======
</TABLE>
F-9
<PAGE> 113
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at December 31, 1996 and 1997 consist of:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Land..................................................... $ 1,254 $ 1,254
Buildings and improvements............................... 17,019 17,906
Machinery and equipment.................................. 70,383 74,406
Furniture and fixtures................................... 3,331 3,997
Leasehold improvements................................... 938 132
Vehicles................................................. 140 119
------- -------
93,066 97,814
Less accumulated depreciation and amortization........... (40,737) (48,343)
------- -------
52,329 49,471
Construction in progress................................. 394 3,731
------- -------
$52,723 $53,202
======= =======
</TABLE>
Depreciation and amortization of property, plant and equipment was $7,787,
$7,756 and $7,875 for the years ended December 31, 1995, 1996 and 1997,
respectively.
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets at December 31, 1996 and 1997 consist of:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES 1996 1997
------------ ------- -------
<S> <C> <C> <C>
Intangible assets:
Grant fees........................................ 3 years $ 87 $ 87
Organizational expenses........................... 5-10 years 1,539 1,539
Loan costs........................................ 5 years 1,596 1,596
Noncompete agreement.............................. 3-5 years 1,250 250
Supply contract................................... 65 months 1,000 1,000
Acquisition costs................................. 5 years 1,043 1,043
Goodwill.......................................... 15 years 12,392 12,392
Intangible pension asset.......................... 37 years 2,004 2,004
Bond issue costs.................................. 7 years -- 4,152
------- -------
20,911 24,063
Less accumulated amortization..................... (6,551) (8,383)
------- -------
14,360 15,680
Other assets:
Cash value of life insurance...................... 2,105 2,670
Other assets...................................... 17 --
------- -------
$16,482 $18,350
======= =======
</TABLE>
Amortization expense related to intangibles totaled $1,662, $1,530 and
$2,398 for the years ended December 31, 1995, 1996 and 1997, respectively. The
1997 amortization expense includes a write-off of $700 associated with loan
costs which is included in the extraordinary loss and also includes a write-off
of $49
F-10
<PAGE> 114
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
associated with a noncompete agreement. Amortization of loan fees that were
charged to interest expense totaled $319, $319 and $319 for the years ended
December 31, 1995, 1996 and 1997, respectively.
The intangible pension asset represents prior service cost related to the
supplemental executive retirement plan and relates to the unrecognized net
obligation at the date of initial application as described in Note 7.
5. LONG-TERM DEBT
On April 2, 1997, Anchor Advanced Products, Inc. issued $100,000 of 11 3/4%
Senior Notes due 2004 (the "Senior Notes"). The Company has guaranteed the
Senior Notes fully and unconditionally. The net proceeds from the sale of the
Senior Notes was $96.6 million (after deducting discounts, commissions, fees and
expenses thereof) and were used: (i) to repay in full $51.5 million in
borrowings under the Revolving Credit and Term Loan Agreement, including all
accrued interest and fees payable upon such prepayment, (ii) to pay $22.3
million to redeem $9.0 million aggregate principal amount of Senior Subordinated
Notes and $12.0 million aggregate principal amount of Junior Subordinated Notes,
each due April 30, 2000, and (iii) to pay $22.8 million of a $29.5 million
dividend on the Company's common stock. All of the outstanding 380,000 warrants
and 153,300 options were exercised prior to the payment of the dividend. The
Company also entered into a credit facility which provided for revolving loans
not to exceed $15.0 million. The proceeds from the exercise of the warrants and
options and an additional borrowing of $1.5 million under the credit facility
were used to supplement the total dividend payment. The Company had no
outstanding debt under the credit facility as of December 31, 1997.
Long-term debt at December 31, 1996 and 1997, consists of:
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Borrowings under revolving credit agreement; floating rates
(a)....................................................... $15,952 $ --
Term note; floating rates(b)................................ 34,750 --
Senior subordinated notes, due April 30, 2000(c)............ 9,000 --
Junior subordinated notes due April 30, 2000(c)............. 12,000 --
Senior notes due April 1, 2004(d)........................... -- 100,000
------- --------
71,702 100,000
Less current maturities..................................... (6,000) --
------- --------
$65,702 $100,000
======= ========
</TABLE>
- ------------------------------
(a) This revolving credit agreement provided a number of options for variable
rate borrowings subject to potential limitations based on percentages of
inventories, receivables and outstanding letters of credit. The agreement
was paid in full during 1997.
(b) This term note was paid in full during 1997.
(c) This senior and junior subordinated debt was payable to certain stockholders
and was paid in full during 1997.
(d) This debt is payable to note holders, subsequent to a public debt offering
in 1997. Interest is paid semiannually on April 1 and October 1 at a fixed
rate of 11.75%. The Senior Notes mature on April 1, 2004, at which time the
full principal amount is due.
The Senior Notes contain restrictions on, among other things, change of
controlling interest or sale of the Company, payment of cash dividends,
redemption of capital stock, creation of liens on assets, acquisition or sale of
subsidiaries, issuance of additional debt, purchases of investments,
consolidating or selling substantially all assets, transaction with related
parties and so-called "junior" payments. The Company was in compliance with
these covenants at December 31, 1997.
F-11
<PAGE> 115
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LEASES
The Company leases a warehouse, land, and certain equipment under capital
leases that expire on various dates through December 2000. The net book value of
buildings, land, and equipment recorded under capital leases at December 31,
1996 and 1997, was $1,594 and $1,240, respectively. Amortization of assets held
under capital leases is included with depreciation expense.
The Company also has a noncancellable operating lease for two facilities
which requires the Company to pay all executory costs such as maintenance,
taxes, and insurance.
Future minimum lease payments under noncancellable operating leases with
initial or remaining lease terms in excess of one year and the present value of
future minimum capital lease payments as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year ending December 31:
1998...................................................... $ 438 $279
1999...................................................... 47 199
2000...................................................... -- 115
2001...................................................... -- 57
Thereafter.................................................. -- --
----- ----
Total minimum lease payments...................... 485 $650
====
Less amounts representing interest (at rates ranging from
10% to 11.7%)............................................. 62
-----
Present value of net minimum capital lease payments....... 423
Less current maturities of obligations under capital
leases.................................................... 382
-----
Obligations under capital leases excluding current
installments........................................... $ 41
=====
</TABLE>
Total rent expense for operating leases for the years ended December 31,
1995, 1996 and 1997 was $1,201, $1,779 and $943, respectively.
7. EMPLOYEE BENEFIT PLANS
The Company sponsors pension plans covering substantially all domestic
employees. Plans covering domestic salaried employees provide benefits that are
based on an employee's years of service and compensation during the five-year
period prior to retirement. The plan covering domestic hourly employees provides
benefits of stated amounts based on an employee's years of service. Annually,
the Company contributes to the plans covering domestic employees such amounts
which are actuarially determined to provide the plans with sufficient assets to
meet future benefit payment requirements. Foreign executives and employees are
covered by fully funded programs as legally required.
F-12
<PAGE> 116
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the funded status of the Company's domestic
defined benefit pension plans and related amounts recognized in the Company's
consolidated balance sheets at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
--------------- ---------------
SALARY HOURLY SALARY HOURLY
------ ------ ------ ------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Benefit obligations:
Vested........................................ $ 987 $1,901 $1,192 $2,194
Nonvested..................................... 58 41 72 105
------ ------ ------ ------
Accumulated benefit obligation................ $1,045 $1,942 $1,264 $2,299
====== ====== ====== ======
Projected benefit obligation for service rendered
to date.......................................... $1,756 $1,942 $2,142 $2,299
Plan assets at estimated fair value................ 1,419 1,732 1,782 2,296
------ ------ ------ ------
Excess of projected benefit obligation over plan
assets........................................... (337) (210) (360) (3)
Unrecognized transition amount..................... 488 7 458 6
Unrecognized prior service cost.................... -- 110 -- 104
Unrecognized net (gain) loss....................... (523) 916 (531) 841
Unrecognized net obligation........................ -- (1,033) -- (951)
------ ------ ------ ------
Accrued (prepaid) pension cost................ $ (372) $ 210 $ (433) $ 3
====== ====== ====== ======
</TABLE>
Plan assets consist of cash and temporary investments.
Net pension cost for the years ended December 31, 1995, 1996 and 1997
included the following components:
<TABLE>
<CAPTION>
1995 1996 1997
--------------- --------------- ---------------
SALARY HOURLY SALARY HOURLY SALARY HOURLY
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Service cost--benefits earned during
the period........................... $184 $168 $199 $182 $209 $197
Interest cost on projected benefit
obligation........................... 106 109 130 131 170 155
Estimated/actual return on plan
assets............................... (87) (111) (158) 14 (148) (266)
Net amortization and deferral.......... 22 38 84 (99) 12 150
---- ---- ---- ---- ---- ----
Net pension cost..................... $225 $204 $255 $228 $243 $236
==== ==== ==== ==== ==== ====
</TABLE>
Assumptions used in accounting for the pension plans as of December 31,
1995, 1996 and 1997 were:
<TABLE>
<CAPTION>
1995 1996 1997
--------------- --------------- ---------------
SALARY HOURLY SALARY HOURLY SALARY HOURLY
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Discount rate.......................... 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
Rate of increase in compensation
levels............................... 4.0% N/A 3.9% N/A 3.9% N/A
Expected long-term rate of return on
assets............................... 8.0% 9.0% 8.0% 9.0% 8.0% 8.0%
</TABLE>
In 1991, the Company entered into agreements with certain key executive
officers, providing for supplemental payments upon retirement, disability, or
death. The Company purchased life insurance policies to fund the liability under
these agreements, which also provide death benefits to the Company. The
following
F-13
<PAGE> 117
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
table sets forth the status of the supplemental executive retirement plan (SERP)
and related amounts recognized in the Company's consolidated balance sheets at
December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Actuarial present value of benefit
obligation--nonvested.................................. $ 4,263 $ 5,069
======= =======
Projected benefit obligation for services rendered to
date................................................... $ 7,401 $ 7,993
Plan assets.............................................. -- --
------- -------
Excess of projected benefit obligations over plan
assets.............................................. (7,401) (7,993)
Unrecognized transition amount........................... 4,746 4,401
Unrecognized net obligation at date of initial
application............................................ (1,608) (1,477)
------- -------
Accrued pension cost................................... $(4,263) $(5,069)
======= =======
</TABLE>
The Company intends to fund the plan through Company-owned life insurance,
which has a cash value of $2,670 at December 31, 1997; however, the insurance
policies are not considered plan assets for accounting purposes.
Net pension cost for the SERP for the years ended December 31, 1995, 1996
and 1997 consists of the following:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Service cost--benefits earned during the period............. $221 $431 $465
Interest cost on projected benefit obligations.............. 246 284 341
Net amortization............................................ 131 130 131
---- ---- ----
$598 $845 $937
==== ==== ====
</TABLE>
The Company also sponsors defined contribution savings plans for
substantially all domestic employees. Contributions for the years ended December
31, 1995, 1996 and 1997, approximated $456, $492 and $532, respectively.
Pension costs for the foreign subsidiary amounted to approximately $582,
$654 and $599 for the years ended December 31, 1995, 1996 and 1997,
respectively.
8. INCOME TAXES
The provision for income taxes for the years ended December 31, 1995, 1996
and 1997 consists of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Federal tax:
Current................................................ $ 939 $2,065 $1,284
Deferred............................................... 57 197 (985)
State:
Current................................................ 32 52 197
Deferred............................................... 3 99 (212)
Foreign tax.............................................. 208 178 510
------ ------ ------
Total tax expense attributable to continuing
operations............................................. $1,239 $2,591 $ 794
====== ====== ======
</TABLE>
F-14
<PAGE> 118
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income tax expense varies from the amount computed by applying the federal
corporate income tax rate of 34% to income before income taxes as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ----
<S> <C> <C> <C>
Computed "expected" income tax expense (benefit)........... $1,250 $2,144 $555
Increase (decrease) in income taxes resulting from:
Foreign sales corporation income......................... (190) (99) (119)
State income taxes, net of federal tax effect............ 23 99 (15)
Nondeductible portion of meals and entertainment......... 69 48 73
Foreign income taxes..................................... 208 178 510
Write off charitable contribution deferred asset......... -- 75 --
Other, net............................................... (121) 146 (210)
------ ------ ----
Actual income tax provision attributable to continuing
operations.......................................... $1,239 $2,591 $794
====== ====== ====
</TABLE>
The components of the net deferred income tax assets and liabilities as of
December 31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
--------------------- ---------------------
CURRENT NONCURRENT CURRENT NONCURRENT
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Deferred tax assets:
Estimate for doubtful accounts and returns....... $ 404 $ -- $ 310 $ --
Inventory allowances............................. 667 -- 796 --
Accrued expenses................................. 860 -- 793 --
Additional pension liability..................... -- 834 -- 1,228
Contributions carryforward....................... -- -- 73 --
Net operating loss carryforward.................. 46 -- -- 598
Alternative minimum tax credits.................. -- 1,332 -- 1,377
Other............................................ 46 495 162 1,157
------ ------- ------ -------
Total deferred tax assets................ 2,023 2,661 2,134 4,360
------ ------- ------ -------
Deferred tax liabilities:
Property, plant and equipment.................... -- 5,567 -- 5,902
Other............................................ -- -- 54 --
------ ------- ------ -------
Total deferred tax liabilities........... -- 5,567 54 5,902
------ ------- ------ -------
Net deferred tax asset (liability)....... $2,023 $(2,906) $2,080 $(1,542)
====== ======= ====== =======
</TABLE>
The Company has at December 31, 1997, $2,088 of federal and state net
operating losses available to either carryback or carryforward. Net operating
losses of approximately $1,466 remain to be carried forward to offset future
state taxable income. Approximately $1,332 of alternative minimum tax credits
may be carried forward indefinitely. The amount of unrecognized deferred tax
liability for temporary differences related to investments in foreign
subsidiaries that are essentially permanent in duration were $1,430 and $1,388
for the years ending December 31, 1996 and 1997, respectively.
9. EMPLOYEE STOCK OPTIONS, WARRANTS, AND INCENTIVES
On October 29, 1990, the Company adopted the 1990 Time Accelerated
Restricted Stock Option Plan, as amended effective April 1, 1996 (the "1990
Plan"). A maximum of 163.3 thousand shares of the Company's common stock may be
issued pursuant to the 1990 Plan upon the exercise of options. Under the 1990
Plan,
F-15
<PAGE> 119
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
nonqualified stock options may be granted to members of senior management of the
Company and its subsidiaries. As of December 31, 1996, options to purchase 163.3
thousand shares of the Company's common stock at exercise prices of
$9.50--$30.00 per share had been granted. The 153 thousand vested options had
been exercised as of December 31, 1997, at an exercise price of $9.50 per share.
On June 11, 1996, the Company adopted the 1995 Time Accelerated Restricted
Stock Option Plan (the "1995 Plan"). A maximum of twenty-five thousand shares of
the Company's common stock may be issued pursuant to the 1995 Plan upon the
exercise of options. Under the 1995 Plan, nonqualified stock options may be
granted to members of senior management of the Company and its subsidiaries who
were formerly employed by Mid-State and who, at the time of adoption of the 1995
Plan, were employed in the Company's Mid-State Plastics Division. As of December
31, 1997, all twenty-five thousand options previously granted had been forfeited
under the terms of the agreement.
Both plans are administered by the Board of Directors of the Company or a
Committee consisting of three or more directors. Subject to the provisions of
each Plan, the Board of Directors of the Company has the authority to select
optionees and determine the terms of the options granted, including (i) the
number of shares subject to such option, (ii) when the option becomes
exercisable and (iii) the exercise price of the option; provided, however, that
no option may have a term in excess of ten years and six months from the date of
grant.
The terms and conditions of an option grant are set forth in a related
option agreement. An option is not transferable by the optionee except by will
or by the laws of descent and distribution. Options granted under either plan
will terminated upon the earliest to occur of (a) ten years and six months have
elapsed since the date of the grant of the option, (b) 30 days following an
optionee's voluntary termination or termination for cause of employment with the
Company or any of its subsidiaries, or (c) 180 days following an optionee's
termination of employment without cause or due to death or disability of the
optionee.
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, Accounting for Stock Based Compensation (SFAS 123). As
permitted by SFAS 123, the Company has chosen to apply APB Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and related interpretations in
accounting for its Plans. No compensation expense is recognized for the granting
of options during 1996 or 1997, as calculated under APB 25. Had compensation
cost for the Company's Plans been determined based on the fair value at the
grant dates for awards under the Plans consistent with the method of SFAS 123,
the Company's net income (loss) and net income (loss) per diluted share would
have been reduced to the pro forma amounts of $3,594 and $2.53, respectively,
for 1996 and $(391) and $(0.26), respectively, for 1997. The fair value of each
option grant is estimated using the Minimum Value Method with the following
assumptions used for the 1990 and 1995 plans; risk-free interest rates of 6.46%
and 6.04%, respectively, and expected lives of ten years.
F-16
<PAGE> 120
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the status of the Company's 1990 Plan as of December 31, 1995,
1996 and 1997, and changes during the years ending on those dates is presented
below:
<TABLE>
<CAPTION>
1995 1996 1997
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of
year..................... 153 $9.50 153 $ 9.50 163 $10.76
Granted.................... -- 10 $30.00 -- --
Exercised.................. -- -- 153 9.50
Forfeited.................. -- -- --
--- ------ ---
Outstanding, end of year... 153 $9.50 163 $10.76 10 $30.00
=== ====== ===
Options exercisable at
year-end................. 153 153 --
Fair value of options
granted during the
year..................... $11.96
======
</TABLE>
A summary of the status of the Company's 1995 Plan as of December 31, 1996,
and changes during the year ending on that date is presented below:
<TABLE>
<CAPTION>
1995 1996 1997
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of
year...................... -- 25 $41.30 25 $41.30
Granted..................... 25 $41.30 -- --
Exercised................... -- -- --
Forfeited................... -- -- 25 41.30
----- --- --
Outstanding, end of year.... 25 $41.30 25 41.30 --
===== === ==
Options exercisable at
year-end.................. -- --
Fair value of options
granted during the year... $5.03
=====
</TABLE>
The following table summarizes information about the Plan's stock options
at December 31, 1997:
<TABLE>
<CAPTION>
NUMBER WEIGHTED-AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICE AT 12/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/97 EXERCISE PRICE
- -------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$30.00 10 10 $30.00 -- --
</TABLE>
The Company had issued to the ML-Lee Funds warrants to purchase 380
thousand shares of common stock exercisable at $9.50 per share. All of these
warrants had been exercised as of December 31, 1997. Affiliates of the ML-Lee
Funds comprise the majority holders of the Company's common stock.
10. CUSTOMER SUPPLY AGREEMENTS
On January 11, 1991, the Company entered into an agreement with a major
customer to supply product at certain agreed-upon levels through December 1992,
with an option for the customer to extend the contract for three additional one
year periods. The customer has extended the agreement through December 31, 1999.
The agreement guarantees certain gross margin percentages in varying amounts
over the term of the agreement based upon variable labor, material and overhead
costs. The agreement is cancellable by the customer; however, if such
cancellation occurs, the customer agrees to absorb a portion of the Company's
capital investment associated with the agreement in decreasing amounts over the
term of the contract.
F-17
<PAGE> 121
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On July 1, 1993, the Company entered into an agreement with another major
customer to supply product at certain agreed-upon levels through December 1997,
with an option for the customer to extend the contract for three additional one
year periods. The customer has extended the agreement through December 31, 1999.
The agreement guarantees certain gross margin percentages in varying amounts
over the term of the agreement based upon variable labor, material and overhead
costs. The agreement is cancellable by the customer; however, if such
cancellation occurs, the customer agrees to absorb a portion of the Company's
capital investment associated with the agreement in decreasing amounts over the
term of the contract.
In connection with the purchase of Mid-State Plastics, Inc., the Company
assumed a contract with a customer to maintain a manufacturing facility in Texas
for the production of injection molded plastic parts. The customer has the
exclusive right, unless otherwise agreed, to purchase the manufacturing capacity
of the facility. The agreement is effective until July 2000, with the customer
having the right to renew on a yearly basis. The customer guarantees the Company
80% of capacity and if not utilized, reimburses the Company based on a
predetermined rate. In the event that production exceeds the guarantee, the
Company owes the customer an amount computed at one-half the predetermined rate.
11. BUSINESS AND CREDIT CONCENTRATIONS
The Company's sales are generally made on account without collateral.
Repayment terms vary based on certain conditions. The Company maintains reserves
which management believes are adequate to provide for potential credit losses.
The majority of the Company's customer base spans the United States.
The Company had two customers at December 31, 1996, and three customers at
December 31, 1997, which individually had accounts receivable balances in excess
of 10% of the total accounts receivable balance. Management believes the total
accounts receivable due from these customers, which was approximately $6,748 and
$4,662 at December 31, 1996 and 1997, respectively, is fully collectible. The
respective percentage for each customer with sales in excess of 10% of the years
ended December 31, 1995, 1996 and 1997, was as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Customer A.............................................. 29% 24% 18%
Customer B.............................................. 14% 19% 24%
Customer C.............................................. 13% 10% 11%
</TABLE>
12. CONTINGENCIES
The Company is subject to claims, normally employment related, in the
ordinary course of business. Management does not believe the resolution of any
such claims will result in a material adverse effect on the future financial
condition, results of operations or cash flows of the Company.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating the fair values of its financial instruments:
CURRENT ASSET AND LIABILITIES
The carrying value of the Company's cash, accounts receivable, accounts
payable and accrued expenses approximate fair value because of the short
maturity of these instruments.
F-18
<PAGE> 122
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NONCURRENT LIABILITIES
The Company estimates that the fair value of the Senior Notes at December
31, 1997 is approximately $106,500, compared to the carrying value of $100,000.
In making such assessments, the Company utilized quoted market prices.
14. RELATED PARTY TRANSACTIONS
Transactions involving related parties not otherwise disclosed herein are
as follows:
Management fees of $180 each year have been paid to Thomas H. Lee Company
during 1995, 1996 and 1997, respectively, for management and other consulting
services provided to the Company. Affiliates of the Thomas H. Lee Company
comprise the majority holders of the Company's common stock.
The Company leases warehouse space (near its facilities in Seagrove, North
Carolina) from Jack C. Lail, a shareholder during 1997. The lease terms are
month-to-month, and rent paid under the lease totaled $64 in 1997.
15. INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT GEOGRAPHIC AREAS
The Company has significant operations in Mexico as well as the United
States. The operations in Mexico do not involve sales to unaffiliated customers.
All sales for the Mexican subsidiary are to the U.S. Company and are marked up
based on a contract price, which at December 31, 1997 was 6.83%. These sales
were $6,418, $6,081 and $9,363, respectively, for the years ending December 31,
1995, 1996 and 1997 and were eliminated in consolidation.
Identifiable assets in Mexico were $14,823 and $15,128, respectively, at
December 31, 1996 and 1997. These amounts include intercompany
receivables/payables of $835 and $1,586, which were eliminated in consolidation.
The Company had sales to customers in foreign countries of $11,249, $13,148
and $19,256 for the years ending December 31, 1995, 1996 and 1997.
16. ANCHOR ADVANCED PRODUCTS, INC. SEPARATE COMPANY FINANCIAL STATEMENTS
As described in footnote 5, Anchor Advanced Products, Inc. issued $100,000
of 11 3/4% Senior Notes due 2004. These notes have been guaranteed fully and
unconditionally by the parent company, Anchor Holdings, Inc. The separate
financial statements of Anchor Advanced Products, Inc. are not included herein
because management has determined that they are not materially different from
those of Anchor Holdings, Inc. Summarized financial information of Anchor
Advanced Products, Inc. for the years ended December 31, 1995, 1996 and 1997,
are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Current assets..................................... $ 45,680 $ 47,502 $ 49,087
Noncurrent assets.................................. 70,416 69,192 71,544
Current liabilities................................ 19,689 20,023 15,368
Noncurrent liabilities............................. 79,577 75,851 108,286
Equity............................................. 16,830 20,820 (3,023)
Net sales.......................................... 149,366 156,858 161,161
Gross profit....................................... 24,338 27,637 25,187
Income from operations before extraordinary
items............................................ 2,189 3,417 583
Net income (loss).................................. 2,189 3,417 (627)
</TABLE>
F-19
<PAGE> 123
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. EARNINGS PER SHARE
The following table sets forth for the periods indicated the calculation of
earnings (loss) per share included in the Company's Consolidated Statements of
Operations:
<TABLE>
<CAPTION>
THIRTEEN WEEKS
ENDED
YEAR ENDED DECEMBER 31, -------------------------
------------------------- MARCH 29, APRIL 4,
1995 1996 1997 1997 1998
------ ------ ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator:
Net income before extraordinary
item.......................... $2,438 $3,626 $ 838 $1,058 $ 81
Extraordinary item............... -- -- (1,210) -- --
------ ------ ------- ------ ------
Numerator for basic and diluted
earnings per share............... $2,438 $3,626 $ (372) $1,058 $ 81
====== ====== ======= ====== ======
Denominator:
Denominator for basic earnings
per share-- weighted-average
shares........................ 1,018 1,018 1,418 1,018 1,551
Potentially dilutive common
shares........................ 288 352 -- 352 --
------ ------ ------- ------ ------
Denominator for diluted earnings
per share--adjusted
weighted-average shares and
dilutive shares.................. 1,306 1,370 1,418 1,370 1,551
====== ====== ======= ====== ======
BASIC
Income before extraordinary
item.......................... $ 2.39 $ 3.56 $ 0.59 $ 1.04 $ 0.05
Extraordinary item............... -- -- (0.85) -- --
------ ------ ------- ------ ------
Net income....................... $ 2.39 $ 3.56 $ (0.26) $ 1.04 $ 0.05
====== ====== ======= ====== ======
DILUTED
Income before extraordinary
item.......................... $ 1.87 $ 2.65 $ 0.59 $ 0.77 $ 0.05
Extraordinary item............... -- -- (0.85) -- --
------ ------ ------- ------ ------
Net income....................... $ 1.87 $ 2.65 $ (0.26) $ 0.77 $ 0.05
====== ====== ======= ====== ======
</TABLE>
18. INTERIM BASIS OF PRESENTATION (UNAUDITED)
The quarterly condensed consolidated financial statements include the
accounts of Holdings and its wholly-owned subsidiaries (together the "Company"
or "Anchor"). The parent company is not consolidated and push down accounting
has not been applied since the Company had outstanding public debt at the time
of acquisition. All significant intercompany balances and transactions have been
eliminated in consolidation. The quarterly consolidated financial statements
have been prepared, without audit, in accordance with generally accepted
accounting principles, pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, the quarterly
consolidated financial statements include all adjustments which are necessary
for a fair presentation of the financial position and results of operations for
the interim periods presented, such adjustments being of a normal recurring
nature. Certain information and footnote disclosures have been condensed or
omitted pursuant to such rules and regulations. It is suggested that these
quarterly consolidated financial statements and notes thereto be read in
conjunction with the full consolidated financial statements and notes thereto
for the year ended December 31, 1997. Results of operations in interim periods
are not necessarily indicative of results to be expected for a full year.
F-20
<PAGE> 124
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
19. RECENT DEVELOPMENTS (UNAUDITED)
On March 19, 1998 Anchor Acquisition Co., a Delaware corporation
("Purchaser"), entered into a Stock Purchase Agreement (the "Purchase
Agreement") with ML-Lee Acquisition Fund II, L.P., ML-Lee Acquisition Fund
(Retirement Accounts) II, L.P. and Thomas H. Lee Equity Partners, L.P. The
closing of the transactions contemplated by the Purchase Agreement occurred
concurrent with the signing of the Purchase Agreement (the "Closing"). Pursuant
to the terms and conditions of the Purchase Agreement, at the Closing the
Purchaser acquired all of the issued and outstanding shares of capital stock of
Anchor Holdings, Inc., whose wholly owned subsidiary is Anchor Advanced
Products, Inc.
The purchase price was $4.00 per share, of which 1,551,217.66 shares of
common stock, $.01 par value per share, were issued and outstanding, for a total
purchase price of $6,204,870.04.
Upon the Closing, the officers and directors of Anchor Holdings, Inc. and
Anchor Advanced Products, Inc. resigned and the Purchaser caused new officers
and a new director of each of those entities to be elected.
On June 3, 1998, the Company froze the benefit accruals for the Anchor
Advanced Products, Inc. Hourly Pension Plan and the Anchor Advanced Products,
Inc. Salaried Pension Plan.
F-21
<PAGE> 125
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Moll PlastiCrafters Limited Partnership:
We have audited the accompanying consolidated balance sheets of MOLL
PLASTICRAFTERS LIMITED PARTNERSHIP (A DELAWARE LIMITED PARTNERSHIP) AND
SUBSIDIARIES as of December 31, 1996 and 1997, and the related consolidated
statements of income, partners' capital and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Moll PlastiCrafters Limited
Partnership and 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.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
March 19, 1998
F-22
<PAGE> 126
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- MARCH 31,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................. $ 877,893 $ 1,729,061 $ 7,140,808
Accounts receivable, net of reserves for doubtful
accounts of $561,000, $579,000, and $930,000
respectively.................................. 8,787,703 22,483,782 53,369,599
Inventories, net................................. 10,541,739 15,579,655 24,621,674
Deposits on tooling.............................. 2,720,730 6,877,297 7,767,926
Equipment held for sale.......................... -- 416,700 --
Other current assets............................. 565,363 392,357 2,877,548
------------ ------------ ------------
Total current assets..................... 23,493,428 47,478,852 95,777,555
------------ ------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land............................................. 377,242 1,624,443 1,977,443
Buildings........................................ 7,293,782 9,512,209 15,721,994
Machinery and equipment.......................... 34,265,843 37,732,863 60,576,565
Less: accumulated depreciation................... (12,950,756) (13,451,227) (15,548,145)
------------ ------------ ------------
Property, plant and equipment, net............ 28,986,111 35,418,288 62,727,857
------------ ------------ ------------
RECEIVABLE FROM AFFILIATES......................... 390,000 464,451 462,646
------------ ------------ ------------
INTANGIBLE AND OTHER ASSETS, NET................... 1,031,256 3,562,964 13,444,984
------------ ------------ ------------
Total assets............................. $ 53,900,795 $ 86,924,555 $172,413,042
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Checks drawn in excess of cash on deposit........ $ 644,864 $ 143,272 $ 1,507,268
Customer deposits on tooling..................... 3,141,118 7,411,548 8,078,415
Short-term borrowings............................ -- -- 23,726,000
Current portion of long-term obligations......... 6,026,626 5,059,450 10,275,742
Accounts payable................................. 4,231,673 16,587,519 32,411,988
Accrued liabilities.............................. 3,976,622 5,505,943 11,304,203
Due to affiliate................................. -- -- 260,574
------------ ------------ ------------
Total current liabilities................ 18,020,903 34,707,732 87,564,190
------------ ------------ ------------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION...... 27,614,197 42,872,953 73,986,638
------------ ------------ ------------
DEFERRED INCOME TAXES.............................. -- 10,377 3,175,593
------------ ------------ ------------
DEFERRED GAIN...................................... -- 1,157,358 1,092,459
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES...................... -- -- --
MINORITY INTEREST.................................. 1,849,755 2,212,675 2,449,561
------------ ------------ ------------
PARTNERS' CAPITAL:
General partner.................................. 1,026,260 648,632 171,373
Limited partners................................. 5,389,680 5,314,828 3,973,228
------------ ------------ ------------
Total partners' capital.................. 6,415,940 5,963,460 4,144,601
------------ ------------ ------------
Total liabilities and partners'
capital................................ $ 53,900,795 $ 86,924,555 $172,413,042
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-23
<PAGE> 127
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES................................ $90,875,746 $89,463,883 $116,947,000 $25,632,292 $60,105,303
COST OF SALES............................ 73,909,450 72,961,380 97,086,199 20,075,328 50,738,439
----------- ----------- ------------ ----------- -----------
Gross profit........................... 16,966,296 16,502,503 19,860,801 5,556,964 9,366,864
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................... 8,300,503 7,189,649 10,757,773 2,461,638 4,816,651
TOOLING INCOME, NET...................... (1,716,091) (706,947) (1,911,871) (360,434) (388,119)
MANAGEMENT AND CONSULTING FEE TO RELATED
PARTIES................................ 1,363,135 1,446,143 1,652,933 401,977 770,681
LOSS INCURRED ON CLOSURE OF FACILITY..... -- -- 1,176,172 -- --
----------- ----------- ------------ ----------- -----------
Operating income....................... 9,018,749 8,573,658 8,185,794 3,053,783 4,167,651
INTEREST EXPENSE, NET.................... 2,413,607 2,518,005 3,405,386 675,840 2,336,695
OTHER (INCOME) EXPENSE................... 119,727 50,307 (299,338) (110,553) 144,395
MINORITY INTEREST IN INCOME (LOSS) OF
SUBSIDIARY............................. -- (31,224) 434,555 319,083 236,912
----------- ----------- ------------ ----------- -----------
INCOME BEFORE TAXES AND EXTRAORDINARY
ITEM................................... 6,485,415 6,036,570 4,645,191 2,169,413 1,449,649
----------- ----------- ------------ ----------- -----------
PROVISION FOR INCOME TAXES
Current................................ -- -- 72,279 -- --
Deferred............................... -- -- 10,343 -- 92,411
----------- ----------- ------------ ----------- -----------
-- -- 82,622 -- 92,411
----------- ----------- ------------ ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM......... 6,485,415 6,036,570 4,562,569 2,169,413 1,357,238
EXTRAORDINARY ITEM LOSS ON EARLY
EXTINGUISHMENT OF DEBT................. -- -- -- -- 736,000
----------- ----------- ------------ ----------- -----------
NET INCOME............................... $ 6,485,415 $ 6,036,570 $ 4,562,569 $ 2,169,413 $ 621,238
=========== =========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<PAGE> 128
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL PARTNER LIMITED PARTNERS TOTAL
--------------- ---------------- ------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1994...................... $2,105,043 $10,609,508 $12,714,551
Net income.................................... 1,755,001 4,730,414 6,485,415
Distributions................................. (3,773,869) (12,537,593) (16,311,462)
----------- ------------ ------------
BALANCE, DECEMBER 31, 1995...................... 86,175 2,802,329 2,888,504
----------- ------------ ------------
Net income.................................... 1,671,224 4,365,346 6,036,570
Distributions................................. (731,139) (1,777,995) (2,509,134)
----------- ------------ ------------
BALANCE, DECEMBER 31, 1996...................... 1,026,260 5,389,680 6,415,940
----------- ------------ ------------
Net income.................................... 1,263,831 3,298,738 4,562,569
Distributions................................. (1,641,975) (3,375,570) (5,017,545)
Translation adjustment........................ 516 1,980 2,496
----------- ------------ ------------
BALANCE, DECEMBER 31, 1997...................... $ 648,632 $ 5,314,828 $ 5,963,460
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-25
<PAGE> 129
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................... $ 6,485,415 $ 6,036,570 $ 4,562,569 $ 2,169,413 $ 621,238
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization..... 4,417,590 4,148,148 5,399,573 1,233,979 2,138,864
Write-off of investment in
affiliate....................... 300,000 -- -- -- --
(Gain) loss on disposal of fixed
assets.......................... 119,727 50,307 (35,661) -- 5,168
Accrued loss on closure of
facility........................ -- -- 1,060,604 -- --
Deferred income taxes............. -- -- 10,343 -- 91,000
Minority interest in subsidiary
income (loss)................... -- (31,224) 434,555 319,083 236,912
Changes in assets and liabilities,
net of assets purchased:
Accounts receivable............. (1,318,658) 3,300,726 (8,347,044) (3,326,100) 2,868,909
Receivable from affiliates...... (390,000) -- (74,451) -- --
Inventories..................... (350,539) 672,096 527,008 (925,373) (1,532,483)
Other current assets............ (781,941) 938,771 181,065 (396,776) (557,434)
Deposits on tooling............. (3,245,354) 3,830,300 1,095,033 (553,375) (920,461)
Other assets.................... -- (251,035) (359,124) 61,460 (915,557)
Accounts payable................ (924,669) (2,559,947) 3,805,343 868,396 (1,965,532)
Accrued liabilities............. 1,535,307 (1,268,403) 84,746 (223,993) (3,034,484)
Customer deposits on tooling.... 3,894,672 (4,066,305) (2,337,203) 747,748 679,787
Checks drawn in excess of cash
on deposit................... (32,370) 2,261 (501,592) (2,796) 1,363,996
------------ ------------ ------------ ----------- ------------
Total adjustments............ 3,223,765 4,765,695 (943,195) (2,197,747) (1,541,315)
------------ ------------ ------------ ----------- ------------
Net cash provided by (used in)
operating activities......... 9,709,180 10,802,265 5,505,764 (28,334) (920,077)
------------ ------------ ------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................ (2,775,589) (1,387,297) (6,561,692) (334,786) (3,204,345)
Proceeds on disposal of fixed
assets............................ 222,947 57,765 267,530 100,269 416,700
Due from Lawson Mardon Packaging,
Inc. ............................. -- (110,609) 110,609 -- --
Purchase of assets of the Reliance
division of Lawson Mardon
Packaging, Inc. .................. -- (10,151,754) -- -- --
Purchase of Hanning................. -- -- (7,181,785) -- --
Purchase of Somomeca, net of cash
received.......................... -- -- (850,000) -- (11,737,470)
------------ ------------ ------------ ----------- ------------
Net cash used in investing
activities................... (2,552,642) (11,591,895) (14,215,338) (234,517) (14,525,115)
------------ ------------ ------------ ----------- ------------
</TABLE>
F-26
<PAGE> 130
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on)
revolving loan facility........... $ (1,388,269) $ 200,375 $ 10,170,694 $ 730,152 $ (9,802,543)
Proceeds from issuance of long-term
obligations....................... 14,267,877 9,597,130 12,513,382 729,567 56,308,024
Principal payments on long-term
obligations....................... (3,540,330) (7,581,902) (7,168,396) (1,297,297) (23,737,022)
Distributions....................... (16,311,462) (2,509,134) (5,017,545) (38,288) (1,859,121)
Financing costs..................... -- (251,032) (842,705) -- --
Minority partner contributions to
Reliance.......................... -- 1,880,979 -- -- --
Distributions to minority partners
of Reliance....................... -- -- (60,760) -- --
------------ ------------ ------------ ----------- ------------
Net cash provided by (used in)
financing activities......... (6,972,184) 1,336,416 9,594,670 124,134 20,909,338
------------ ------------ ------------ ----------- ------------
EFFECT OF EXCHANGE RATE CHANGES IN
CASH................................ -- -- (33,928) (11,109) (52,399)
------------ ------------ ------------ ----------- ------------
NET CHANGE IN CASH.................... 184,354 546,786 851,168 (149,826) 5,411,747
------------ ------------ ------------ ----------- ------------
BALANCE AT BEGINNING OF PERIOD........ 146,753 331,107 877,893 877,893 1,729,061
------------ ------------ ------------ ----------- ------------
BALANCE AT END OF PERIOD.............. $ 331,107 $ 877,893 $ 1,729,061 $ 728,067 $ 7,140,808
============ ============ ============ =========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.............. $ 2,225,115 $ 2,822,910 $ 3,414,407 $ 644,112 $ 1,446,297
============ ============ ============ =========== ============
Cash paid for income taxes.......... $ -- $ -- $ 21,590 $ -- $ --
============ ============ ============ =========== ============
</TABLE>
Non-cash transaction:
During 1997, the Partnership incurred a payable to the former owners of
Hanning of $1,500,000 for the purchase of Hanning.
During 1997, the Partnership terminated a capital lease which resulted in a
reduction of debt by $2,503,226 and reduction of fixed assets by $1,205,254.
The accompanying notes are an integral part of these consolidated financial
statements.
F-27
<PAGE> 131
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Moll PlastiCrafters Limited Partnership ("Moll" or the "Partnership") was
formed in July 1991 for the purpose of manufacturing and selling injection
molded plastic parts. Under the partnership agreement, the partnership is
scheduled to terminate on December 31, 2012. Moll operates manufacturing
facilities in the United States, Canada, Germany and the United Kingdom.
At December 31, 1997, Moll maintained investments in three wholly-owned
subsidiaries (Moll Industries, LLC; Moll PlastiCrafters UK, Ltd.; and Moll
PlastiCrafters, LLC) as well as a 69% ownership interest in Reliance Products
Limited Partnership.
Moll Industries, LLC ("Industries") was formed on December 30, 1997. At
December 31, 1997, Industries contained no operating activities.
Moll PlastiCrafters UK, Ltd. ("Moll UK") was formed in 1997 and contains
the United Kingdom operations of Hanning purchased in 1997 (see Note 3).
Moll PlastiCrafters, LLC ("Moll Germany") was formed in 1997 and contains
the German operations of Hanning purchased in 1997 (see Note 3).
Reliance Products Limited Partnership ("Reliance") was formed in 1996. Moll
owns a 69% limited partnership interest in Reliance through its holdings of
Class B partnership units (see Note 3). The minority partners of Reliance
contributed $1,880,979 to Reliance upon its formation. Reliance operates a
production facility in Canada. The Reliance partnership agreement establishes
priorities for allocations of income, as follows: first, to the holders of Class
A partnership units until each has received a 19.5% return on its unreturned
capital; second, to Moll and the general partner until each has received a 30%
return on its unreturned capital contribution; third, to the remaining holders
of Class B partnership units until each has received a 30% return on its
unreturned capital contribution and fourth, to each of the Class B partnership
unit holders in proportion to the number of units held.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Moll and its
majority owned subsidiaries (collectively, the "Partnership"). All significant
intercompany transactions and balances have been eliminated.
REVENUES AND ACCOUNTS RECEIVABLE
The Partnership's customers operate primarily in the home appliance,
business equipment and electronics industries. The Partnership generally grants
credit to customers on an unsecured basis. Revenues from sales are recognized at
the time products are shipped.
TOOLING
The Partnership enters into agreements with its customers to design and
produce certain customer owned plastic injection tooling (primarily molds).
Monies paid or received by the Partnership in connection with tooling that
remains undelivered at the end of an accounting period are included as Deposits
on Tooling or Customer Deposits on Tooling, respectively, in the accompanying
consolidated balance sheet. At the time of delivery of completed tooling, the
excess of revenues over costs incurred are recognized in the accompanying
consolidated statements of income as tooling revenue, net.
F-28
<PAGE> 132
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out (FIFO)
method) or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is valued at cost or allocated fair value at
time of acquisition. Depreciation is computed using the straight-line and
declining balance methods over the estimated useful lives of the assets, which
are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and building improvements................... 25
Machinery and equipment............................... 3-10
Furniture and fixtures................................ 10
Computer hardware and software........................ 3-10
Automobiles........................................... 3
</TABLE>
INTANGIBLE ASSETS
Loan costs are amortized over the term of the related loan using the
straight-line method. Organizational costs are amortized over five years using
the straight-line method. Covenants not to compete are amortized over the life
of the agreements using the straight-line method.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Partnership estimates the fair value of financial instruments using
quoted or estimated market prices based upon the current interest rate
environment and the remaining term to maturity. At December 31, 1997, there were
no material differences in the book values of the Partnership's financial
instruments and their related fair values.
INCOME TAXES
As Moll is a partnership, the earnings of Moll, including the earnings of
foreign subsidiaries attributable to Moll for United States income tax purposes,
are included in the tax returns of its partners. Accordingly, the consolidated
financial statements contain no provision for federal or state income taxes
related to these earnings.
Certain of the Partnership's subsidiaries formed in 1997 are taxable
entities. The Partnership has accounted for income taxes for these subsidiaries
using the liability method which requires recognition of deferred tax assets and
liabilities for the expected future consequences of events that have been
included in the financial statements or income tax returns.
The Partnership's taxable subsidiaries have no significant differences
between its financial reporting and tax basis except for its property, plant and
equipment, for which a deferred tax liability has been reflected in the
accompanying consolidated balance sheet. The Partnership's taxable subsidiaries
incurred current foreign income tax expense of $72,279 in 1997.
PARTNER'S CAPITAL
The income of the Partnership is allocated to the partners based on their
respective ownership percentages. Amounts classified as partners' capital are
subject to distribution at the discretion of the partners; however, the amount
of distributions is subject to limitations under certain of the Partnerships'
debt agreements (See Note 6).
F-29
<PAGE> 133
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Partnership's foreign subsidiaries are
translated to U.S. dollars at current exchange rates, while revenues and
expenses are translated at the average exchange rate prevailing during the
period. Translation adjustments are recorded as a component of partners'
capital.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
ACCRUED CLAIMS AND LITIGATION
The Partnership is partially self-insured for claims arising from public
liability, property damage, workers' compensation, and employee health benefits.
Excess insurance coverage is maintained for per-incident and cumulative
liability losses for these risks in amounts management considers adequate.
Amounts are accrued currently for the estimated cost of claims incurred,
including related expenses. Management considers the accrued liabilities for
unsettled claims to be adequate; however, there is no assurance that the amounts
accrued will not vary from the ultimate amounts incurred upon final disposition
of all outstanding claims. As a result, periodic adjustments to the reserves
will be made as events occur which indicate that changes are necessary.
LONG-LIVED ASSETS
When factors are present which indicate the cost of assets may not be
recovered, the Partnership evaluates the realizability of its long-lived assets,
based upon the anticipated future cash flows generated by the asset.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
INTERIM FINANCIAL STATEMENTS
The unaudited financial statements have been prepared on a basis consistent
with the audited financial statements. In the opinion of management, the
accompanying unaudited financial statements reflect all adjustments necessary to
present fairly the financial position as of March 31, 1998 and the results of
operations and cash flows for the three months ended March 31, 1997 and 1998.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures About Segments of an
Enterprise and Related Information. This Statement establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Statement is
effective for fiscal years beginning after December 15, 1997. The Partnership is
evaluating SFAS No. 131 to determine the impact, if any, on its reporting and
disclosure requirements.
F-30
<PAGE> 134
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income. The
Statement establishes standards for reporting comprehensive income and its
components in a full set of financial statements. The Statement is effective for
fiscal years beginning after December 15, 1997. The Partnership currently
reports one-item in partners' capital that would be classified as other
comprehensive income.
3. ACQUISITIONS
RELIANCE
Effective December 12, 1996, Reliance purchased the net assets of the
Reliance Division of Lawson Mardon Packaging, Inc. for cash of $10,151,754,
whose operations are located in Canada. The transaction has been accounted for
by the purchase method with the purchase price allocated based on the fair
values of the assets purchased and liabilities assumed, as follows:
<TABLE>
<S> <C>
Accounts receivable......................................... $ 2,153,935
Inventories................................................. 2,823,970
Prepaid expenses............................................ 68,495
Equipment................................................... 7,255,970
Liabilities assumed......................................... (2,150,616)
-----------
$10,151,754
===========
</TABLE>
HANNING
Effective August 8, 1997, Moll acquired a group of companies that had
previously been under common ownership ("Hanning"). The companies acquired, the
type of acquisition and the country of operations are as follows:
<TABLE>
<CAPTION>
TYPE OF COUNTRY OF
COMPANY ACQUISITION OPERATIONS
------- -------------------- --------------
<S> <C> <C>
Hanning Corporation............................ Assets United States
Hanning-Kunststoffe Beteilingungs-GmbH......... Stock Germany
Hanning-Kunststoffe GmbH & Co. ................ Partnership Interest Germany
Hanning Plastics, Ltd. ........................ Assets United Kingdom
Hanning Property Associates.................... Assets United States
PB Hanning GmbH & Co. ......................... Stock Germany
PB Hanning GmbH & Co. Handelsgesellschaft...... Partnership Interest Germany
</TABLE>
Moll paid $7,582,000 in cash and agreed to pay the sellers $1,500,000 over
four years. Additionally, Moll incurred expenses totaling approximately
$1,400,000 in connection with this acquisition. The purchase price is subject to
adjustment based on an evaluation of the assets purchased and liabilities
assumed which is currently in process. However, the purchase price, excluding
expenses, may not exceed $10,000,000.
F-31
<PAGE> 135
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The acquisition was accounted for using the purchase method of accounting.
The purchase price has been allocated to the assets acquired (net of $1,800,000
of assets which were distributed to partners of Moll) and liabilities assumed
based on information currently available as to their fair values as follows:
<TABLE>
<S> <C>
Accounts receivable......................................... $ 5,369,000
Inventories................................................. 5,790,000
Deposits on tooling......................................... 5,177,000
Prepaid expenses............................................ 140,000
Property, plant and equipment............................... 11,180,000
Other assets................................................ 21,000
Accounts payable............................................ (6,343,000)
Accrued liabilities and other current liabilities........... (2,270,000)
Customer deposits on tooling................................ (6,536,000)
Noncurrent liabilities...................................... (3,846,000)
-----------
$ 8,682,000
===========
</TABLE>
An evaluation of the acquired assets and liabilities is in progress. Upon
completion of the evaluation, net additions or reductions, if any, in the fair
values currently assigned will be credited or charged against long-term assets.
The results of operations of Reliance and Hanning have been included in the
consolidated financial statements since the effective date of each acquisition.
See Note 16 for unaudited pro forma information.
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets of the Partnership at December 31, 1996 and
1997 consist of the following:
<TABLE>
<CAPTION>
1996 1997
----------- ----------
<S> <C> <C>
Covenants not to compete................................... $ 1,740,678 $1,344,199
Acquisition costs on pending transactions.................. -- 1,065,778
Deposit on purchase of Somomeca............................ -- 850,000
Loan costs................................................. 455,060 842,705
Organization costs......................................... 327,108 --
Other...................................................... 226,055 456,513
----------- ----------
2,748,901 4,559,195
Less: accumulated amortization........................... (1,717,645) (996,231)
----------- ----------
$ 1,031,256 $3,562,964
=========== ==========
</TABLE>
5. INVENTORIES
Inventories of the Partnership at December 31, 1996 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Raw materials............................................. $ 4,696,804 $ 7,718,780
Work-in-progress.......................................... 999,307 1,413,502
Finished goods............................................ 5,656,377 7,614,110
Less: reserve for excess and obsolete inventory........... (810,749) (1,166,737)
----------- -----------
$10,541,739 $15,579,655
=========== ===========
</TABLE>
F-32
<PAGE> 136
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM OBLIGATIONS
Long-term obligations of the Partnership at December 31, 1996 and 1997
consist of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Revolving loan facility with a bank that provided for
borrowings up to the lesser of $10,950,000 or the sum of
85% of eligible accounts receivable and 50% of eligible
inventories. Interest was payable monthly at the bank's
reference rate plus 0.5% (9.25% at December 31, 1997).
This revolving loan facility was refinanced on January 8,
1998...................................................... $ 200,375 $10,720,543
Revolving credit agreement under which the Partnership can
obtain up to $12,300,000 (Canadian dollars, approximately
$8,600,000 U.S. dollars at December 31, 1997) in loans.
Loans bear interest at either the lender's floating rate
plus 0.5% or at a IBOR based rate at the option of the
Partnership (5.98% at December 31, 1997). The available
loan amount decreases by approximately $73,000 monthly and
expires on December 11, 1999.............................. 6,448,021 5,809,071
Term note payable to a bank. Interest payable monthly at a
range of LIBOR plus 2% (7.94% at December 31, 1997) to
8.75%. This note was refinanced on January 8, 1998. ...... 20,941,652 24,598,000
Industrial Development Revenue Bonds, payable in annual
principal installments of $190,000 to $220,000 through
December 1, 1999. Interest is payable bi-annually at 8.25%
to 8.625%. ............................................... 635,000 440,000
Note payable to former owner of Quality Plastics Company,
Inc. in annual installments of $448,569 beginning October
7, 1996 with the remaining balance due October 7, 1999.
Interest is payable semi-annually at 9%. This note was
refinanced on January 8, 1998. ........................... 1,794,228 1,345,708
Payable to former owners of Hanning. The payable is
denominated in Deutsche Marks. Principle is payable in
three equal annual payments beginning August 1999.
Interest is due annually at 8%. .......................... -- 1,500,000
Mortgage payable in monthly installments of $28,486. The
mortgage expires on December 1, 2012. Interest is payable
at 8.40%. ................................................ -- 2,901,884
----------- -----------
Total long-term debt.............................. 30,019,276 47,315,206
----------- -----------
Capitalized equipment sublease obligation, interest on the
sublease is 9.5%. The debt was extinguished in June
1997...................................................... 2,806,133 --
Other capitalized equipment leases.......................... 815,414 617,197
----------- -----------
Total capitalized lease obligations (see Note
7)............................................. 3,621,547 617,197
----------- -----------
Total long-term obligations............................... 33,640,823 47,932,403
Less current portion...................................... (6,026,626) (5,059,450)
----------- -----------
$27,614,197 $42,872,953
=========== ===========
</TABLE>
F-33
<PAGE> 137
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The amounts of all long-term obligations, excluding capital leases, to be
repaid for the years following December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................ $ 4,745,504
1999............................................ 10,239,904
2000............................................ 5,920,511
2001............................................ 5,931,032
2002............................................ 7,442,473
Thereafter...................................... 13,035,782
-----------
$47,315,206
===========
</TABLE>
DEBT REFINANCING
On January 8, 1997, the Partnership entered into a credit agreement
("Credit Agreement") with a group of lenders ("Lenders"), in which the Lenders
agreed to loan the Partnership $60,000,000 in term debt (under two equal
tranches) and make available a revolving credit facility of up to $10,000,000,
based on the level of eligible accounts receivable and inventory. The debt under
the Credit Agreement earns interest at a variable rate depending upon the market
rate and certain financial ratios of the Partnership. The effective interest
rate would have been approximately 8.25% if the debt had been outstanding at
December 31, 1997. Substantially all assets of the Partnership are pledged as
collateral on the Credit Agreement.
Tranche A and the revolving credit facility expire on December 31, 2003.
Tranche B expires on December 31, 2005. The term loans require varying,
quarterly principal payments beginning in 1998. These requirements have been
reflected in the debt maturities included above. Additionally, the Credit
Agreement requires prepayment of a portion of the term loans should the
Partnership generate a specified level of cash flows as defined in the Credit
Agreement. Any outstanding balance under the revolving credit facility is due at
expiration.
The Credit Agreement contains restrictions on the payment of dividends and
distributions, transactions with affiliated parties, purchase and sale of fixed
assets and limitations on the level of advances that can be made to certain
subsidiaries, among others. Additionally, it contains various financial
covenants, all of which the Partnership was in compliance with as of December
31, 1997.
The Partnership had deferred costs of $671,000 at December 31, 1997 related
to the previous credit agreement which will be expensed in 1998 in connection
with the refinancing.
LEASE RENEGOTIATION
On June 15, 1997, the Partnership renegotiated an agreement for the lease
of equipment. The terms of the original agreement required the lease to be
accounted for as a capital lease. However, the terms of the new agreement result
in the lease being accounted for as an operating lease. At the date of the
renegotiation, the difference between the net book value of the assets and the
related debt under the capital lease, $1,297,972, was reflected as a deferred
gain in the accompanying consolidated balance sheets at December 31, 1997.
F-34
<PAGE> 138
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. LEASE COMMITMENTS
The aggregate future minimum fixed lease obligations for the Partnership as
of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES - OPERATING
EQUIPMENT LEASES
---------------- ----------
<S> <C> <C>
1998..................................................... $362,732 $3,243,318
1999..................................................... 269,916 2,043,698
2000..................................................... 34,498 1,680,386
2001..................................................... 14,476 1,450,466
2002..................................................... 4,557 552,571
Thereafter............................................... -- 66,201
-------- ----------
Total minimum lease payments............................. 686,179 $9,036,640
==========
Less amounts representing interest....................... 68,982
--------
Present value of minimum capital lease payments.......... $617,197
========
</TABLE>
Total rent expense for the Partnership's operating leases was approximately
$1,375,000, $1,780,000 and $2,835,000 for 1995, 1996 and 1997, respectively.
8. RETIREMENT PLANS
The Partnership maintains profit-sharing plans covering substantially all
employees in the United States and Canada meeting the service requirements
defined in the plan. Under the provisions of the plans, employees may contribute
from 2% to 15% of their wages. The Partnership may make matching contributions
equal to a discretionary percentage, to be determined by the Partnership.
Matching contributions are subject to certain vesting requirements. The
Partnership contributed approximately $143,000, $165,000 and $233,000 to the
plans in 1995, 1996 and 1997, respectively.
9. RELATED PARTIES
At December 31, 1997, the Partnership has a note receivable of $390,000
from an individual with ownership interest in certain partners of Moll. The note
is payable in three equal annual installments beginning February 1, 1998 and
bears interest at 9%.
The Partnership pays management fees to certain related companies which are
limited in amount under the Partnership's debt agreements. Management fee
expense was approximately $1,363,000, $1,346,000 and $1,553,000 for 1995, 1996
and 1997, respectively. Of this amount, approximately $150,000 was recorded as
an accrued liability at December 31, 1997.
Under the terms of Moll's Partnership Agreement, effective September 1995,
Moll committed to pay consultant fees to a partner as defined in the Partnership
Agreement not to exceed $100,000 per year. The arrangement was for two years and
terminated in September 1997. Payments made in 1996 and 1997 were $100,000 per
year.
The Partnership leases land and buildings in Germany from an entity owned
by certain partners of the Partnership. The lease expires on August 7, 1998,
contains three automatic one year extensions and accrues rent at a rate of
790,000 Deutsche Marks ($439,000 per year based on the December 31, 1997
exchange rate). Payment of the accrued rent is subject to restrictions as
defined in the Credit Agreement (see Note 6). The Partnership recognized rent
expense of $176,000 in 1997, which is included in accounts payable at December
31, 1997.
F-35
<PAGE> 139
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. FACILITY CLOSURE
In September 1997, the Partnership closed its El Paso facility. The
expenses incurred in closing the facility are reflected as "Loss Incurred on
Closure of Facility" in the accompanying consolidated statements of income.
Liabilities and reserves of $1,061,000 are included in the accompanying December
31, 1997 consolidated balance sheet for anticipated future expenditures and
losses related to the closure. Equipment from the El Paso facility that was
disposed of in February 1998 is included in the accompanying consolidated
balance sheets as "Equipment Held for Sale" at its net realized value.
11. MAJOR CUSTOMERS
Two customers accounted for approximately 46%, 50% and 45% of the
Partnership's net sales in 1995, 1996 and 1997, respectively. In addition,
approximately 49% and 61% of the Partnership's total accounts receivable at
December 31, 1996 and 1997 were from these customers. Management believes the
credit risk associated with these customers is minimal.
12. CONTINGENCIES
The Partnership is a party to various lawsuits and claims in the normal
course of business. While the outcome of the lawsuits and claims against the
Partnership cannot be predicted with certainty, management believes that the
ultimate resolution of the matters will not have a material effect on the
financial position or results of operations of the Partnership.
13. SEGMENT INFORMATION
The Partnership operates in one industry segment. The following table
presents sales and other financial information by geographic region for the
years ended December 31, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Net sales:
United States............................ $90,875,746 $89,035,929 $ 87,584,479
Canada................................... -- 427,954 17,383,250
Europe................................... -- -- 11,979,271
----------- ----------- ------------
Total net sales.................. $90,875,746 $89,463,883 $116,947,000
=========== =========== ============
Operating income:
United States............................ $ 9,018,749 $ 8,626,800 $ 8,306,464
Canada................................... -- (53,142) 1,551,115
Europe................................... -- -- (1,671,785)
----------- ----------- ------------
Total operating income........... $ 9,018,749 $ 8,573,658 $ 8,185,794
=========== =========== ============
Identifiable assets:
United States............................ $51,287,835 $41,502,714 $ 60,529,356
Canada................................... -- 12,590,288 12,353,975
Europe................................... -- -- 15,146,654
Eliminations............................. -- (192,207) (1,105,430)
----------- ----------- ------------
Total assets..................... $51,287,835 $53,900,795 $ 86,924,555
=========== =========== ============
</TABLE>
F-36
<PAGE> 140
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Depreciation and amortization:
United States............................ $ 4,417,590 $ 4,087,803 $ 3,819,324
Canada................................... -- 60,345 1,158,082
Europe................................... -- -- 422,167
----------- ----------- ------------
Total............................ $ 4,417,590 $ 4,148,148 $ 5,399,573
=========== =========== ============
Capital expenditures:
United States............................ $ 2,775,589 $ 1,387,297 $ 5,965,381
Canada................................... -- -- 531,633
Europe................................... -- -- 64,678
----------- ----------- ------------
Total............................ $ 2,775,589 $ 1,387,297 $ 6,561,692
=========== =========== ============
</TABLE>
14. SOMOMECA ACQUISITION
Effective January 8, 1998, Industries, through its subsidiaries, purchased
100% of the outstanding shares of Somomeca Industries S.A.R.L. ("Somomeca").
Somomeca's operations are located primarily in France. Somomeca incurred a net
loss before taxes of $363,000 on revenues of $84,926,000 in their fiscal year
ended August 31, 1997. The Partnership paid $12,587,000 net of cash received and
assumed $68,377,000 of liabilities in the acquisition. The stock purchase
agreement allows for a reduction of the purchase price if the stockholders'
equity of Somomeca at the closing date is less than the similar amount on
February 28, 1997. An evaluation of the stockholders' equity at the closing date
is currently in process. Additionally, the stock purchase agreement requires the
payment of additional consideration of up to 13,000,000 French Franc ($2,135,000
at December 31, 1997 exchange rates) should Somomeca achieve specified operating
results for the twelve months ending August 31, 1998. See Note 15 for unaudited
pro forma information.
As discussed in Note 1, during 1997 and at December 31, 1997, Industries
did not contain any assets, liabilities, or operations. In the future, the
members of Industries, excluding Moll, are entitled to all distributions made by
Industries which are attributable to a) any distribution received by Industries
from any direct or indirect subsidiary organized under the laws of France (the
"French Companies") and b) proceeds from the sale or other disposition of the
equity interests in any of the French Companies.
Secondly, a member of Industries is entitled to a distribution equal to 5%
of the debt service paid to Industries by the French Companies on the initial
acquisition loan (agreed to be $13,000,000). However, no amount shall be paid
unless the manager of Industries concludes that the liquidation of Industries
would result in aggregate distributions to Moll that are in excess of the
acquisition debt amount.
Thirdly, a member of Industries is entitled to a distribution if
indebtedness of the French Companies to Industries exceeds $40 million. The
amount of the distribution equals 5% of the debt service on the indebtedness in
excess of $40 million.
Moll is entitled to all other distributions of Industries.
15. SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARIES
The following reflects the summarized combined financial data of Moll
PlastiCrafters GmbH and Moll Industries UK, Limited (formerly companies in the
Hanning Companies) and Moll Plastics SARL (formerly Somomeca Industries) since
the date of their acquisition by the Company (See Notes 3 and 16). These
companies and all of their subsidiaries have guaranteed the $100,000,000 of
11 3/4% Senior Notes due 2004, issued by Anchor (See Note 16) and represent all
of the subsidiaries of the Company for the periods presented.
F-37
<PAGE> 141
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Statement of Income Data:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED
1997 MARCH 31, 1998
------------ --------------
(UNAUDITED)
<S> <C> <C>
Net sales.............................................. $11,979,000 $29,814,000
Gross margin........................................... (740,000) 3,048,000
Income (loss) from operations.......................... (1,671,000) 980,000
Net loss............................................... (1,607,000) (628,000)
</TABLE>
Balance Sheet Data:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 MARCH 31, 1998
------------ --------------
(UNAUDITED)
<S> <C> <C>
Current assets......................................... $ 9,528,000 $ 50,921,000
Total assets........................................... 17,591,000 115,574,000
Current liabilities.................................... 19,054,000 109,158,000
Total liabilities...................................... 19,089,000 118,210,000
Partners deficit....................................... (1,498,000) (2,636,000)
</TABLE>
16. SUBSEQUENT EVENT AND PRO FORMA INFORMATION (UNAUDITED)
Effective June 26, 1998, the Partnership completed a series of transactions
as follows:
(i) the distribution by the Partnership of its 69% Class B limited
partnership interest in Reliance to certain of Moll's limited partners,
(ii) the merger of Moll into Anchor Advanced Products, Inc. ("Anchor")
in exchange for common shares of AMM Holdings, Inc. ("Holdings"--Anchor's
parent), to form Moll Industries, Inc.,
(iii) the issuance by Moll Industries, Inc. of $130,000,000 Senior
Subordinated Notes,
(iv) the acquisition of Gemini Plastic Services, Inc. by Moll
Industries, Inc., and
(v) a capital contribution by AMM Holdings Inc. into Moll Industries,
Inc. of $2,000,000.
The following unaudited statement of income data gives effect to these
transactions as well as the acquisitions of Reliance, Hanning, and Somomeca as
if they had occurred at the beginning of the respective periods.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
Net sales............................................... $421,683,000 $414,630,000
------------ ------------
Operating income........................................ $ 30,538,000 $ 30,458,000
------------ ------------
Income before taxes and extraordinary item.............. $ 3,668,000 $ 4,321,000
------------ ------------
</TABLE>
F-38
<PAGE> 142
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following unaudited balance sheet information gives effect to the
transactions as if they had occurred on March 31, 1998.
<TABLE>
<S> <C>
Current assets.............................................. $156,174,000
------------
Total assets................................................ $329,817,000
------------
Current liabilities......................................... $ 69,655,000
------------
Total liabilities........................................... $329,623,000
------------
Stockholders' equity........................................ $ 194,000
------------
</TABLE>
F-39
<PAGE> 143
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Somomeca Industries:
We have audited the accompanying consolidated balance sheets of SOMOMECA
INDUSTRIES (a French corporation) and subsidiaries as of December 31, 1997 and
as of August 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the four month period ended
December 31, 1997 and for each of the three years in the period ended August 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
SOMOMECA INDUSTRIES and subsidiaries as of December 31, 1997 and as of August
31, 1997 and 1996, and the results of their operations and their cash flows for
the four month period ended December 31, 1997 and for each of the three years in
the period ended August 31, 1997, in conformity with generally accepted
accounting principles in the United States.
BARBIER, FRINAULT & ASSOCIES
Member Firm of Andersen Worldwide
February 17, 1998
Paris, France
F-40
<PAGE> 144
SOMOMECA INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF US DOLLARS -- NOTE 2)
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1997 1997
---------- ---------- ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................... $ 851 $ 804 $ 428
Trade receivables, net of allowance of $91, $213 and
$104 respectively.................................... 21,223 25,752 26,623
Other receivables....................................... 1,235 1,667 1,193
Inventories............................................. 8,976 7,862 7,806
Prepaid expenses........................................ 1,030 502 730
Deferred tax assets..................................... 684 828 617
------- ------- -------
Total current assets............................ 33,999 37,415 37,397
------- ------- -------
PROPERTY, PLANT AND EQUIPMENT, NET........................ 23,676 21,304 22,438
------- ------- -------
OTHER ASSETS.............................................. 7,204 5,928 6,029
------- ------- -------
Total assets.................................... $64,879 $64,647 $65,864
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving lines of credit............................... $ 9,111 $17,841 $16,005
Current portion of long-term obligations................ 5,110 4,328 4,026
Accounts payable........................................ 17,764 16,459 18,221
Accrued liabilities..................................... 9,922 7,121 7,778
------- ------- -------
Total current liabilities....................... 41,907 45,749 46,030
------- ------- -------
DEFERRED INCOME TAXES..................................... 1,192 1,046 1,399
------- ------- -------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION............. 13,286 11,349 10,523
------- ------- -------
MINORITY INTEREST......................................... 2,065 1,430 1,513
------- ------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock (par value of $9.89; 500,000 shares
authorized and outstanding).......................... 4,943 4,943 4,943
Additional paid-in capital.............................. 1,848 1,848 1,848
Retained earnings (deficit)............................. (614) (775) 352
Accumulated foreign currency translation adjustment..... 252 (943) (744)
------- ------- -------
Total stockholders' equity...................... 6,429 5,073 6,399
------- ------- -------
Total liabilities and stockholders' equity...... $64,879 $64,647 $65,864
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE> 145
SOMOMECA INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF US DOLLARS--NOTE 2)
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE YEAR ENDED AUGUST 31, MONTHS ENDED
----------------------------- DECEMBER 31,
1995 1996 1997 1997
------- ------- ------- ------------
<S> <C> <C> <C> <C>
NET SALES....................................... $64,533 $81,983 $84,926 $32,414
COST OF SALES................................... 54,747 70,353 75,807 27,506
------- ------- ------- -------
Gross profit............................. 9,786 11,630 9,119 4,908
OPERATING EXPENSES
Selling and marketing......................... 1,494 1,403 1,690 394
General and administrative.................... 3,317 4,322 4,853 1,337
Other income (expense) net.................... (366) (121) (341) 244
------- ------- ------- -------
Total operating expenses.............. 5,177 5,846 6,884 1,975
------- ------- ------- -------
Operating income...................... 4,609 5,784 2,235 2,933
INTEREST INCOME (EXPENSE)
Interest income............................... 445 37 50 1
Interest expense.............................. (3,042) (3,189) (2,648) (806)
------- ------- ------- -------
Total interest income (expense)....... (2,597) (3,152) (2,598) (805)
------- ------- ------- -------
Income (loss) before income taxes..... 2,012 2,632 (363) 2,128
INCOME TAX (EXPENSE) BENEFIT
Current income tax............................ (679) (995) (74) (373)
Deferred income tax........................... (301) (178) 218 (563)
------- ------- ------- -------
Total income tax (expense) benefit.... (980) (1,173) 144 (936)
------- ------- ------- -------
Income (loss) before minority interest........ 1,032 1,459 (219) 1,192
MINORITY INTEREST............................... (108) (265) 272 (65)
------- ------- ------- -------
NET INCOME...................................... $ 924 $ 1,194 $ 53 $ 1,127
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE> 146
SOMOMECA INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA--NOTE 2)
<TABLE>
<CAPTION>
ACCUMULATED
FOREIGN
COMMON STOCK ADDITIONAL RETAINED CURRENCY TOTAL
----------------- PAID-IN EARNINGS TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT EQUITY
------- ------ ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE
AUGUST 31, 1994......... 500,000 $4,943 $1,848 $(2,693) $ -- $ 4,098
Net income................ -- -- -- 924 -- 924
Foreign currency
translation
adjustment.............. -- -- -- -- 348 348
------- ------ ------ ------- ------- -------
BALANCE
AUGUST 31, 1995......... 500,000 4,943 1,848 (1,769) 348 5,370
Dividends................. -- -- -- (39) -- (39)
Net income................ -- -- -- 1,194 -- 1,194
Foreign currency
translation
adjustment.............. -- -- -- -- (96) (96)
------- ------ ------ ------- ------- -------
BALANCE
AUGUST 31, 1996......... 500,000 4,943 1,848 (614) 252 6,429
Dividends................. -- -- -- (214) -- (214)
Net income................ -- -- -- 53 -- 53
Foreign currency
translation
adjustment.............. -- -- -- -- (1,195) (1,195)
------- ------ ------ ------- ------- -------
BALANCE
AUGUST 31, 1997......... 500,000 4,943 1,848 (775) (943) 5,073
Net income................ -- -- -- 1,127 -- 1,127
Foreign currency
translation
adjustment.............. -- -- -- -- 199 199
------- ------ ------ ------- ------- -------
BALANCE
DECEMBER 31, 1997....... 500,000 $4,943 $1,848 $ 352 $ (744) $ 6,399
======= ====== ====== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-43
<PAGE> 147
SOMOMECA INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF US DOLLARS--NOTE 2)
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE YEAR ENDED AUGUST 31, MONTHS ENDED
------------------------------ DECEMBER 31,
1995 1996 1997 1997
------- ------- -------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income..................................... $ 924 $ 1,194 $ 53 $ 1,127
Adjustments to reconcile net income to net cash
provided by operating activities.............
Depreciation and amortization.................. 3,324 5,693 6,386 1,971
Loss (gain) on sale of assets.................. (76) (244) (47) 24
Changes in operating assets and liabilities:
(Increase) decrease in inventories........... (80) (3,248) (603) 346
(Increase) decrease in trade and other
receivables............................... (5,164) (7,348) (11,235) 262
(Increase) decrease in other assets.......... 2,451 (1,944) 9 248
Increase (decrease) in accounts payable...... (984) 8,252 2,192 1,180
Increase (decrease) in other liabilities..... 5,177 (1,550) (814) 115
Minority interest............................ (28) (135) (282) 31
------- ------- -------- -------
Net cash provided by (used in) operating
activities........................... 5,544 670 (4,341) 5,304
------- ------- -------- -------
INVESTING ACTIVITIES
Purchase of additional ownership in
subsidiaries................................. -- (297) -- --
Purchase of property, plant and equipment...... (4,115) (6,956) (6,117) (1,771)
Proceeds from sales of property, plant and
equipment.................................... 547 1,728 495 --
------- ------- -------- -------
Net cash used in investing activities..... (3,568) (5,525) (5,622) (1,771)
------- ------- -------- -------
FINANCING ACTIVITIES
Proceeds from (repayment of) short-term
borrowings................................... 1,260 6,972 11,566 (2,512)
Repayment of capital lease obligations......... (4,446) (3,005) (3,085) (824)
Proceeds from issuance of long-term debt....... 2,333 1,656 3,750 --
Repayment of principal of long-term debt....... (773) (806) (1,903) (637)
Dividends...................................... -- (39) (214) --
------- ------- -------- -------
Net cash provided by (used in) financing
activities........................... (1,626) 4,778 10,114 (3,973)
------- ------- -------- -------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON
CASH......................................... 51 17 (198) 64
------- ------- -------- -------
NET INCREASE (DECREASE) IN CASH................ 401 (60) (47) (376)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD....................................... 510 911 851 804
------- ------- -------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD....... $ 911 $ 851 $ 804 $ 428
======= ======= ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest..................................... $ 2,995 $ 3,044 $ 2,577 $ 769
------- ------- -------- -------
Income taxes................................. $ 374 $ 1,304 $ 777 $ --
======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE> 148
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA--NOTE 2)
1. BASIS OF PRESENTATION
The SOMOMECA INDUSTRIES and subsidiaries (the Company) consolidated
financial statements include the following entities:
<TABLE>
<CAPTION>
CONSOLIDATED ENTITIES % OWNED BUSINESS
<S> <C> <C>
SOMOMECA INDUSTRIES................. Holdings
SOMOMECA INDUSTRIES owned
subsidiaries:
SAPI (SARL)....................... 100 Manufacturing and selling of
injection molded plastic parts
SOMOPLAST Lorraine................ 100 Manufacturing and selling of
injection molded plastic parts
BBI............................... 100 Manufacturing and selling of
injection molded plastic parts
SCI Bonnevalaise.................. 100 Building ownership
FINANCIERE SOMOMECA............... 73.7 Holdings
FINANCIERE SOMOMECA owned
subsidiaries:
STAPHANE.......................... 100 Manufacturing and selling of molds
for plastic injection
SERIM............................. 100 Manufacturing and selling of molds
for plastic injection and of
injection molded plastic parts
SOMOPLAST......................... 100 Manufacturing and selling of
injection molded plastic parts
SEMIP............................. 100 Manufacturing and selling of molds
for plastic injection
PROMOLDE.......................... 100 Manufacturing and selling of molds
for plastic injection
SCI TERREAU BRENOT................ 95 Building ownership
</TABLE>
The entities listed above were acquired on January 8, 1998 by Moll
PlastiCrafters Limited Partnership.
F-45
<PAGE> 149
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Before September 1995, the legal organization of the various companies
forming SOMOMECA INDUSTRIES was as follows:
<TABLE>
<CAPTION>
% OWNED
<S> <C>
SAPI
SAPI owned subsidiaries:
SCI Bonnevalaise.......................................... 100
BBI....................................................... 100
FINANCIERE SOMOMECA....................................... 16
SCP Staphane
FINANCIERE SOMOMECA....................................... 52
FINANCIERE SOMOMECA owned subsidiaries:
STAPHANE.................................................. 100
SOMOPLAST................................................. 100
SERIM..................................................... 100
SEMIP..................................................... 100
PROMOLDE.................................................. 100
SCI Terreau Brenot........................................ 95
</TABLE>
In September 1995, SAPI and SCP Staphane completed a restructuring which
led to the SOMOMECA INDUSTRIES current structure, as follows:
- SAPI and SCP STAPHANE were merged, to form SOMOMECA INDUSTRIES, holding
company owned by two individuals (the Staphane family).
- The molding activity of SAPI was contributed to a new company, SAPI
(SARL).
- The number of authorized common shares was set at 500,000, with a par
value of $9.89.
As the previous separate entities and newly formed entity were all under
common control, the restructuring has been reflected as if it occurred at
September 1, 1994, similar to a pooling of interest.
As of August 31, 1994, FINANCIERE SOMOMECA was partly directly held by the
two individuals. During the year ended August 31, 1995, the shares of FINANCIERE
SOMOMECA held by the Staphane family were contributed to the Company.
Accordingly, the investment of this family in FINANCIERE SOMOMECA has been
reflected in the position of stockholders' equity at August 31, 1994, as the
Companies were under common control.
SOMOPLAST LORRAINE (100% owned by SOMOMECA INDUSTRIES) was incorporated
during the year ended August 31, 1996. During the same year, SOMOMECA INDUSTRIES
acquired 5.7% of FINANCIERE SOMOMECA shares from CENTREST (a French company).
SOMOMECA INDUSTRIES and its subsidiaries manufacture and sell molds or
injection molded plastic parts to the automotive industry (car manufacturers and
equipment suppliers) and to other industries.
All companies, except PROMOLDE (Portugal), are located in France.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries, after elimination of intercompany balances
and transactions.
F-46
<PAGE> 150
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
GOODWILL
Goodwill, arising from the difference between the investment cost in
certain subsidiaries and their net assets value at the date of the acquisition,
are being amortized, from the acquisition date, over 20 years. The Company
evaluates on a continual basis, the realizability of goodwill using measurements
of earnings before amortization, as well as operating cash flows for the
respective acquired operations.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation and
amortization are provided over the following estimated useful lives, using the
straight-line method:
<TABLE>
<S> <C>
Buildings........................................ 20 years
Leasehold improvements........................... 5-10 years
Production equipment............................. 3-7 years
Other equipment.................................. 3-10 years
</TABLE>
REVENUE RECOGNITION
Revenue from sales is recognized at the time products are shipped or at the
time of the first use for molds sold to certain customers and used for
outsourced plastic parts production.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ form those estimates.
INVENTORIES
Inventories are valued at the lower of cost (using the weighted average
cost method) or market.
RETIREMENT INDEMNITIES OBLIGATIONS
Company personnel are granted payments, defined by law, at the time they
retire. The related retirement indemnities obligation has been accrued under the
criteria set forth by Statement of Financial Accounting Standards No. 87.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the company to
concentrations of credit risk consist principally of cash investments and trade
receivables. The Company has cash investment policies that limit investments to
short-term low risk instruments.
With respect to trade receivables, one customer accounted for approximately
17% of SOMOMECA Industries and subsidiaries sales in the four month period ended
December 31, 1997 (24% in 1997, 26% in 1996 and 30% in 1995). In addition,
approximately 18% of total trade receivables as of December 31, 1997 (28% as of
August 31, 1997, and 36% as of August 31, 1996) were from that customer.
Management believes the credit risk associated with this customer is minimal.
F-47
<PAGE> 151
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOREIGN CURRENCY TRANSLATION
The Company's functional currency is the French Franc. In the accompanying
financial statements, assets and liabilities are translated into US Dollars at
the current exchange rate as of the applicable balance sheet dates. Revenues and
expenses are translated at the average exchange rate prevailing during the
period. Gains and losses resulting from the translation into US Dollars are
reported in a separate component of stockholders' equity.
The functional currency for the Company's only foreign subsidiary (in
Portugal) is its local currency. Accordingly, all the assets and liabilities of
the subsidiary are translated into French Francs at the current exchange rate as
of the applicable balance sheet date. Revenues and expenses are translated at
the average exchange rate prevailing during the period. Gains and losses
resulting from the translation of the subsidiary financial statements were
insignificant as of December 31, 1997.
INCOME TAXES
Deferred taxes are provided utilizing the liability method whereby deferred
tax assets are recognized for deductible temporary differences and operating
loss carryforwards, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
AUGUST 31,
-------------------- DECEMBER 31,
1996 1997 1997
-------- -------- ------------
<S> <C> <C> <C>
Land............................................. $ 845 $ 666 $ 690
Buildings and leasehold improvements............. 14,968 11,973 12,403
Production equipment............................. 30,077 30,910 34,122
Other equipment.................................. 4,412 3,946 3,863
-------- -------- --------
Total cost....................................... 50,302 47,495 51,078
Less--accumulated depreciation................... (26,626) (26,191) (28,640)
-------- -------- --------
$ 23,676 $ 21,304 $ 22,438
======== ======== ========
</TABLE>
4. INVENTORIES
Inventories include the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Raw materials...................................... $ 3,350 $ 2,868 $ 3,294
Work in progress................................... 2,571 2,987 2,841
Finished products.................................. 3,055 2,007 1,671
------- ------- -------
$ 8,976 $ 7,862 $ 7,806
======= ======= =======
</TABLE>
F-48
<PAGE> 152
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. OTHER ASSETS
Other assets include the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Acquisition goodwill............................... $ 8,281 $ 6,753 $ 6,998
Less--amortization................................. (2,325) (2,232) (2,430)
------- ------- -------
5,956 4,521 4,568
Other assets....................................... 1,248 1,407 1,461
------- ------- -------
$ 7,204 $ 5,928 $ 6,029
======= ======= =======
</TABLE>
6. REVOLVING LINES OF CREDIT
Short term financing facilities include the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Authorized lines of credit......................... $31,620 $28,274 $29,314
======= ======= =======
Outstanding amounts under lines of credit.......... $ 9,111 $17,841 $16,005
======= ======= =======
Maximum balances outstanding....................... $20,751 $20,483 $24,247
======= ======= =======
Average balances outstanding....................... $18,355 $18,710 $20,903
======= ======= =======
</TABLE>
Interest rates on these lines of credit are generally based on reference
market rates (such as PIBOR 3 month) plus 1.5% (5% at December 31, 1997).
Lines of credit are secured by substantially all of the Company's assets.
7. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Long-term borrowings............................... $ 6,869 $ 7,033 $ 6,093
Capital leases..................................... 11,005 8,126 7,887
Retirement indemnities obligations................. 522 518 569
------- ------- -------
18,396 15,677 14,549
Less--current portion.............................. (5,110) (4,328) (4,026)
------- ------- -------
$13,286 $11,349 $10,523
======= ======= =======
</TABLE>
Long-term borrowings are secured by substantially all of the Company's
assets. These long-term borrowings did not include any individual loan of
significant amount for each of the periods.
F-49
<PAGE> 153
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest rates on long-term borrowings and capital leases can be summarized
as follows:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
RANGE OF INTEREST RATES 1996 1997 1997
------------------------- ------- ------- ------------
<S> <C> <C> <C> <C>
Fixed rate loans:
Loans.................... 6.31% to 12.75% $ 6,869 $ 7,033 $ 6,093
Capital leases........... 4.68% to 15.35% 8,472 6,441 6,736
Variable rate loans:
Capital leases........... TAM to TAM + 1.5% 2,533 1,685 1,151
------- ------- -------
$17,874 $15,159 $13,980
======= ======= =======
</TABLE>
Future payments on long-term loans are due as follows:
<TABLE>
<S> <C>
1998................................................ $2,021
1999................................................ 1,767
2000................................................ 1,168
2001................................................ 767
2002................................................ 200
Thereafter.......................................... 170
------
$6,093
======
</TABLE>
The Company leases certain equipment under capital leases which expire on
various dates through 2004. Future payments on capital leases are due as
follows:
<TABLE>
<S> <C>
1998............................................... $ 2,517
1999............................................... 1,999
2000............................................... 1,381
2001............................................... 834
2002............................................... 663
Thereafter......................................... 2,007
Less amount representing interest.................. (1,514)
-------
$ 7,887
=======
</TABLE>
8. RETIREMENT INDEMNITIES OBLIGATIONS
The Company maintains defined unfunded retirement indemnity plans which
cover substantially all of their employees.
In order to comply with US GAAP, the Company has applied SFAS No. 87
"Employers' Accounting for Pensions" and SFAS No. 88 "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits" as follows:
- the transition obligation or fund excess has been determined as of
September 1, 1994 as being the difference between the liabilities
accounted for under prior years' accounting policies and the funded
status of the plans resulting from actuarial calculations; the transition
obligation or fund excess, as determined at September 1, 1994 has been
deducted from retained earnings as if the Company had always applied SFAS
No. 87. Amortization of a transition obligation would have led to
expenses not significantly different from what has been accounted for;
F-50
<PAGE> 154
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- the actuarial method used is the projected unit credit method. However,
when the benefit formulas attribute more benefits to senior employees or
when the plans are integrated with social security systems or multi
employer plans, the Company has elected to apply the projected unit
credit service pro-rata method to avoid delayed recognition of pension
costs.
The status of pension plans determined in accordance with U.S. GAAP is as
follows:
<TABLE>
<CAPTION>
AUGUST 31,
------------ DECEMBER 31,
1996 1997 1997
---- ---- ------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................. $ -- $ -- $ --
Non-vested benefit obligation......................... 393 390 428
---- ---- ----
Accumulated benefit obligation.......................... 393 390 428
Effect of projected future salary increases............. 129 128 141
---- ---- ----
Projected benefit obligation............................ $522 $518 $569
==== ==== ====
</TABLE>
The pension liability is included in the accompanying balance sheets as a
component of long-term obligations.
The net periodic pension cost of the Company's retirement indemnity plans,
determined in accordance with US GAAP, includes the following components:
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE YEAR ENDED AUGUST 31, MONTHS ENDED
------------------------------ DECEMBER 31,
1995 1996 1997 1997
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Service cost............................... $ 40 $ 46 $ 42 $14
Interest cost on projected benefit
obligation............................... 38 33 31 10
Net amortization and deferrals............. 23 30 28 9
---- ---- ---- ---
Net pension cost........................... $101 $109 $101 $33
==== ==== ==== ===
</TABLE>
Average assumptions used in accounting for the Company's retirement
indemnities obligations under US GAAP are as follows:
<TABLE>
<CAPTION>
AUGUST 31,
------------ DECEMBER 31,
1996 1997 1997
---- ---- ------------
<S> <C> <C> <C>
Discount rate............................................. 6.0% 6.0% 6.0%
Rate of increase in compensation levels................... 2.5% 2.0% 2.0%
</TABLE>
9. OPERATING LEASES
The Company leases certain equipment under operating leases. Rent expense
was $261, $290, $155, and $37 for each of the years ended August 31, 1995, 1996
and 1997 and for the four month period ended December 31, 1997 respectively.
Future payments on operating leases were due as follows:
<TABLE>
<S> <C>
1998................................................... $64
1999................................................... 20
2000................................................... 2
---
$86
===
</TABLE>
F-51
<PAGE> 155
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
From time to time the Company is involved in certain legal actions arising
in the ordinary course of business. In the opinion of management, the outcome of
such actions will not have a material adverse effect on the Company's financial
position or results of operations.
11. INCOME TAXES
For income tax purposes, SOMOMECA INDUSTRIES and its subsidiaries formed
two distinct tax consolidation groups. The (provision) benefit for income taxes
consists of the following:
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE YEAR ENDED AUGUST 31, MONTHS ENDED
------------------------------ DECEMBER 31,
1995 1996 1997 1997
------- --------- ------ ------------
<S> <C> <C> <C> <C>
Current income tax.......................... $(679) $ (995) $(74) $(373)
Deferred income tax......................... (301) (178) 218 (563)
----- ------- ---- -----
Total (provision) benefit................... $(980) $(1,173) $144 $(936)
===== ======= ==== =====
</TABLE>
The reconciliation of the statutory income tax rate to the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE FOUR
AUGUST 31, MONTHS ENDED
-------------------- DECEMBER 31,
1995 1996 1997 1997
---- ---- ---- ------------
<S> <C> <C> <C> <C>
Statutory income tax rate........................ 33.3% 36.6% 36.6% 41.6%
Non-deductible expenses.......................... 15.4% 7.5% 3.1% 1.3%
Effect of the variation of statutory income tax
rate........................................... -- 0.4% -- 2.0%
---- ---- ---- -----
48.7% 44.5% 39.7% 44.9%
==== ==== ==== =====
</TABLE>
F-52
<PAGE> 156
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the deferred tax asset (liability) consisted of the
following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Current deferred tax asset
Temporary timing differences....................... $ 279 $ 221 $ 310
Other temporary differences between tax reporting
and US GAAP financial reporting:
--inventory pricing.............................. 171 337 139
--reserve for doubtful accounts.................. 33 78 43
--subsidies income recognition................... 59 89 --
--other, net..................................... 142 103 125
------- ------- -------
684 828 617
------- ------- -------
Non-current deferred tax asset (liability)
Net operating loss carry forward................... 119 178 --
Other temporary differences between tax reporting
and US GAAP financial reporting:
--retirement indemnities......................... 191 189 183
--capital leases................................. (1,092) (896) (861)
--accumulated engineering costs expensed in tax
reporting..................................... (410) (517) (721)
------- ------- -------
(1,192) (1,046) (1,399)
------- ------- -------
Net deferred tax liability......................... $ (508) $ (218) $ (782)
======= ======= =======
</TABLE>
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values of financial instruments is made in
accordance with the requirements of SFAS No. 107, Disclosures about Fair Value
of Financial Instruments. The estimated fair value amounts have been determined
by the Company using available market information and appropriate valuation
methodologies.
CASH, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
The carrying amounts of these items are a reasonable estimate of their fair
value due to their short-term nature.
LONG-TERM DEBT
The carrying amount of the revolving lines of credit approximates fair
value as the interest rate fluctuates with changes in market conditions. It is
estimated that the fair value of the long-term debt is $15,516.
F-53
<PAGE> 157
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. SALES GEOGRAPHICAL DATA
Sales to foreign countries represented 8%, 10%, 12% and 10% of Company
sales for the years ended August 31, 1995, 1996 and 1997 and for the four-month
period ended December 31, 1997 respectively, as follows:
<TABLE>
<CAPTION>
FOR THE FOUR
MONTHS ENDED
FOR THE YEAR ENDED AUGUST 31, DECEMBER 31,
-------------------------------------------------- --------------
1995 % 1996 % 1997 % 1997 %
------- --- ------- --- ------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
France............... $59,370 92 $73,784 90 $74,734 88 $29,173 90
Other EEC
countries.......... 5,163 8 8,199 10 10,192 12 3,241 10
------- --- ------- --- ------- --- ------- ---
Total...... $64,533 100 $81,983 100 $84,926 100 $32,414 100
======= === ======= === ======= === ======= ===
</TABLE>
F-54
<PAGE> 158
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Hanning Companies:
We have audited the accompanying combined balance sheets of the HANNING
COMPANIES (see Note 1) as of December 31, 1995 and 1996, and the related
combined statements of operations, equity (deficit) and cash flows for the years
then ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Hanning
Companies as of December 31, 1995 and 1996, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
May 19, 1998
F-55
<PAGE> 159
THE HANNING COMPANIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 112,408 $ 371,518
Accounts receivable, net of reserves for doubtful accounts
of $34,000 and $29,000, respectively................... 6,971,529 4,795,473
Inventories, net.......................................... 7,343,295 5,748,393
Deposits on tooling....................................... 3,183,587 3,227,968
Other receivables......................................... 159,274 45,225
Other assets.............................................. 460,350 262,871
----------- -----------
Total current assets.............................. 18,230,443 14,451,448
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land...................................................... 626,337 520,653
Buildings................................................. 5,166,315 3,665,318
Machinery and equipment................................... 6,172,294 6,968,976
Less: accumulated depreciation............................ (5,186,735) (6,116,331)
----------- -----------
Property, plant and equipment, net................ 6,778,211 5,038,616
DUE FROM AFFILIATES, NET.................................... 3,353,088 2,314,405
OTHER ASSETS................................................ 65,294 24,478
----------- -----------
Total assets...................................... $28,427,036 $21,828,947
=========== ===========
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Checks drawn in excess of cash on deposit................. $ 170,858 $ 321,070
Accounts payable.......................................... 10,419,740 8,986,502
Customer deposits on tooling.............................. 4,049,770 3,016,117
Short-term borrowings..................................... 953,343 1,597,777
Current portion of stockholder debt....................... 2,097,103 1,250,766
Current portion of long-term obligations.................. 1,065,374 1,907,866
Accrued liabilities....................................... 3,048,800 3,195,179
----------- -----------
Total current liabilities......................... 21,804,988 20,275,277
----------- -----------
STOCKHOLDER DEBT, NET OF CURRENT PORTION.................... 906,683 259,615
----------- -----------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION............... 3,650,201 1,573,441
----------- -----------
COMMITMENTS AND CONTINGENCIES
EQUITY (DEFICIT):
Capital................................................... 1,405,280 1,420,640
Additional paid-in capital................................ 6,269,319 7,599,372
Receivable from partners.................................. -- (1,000,000)
Translation adjustment.................................... 109,762 38,393
Retained deficit.......................................... (5,719,197) (8,337,791)
----------- -----------
Total equity (deficit)............................ 2,065,164 (279,386)
----------- -----------
Total liabilities and equity (deficit)............ $28,427,036 $21,828,947
=========== ===========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-56
<PAGE> 160
THE HANNING COMPANIES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SEVEN MONTHS AND SEVEN DAYS
FOR THE YEAR ENDED DECEMBER 31, ENDED AUGUST 7,
-------------------------------- ----------------------------
1995 1996 1996 1997
-------------- -------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES............................. $57,298,730 $54,062,809 $33,075,375 $29,640,348
COST OF SALES......................... 55,447,691 51,456,915 31,526,552 28,342,440
----------- ----------- ----------- -----------
Gross profit........................ 1,851,039 2,605,894 1,548,823 1,297,908
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................ 4,804,885 5,775,080 3,270,550 2,723,412
TOOLING REVENUE, NET.................. 348,795 957,467 540,610 1,113,673
----------- ----------- ----------- -----------
Operating loss...................... (2,605,051) (2,211,719) (1,181,117) (311,831)
INTEREST INCOME....................... 290,421 209,728 123,800 61,490
INTEREST EXPENSE...................... 727,899 570,847 409,604 290,623
OTHER (INCOME) EXPENSE................ 194,271 (171,104) (141,500) (293,432)
----------- ----------- ----------- -----------
Loss before income tax expense...... (3,236,800) (2,401,734) (1,325,421) (247,532)
----------- ----------- ----------- -----------
INCOME TAX EXPENSE.................... 18,578 216,860 126,545 382,192
----------- ----------- ----------- -----------
Net Loss............................ $(3,255,378) $(2,618,594) $(1,451,966) $ (629,724)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-57
<PAGE> 161
THE HANNING COMPANIES
COMBINED STATEMENTS OF EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ADDITIONAL RECEIVABLE
PAID-IN FROM TRANSLATION RETAINED
CAPITAL CAPITAL PARTNER ADJUSTMENT DEFICIT TOTAL
---------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1994.................. $1,405,280 $3,130,806 $ -- $ -- $(2,463,819) $ 2,072,267
Translation
adjustments........... -- -- -- 109,762 -- 109,762
Capital contribution.... -- 3,138,513 -- -- -- 3,138,513
Net loss................ -- -- -- -- (3,255,378) (3,255,378)
---------- ---------- ----------- -------- ----------- -----------
BALANCE, DECEMBER 31,
1995.................. 1,405,280 6,269,319 -- 109,762 (5,719,197) 2,065,164
Translation
adjustment............ -- -- -- (71,369) -- (71,369)
Receivable from
Partner............... -- -- (1,000,000) -- -- (1,000,000)
Capital contribution.... 15,360 1,330,053 -- -- -- 1,345,413
Net loss................ -- -- -- -- (2,618,594) (2,618,594)
---------- ---------- ----------- -------- ----------- -----------
BALANCE, DECEMBER 31,
1996.................. $1,420,640 $7,599,372 $(1,000,000) $ 38,393 $(8,337,791) $ (279,386)
========== ========== =========== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-58
<PAGE> 162
THE HANNING COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEVEN MONTHS AND SEVEN DAYS
DECEMBER 31, ENDED AUGUST 7,
-------------------------- ----------------------------
1995 1996 1996 1997
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................... $(3,255,378) $(2,618,594) $(1,451,966) $ (629,724)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization............ 1,653,439 1,347,843 883,205 640,714
Gain on disposal of fixed assets......... (174,711) (62,397) -- (23,999)
Changes in assets and liabilities:
Accounts receivable.................... (1,112,144) 1,837,848 933,877 (1,235,372)
Due from affiliates, net............... (3,119) 25,714 (97,703) 2,782,953
Inventories............................ 1,082,034 1,285,704 546,713 (739,036)
Deposits on tooling.................... (3,140,865) (146,677) 1,131,761 (4,299,084)
Other assets........................... (203,848) 218,472 (218,012) (148,967)
Other receivables...................... (11,720) 114,049 154,472 3,474
Accounts payable....................... 1,884,153 (938,846) (3,825,510) (1,992,673)
Accrued liabilities.................... (424,178) 339,433 1,301,398 (155,610)
Checks drawn in excess of cash on
deposit............................. (184,328) 150,212 610,906 (321,070)
Customer deposits on tooling........... 3,836,908 (926,547) 302,495 5,822,111
----------- ----------- ----------- -----------
Total adjustments................. 3,201,621 3,244,808 1,723,602 333,441
----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities............ (53,757) 626,214 271,636 (296,283)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment.............................. (945,461) (1,029,359) (438,201) (544,845)
Proceeds on disposal of fixed assets..... 174,711 1,248,344 1,163,812 23,999
----------- ----------- ----------- -----------
Net cash (used in) provided by
investing activities............ (770,750) 218,985 725,611 (520,846)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term borrowings...... 800,133 731,628 300,451 (1,387,662)
Partner contributions.................... 3,138,513 1,345,413 15,308 --
Receivable from partner.................. -- (1,000,000) (1,000,000) --
Net change in stockholder debt........... (2,533,096) (1,466,937) (9,495) 2,790,838
Principal payments on long-term
obligations............................ (569,951) (199,102) -- (705,343)
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities............ 835,599 (588,998) (693,736) 697,833
----------- ----------- ----------- -----------
EFFECT OF EXCHANGE RATE.................... 575 2,909 2,744 (3,839)
----------- ----------- ----------- -----------
NET CHANGE IN CASH......................... 11,667 259,110 306,255 (123,135)
BALANCE AT BEGINNING OF PERIOD............. 100,741 112,408 112,408 371,518
----------- ----------- ----------- -----------
BALANCE AT END OF PERIOD................... $ 112,408 $ 371,518 $ 418,663 $ 248,383
=========== =========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest................... $ 539,854 $ 465,585 $ 172,497 $ 241,773
=========== =========== =========== ===========
Cash paid for income taxes............... $ 19,078 $ 23,661 $ 14,000 $ 258,518
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-59
<PAGE> 163
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Hanning Companies (the "Company") consists of the following entities
which are under common ownership.
<TABLE>
<CAPTION>
TYPE OF COUNTRY OF
COMPANY ENTITY OPERATIONS
<S> <C> <C>
Hanning Corporation......................................... Corporation United States
Hanning--Kunststoffe Beteilingungs-GmbH..................... Corporation Germany
Hanning--Kumststoffe GmbH & Co. ............................ Partnership Germany
Hanning Plastics, Ltd. ..................................... Corporation United Kingdom
Hanning Property Associates................................. Corporation United States
PB Hanning GmbH & Co. ...................................... Corporation Germany
PB Hanning GmbH & Co. Handelsgesellschaft................... Partnership Germany
</TABLE>
The entities listed above were acquired through either asset or stock
purchases on August 8, 1997, by Moll PlastiCrafters Limited Partnership. The
Company manufactures custom injection molded parts which it sells primarily to
customers in the office equipment, home appliance and automotive industries.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of the combined
companies. All significant inter-company balances and transactions have been
eliminated in combination.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue from sales of injection molded plastic parts is recognized at the
time products are shipped.
TOOLING
The Company enters into agreements with its major customers to design and
produce certain customer owned plastic injection tooling (primarily molds).
Amounts paid or received by the Company in connection with this activity related
to tooling that remains undelivered at the end of an accounting period are
included as Deposits on Tooling or Customer Deposits on Tooling, respectively,
in the accompanying combined balance sheet. At the time of delivery of completed
tooling, the excess of revenues over costs are recognized in the accompanying
combined statements of operations as tooling revenue, net.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out (FIFO)
method) or market.
F-60
<PAGE> 164
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is valued at cost. Depreciation is computed
using straight-line and accelerated methods over the estimated useful lives of
the assets, as follows:
<TABLE>
<S> <C>
Buildings..................................... 40 to 50 years
Machinery and equipment....................... 3 to 10 years
</TABLE>
INCOME TAXES
Certain of the entities included in the Company are partnerships. The
earnings of the partnerships are included in the tax returns of its partners.
Accordingly, the combined financial statements contained no provision for
federal or state income taxes related to these earnings.
Certain of the entities included in the Company are taxable entities. As
such the Company has accounted for income taxes using the liability method which
requires recognition of deferred tax assets and liabilities for the expected
future consequences of events that have been included in the combined financial
statements or income tax returns.
Certain of the Company's incurred costs were not deductible for income tax
purposes. As a result, the Company incurred current income tax expense. At
December 31, 1996, the Company had net operating loss carryforwards available to
offset future taxable income. However, due to the Company's historical operating
results, it has not recognized a deferred tax asset in the accompanying combined
financial statements.
LONG-LIVED ASSETS
When factors are present which indicate the cost of long-lived assets may
not be recovered, the Company evaluates the realizability of its long-lived
assets, based upon the anticipated future cash flows generated by the asset.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company are translated to United States
dollars at current exchange rates, while revenues and expenses are translated at
the average rate prevailing during the period. Gains and losses resulting from
translation since January 1, 1995 are accumulated in a separate component of
equity (deficit).
INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited, interim financial
statements have been prepared on a basis consistent with the audited financial
statements and contain all adjustments necessary to present fairly the Company's
results of operations and cash flows for the seven months and seven days ended
August 7, 1996 and 1997.
F-61
<PAGE> 165
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Raw materials............................................... $4,341,883 $3,325,107
Work-in-process............................................. 1,137,132 694,188
Finished goods.............................................. 2,368,651 2,327,113
Reserve..................................................... (504,371) (598,015)
---------- ----------
$7,343,295 $5,748,393
========== ==========
</TABLE>
4. RELATED PARTIES
The Company has certain transactions with companies that are affiliated
through common ownership. At December 31, 1996, the Company has a net receivable
from these affiliated parties totaling $2,314,405 related to these transactions.
The Company pays management fees to a related company. Management fee
expense was approximately $262,000 and $264,000 for 1995 and 1996, respectively.
5. STOCKHOLDER DEBT
Stockholder debt consists of the following:
A note bearing interest at 7.5% per annum, payable semiannually (interest
expense totaled $155,868 and $83,428 in 1995 and 1996, respectively.) The note
matures on June 30, 1998 and requires repayment in Deutsche Marks. The
outstanding balance was DM 2,200,507 and DM 1,400,507 at December 31, 1995 and
1996, respectively ($1,534,079 and $908,123, respectively). Principle payments,
in U.S. dollars and stated at current exchange rates, are due as follows:
1997--$648,508 and 1998--$259,615. The note is unsecured and may be repaid at
any time without penalty.
A note bearing interest at a prime rate plus 1%, payable quarterly
(interest expense totaled $18,738 in 1996). The outstanding balance was $312,728
at December 31, 1996.
Additionally, the Company has payables to the stockholders totaling DM
2,108,295 and DM 337,174 at December 31, 1995 and 1996, respectively ($1,469,707
and $289,530, respectively). These payables do not bear interest and are due on
demand.
6. SHORT-TERM BORROWINGS
The Company has the following revolving loan facilities:
Facility with a bank which provides for borrowings up to DM 2,000,000
($1,300,000 at December 31, 1996). The Company had a balance outstanding of DM
1,080,672 and DM 2,458,499 at December 31, 1995 and 1996, respectively ($753,343
and $1,597,777, respectively). Interest is payable quarterly at a variable rate
(6.55% at December 31, 1996). The facility is secured by land and an office
building in Germany.
Facility with a bank which provides for borrowings up to $250,000. The
Company had a balance outstanding of $200,000 and $0 at December 31, 1995 and
1996, respectively. Interest is payable monthly at prime (8.25% at December 31,
1996). The facility is secured by all assets of the Company located in the
United States.
F-62
<PAGE> 166
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. LONG-TERM OBLIGATIONS
The Company has the following long-term debt obligations:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
Term loan payable to a bank, denominated in Deutsche
Marks, payable in annual installments of DM 1,200,000
($779,879 at December 31, 1996 exchange rates), matures
May 10, 1999. Interest payable quarterly at 6.92%.
Secured by land and office building in Germany. ........ $ 3,346,113 $ 2,339,463
Term loan payable to a bank, payable in annual
installments of $181,173 in addition to a balloon
payment of $920,000 due on December 15, 1997. Interest
is payable at the banks base rate plus 1% (9.25% at
December 31, 1996). .................................... 1,300,275 1,101,173
Capital lease obligations (see Note 8).................... 69,187 40,671
----------- -----------
4,715,575 3,481,307
Less current portion...................................... (1,065,374) (1,907,866)
----------- -----------
$ 3,650,201 $ 1,573,441
=========== ===========
</TABLE>
The amounts of all long-term obligations, excluding capital leases, to be
repaid for the years following December 31, 1996 are as follows:
<TABLE>
<S> <C> <C>
1997...................................................... $ 1,881,052
1998...................................................... 779,879
1999...................................................... 779,705
-----------
$ 3,440,636
===========
</TABLE>
8. LEASE COMMITMENTS
The aggregate future minimum fixed lease obligations for the Company as of
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPERATING
CAPITAL LEASES LEASES
-------------- ---------
<S> <C> <C>
1997........................................................ $28,181 $212,541
1998........................................................ 10,509 285,670
1999........................................................ 4,618 35,287
2000........................................................ 385 --
------- --------
Total minimum lease payments................................ 43,693 $533,498
========
Less amounts representing interest.......................... 3,022
-------
Present value of minimum capital lease payments............. $40,671
=======
</TABLE>
Total rent expense for the Company's operating leases for the years ended
December 31, 1995 and 1996 was approximately $180,839 and $654,354.
F-63
<PAGE> 167
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. RETIREMENT PLAN
The Company has a 401(k) deferred compensation plan covering substantially
all U.S. employees meeting the service requirements defined in the plan. Under
the provisions of the plan, employees may elect to contribute up to 15% of their
wages. The Company may make matching contributions equal to a discretionary
percentage, to be determined by the Company. The Company made no contributions
to the plan for the years ended December 31, 1995 and 1996.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values of financial instruments is disclosed
in accordance with the requirements of SFAS No. 107, Disclosures about Fair
Value of Financial Instruments. The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies.
Cash, accounts receivable, and accounts payable
The carrying amounts of these items are a reasonable estimate of their fair
value due to their short-term nature.
Short-term borrowings
The carrying amounts of the short-term borrowings approximates fair value
as the interest rates reflect market rates.
Long-term obligations
The fair value of the variable rate obligation approximates its fair value
since the interest rate reflects market rates. The fair value of the fixed rate
obligation is estimated to be $1,987,550 as compared to its carrying amount of
$2,339,463. The Company estimated the fair value based on estimated borrowing
rates for similar obligations with similar terms.
Note payable to stockholder
The carrying amount of the note payable approximates fair value based upon
current market rates and the remaining term to maturity.
11. CONTINGENCIES
The Company is a party to various lawsuits and claims in the normal course
of business. While the outcome of the lawsuits and claims against the Company
cannot be predicted with certainty, management believes that the ultimate
resolution of these matters will not have a material effect on the Company. The
Company is undergoing a tax audit covering the years 1993 to 1996. Management is
currently not able to determine the effects on the financial statements, if any.
12. MAJOR CUSTOMERS
Two customers accounted for approximately 86% and 91% of the Company's net
sales in 1995 and 1996, respectively. In addition, approximately 86% and 81% of
the Company's total accounts receivable at December 31, 1995 and 1996,
respectively, were from these customers. Management believes the credit risk
associated with these customers to be minimal.
F-64
<PAGE> 168
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
13. SEGMENT INFORMATION
The Company operates in one industry segment. The following table presents
sales and other financial information by geographic region for the years ended
December 31, 1995 and 1996.
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Net sales:
United States........................................... $ 8,599,770 $11,641,318
Europe.................................................. 48,698,960 42,421,491
----------- -----------
Total net sales................................. $57,298,730 $54,062,809
=========== ===========
Operating loss:
United States........................................... $ (322,310) $ 475,000
Europe.................................................. (2,616,741) (2,686,719)
Eliminations............................................ 334,000 --
----------- -----------
Total operating loss............................ $(2,605,051) $(2,211,719)
=========== ===========
Identifiable assets:
United States........................................... $ 8,882,549 $ 7,222,715
Europe.................................................. 20,018,870 16,236,720
Eliminations............................................ (474,383) (1,630,488)
----------- -----------
Total assets.................................... $28,427,036 $21,828,947
=========== ===========
Depreciation and amortization:
United States........................................... $ 618,297 $ 494,497
Europe.................................................. 1,035,142 853,346
----------- -----------
Total........................................... $ 1,653,439 $ 1,347,843
=========== ===========
Capital Expenditures:
United States........................................... $ 516,959 $ 474,874
Europe.................................................. 428,502 554,485
----------- -----------
Total........................................... $ 945,461 $ 1,029,359
=========== ===========
</TABLE>
F-65
<PAGE> 169
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE 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 THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information........................ i
Prospectus Summary........................... 1
Risk Factors................................. 11
The Company.................................. 17
The Transactions............................. 18
Use of Proceeds.............................. 20
Capitalization............................... 21
Selected Unaudited Pro Forma and Historical
Consolidated Financial Data................ 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 25
The Exchange Offer........................... 35
Business..................................... 42
Management................................... 52
Certain Beneficial Owners.................... 56
Certain Relationships and Related
Transactions............................... 57
Description of Notes......................... 58
Description of Certain Indebtedness.......... 86
Certain Federal Income Tax Considerations.... 89
Plan of Distribution......................... 91
Legal Matters................................ 91
Experts...................................... 91
Index to Unaudited Pro Forma Consolidated
Financial Statements....................... P-1
Index to Financial Statements................ F-1
</TABLE>
UNTIL , 1998 (90 DAYS FOLLOWING THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTIVE TRANSACTIONS IN THE NEW NOTES WHETHER OR NOT PARTICIPATING IN
THE EXCHANGE OFFER MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS OBLIGATION 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.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$130,000,000
[MOLLCORP LOGO]
10 1/2% SENIOR
SUBORDINATED NOTES
DUE 2008
------------------------
PROSPECTUS
------------------------
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 170
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law ("DGCL"), as amended,
allows a corporation to eliminate the personal liability of directors of a
corporation to the corporation or its stockholders for monetary damages for a
breach of fiduciary duty as a director, except where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law or obtained an improper
personal benefit.
Section 145 of the DGCL, as amended, empowers a Delaware corporation to
indemnify any persons who are, or are threatened to be made, parties to any
threatened, pending or completed legal action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of such corporation), by reason of the fact that such person is or was
an officer, director, employee or agent of such corporation, or is or was
serving at the request of such corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided that
such officer or director acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests, and, for
criminal proceedings, had no reasonable cause to believe his conduct was
unlawful. A Delaware corporation may indemnify officers and directors against
expenses (including attorneys' fees) in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
Restated Certificate of Incorporation
Article Eighth of the Restated Certificate of Incorporation of the Company
provides in relevant part as follows:
No director shall be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
notwithstanding any provision of law imposing such liability; provided, however,
that, to the extent provided by applicable law, this provision shall not
eliminate 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 omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of Delaware, or
(iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with respect
to any acts or omissions of such director occurring prior to such amendment or
repeal.
By-laws
Article 10 of the By-laws of the Company provides as follows:
ARTICLE 10
INDEMNIFICATION
Section 10.1 Third Party Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation,
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<PAGE> 171
partnership, joint venture, trust or other enterprise, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 10.2 Derivative Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnify for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 10.3 Expenses. To the extent that a Director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 10.1 and 10.2,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
Section 10.4 Authorization. Any indemnification under Sections 10.1 and
10.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Sections 10.1 and 10.2.
Such determination shall be made (a) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.
10.5 Advance Payment of Expenses. Expenses incurred by an officer or
Director in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of such officer or Director to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article 10. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
Section 10.6 Non-Exclusiveness. The indemnification provided by this
Article 10 shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 10.7 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the
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<PAGE> 172
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article 10.
Section 10.8 Constituent Corporations. The Corporation shall have power to
indemnify any person who is or was a director, officer, employee or agent of a
constituent corporation absorbed in a consolidation or merger with this
Corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, in the same manner as hereinabove
provided for any person who is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
Section 10.9 Additional Indemnification. In addition to the foregoing
provisions of this Article 10, the Corporation shall have the power, to the full
extent provided by law, to indemnify any person for any act or omission of such
person against all loss, cost, damage and expense (including attorney's fees) if
such person is determined (in the manner prescribed in Section 10.4 hereof) to
have acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the Corporation.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The following exhibits are filed as a part of this
Registration Statement:
<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation of Moll Industries,
Inc. (formerly known as Anchor Advanced Products, Inc.)(1)
3.2 By-Laws of Moll Industries, Inc.(1)
4.1 Indenture dated as of June 26, 1998 by and between Moll
Industries, Inc. and State Street Bank and Trust Company, as
trustee
4.2 Form of 10 1/2% Senior Subordinated Note due 2008 (included
in Exhibit 4.1)
4.3 Form of Connecticut Development Authority Note(1)
4.4 Amended and Restated Credit Agreement by and among Moll
Industries, Inc., the guarantors from time party thereto,
the lenders from time to time party thereto and NationsBank,
N.A., as agent*
4.5 Pledge Agreement dated as of June 26, 1998 by and among
NationsBank, N.A., Moll Plastics, LLC and Moll Industries,
LLC (English translation)
4.6 Registration Rights Agreement dated as June 26, 1998 by and
among Moll Industries, Inc. Donaldson, Lufkin & Jenrette
Securities Corporation and NationsBanc Montgomery Securities
LLC
4.7 Indenture dated as of April 2, 1997 by and among between
Anchor Advanced Products, Inc., Anchor Holdings, Inc. and
Fleet National Bank, as trustee(1)
4.8 First Supplemental Indenture dated as of March 18, 1998 by
and among Anchor Advanced Products, Inc., Anchor Holdings,
Inc. and State Street Bank and Trust Company (as successor
to Fleet National Bank), as trustee
4.9 Note Guarantee dated as of June 26, 1998
4.10 Substitute Note Guarantee dated as of June 26, 1998 of Moll
Industries, LLC and Moll Plastics, LLC
4.11 Substitute Note Guarantee dated as of June 26, 1998 of Moll
PlastiCrafters GmbH, Hanning-Kunststoffe Beteilingungs-GmbH,
Hanning-Kunststoffe GmbH & Co., "PB" Hanning GmbH, and PB
Hanning GmbH & Co. Handelsgesellschaft
4.12 Substitute Note Guarantee dated as of June 26, 1998 of Moll
Industries UK, Limited
4.13 Substitute Note Guarantee dated as of June 26, 1998 of
Promolde LDA*
4.14 Substitute Note Guarantee dated as of June 26, 1998 of Moll
Plastics SARL, 2BI SARL, Somoplast SARL, Semip SARL,
Somomeca Industries SARL, Serim SARL, Staphane SARL, SAPI
SARL and Somoplast Lorraine SARL
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
</TABLE>
II-3
<PAGE> 173
<TABLE>
<S> <C>
10.1 Purchase Agreement dated as June 26, 1998 by and among Moll
Industries, Inc. Donaldson, Lufkin & Jenrette Securities
Corporation and NationsBanc Montgomery Securities LLC
10.2 Stock Purchase Agreement dated as of June 4, 1998 by and
among Anchor Advanced Products, Inc., and the Selling
Stockholders of Gemini Plastic Services, Inc.(2)
10.3 Purchase and Sale Agreement dated as of June 4, 1998 by and
among Anchor Advanced Products, Inc., and the Robert S.
Hayberg and Linda Hayberg(2)
10.4 Stock Purchase Agreement dated as of March 19, 1998 by and
among Anchor Acquisition Co., Anchor Holdings, Inc. and the
Selling Stockholders of Anchor Holdings, Inc. together with
Exhibits and Schedules(3)
10.5 Form of Employment Agreement(1)
10.6 Form of Supplemental Executive Retirement Benefit Agreement
and Side Letter(1)
10.7 Letter Agreement dated March 19, 1998 between Thomas H. Lee
Company and Anchor Acquisition Co.
10.8 Employment and Consulting Agreement dated as of June 9, 1998
by and among George T. Votis, Richard P. Fackler, Anchor
Advanced Products, Inc. and Moll PlastiCrafters Limited
Partnerships
10.9 Combined Share and Asset Purchase Agreement dated August 7,
1997 (the "Combined Purchase Agreement"), by and among the
Sellers and Buyers named therein.
10.10 Amendment to the Combined Purchase Agreement dated September
23, 1997.
10.11 Stock Purchase Agreement dated October 28, 1997 by and among
Roland Staphane and Angele Staphane and Moll Plastics SARL.
12.1 Computation of Ratio of Earnings to Fixed Charges, Ratio of
Earnings to Cash Interest Expense and Ratio of Net Debt to
EBITDA
16.1 Letter of PricewaterhouseCoopers LLP dated August 3, 1998
21.1 List of Subsidiaries of Moll Industries, Inc.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Arthur Andersen LLP
24.1 Powers of Attorney for Moll Industries, Inc. (contained on
the signature pages of this Registration Statement)
25.1 Statement of Eligibility and Qualification on Form T-1 of
Trustee
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Clients
99.4 Form of Letter to Brokers, Dealers, Trust Companies and
Other Nominees
99.5 Exchange Agent Agreement between Moll Industries, Inc. and
State Street Bank and Trust Company
</TABLE>
- ------------------------------
* To be filed by amendment.
1. Incorporated by reference from the Registration Statement on Form S-4, File
No. 333-26943 of Anchor Advanced Products, Inc. ("Anchor").
2. Incorporated by reference to Anchor's Form 8-K, filed with the Commission on
June 4, 1998.
3. Incorporated by reference to Anchor's Form 8-K, filed with the Commission on
March 19, 1998.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by them together represent
the same agreement.
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<PAGE> 174
(2) That every prospectus: (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first-class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(5) Insofar as indemnification for liabilities arising under the
Securities Act 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 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 and will be
governed by the final adjudication of such issue.
II-5
<PAGE> 175
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Tennessee, on August 7, 1998.
MOLL INDUSTRIES, INC.
By: /s/ GEORGE T. VOTIS
------------------------------------
Name: George T. Votis
Title: Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
EACH PERSON IN SO SIGNING, ALSO MAKES, CONSTITUTES AND APPOINTS PHYLLIS C.
BEST AND CHARLES B. SCHIELE, AND EACH OF THEM ACTING ALONE, HIS TRUE AND LAWFUL
ATTORNEY-IN-FACT, WITH FULL POWER OF SUBSTITUTION, TO EXECUTE AND CAUSE TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE REQUIREMENTS
OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), ANY AND ALL AMENDMENTS
AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT, WITH EXHIBITS
THERETO AND OTHER DOCUMENTS IN CONNECTION THEREWITH, AND ANY RELATED
REGISTRATION STATEMENT AND ITS AMENDMENTS AND POST-EFFECTIVE AMENDMENTS FILED
PURSUANT TO RULE 462(B) UNDER THE ACT, WITH EXHIBITS THERETO AND OTHER DOCUMENTS
IN CONNECTION THEREWITH, AND HEREBY RATIFIES AND CONFIRMS ALL THAT SAID
ATTORNEY-IN-FACT OR HIS SUBSTITUTE OR SUBSTITUTES MAY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GEORGE T. VOTIS Chairman and Chief Executive August 7, 1998
- ----------------------------------------------------- Officer
George T. Votis
/s/ CHARLES B. SCHIELE President and Director August 7, 1998
- -----------------------------------------------------
Charles B. Schiele
/s/ PHYLLIS C. BEST Chief Financial Officer August 7, 1998
- -----------------------------------------------------
Phyllis C. Best
</TABLE>
II-6
<PAGE> 176
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation of Moll Industries,
Inc. (formerly known as Anchor Advanced Products, Inc.)(1)
3.2 By-Laws of Moll Industries, Inc.(1)
4.1 Indenture dated as of June 26, 1998 by and between Moll
Industries, Inc. and State Street Bank and Trust Company, as
trustee
4.2 Form of 10 1/2% Senior Subordinated Note due 2008 (included
in Exhibit 4.1)
4.3 Form of Connecticut Development Authority Note(1)
4.4 Amended and Restated Credit Agreement by and among Moll
Industries, Inc., the guarantors from time party thereto,
the lenders from time to time party thereto and NationsBank,
N.A., as agent*
4.5 Pledge Agreement dated as of June 26, 1998 by and among
NationsBank, N.A., Moll Plastics, LLC and Moll Industries,
LLC (English translation)
4.6 Registration Rights Agreement dated as June 26, 1998 by and
among Moll Industries, Inc. Donaldson, Lufkin & Jenrette
Securities Corporation and NationsBanc Montgomery Securities
LLC
4.7 Indenture dated as of April 2, 1997 by and among between
Anchor Advanced Products, Inc., Anchor Holdings, Inc. and
Fleet National Bank, as trustee(1)
4.8 First Supplemental Indenture dated as of March 18, 1998 by
and among Anchor Advanced Products, Inc., Anchor Holdings,
Inc. and State Street Bank and Trust Company (as successor
to Fleet National Bank), as trustee
4.9 Note Guarantee dated as of June 26, 1998
4.10 Substitute Note Guarantee dated as of June 26, 1998 of Moll
Industries, LLC and Moll Plastics, LLC
4.11 Substitute Note Guarantee dated as of June 26, 1998 of Moll
PlastiCrafters GmbH, Hanning-Kunststoffe Beteilingungs-GmbH,
Hanning-Kunststoffe GmbH & Co., "PB" Hanning GmbH, and PB
Hanning GmbH & Co. Handelsgesellschaft
4.12 Substitute Note Guarantee dated as of June 26, 1998 of Moll
Industries UK, Limited
4.13 Substitute Note Guarantee dated as of June 26, 1998 of
Promolde LDA*
4.14 Substitute Note Guarantee dated as of June 26, 1998 of Moll
Plastics SARL, 2BI SARL, Somoplast SARL, Semip SARL,
Somomeca Industries SARL, Serim SARL, Staphane SARL, SAPI
SARL and Somoplast Lorraine SARL
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
10.1 Purchase Agreement dated as June 26, 1998 by and among Moll
Industries, Inc. Donaldson, Lufkin & Jenrette Securities
Corporation and NationsBanc Montgomery Securities LLC
10.2 Stock Purchase Agreement dated as of June 4, 1998 by and
among Anchor Advanced Products, Inc., and the Selling
Stockholders of Gemini Plastic Services, Inc.(2)
10.3 Purchase and Sale Agreement dated as of June 4, 1998 by and
among Anchor Advanced Products, Inc., and the Robert S.
Hayberg and Linda Hayberg(2)
10.4 Stock Purchase Agreement dated as of March 19, 1998 by and
among Anchor Acquisition Co., Anchor Holdings, Inc. and the
Selling Stockholders of Anchor Holdings, Inc. together with
Exhibits and Schedules(3)
10.5 Form of Employment Agreement(1)
10.6 Form of Supplemental Executive Retirement Benefit Agreement
and Side Letter(1)
10.7 Letter Agreement dated March 19, 1998 between Thomas H. Lee
Company and Anchor Acquisition Co.
</TABLE>
<PAGE> 177
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.8 Employment and Consulting Agreement dated as of June 9, 1998
by and among George T. Votis, Richard P. Fackler, Anchor
Advanced Products, Inc. and Moll PlastiCrafters Limited
Partnerships
10.9 Combined Share and Asset Purchase Agreement dated August 7,
1997 (the "Combined Purchase Agreement"), by and among the
Sellers and Buyers named therein.
10.10 Amendment to the Combined Purchase Agreement dated September
23, 1997.
10.11 Stock Purchase Agreement dated October 28, 1997 by and among
Roland Staphane and Angele Staphane and Moll Plastics SARL.
12.1 Computation of Ratio of Earnings to Fixed Charges, Ratio of
Earnings to Cash Interest Expense and Ratio of Net Debt to
EBITDA.
16.1 Letter of PricewaterhouseCoopers LLP dated August 3, 1998
21.1 List of Subsidiaries of Moll Industries, Inc.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Arthur Andersen LLP
24.1 Powers of Attorney for Moll Industries, Inc. (contained on
the signature pages of this Registration Statement)
25.1 Statement of Eligibility and Qualification on Form T-1 of
Trustee
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Clients
99.4 Form of Letter to Brokers, Dealers, Trust Companies and
Other Nominees
99.5 Exchange Agent Agreement between Moll Industries, Inc. and
State Street Bank and Trust Company
</TABLE>
- ------------------------------
* To be filed by amendment.
1. Incorporated by reference from the Registration Statement on Form S-4, File
No. 333-26943 of Anchor Advanced Products, Inc. ("Anchor").
2. Incorporated by reference to Anchor's Form 8-K, filed with the Commission on
June 4, 1998.
3. Incorporated by reference to Anchor's Form 8-K, filed with the Commission on
March 19, 1998.
<PAGE> 1
EXHIBIT 4.1
MOLL INDUSTRIES, INC.
SERIES A AND SERIES B
10 1/2% SENIOR SUBORDINATED NOTES DUE 2008
INDENTURE
Dated as of June 26, 1998
STATE STREET BANK AND TRUST COMPANY
Trustee
<PAGE> 2
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
310 (a)(1)..................................................................7.10
(a)(2) .....................................................................7.10
(a)(3)......................................................................N.A.
(a)(4)......................................................................N.A.
(a)(5)......................................................................7.10
(i)(b)......................................................................7.10
(ii)(c).....................................................................N.A.
311(a)......................................................................7.11
(b).........................................................................7.11
(iii(c).....................................................................N.A.
312 (a).....................................................................2.05
(b)........................................................................12.03
(iv)(c)....................................................................12.03
313(a)......................................................................7.06
(b)(1).....................................................................10.03
(b)(2)......................................................................7.07
(v)(c)...............................................................7.06; 12.02
(vi)(d).....................................................................7.06
314(a)...............................................................4.03; 12.02
(c)(1)....................................................................12.04
(c)(2).....................................................................12.04
(c)(3)......................................................................N.A.
(vii)(e)..................................................................12.05
(f)...........................................................................NA
315 (a).....................................................................7.01
(b)..................................................................7.05, 12.02
(A)(c)......................................................................7.01
(d).........................................................................7.01
(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
(B)(c)......................................................................2.12
317 (a)(1)..................................................................6.08
(a)(2)......................................................................6.09
(b).........................................................................2.04
318 (a)....................................................................12.01
(b).........................................................................N.A.
(c)........................................................................12.01
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE........................................................... 1
SECTION 1.01. Definitions.................................................................................... 1
SECTION 1.02. Other Definitions.............................................................................. 15
SECTION 1.03. Incorporation of TIA Terms..................................................................... 15
SECTION 1.04. Rules of Construction.......................................................................... 16
ARTICLE 2. THE NOTES............................................................................................ 16
SECTION 2.01. Form and Dating................................................................................ 16
SECTION 2.02. Execution and Authentication................................................................... 17
SECTION 2.03. Registrar and Paying Agent..................................................................... 17
SECTION 2.04. Paying Agent to Hold Money in Trust............................................................ 18
SECTION 2.05. Holder Lists................................................................................... 18
SECTION 2.06. Transfer and Exchange.......................................................................... 18
SECTION 2.07. Replacement Notes.............................................................................. 29
SECTION 2.08. Outstanding Notes.............................................................................. 30
SECTION 2.09. Treasury Notes................................................................................. 30
SECTION 2.10. Temporary Notes................................................................................ 30
SECTION 2.11. Cancellation................................................................................... 30
SECTION 2.12. Defaulted Interest............................................................................. 31
ARTICLE 3. REDEMPTION AND PREPAYMENT............................................................................ 31
SECTION 3.01. Notices to Trustee............................................................................. 31
SECTION 3.02. Selection of Notes to Be Redeemed.............................................................. 31
SECTION 3.03. Notice of Redemption........................................................................... 32
SECTION 3.04. Effect of Notice of Redemption................................................................. 32
SECTION 3.05. Deposit of Redemption Price.................................................................... 32
SECTION 3.06. Notes Redeemed in Part......................................................................... 33
SECTION 3.07. Optional Redemption............................................................................ 33
SECTION 3.08. Mandatory Redemption........................................................................... 34
SECTION 3.09. Offer to Purchase by Application of Excess Proceeds............................................ 34
ARTICLE 4. COVENANTS............................................................................................ 35
SECTION 4.01. Payment of Notes............................................................................... 35
SECTION 4.02. Maintenance of Office or Agency................................................................ 36
SECTION 4.03. Reports........................................................................................ 36
SECTION 4.04. Compliance Certificate......................................................................... 36
SECTION 4.05. Taxes.......................................................................................... 37
SECTION 4.06. Stay, Extension and Usury Laws................................................................. 37
SECTION 4.07. Restricted Payments............................................................................ 37
SECTION 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries................................. 39
SECTION 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock..................................... 40
SECTION 4.10. Asset Sales.................................................................................... 42
SECTION 4.11. Transactions with Affiliates................................................................... 43
SECTION 4.12. Liens.......................................................................................... 43
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Page
SECTION 4.13. Corporate Existence............................................................................ 43
SECTION 4.14. Offer to Repurchase Upon Change of Control..................................................... 44
SECTION 4.15. No Senior Subordinated Debt.................................................................... 45
SECTION 4.16. Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Restricted Subsidiaries....................................................................... 45
SECTION 4.17. Limitation on Guarantees of Company Indebtedness by Restricted
Subsidiaries................................................................................... 45
SECTION 4.18. Additional Guarantees.......................................................................... 46
ARTICLE 5. SUCCESSORS........................................................................................... 46
SECTION 5.01. Merger, Consolidation, or Sale of Assets....................................................... 46
SECTION 5.02. Successor Corporation Substituted.............................................................. 47
ARTICLE 6. DEFAULTS AND REMEDIES ............................................................................... 47
SECTION 6.01. Events of Default.............................................................................. 47
SECTION 6.02. Acceleration................................................................................... 48
SECTION 6.03. Other Remedies................................................................................. 49
SECTION 6.04. Waiver of Past Defaults........................................................................ 50
SECTION 6.05. Control by Majority............................................................................ 50
SECTION 6.06. Limitation on Suits............................................................................ 50
SECTION 6.07. Rights of Holders of Notes to Receive Payment.................................................. 51
SECTION 6.08. Collection Suit by Trustee..................................................................... 51
SECTION 6.09. Trustee May File Proofs of Claim............................................................... 51
SECTION 6.10. Priorities..................................................................................... 51
SECTION 6.11. Undertaking for Costs ......................................................................... 52
ARTICLE 7. TRUSTEE.............................................................................................. 52
SECTION 7.01. Duties of Trustee ............................................................................. 52
SECTION 7.02. Rights of Trustee ............................................................................. 53
SECTION 7.03. Individual Rights of Trustee .................................................................. 54
SECTION 7.04. Trustee's Disclaimer .......................................................................... 54
SECTION 7.05. Notice of Defaults ............................................................................ 54
SECTION 7.06. Reports by Trustee to Holders of the Notes..................................................... 54
SECTION 7.07. Compensation and Indemnity..................................................................... 54
SECTION 7.08. Replacement of Trustee ........................................................................ 55
SECTION 7.09. Successor Trustee by Merger, etc. ............................................................. 56
SECTION 7.10. Eligibility; Disqualification ................................................................. 56
SECTION 7.11. Preferential Collection of Claims Against Company.............................................. 56
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE............................................................. 57
SECTION 8.01. Option to Effect Legal Defeasance or Covenant Defeasance ...................................... 57
SECTION 8.02. Legal Defeasance and Discharge ................................................................ 57
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Page
SECTION 8.03. Covenant Defeasance............................................................................ 57
SECTION 8.04. Conditions to Legal or Covenant Defeasance..................................................... 58
SECTION 8.05. Deposited Money and Cash Equivalents to be Held in Trust; Other
Miscellaneous Provisions....................................................................... 59
SECTION 8.06. Repayment to Company........................................................................... 59
SECTION 8.07. Reinstatement.................................................................................. 60
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER..................................................................... 60
SECTION 9.01. Without Consent of Holders of Notes............................................................ 60
SECTION 9.02. With Consent of Holders of Notes............................................................... 61
SECTION 9.03. Compliance with Trust Indenture Act............................................................ 62
SECTION 9.04. Revocation and Effect of Consents.............................................................. 62
SECTION 9.05. Notation on or Exchange of Notes .............................................................. 62
SECTION 9.06. Trustee to Sign Amendments, etc ............................................................... 63
ARTICLE 10. SUBORDINATION ...................................................................................... 63
SECTION 10.01. Agreement to Subordinate.......................................................... 63
SECTION 10.02. Certain Definitions............................................................... 63
SECTION 10.03. Liquidation; Dissolution; Bankruptcy.............................................. 64
SECTION 10.04. Default on Designated Senior Debt................................................. 64
SECTION 10.05. Acceleration of Securities........................................................ 65
SECTION 10.06. When Distribution Must Be Paid Over............................................... 65
SECTION 10.07. Notice by Company................................................................. 65
SECTION 10.08. Subrogation....................................................................... 65
SECTION 10.09. Relative Rights................................................................... 66
SECTION 10.10. Subordination May Not Be Impaired by Company...................................... 66
SECTION 10.11. Distribution or Notice to Representative.......................................... 66
SECTION 10.12. Rights of Trustee and Paying Agent................................................ 66
SECTION 10.13. Authorization to Effect Subordination............................................. 67
SECTION 10.14. Amendments........................................................................ 67
ARTICLE 11. NOTE GUARANTEES..................................................................................... 67
SECTION 11.01. Subordination of Note Guarantee................................................... 67
SECTION 11.02. Limitation on Guarantor Liability................................................. 67
SECTION 11.03. Execution and Delivery of Note Guarantee.......................................... 68
SECTION 11.04. Guarantors May Consolidate, etc., on Certain Terms................................ 68
SECTION 11.05. Releases Following Sale of Assets................................................. 69
ARTICLE 12. MISCELLANEOUS....................................................................................... 69
SECTION 12.01. Trust Indenture Act Controls...................................................... 69
SECTION 12.02. Notices........................................................................... 70
SECTION 12.03. Communication by Holders of Notes with Other Holders of Notes. ................... 71
SECTION 12.04. Certificate and Opinion as to Conditions Precedent................................ 71
SECTION 12.05. Statements Required in Certificate or Opinion..................................... 71
SECTION 12.06. Rules by Trustee and Agents. ..................................................... 71
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
Page
SECTION 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders.......... 72
SECTION 12.08. Governing Law. ................................................................... 72
SECTION 12.09. No Adverse Interpretation of Other Agreements. ................................... 72
SECTION 12.10. Successors. ...................................................................... 72
SECTION 12.11. Severability. .................................................................... 72
SECTION 12.12. Counterpart Originals............................................................. 72
SECTION 12.13. Table of Contents, Headings, etc.................................................. 72
</TABLE>
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF IAI CERTIFICATE
Exhibit E FORM OF NOTE GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
<PAGE> 7
INDENTURE dated as of June 26, 1998 between Moll Industries,
Inc., a Delaware corporation (the "Company"), and State Street Bank and Trust
Company, as trustee (the "Trustee"). The Company and the Trustee agree as
follows for the benefit of each other and for the equal and ratable benefit of
the Holders of the 10 1/2% Series A Senior Subordinated Notes due 2008 (the
"Series A Notes") and the 10 1/2% Series B Senior Subordinated Notes due 2008
(the "Series B Notes" and, together with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"144A Global Note" means a global note in the form of Exhibit
A hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Guarantee" means any guarantee of the Company's
obligations under this Indenture and the Notes issued after the date of this
Indenture as described in Sections 4.17 and 4.18 hereof.
"Additional Guarantor" means any Subsidiary of the Company
that guarantees the Company's obligations under this Indenture and the Notes
issued after the date of this Indenture as described in Sections 4.17 and 4.18
hereof.
"Additional Notes" means up to $70.0 million in aggregate
principal amount of Notes (other than the Initial Notes) issued under this
Indenture in accordance with Sections 2.02 and 4.09 hereof.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"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 or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or
<PAGE> 8
rights (including, without limitation, by way of a sale and leaseback) other
than sales of inventory in the ordinary course of business consistent with past
practices (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company and its Subsidiaries taken as
a whole will be governed by the provisions of Section 4.14 and/or the provisions
of Section 5.1 and not by the provisions of Section 4.10), and (ii) the issue or
sale by the Company or any of its Restricted Subsidiaries of Equity Interests of
any of the Company's Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $1.0 million or (b) for net proceeds in
excess of $1.0 million. Notwithstanding the foregoing, (i) a transfer of assets
by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, and
(iii) a Restricted Payment that is permitted by Section 4.07 hereof shall not be
deemed to be Asset Sales.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company, or any authorized committee of the Board of Directors.
"Borrowing Base" means, as of any date, an amount equal to the
sum of (a) 85% of the face amount of all accounts receivable owned by the
Company and its Restricted Subsidiaries as of such date that are not more than
90 days past due, plus (b) 50% of the book value of all inventory (excluding
work in progress) owned by the Company and its Restricted Subsidiaries as of
such date, plus (c) 25% of the book value of all inventory owned by the Company
and its Restricted Subsidiaries as of such date that is work in progress, all
calculated on a consolidated basis and in accordance with GAAP. To the extent
that information is not available as to the amount of accounts receivable or
inventory or trade payables as of a specific date, the Company may utilize the
most recent available information for purposes of calculating the Borrowing
Base.
"Business Day" means any day other than a Legal Holiday.
"Capital Contribution" means the contribution (including the
purchase of Capital Stock that is not Disqualified Stock) by Holdings to the
Company of up to all of the gross proceeds from the sale by Holdings of its
Senior Discount Notes.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than six months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers'
<PAGE> 9
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation, a division of the McGraw-Hill Companies, Inc., and in each case
maturing within six months after the date of acquisition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the
following: (i) (a) any transaction (including a merger or consolidation) the
result of which is that any "person" or "group" (each within the meaning of
Sections 13(d) and 14(d)(2) of the Exchange Act), other than the Principals and
their Related Parties, becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of more than 50% of the total
voting power of all Capital Stock of the Company, Holdings or a successor entity
normally entitled to vote in the election of directors, managers or trustees, as
applicable, calculated on a fully diluted basis, and (b) as a result of the
consummation of such transaction, any "person" or "group" (each as defined
above) becomes the "beneficial owner" (as defined above), directly or
indirectly, of more of the voting stock of the Company or Holdings than is at
the time "beneficially owned" (as defined above) by the Principals, or (ii) the
first day on which a majority of the members of the Board of Directors are not
Continuing Directors, or (iii) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole or Holdings and its Subsidiaries
taken as a whole, in each case, to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than the Principals or their Related
Parties. For purposes of this definition, any transfer of an Equity Interest of
an entity that was formed for the purpose of acquiring voting stock of the
Company or Holdings shall be deemed to be a transfer of such percentage of such
voting stock as corresponds to the percentage of the equity of such entity that
has been so transferred.
"Company" means Moll Industries, Inc. and any and all
successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus,
without duplication, (i) an amount equal to any extraordinary loss plus any net
loss realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income), plus (ii) provision for
taxes based on income or profits of such Person and its Restricted Subsidiaries
for such period, to the extent that such provision for taxes was included in
computing such Consolidated Net Income, plus (iii) consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior period
and deferred finance charges) and other non-cash charges of such Person and its
Restricted Subsidiaries for such period (excluding any such non-cash charges to
the extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash charges that was paid in a prior
period) to the extent that such depreciation, amortization and other non-cash
charges were deducted in computing such Consolidated
<PAGE> 10
Net Income. Notwithstanding the foregoing, the provision for taxes on the income
or profits of, and the depreciation and amortization and other non-cash charges
of, a Subsidiary of the referent Person shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent that a corresponding
amount would be permitted at the date of determination to be dividended to the
Company by such Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (i) the Net Income (but not loss) of any
Restricted Subsidiary that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid in cash to the Company or any of its Wholly Owned Restricted Subsidiaries,
(ii) the Net Income of any Restricted Subsidiary that is not a Wholly Owned
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Restricted Subsidiary of
that Net Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common stockholders
of such Person and its consolidated Restricted Subsidiaries as of such date plus
(ii) the respective amounts reported on such Person's balance sheet as of such
date with respect to any series of preferred stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date of this Indenture
in the book value of any asset owned by such Person or a consolidated Restricted
Subsidiary of such Person, (y) all investments as of such date in unconsolidated
Restricted Subsidiaries and in Persons that are not Restricted Subsidiaries
(except, in each case, Permitted Investments), and (z) all unamortized debt
discount and expense and unamortized deferred charges as of such date, all of
the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of either (a) a majority of
the Continuing Directors who were members of such Board of Directors at the time
of such nomination or election or (b) a majority in interest of the Principals.
For purposes of the foregoing, a "majority in interest of the Principals" shall
mean any group of Principals who beneficially own in the aggregate more than 50%
of the Capital Stock of Holdings held by all of the Principals.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 12.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or
more debt facilities
<PAGE> 11
(including, without limitation, the Revolving Credit Facility) or commercial
paper facilities, in each case with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Custodian" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof, in
the form of Exhibit A hereto, except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the Holder thereof, in whole or in part, on or prior
to September 30, 2008.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
"Existing Indebtedness" means up to $21.7 million in aggregate
principal amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Revolving Credit Facility) in existence on the date of
this Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any
period, the sum, without
<PAGE> 12
duplication, of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon)
and (iv) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a
significant segment of the accounting profession.
"Global Notes" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
<PAGE> 13
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantor" means each Subsidiary of the Company, if any, that
executes a Guarantee of the obligations of the Company under this Indenture and
the Notes in accordance with Sections 4.17 and 4.18 hereof and their successors
and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"Holdings" means means AMM Holdings, Inc., a Delaware
corporation, and any successor thereto.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether or
not such indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any Indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall be
(i) the accreted value thereof, in the case of any Indebtedness that does not
require current payments of interest, and (ii) the principal amount thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness. Indebtedness shall include interest accruing
after the filing of any bankruptcy petition whether or not the claim for such
interest is admitted as a claim after such filing in such proceeding.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Notes" means $130.0 million in aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as
<PAGE> 14
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not
also QIBs.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP; provided that an acquisition of assets, Equity Interests or other
securities by the Company for consideration consisting of common equity
securities of the Company shall not be deemed to be an Investment. If the
Company or any Restricted Subsidiary of the Company sells or otherwise disposes
of any Equity Interests of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted 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 Equity Interests of such Restricted
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which
commercial banks in the City of New York, in Hartford, Connecticut or at a place
of payment are authorized or required by law, regulation or executive order to
remain closed. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means the additional amounts (if any)
payable by the Company in the event of a Registration Default under, and as
defined in, the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Subsidiaries
or the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any
<PAGE> 15
tax sharing arrangements), amounts required to be applied to the repayment of
Indebtedness (other than Indebtedness under the Revolving Credit Facility)
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither
the Company nor any of its Restricted Subsidiaries (a) provides credit support
of any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender, and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Guarantee" means the Guarantee by each Guarantor of the
Company's payment obligations under this Indenture and the Notes, executed
pursuant to the provisions of this Indenture.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities (including any
amounts payable in respect of obligations to register securities of the Company
under the Securities Act) payable under the documentation governing any
Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer, or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company (or
any Guarantor, if applicable).
"Participant" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Investments" means (a) any Investment in the
Company or in a Restricted Subsidiary of the Company that is engaged in the same
or a similar line of business as the Company and its Restricted Subsidiaries
were engaged in on the date of this Indenture; (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of
the Company in a
<PAGE> 16
Person, if as a result of such Investment (i) such Person becomes a Restricted
Subsidiary of the Company that is engaged in the same or a similar line of
business as the Company and its Subsidiaries were engaged in on the date of this
Indenture or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company that is
engaged in the same or a similar line of business as the Company and its
Restricted Subsidiaries were engaged in on the date of this Indenture; (d) any
Restricted Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with Section 4.10
hereof; (e) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company; and (f) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (f) that are at the time outstanding, not to exceed $5.0 million.
"Permitted Liens" means (i) any Lien existing on property of
the Company or any Subsidiary on the date of this Indenture securing
Indebtedness outstanding on such date; (ii) any Lien securing obligations under
Senior Debt and any Guarantee thereof, which obligations or Guarantee are
permitted by the terms of this Indenture to be incurred and outstanding; (iii)
Liens for taxes, fees, assessments or other governmental charges which are not
delinquent or remain payable without penalty, or which are being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP are being maintained; (iv) carriers', warehousemen's,
mechanics', landlords', materialmen's, repairmen's or other similar Liens
arising in the ordinary course of business which are not delinquent or which are
being contested in good faith and by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property subject
thereto; (v) Liens (other than any Lien imposed by ERISA) consisting of pledges
or deposits required in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other social security
legislation; (vi) Liens on property of the Company or any Subsidiary securing
(a) the non-delinquent performance of bids, trade contracts (other than for
borrowed money), leases and statutory obligations, (b) surety bonds (excluding
appeal bonds and bonds posted in connection with court proceedings or judgments)
and (c) other non-delinquent obligations of a like nature, including pledges or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security
legislation, in each case, incurred in the ordinary course of business; (vii)
Liens consisting of judgment or judicial attachment Liens and Liens securing
contingent obligations on appeal bonds and other bonds posted in connection with
court proceedings or judgments; provided that the enforcement of such Liens is
effectively stayed and all such Liens in the aggregate at any time outstanding
for the Company and its Subsidiaries do not exceed $3.0 million; (viii)
easements, rights-of-way, restrictions and other similar encumbrances incurred
in the ordinary course of business which, in the aggregate, are not substantial
in amount, and which do not in any case materially detract from the value of the
property subject thereto or interfere with the ordinary conduct of the
businesses of the Company and its Subsidiaries taken as a whole; (ix) purchase
money security interests on any property acquired by the Company or any
Subsidiary in the ordinary course of business, securing Indebtedness incurred or
assumed for the purpose of financing all or any part of the cost of acquiring
such property; provided that (a) any such Lien attaches to such property
concurrently with or within 90 days after the acquisition thereof, (b) such Lien
attaches solely to the property so acquired in such transaction, (c) the
principal amount of the Indebtedness secured thereby does not exceed 100% of the
cost of such property and (d) the principal amount of the Indebtedness secured
by all such purchase money security interests shall not at any time exceed $5.0
million; (x) Liens securing obligations in respect of Capital Lease Obligations
on assets subject to such leases, provided that such Capital Lease Obligations
are otherwise permitted hereunder; (xi) Liens arising solely by virtue of any
statutory or common law provision relating to banker's liens, rights of setoff
or similar rights and remedies as to deposit accounts or other funds maintained
with a creditor depository institution; provided that (a) such deposit account
is not a
<PAGE> 17
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the Federal Reserve Board, and (b) such deposit account is not intended by the
Company or any Subsidiary to provide collateral to the depository institution;
(xii) Liens in favor of the Company or any Wholly Owned Restricted Subsidiary;
(xiii) Liens on property of a Person existing at the time such Person becomes a
Restricted Subsidiary or such Person is merged into or consolidated with the
Company or any Restricted Subsidiary of the Company; provided that such Liens
were in existence prior to the contemplation of such merger or consolidation and
do not extend to any assets other than those of the Person merged into or
consolidated with the Company; (xiv) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
acquisition; (xv) extensions, renewals and replacements of Liens referred to in
clauses (i) through (xiv) above; provided that any such extension, renewal or
replacement Lien is limited to the property or assets covered by the Lien
extended, renewed or replaced and does not secure any Indebtedness in addition
to that secured immediately prior to such extension, renewal or replacement; and
(xvi) Liens securing other Indebtedness of the Company and its Subsidiaries not
expressly permitted by clauses (i) through (xv) above; provided that the
aggregate amount of the Indebtedness secured by Liens permitted pursuant to this
clause (xvi) does not exceed $3.0 million in the aggregate and provided,
further, that such Indebtedness was permitted to be incurred by the terms of
this Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness outstanding or available to be borrowed of the Company
or any of its Restricted Subsidiaries; provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness outstanding or available to be borrowed so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness outstanding or
available to be borrowed being extended, refinanced, renewed, replaced, defeased
or refunded; (iii) if the Indebtedness outstanding or available to be borrowed
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness outstanding or available to be borrowed being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or by the Restricted Subsidiary
who is the obligor on the Indebtedness outstanding or available to be borrowed
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principals" means Mr. George T. Votis and Mr. Anastasios
Votis.
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this
<PAGE> 18
Indenture.
"Public Equity Offering" means a public offering of Equity
Interests (other than Disqualified Stock) of (i) the Company or (ii) Holdings,
to the extent the net proceeds thereof are contributed to the Company as a
capital contribution to capital stock, in each case, resulting in cash proceeds
to the Company of at least $25.0 million.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of June 26, 1998, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time and, with respect to any Additional
Notes, one or more registration rights agreements between the Company and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Note" means a global Note bearing the
Private Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"Related Party" with respect to any Principal means (i) any
controlling stockholder, 80% (or more) owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal or (ii) any trust
(including any related trustee), corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of such Principal and/or such
other Persons referred to in the immediately preceding clause (i).
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means any Investment other than a
Permitted Investment.
"Restricted Subsidiary" means any Subsidiary of the Company on
the date of this Indenture that is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the credit facility among
the Company, Holdings, the lenders party thereto in their capacities as lenders
thereunder and NationsBank, N.A., as agent, 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
<PAGE> 19
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 by Section 4.09 hereof) 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 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Rule 903" means Rule 903 promulgated under the Securities
Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Discount Note Indenture" means that certain indenture,
dated as of the date hereof, between Holdings and State Street Bank and Trust
Company, as trustee, as amended or supplemented from time to time, relating to
the Senior Discount Notes.
"Senior Discount Notes" means Holdings' 13 1/2% Senior
Discount Notes due 2009 issued pursuant to the Senior Discount Note Indenture.
"Senior Note Indenture" means that certain indenture, dated as
of March 27, 1997, between the Company and State Street Bank and Trust Company,
as trustee, as amended or supplemented from time to time, relating to the Senior
Notes.
"Senior Notes" means the Company's 11 3/4% Senior Notes due
2004 issued pursuant to the Senior Note Indenture.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Tax Sharing Agreement" means any tax allocation agreement
between the Company or any of its Restricted Subsidiaries with the Company or
any direct or indirect shareholder of the Company with respect to consolidated
or combined tax returns including the Company or any of its Restricted
Subsidiaries, but, in each case, only to the extent that amounts payable from
time to time by the Company
<PAGE> 20
or any such Restricted Subsidiary under any such agreement do not exceed the
corresponding tax payments that the Company or such Restricted Subsidiary would
have been required to make to any relevant taxing authority had the Company or
such Restricted Subsidiary not joined in such consolidated or combined returns,
but instead had filed returns including only the Company and its Restricted
Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
"Trustee" means the party named as such in the preamble to
this Indenture until a successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor serving
hereunder.
"Unrestricted Global Note" means a permanent global Note in
the form of Exhibit A attached hereto that bears the Global Note Legend and that
has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
"Unrestricted Subsidiary" means any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary of the Company than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; and (d)
has not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant set forth in Section
4.09 hereof, the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
Section 4.09 hereof and (ii) no Default or Event of Default would be in
existence following such designation.
<PAGE> 21
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person and one or more Wholly Owned Subsidiaries
of such Person.
SECTION 1.02. Other Definitions.
Defined in
Term Section
"Affiliate Transaction"...............................................4.11
"Asset Sale Offer"....................................................3.09
"Authentication Order"................................................2.02
"Change of Control Offer".............................................4.14
"Change of Control Payment"...........................................4.14
"Change of Control Payment Date" .....................................4.14
"Covenant Defeasance".................................................8.03
"Designated Senior Debt"..............................................10.02
"Event of Default"....................................................6.01
"Excess Proceeds".....................................................4.10
"incur"...............................................................4.09
"Legal Defeasance" ...................................................8.02
"Offer Amount"........................................................3.09
"Offer Period"........................................................3.09
"Other Indebtedness"..................................................4.17
"Paying Agent"........................................................2.03
"Permitted Junior Securities".........................................10.02
"Purchase Date".......................................................3.09
"Registrar"...........................................................2.03
"Representative"......................................................10.02
"Restricted Payments".................................................4.07
"Senior Debt".........................................................10.02
SECTION 1.03. Incorporation of TIA Terms.
Whenever this Indenture refers to a provision of the TIA, the
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:
"indenture securities" means the Notes;
<PAGE> 22
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Notes and any Note Guarantee means the
Company and the Guarantors, respectively, and any successor obligor upon the
Notes and the Note Guarantees, respectively.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. 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 in the plural include the singular;
(5) provisions apply to successive events
and transactions; and
(6) references to sections of or rules under
the Securities Act shall be deemed to include
substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes.
<PAGE> 23
Notes issued in global form shall be substantially in the form of Exhibit A
attached hereto (including the Global Note Legend thereon and the "Schedule of
Exchanges of Interests in the Global Note" attached thereto). Notes issued in
definitive form shall be substantially in the form of Exhibit A attached hereto
(but without the Global Note Legend thereon and without the "Schedule of
Exchanges of Interests in the Global Note" attached thereto). Each Global Note
shall represent such of the outstanding Notes as shall be specified therein and
each shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the aggregate principal amount of outstanding Notes represented
thereby shall be made by the Trustee, in accordance with instructions given by
the Holder thereof as required by Section 2.06 hereof.
(c) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Global Notes that are held by
Participants through Euroclear or Cedel Bank.
SECTION 2.02. Execution and Authentication.
One Officer shall sign the Notes for the Company by manual or
facsimile signature.
If the Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by one Officer (an "Authentication Order"), authenticate Notes for original
issue up to the aggregate principal amount stated in paragraph 4 of the Notes.
The aggregate principal amount of Notes outstanding at any time may not exceed
such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. An authenticating agent may authenticate
Notes 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 Holders or an
Affiliate of the Company.
SECTION 2.03. Registrar and Paying Agent
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any
<PAGE> 24
additional paying agent. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company shall notify the Trustee in writing of
the name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such. The Company or any of its Restricted Subsidiaries may
act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Custodian with respect to the Global
Notes.
SECTION 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and will notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Restricted Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. Holder 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 all Holders and shall otherwise comply with TIA Section 312(a). If
the Trustee is not the Registrar, the Company shall furnish to the Trustee at
least seven Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of the
Holders of Notes and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. All Global Notes will be
exchanged by the Company for Definitive Notes if (i) the Company delivers to the
Trustee notice from the Depositary that it is unwilling or unable to continue to
act as Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee. Upon the occurrence of either of
the preceding events in (i) or (ii) above, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or
<PAGE> 25
2.10 hereof, shall be authenticated and delivered in the form of, and shall be,
a Global Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.06(a), however, beneficial interests in a Global Note
may be transferred and exchanged as provided in Section 2.06(b), (c) or (f)
hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial
interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend;
provided, however, that prior to the expiration of the 40-day
restricted period (as defined in Regulation S), transfers of beneficial
interests in the Regulation S Global Note may not be made to a U.S.
Person or for the account or benefit of a U.S. Person (other than
Donaldson, Lufkin & Jenrette Securities Corporation or NationsBanc
Montgomery Securities LLC, as initial purchasers). Beneficial interests
in any Unrestricted Global Note may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers
described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above,
the transferor of such beneficial interest must deliver to the
Registrar either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in the Global Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase or (B) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary
to the Registrar containing information regarding the Person in whose
name such Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above. Upon consummation of an Exchange
Offer by the Company in accordance with Section 2.06(f) hereof, the
requirements of this Section 2.06(b)(ii) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained
in the Letter of Transmittal delivered by the Holder of such beneficial
interests in the Restricted Global Notes. Upon satisfaction of all of
the requirements for transfer or exchange of beneficial interests in
Global Notes contained in this Indenture and the Notes or otherwise
applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to Section
2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with
<PAGE> 26
the requirements of Section 2.06(b)(ii) above and the Registrar
receives the following:
(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Global Note, then
the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2)
thereof.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3)
a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Note, a certificate
from such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest to
a Person who shall take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note, a certificate from such holder
in the form of Exhibit B hereto, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an
<PAGE> 27
Authentication Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate principal
amount equal to the aggregate principal amount of beneficial interests
transferred pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest in
a Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities
Act other than those listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth in Exhibit B
hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c)
thereof,
<PAGE> 28
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear
the Private Placement Legend and shall be subject to all restrictions
on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the
case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating
in the distribution of the Exchange Notes or (3) a Person who
is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Definitive
Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit
C hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in
the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with
<PAGE> 29
the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest
in an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive
Note, then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly pursuant
to Section 2.06(h) hereof, and the Company shall execute and the
Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant
to this Section 2.06(c)(iii) shall be registered in such name or names
and in such authorized denomination or denominations as the holder of
such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive
Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive Notes
to a Person who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Company or
<PAGE> 30
any of its Subsidiaries, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, in the case of clause (c)
above, the Regulation S Global Note, and in all other cases, the IAI
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes
proposes to exchange such Notes for a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Definitive Notes
proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this
<PAGE> 31
Section 2.06(d)(ii), the Trustee shall cancel the Definitive
Notes and increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Definitive Notes to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
<PAGE> 32
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Notes for
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof;
or
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such Notes to a
Person who shall take delivery thereof in the form of
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests, an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such
exchange or transfer is in compliance with the Securities Act
and that the restrictions on transfer contained herein and in
the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the
<PAGE> 33
appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below,
each Global Note and each Definitive Note (and all Notes
issued in exchange therefor or substitution thereof) shall
bear the legend in substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS,
EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) OR
REGULATION D UNDER THE SECURITIES ACT (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF
THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE)
AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM
<PAGE> 34
THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND
"UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THIS INDENTURE CONTAINS
A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f)
to this Section 2.06 (and all Notes issued in exchange
therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend
in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS
DEFINED IN THIS INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE
IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF,
AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THIS INDENTURE,
(II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN
PART PURSUANT TO SECTION 2.06(a) OF THIS INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION
PURSUANT TO SECTION 2.11 OF THIS INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH
THE PRIOR WRITTEN CONSENT OF THE COMPANY."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Company's order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global
<PAGE> 35
Note or to a Holder of a Definitive Note 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
similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such registration
of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 hereof and ending
at the close of business on the day of selection, (B) to register the
transfer of or to exchange any Note so selected for redemption in whole
or in part, except the unredeemed portion of any Note being redeemed in
part or (c) to register the transfer of or to exchange a Note between a
record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Notes and for all other purposes, and
none of the Trustee, any Agent or the Company shall be affected by
notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
SECTION 2.07. Replacement Notes
If any mutilated Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon receipt of an Authentication Order, shall authenticate a replacement Note
if the Trustee's requirements are met. If required by the Trustee or the
Company, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may suffer
if a Note is replaced. The Company may charge for its expenses in replacing a
Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
<PAGE> 36
SECTION 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note; however, Notes held by the Company or a
Subsidiary of the Company shall not be deemed to be outstanding for purposes of
Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
SECTION 2.10. Temporary Notes
Until certificates representing Notes are ready for delivery,
the Company may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
<PAGE> 37
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. Selection of Notes to Be Redeemed
If less than all of the Notes are to be redeemed or purchased
in an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or in accordance with any other method the Trustee considers fair and
appropriate. In the event of partial redemption by lot, the particular Notes to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. Notice of Redemption
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
<PAGE> 38
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. Effect of Notice of Redemption
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. Deposit of Redemption Price
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the
<PAGE> 39
preceding paragraph, interest shall be paid on the unpaid principal, from the
redemption date until such principal is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case at the rate provided in
the Notes and in Section 4.01 hereof.
SECTION 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to July 1, 2003. Thereafter, the Company shall have the option to redeem
the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on July 1 of the
years indicated below:
YEAR PERCENTAGE
2003............................................. 105.250%
2004............................................. 103.500%
2005............................................. 101.750%
2006 and thereafter.............................. 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
at any time prior to July 1, 2001, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes originally issued in
the Offering at a redemption price of 110.5% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
redemption date, with the net cash proceeds of one or more Public Equity
Offerings; provided that at least 65% of the original aggregate principal amount
of Notes remains outstanding immediately after the occurrence of each such
redemption (excluding Notes held by the Company and its Subsidiaries); and
provided, further, that each such redemption shall occur within 90 days of the
date of the closing of such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
SECTION 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an offer to all Holders to purchase Notes
(an "Asset Sale Offer"), it shall follow the procedures specified below.
<PAGE> 40
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice,
which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not elect
to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, the Depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
<PAGE> 41
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee, upon written request from the Company shall authenticate
and mail or deliver such new Note to such Holder, in a principal amount equal to
any unpurchased portion of the Note surrendered. Any Note not so accepted shall
be promptly mailed or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Asset Sale Offer on the
Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. 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
<PAGE> 42
and demands may be made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the SEC on Form 8-K if the Company were required to file such
reports, in each case, within the time periods specified in the SEC's rules and
regulations. In addition, following consummation of the Exchange Offer, whether
or not required by the rules and regulations of the SEC, the Company shall file
a copy of all such information and reports with the SEC for public availability
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall at
all times comply with TIA Section 314(a).
(b) For so long as any Notes remain outstanding, the Company shall
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
SECTION 4.04. Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor
is so required under the TIA) shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company 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 or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event
<PAGE> 43
and what action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification 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 4 or Article 5 hereof 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.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05. Taxes.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
SECTION 4.06. Stay, Extension and 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, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company) or
to the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or such Restricted Subsidiary or dividends or distributions payable
to the Company or any Restricted Subsidiary of the Company); (ii) purchase,
redeem or otherwise acquire or retire for value any Equity Interests of the
Company or any Affiliate of the Company that is not a Subsidiary (other than any
such Equity Interests owned by the Company or any Wholly Owned Restricted
Subsidiary of the Company); (iii) make any principal payment on or with respect
to, or purchase, redeem, defease or otherwise acquire or retire for value prior
to a scheduled mandatory sinking fund payment date or final maturity date any
Indebtedness that is pari passu with or subordinated to the Notes (other than
the Notes); or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless,
<PAGE> 44
at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of this Indenture (excluding Restricted Payments permitted by
clause (ii) of the next succeeding paragraph), is less than the sum of (i) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the first full fiscal quarter after the date of this
Indenture to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds
received by the Company from the issue or sale since the date of this Indenture
of Equity Interests of the Company (other than Disqualified Stock) or of
Disqualified Stock or debt securities of the Company that have been converted
into such Equity Interests (other than Equity Interests (or Disqualified Stock
or convertible debt securities) sold to a Restricted Subsidiary of the Company
and other than Disqualified Stock or convertible debt securities that have been
converted into Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was made after the date of this Indenture is sold for cash or
otherwise liquidated or repaid for cash, the lesser of (A) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted Investment.
The foregoing provisions shall not prohibit: (i) the payment
of any dividend or distribution within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of this Indenture; (ii) the redemption, repurchase, retirement,
defeasance or other acquisition of any Equity Interests of the Company in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Company) of, other Equity
Interests of the Company (other than any Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase or other acquisition of pari passu or subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness
or the substantially concurrent sale (other than to a Restricted Subsidiary of
the Company) of Equity Interests of the Company (other than Disqualified Stock);
(iv) the purchase, redemption or other acquisition prior to the stated maturity
thereof of Indebtedness that is subordinated to the Notes in exchange for or out
of the net cash proceeds of a substantially concurrent issue and sale (other
than to the Company or any of its Restricted Subsidiaries) of new Indebtedness;
provided that (x) the principal amount of such new Indebtedness shall not exceed
the principal amount of Indebtedness so refinanced (plus the amount of such
reasonable expenses incurred in connection therewith), (y) such new Indebtedness
shall have a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being refinanced, and (z)
the new Indebtedness shall be subordinate in right of payment to the Notes; (v)
the repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of Holdings or the Company held by any member of Holdings' or
the Company's (or any of their Restricted Subsidiaries') management pursuant to
any management equity subscription agreement or stock option agreement or in
connection with the termination of employment of any employees or management of
Holdings or the Company or their Restricted Subsidiaries; provided that the
aggregate
<PAGE> 45
price paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $2.0 million in the aggregate plus the aggregate cash
proceeds received by Holdings or the Company after the date of this Indenture
from any reissuance of Equity Interests by Holdings or the Company to members of
management of Holdings or the Company and their Restricted Subsidiaries and no
Default or Event of Default shall have occurred and be continuing immediately
after any such transaction; (vi) Investments received by the Company and its
Restricted Subsidiaries as non-cash consideration from Asset Sales to the extent
permitted by Section 4.10 hereof; (vii) the payment of any dividend or
distribution by a Subsidiary of the Company to the holders of its Common Equity
Interests on a pro rata basis; (viii) payments to Holdings pursuant to the Tax
Sharing Agreement; (ix) the payment of any dividend or distribution by the
Company to Holdings in an aggregate amount not to exceed the Capital
Contribution, provided that the Capital Contribution shall be excluded from
clause (c)(ii) of the preceding paragraph, (x) other Restricted Payments not to
exceed $3.0 million in the aggregate, and (xi) distributions to the former
partners of Moll for tax liabilities of such partners for periods prior to the
date of this Indenture in an amount not to exceed the product of (A) the taxable
income of Moll for the related period and (B) the maximum combined federal,
state and local income tax rates applicable to a resident of New York City.
The amount of all Restricted Payments (other than cash or Cash
Equivalents) shall be the fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) on the date of the Restricted Payment of the asset(s) proposed to be
transferred or issued by the Company or such Restricted Subsidiary, as the case
may be, pursuant to the Restricted Payment. Not later than the date of making
any Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal required by
this Indenture.
SECTION 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to: (i)(a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of this Indenture, (b) the Revolving
Credit Facility as in effect as of the date of this Indenture, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Revolving
Credit Facility as in effect on the date of this Indenture, (c) this Indenture
and the Notes, (d) applicable law, (e) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to
be incurred; (f) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (g) purchase money obligations or Capital Lease Obligations for
property acquired in the ordinary course of business that impose restrictions of
the
<PAGE> 46
nature described in clause (iii) above on the property so acquired, (h)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced, (i) customary restrictions imposed on the transfer of
copyrighted or patented materials and customary provisions in agreements that
restrict the assignees of such agreements or any rights thereunder; (j)
restrictions with respect to a Subsidiary of the Company imposed pursuant to a
binding agreement which has been entered into for the sale or disposition of all
or substantially all of the Capital Stock or assets of such Subsidiary; or (k)
any restriction on the ability of the Company or any Restricted Subsidiary to
transfer any property or assets on account of a Permitted Lien.
SECTION 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company shall not issue any
Disqualified Stock and shall not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2.0 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The foregoing provisions shall not apply to:
(i) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness under the Revolving Credit Facility;
provided that the aggregate principal amount of all revolving credit
Indebtedness and letters of credit of the Company and its Subsidiaries
outstanding under all Credit Facilities after giving effect to such
incurrence (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company and its
Subsidiaries thereunder) does not exceed the greater of (x) $50.0
million or (y) the amount of the Borrowing Base as of the date of such
incurrence;
(ii) Guarantees of the Indebtedness under the Revolving Credit
Facility required by the Revolving Credit Facility and Guarantees
permitted under or required by this Indenture;
(iii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness represented
by (a) the Notes and this Indenture and the incurrence by Restricted
Subsidiaries of Guarantees required or permitted to be incurred under
this Indenture and (b) the Senior Notes and the Senior Notes Indenture
and the incurrence by Restricted Subsidiaries of Guarantees required or
permitted to be incurred under such indenture;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction
or improvement of property, plant or equipment used in the business of
the Company or such
<PAGE> 47
Restricted Subsidiary, in an aggregate principal amount not to exceed
$10.0 million at any time outstanding;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of
assets or a new Subsidiary; provided that such Indebtedness was
incurred by the prior owner of such assets or such Subsidiary prior to
such acquisition by the Company or one of its Restricted Subsidiaries
and was not incurred in connection with, or in contemplation of, such
acquisition by the Company or one of it Restricted Subsidiaries; and
provided, further that the principal amount (or accreted value, as
applicable) of such Indebtedness, together with any other outstanding
Indebtedness incurred pursuant to this clause (vi), does not exceed
$5.0 million;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Indebtedness that was permitted by this Indenture to be incurred;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company
and any of its Wholly Owned Restricted Subsidiaries; provided, however,
that (A) if the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in
cash of all Obligations with respect to the Notes and (B)(1) any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than the Company or a
Wholly Owned Restricted Subsidiary and (2) any sale or other transfer
of any such Indebtedness to a Person that is not either the Company or
a Wholly Owned Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of Revolving Credit
Facility or this Indenture to be outstanding; and
(x) the Guarantee by the Company of Indebtedness of a
Restricted Subsidiary of the Company that was permitted to be incurred
by another provision of this Section 4.09.
(xi) For purposes of determining compliance with this Section
4.09, in the event that an item of Indebtedness meets the criteria of
more than one of the categories described in clauses (i) through (x)
above or is entitled to be incurred pursuant to the first paragraph of
this Section 4.09, the Company shall, in its sole discretion, classify
such item of Indebtedness in any manner that complies with this
covenant and such item of Indebtedness will be treated as having been
incurred pursuant to only one of such clauses or pursuant to the first
paragraph of this Section 4.09. Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness for
purposes of this Section 4.09.
SECTION 4.10. Asset Sales
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or
the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee with
<PAGE> 48
respect to any Asset Sale involving in excess of $1.0 million) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash or Cash Equivalents; provided that the amount
of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any guarantee thereof) that are assumed by
the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Restricted Subsidiary from further liability
and (y) any securities, notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are immediately
converted by the Company or such Restricted Subsidiary into cash (to the extent
of the cash received), shall be deemed to be cash for purposes of this Section
4.10.
Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company or its Restricted Subsidiary, as the case may be, may
apply such Net Proceeds from such Asset Sale to permanently reduce Senior Debt
either in accordance with its terms, if applicable, or on terms more favorable
to the Company than such terms or, to the extent not required to be applied
thereunder, may, at its option, apply such Net Proceeds to repayment of
Indebtedness of a Restricted Subsidiary (in the case of Net Proceeds from an
Asset Sale effected by a Restricted Subsidiary) or to an investment in a
Restricted Subsidiary or in another business or capital expenditure or other
long-term/tangible assets, in each case, in the same or a similar line of
business as the Company or any of its Restricted Subsidiaries were engaged in on
the date of this Indenture or in businesses reasonably related thereto. Pending
the final application of any such Net Proceeds, the Company may temporarily
reduce Indebtedness under the Revolving Credit Facility or otherwise invest such
Net Proceeds in any manner that is not prohibited by this Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million,
the Company shall be required to make an offer to all Holders of Notes (an
"Asset Sale Offer") to purchase the maximum principal amount of Notes that may
be purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date of purchase, in accordance
with the procedures set forth in Section 3.09 hereof. To the extent that the
aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
SECTION 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to or enter into any other
transaction with, or for the benefit of, any Affiliate of the Company (each of
the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view
<PAGE> 49
issued by an accounting, appraisal or investment banking firm of national
standing; provided that (v) any leases relating to real property in Germany
between the Company and any of the Principals, as in effect on the date of this
Indenture, (w) any employment agreement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business and consistent
with the past practice of the Company or such Restricted Subsidiary, (x)
transactions between or among the Company and/or its Restricted Subsidiaries,
(y) investment banking and management fees in an aggregate amount no greater
than $200,000 per annum plus reimbursement of expenses to be paid by the Company
to Galt Industries, Inc. or its successors and assigns, and (z) Restricted
Payments that are permitted by Section 4.07 hereof, in each case, shall not be
deemed Affiliate Transactions.
SECTION 4.12. Liens.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien (other than Permitted Liens) upon any of their property
or assets, now owned or hereafter acquired, unless all payments due under this
Indenture and the Notes are secured on an equal and ratable basis with the
obligations so secured until such time as such obligations are no longer secured
by a Lien.
SECTION 4.13. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of its Subsidiaries, if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.14. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall make
an offer to repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of each Holder's Notes (the "Change of Control Offer") at an offer
price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of purchase (the "Change of Control Payment"). Within 30 calendar days following
any Change of Control, the Company shall mail a notice to each Holder stating:
(i) that the Change of Control Offer is being made pursuant to this Section 4.14
and that all Notes tendered will be accepted for payment; (ii) the purchase
price and the purchase date, which shall be no earlier than 30 calendar days nor
later than 60 calendar days from the date such notice is mailed (the "Change of
Control Payment Date"); (iii) that any Note not tendered will continue to accrue
interest; (iv) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest after the Change of Control Payment
Date; (v) that Holders electing to have any Notes purchased pursuant to a Change
of Control Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their election if the Paying
Agent receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting
<PAGE> 50
forth the name of the Holder, the principal amount of Notes delivered for
purchase, and a statement that such Holder is withdrawing such Holder's election
to have such Notes purchased; and (vii) that Holders whose Notes are being
purchased only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple thereof. The Company
shall comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (iii) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) Prior to the mailing of a notice of a Change of Control, but in any
event within 90 days following a Change of Control, the Company shall either
repay in full all outstanding Senior Debt or obtain the requisite consents, if
any, under the agreements governing outstanding Senior Debt to permit the
repurchase of Notes as provided in this Section 4.14. The Company shall first
comply with this Section 4.14(c) before it shall be required to repurchase Notes
pursuant to Section 4.14(b) hereof. The Company's failure to comply with this
Section 4.14(c) shall constitute an Event of Default described in clause (d) and
not in clause (c) of Section 6.1 hereof.
(d) Notwithstanding anything to the contrary in this Section 4.14, 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 set forth in this
Section 4.14 and Section 3.09 hereof and purchases all Notes validly tendered
and not withdrawn under such Change of Control Offer.
SECTION 4.15. No Senior Subordinated Debt.
The Company shall not incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt and senior in any respect in right of
payment to the Notes provided, however, that no Indebtedness of the Company
shall be deemed to be contractually subordinated to any other Indebtedness of
the Company solely by virtue of being unsecured.
SECTION 4.16. Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Restricted Subsidiaries.
The Company (i) shall not, and shall not permit any Wholly
Owned Restricted
<PAGE> 51
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Capital Stock of any Wholly Owned Restricted Subsidiary of the Company to
any Person (other than the Company or a Wholly Owned Restricted Subsidiary of
the Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Wholly Owned Restricted
Subsidiary and (b) the cash Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance Section 4.10 hereof; and
(ii) shall not permit any Wholly Owned Restricted Subsidiary of the Company to
issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to the Company or a Wholly Owned Restricted Subsidiary of the Company.
SECTION 4.17. Limitation on Guarantees of Company Indebtedness by Restricted
Subsidiaries.
In the event that any Restricted Subsidiary, directly or
indirectly, guarantees any Indebtedness of the Company other than the Notes (the
"Other Indebtedness"), the Company shall cause such Restricted Subsidiary to
deliver to the Trustee a supplemental indenture pursuant to which such
Restricted Subsidiary shall concurrently guarantee the Company's Obligations
under this Indenture and the Notes to the same extent that such Restricted
Subsidiary guaranteed the Company's Obligations under the Other Indebtedness
(including waiver of subrogation, if any) and such Additional Guarantee shall be
on the same terms and subject to the same conditions as such Restricted
Subsidiary's Guarantee of the Other Indebtedness, unless such Other Indebtedness
is Senior Debt, in which case the Guarantee of the Notes may be subordinated to
the Guarantee of such Senior Debt to the same extent as the Notes are
subordinated to such Senior Debt. Each Additional Guarantee shall by its terms
provide that the Additional Guarantor making such Additional Guarantee will be
automatically and unconditionally released and discharged from its obligations
under such Additional Guarantee upon the release or discharge of the guarantee
of the Other Indebtedness that resulted in the creation of such Additional
Guarantee, except a discharge or release by, or as a result of, any payment
under the guarantee of such Other Indebtedness by such Additional Guarantor. The
form of such Guarantee is attached as Exhibit E hereto.
SECTION 4.18. Additional Guarantees.
If (i) the Company or any of its Restricted Subsidiaries
shall, after the date of this Indenture, transfer or cause to be transferred,
including by way of any Investment, in one or a series of transactions (whether
or not related), any assets, businesses, divisions, real property or equipment
having an aggregate fair market value (as determined in good faith by the Board
of Directors) in excess of $1.0 million to any Restricted Subsidiary that is not
a Guarantor, (ii) the Company or any of its Restricted Subsidiaries shall
acquire another Restricted Subsidiary having total assets with a fair market
value (as determined in good faith by the Board of Directors) in excess of $1.0
million, or (iii) any Restricted Subsidiary shall incur Acquired Debt, then the
Company shall, at the time of such transfer, acquisition or incurrence, (x)
cause such transferee, acquired Restricted Subsidiary or Restricted Subsidiary
incurring Acquired Debt (if not then a Guarantor) to execute a Guarantee (which
by its terms will be subordinated to the Senior Debt of such Guarantor on the
same basis as the Notes are subordinated to Senior Debt of the Company) of the
Obligations of the Company under the Notes and this Indenture in the form of
Exhibit E hereto and (y) deliver to the Trustee an Opinion of Counsel, in form
reasonably satisfactory to the Trustee, that such Guarantee is a valid, binding
and enforceable obligation of such transferee, acquired Restricted Subsidiary or
Restricted Subsidiary incurring Acquired Debt, subject to customary exceptions
for bankruptcy and equitable principles. Notwithstanding the foregoing, the
Company or any of its Restricted Subsidiaries may make a Restricted Investment
in any Wholly Owned Restricted Subsidiary of the Company without compliance with
this Section 4.18, provided that such Restricted Investment is permitted by
Section 4.07 hereof.
<PAGE> 52
ARTICLE 5.
SUCCESSORS
SECTION 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not consolidate or merge with or into
(whether or not the Company is the surviving corporation), or sell, assign,
transfer, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Notes and this
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof. The
Company shall not, directly or indirectly, lease all or substantially all of its
properties or assets, in one or more related transactions, to any other Person.
The provisions of this Section shall not be applicable to a sale, assignment,
transfer, conveyance or other disposition of assets between or among the Company
and its Wholly Owned Restricted Subsidiaries.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
<PAGE> 53
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by the
provisions of Article 10 hereof) and such default continues for a period of 30
days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes (whether or not prohibited by the provisions of
Article 10 hereof) when the same becomes due and payable at maturity, upon
redemption (including in connection with an offer to purchase) or otherwise;
(c) the Company fails to comply with any of the provisions of Section
4.07, 4.09, 4.10 or 4.14 hereof (whether or not prohibited by the provisions of
Article 10 hereof);
(d) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the Notes for
60 days after notice to the Company by the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes then outstanding voting as a
single class;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, if (i) such default results in the
acceleration of such Indebtedness prior to its express maturity or shall
constitute a default in the payment of such Indebtedness at final maturity of
such Indebtedness, and (ii) the principal amount of any such Indebtedness that
has been accelerated or not paid at maturity, when added to the aggregate
principal amount of all other Indebtedness that has been accelerated or not paid
at maturity, exceeds $5.0 million;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Restricted Subsidiaries and such judgment or judgments remain
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all such undischarged
judgments exceeds $5.0 million;
(g) the Company, any of its Restricted Subsidiaries that qualifies as a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, pursuant to or within the
meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(h) court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an
<PAGE> 54
involuntary case;
(ii) appoints a Custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days; or
(i) except as permitted by this Indenture, if any Note Guarantee
is issued by a Restricted Subsidiary, such Note Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Guarantor or any Person acting on behalf
of any Guarantor shall deny or disaffirm its obligations under its Note
Guarantee.
SECTION 6.02. Acceleration.
If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately; provided, that so
long as any Indebtedness permitted to be incurred pursuant to the Revolving
Credit Facility shall be outstanding, such acceleration shall not be effective
until the earlier of (i) an acceleration of any such Indebtedness under the
Revolving Credit Facility or (ii) five business days after receipt by the
Company of written notice of such acceleration. Notwithstanding the foregoing,
in the case of an Event of Default specified in clause (g) or (h) of Section
6.01 hereof occurs with respect to the Company or any Restricted Subsidiary that
qualifies as a Significant Subsidiary, the principal of, and premium and
Liquidated Damages, if any, and any accrued and unpaid interest on all
outstanding Notes shall become due and payable without further action or notice.
The holders of a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may on behalf of all of the holders
rescind an acceleration and its consequences if (a) the annulment of the
acceleration of the Notes would not conflict with any judgment or decree of a
court of competent jurisdiction, and (b) all existing Events of Default, except
nonpayment of principal or interest on the Notes that became due solely because
of the acceleration of the Notes, have been cured or waived. In the event of a
declaration of acceleration of the Notes because an Event of Default has
occurred and is continuing as a result of the acceleration of any Indebtedness
described Section 6.01(e) hereof, the declaration of acceleration of the Notes
shall be automatically annulled if the holders of any Indebtedness described in
Section 6.01(e) hereof have rescinded the declaration of acceleration in respect
of such Indebtedness within 30 days of the date of such declaration and if (a)
the annulment of the acceleration of the Notes would not conflict with any
judgment or decree of a court of competent jurisdiction, and (b) all existing
Events of Default, except nonpayment of principal or interest on the Notes that
became due solely because of the acceleration of the Notes, have been cured or
waived.
If an Event of Default occurs on or after July 1, 2003 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to July 1, 2003 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding the prohibition on redemption of
the Notes prior to such date, then, upon
<PAGE> 55
acceleration of the Notes, an additional premium shall also become and be
immediately due and payable in an amount, for each of the years beginning on
July 1 of the years set forth below, as set forth below (expressed as a
percentage of principal amount of Notes that would otherwise be due but for the
provisions of this sentence, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of payment):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
1998................................................ 114.00%
1999................................................ 112.250%
2000................................................ 110.500%
2001................................................ 108.750%
2002................................................ 107.00%
</TABLE>
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note 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. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05. Control by Majority.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
SECTION 6.06. Limitation on Suits.
<PAGE> 56
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the respective
due dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest 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 is authorized to 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, disbursements and advances of the Trustee, its agents and counsel) and
the Holders of the Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Notes), its creditors or its property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder 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 Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
<PAGE> 57
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes 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 a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
<PAGE> 58
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, 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 liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) 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 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(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.
(a) The Trustee may conclusively rely upon 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 or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the
<PAGE> 59
misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(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 or direction
of any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
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 Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after it occurs. Except
in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if no
event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by
<PAGE> 60
mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Notes are listed
on any stock exchange.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture,
including the costs and expenses of enforcing this Indenture against the Company
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Company or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. 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
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need not
pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby
<PAGE> 61
created by so notifying the Company. The Holders of Notes of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
<PAGE> 62
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Sections 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest on such Notes when such payments
are due, (b) the Company's obligations with respect to such Notes under Article
2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and the Company's obligations in connection therewith
and (d) this Article Eight. Subject to compliance with this Article Eight, the
Company may exercise its option under this Section 8.02 notwithstanding the
prior exercise of its option under Section 8.03 hereof.
SECTION 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.14, 4.15, 4.16, 4.17 and 4.18 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 8.04
are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes 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 (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant
<PAGE> 63
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.01 hereof of
the option applicable to this Section 8.03 hereof, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through
6.01(f) and Section 6.01(i) hereof shall not constitute Events of Default.
SECTION 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in United States dollars,
non-callable Cash Equivalents, or a combination thereof, in such amounts as will
be sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium and Liquidated Damages, if
any, and interest on the outstanding Notes on the stated date for payment
thereof or on the applicable redemption date, as the case may be, and the
Company must specify whether the Notes are being defeased to maturity or to a
particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
<PAGE> 64
(e) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. Deposited Money and Cash Equivalents to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable
Cash Equivalents (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or non-callable
Cash Equivalents deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the request of the Company any money or non-callable Cash Equivalents
held by it as provided in Section 8.04 hereof which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only
<PAGE> 65
to the Company for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the Company
as trustee thereof, shall thereupon cease; provided, however, that the Trustee
or such Paying Agent, before being required to make any such repayment, may at
the expense of the Company cause to be published once, in the New York Times and
The Wall Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such notification or publication, any unclaimed balance
of such money then remaining will be repaid to the Company.
SECTION 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company
makes any payment of principal of, premium, if any, or interest on any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company,
the Guarantors and the Trustee may amend or supplement this Indenture, the Note
Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes or to alter the provisions of Article 2 hereof (including
the related definitions) in a manner that does not materially adversely affect
any Holder;
(c) to provide for the assumption of the Company's or a
Guarantor's obligations to the Holders of the Notes by a successor to the
Company or a Guarantor pursuant to Article 5 or Article 11 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance
with the limitations set forth in this Indenture as of the date hereof; or
<PAGE> 66
(g) to allow any Guarantor to execute a supplemental indenture
and/or a Note Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company and
the Guarantors in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into such amended or supplemental
Indenture that affects its own rights, duties or immunities under this Indenture
or otherwise.
SECTION 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and
the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10
and 4.14 hereof), the Note Guarantees and the Notes with the consent of the
Holders of at least a majority in principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest on the Notes,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of this Indenture, the Note Guarantees or the
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Notes (including Additional Notes, if any) voting
as a single class (including consents obtained in connection with a tender offer
or exchange offer for, or purchase of, the Notes). In addition, (a) any
amendment to the provisions of Article 10 of this Indenture (which relate to
subordination) will require the consent of the Holders of at least 75% in
aggregate principal amount of the Notes then outstanding if such amendment would
adversely affect the rights of Holders of Notes, and (b) any amendment to the
provisions of Article 10 of this Indenture or to a requirement that no legal
defeasance or covenant defeasant shall be permitted that would constitute a
default under any material agreement shall not be permitted without the consent
of the holders of the Designated Senior Debt. Section 2.08 hereof shall
determine which Notes are considered to be "outstanding" for purposes of this
Section 9.02.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02
hereof, the Trustee shall join with the Company in the execution of such amended
or supplemental Indenture unless such amended or supplemental Indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes 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 amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal
<PAGE> 67
amount of the Notes (including Additional Notes, if any) then outstanding voting
as a single class may waive compliance in a particular instance by the Company
with any provision of this Indenture or the Notes. However, without the consent
of each Holder affected, an amendment or waiver under this Section 9.02 may not
(with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Note or alter or waive any of the provisions with respect to the redemption of
the Notes except as provided above with respect to Sections 3.09, 4.10 and 4.14
hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes (including Additional Notes, if
any) and a waiver of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating
to waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other
than a payment required by Sections 3.09, 4.10 and 4.14 hereof); or
(h) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with the
TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. Notation on or Exchange of Notes.
<PAGE> 68
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall, upon receipt
of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 12.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
SECTION 10.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note
agrees, that the Indebtedness evidenced by the Notes is subordinated in right of
payment, to the extent and in the manner provided in this Article 10, to the
prior payment in full of all Senior Debt (whether outstanding on the date hereof
or hereafter created, incurred, assumed or guaranteed), and that the
subordination is for the benefit of the holders of Senior Debt.
SECTION 10.02. Certain Definitions.
"Designated Senior Debt" means (i) any Indebtedness
outstanding under the Revolving Credit Facility and (ii) after the Revolving
Credit Facility has been terminated, any other Senior Debt permitted under this
Indenture the principal amount of which is $25.0 million or more and that has
been designated by the Company in writing to the Trustee as "Designated Senior
Debt."
"Permitted Junior Securities" means Equity Interests in the
Company or debt securities that are subordinated to all Senior Debt (and any
debt securities issued in exchange for Senior Debt) to substantially the same
extent as, or to a greater extent than, the Notes are subordinated to Senior
Debt pursuant to this Article 10.
"Representative" means this Indenture trustee or other
trustee, agent or representative for any Senior Debt.
"Senior Debt" means (i) all Indebtedness outstanding under the
Revolving Credit Facility and all Hedging Obligations with respect thereto, (ii)
any other Indebtedness permitted to be incurred by the Company or any Restricted
Subsidiary under the terms of this Indenture, unless the instrument under
<PAGE> 69
which such Indebtedness is incurred expressly provides that it is on a parity
with or subordinated in right of payment to the Notes or any Guarantee of the
Notes by a Restricted Subsidiary and (iii) all Obligations with respect to the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Debt shall not include (w) any liability for federal, state, local or other
taxes owed or owing by the Company, (x) any Indebtedness of the Company to any
of its Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of this Indenture.
A distribution may consist of cash, securities or other
property, by set-off or otherwise.
SECTION 10.03. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, in an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities:
(1) holders of Senior Debt shall be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt whether or not such interest is allowed as a claim in
such proceeding) before Holders of the Notes shall be entitled to receive any
payment with respect to the Notes (except that Holders may receive (i) Permitted
Junior Securities and (ii) payments and other distributions made from any
defeasance trust created pursuant to Section 8.01 hereof); and
(2) until all Obligations with respect to Senior Debt (as
provided in subsection (1) above) are paid in full, any distribution to which
Holders would be entitled but for this Article 10 shall be made to holders of
Senior Debt (except that Holders of Notes may receive (i) Permitted Junior
Securities and (ii) payments and other distributions made from any defeasance
trust created pursuant to Section 8.01 hereof), as their interests may appear.
SECTION 10.04. Default on Designated Senior Debt.
The Company may not make any payment or distribution to the
Trustee or any Holder in respect of Obligations with respect to the Notes and
may not acquire from the Trustee or any Holder any Notes for cash or property
(other than (i) Permitted Junior Securities and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section 8.01
hereof) until all principal and other Obligations with respect to the Senior
Debt have been paid in full if:
(i) a default in the payment of any principal or other
Obligations with respect to Designated Senior Debt occurs and is
continuing beyond any applicable grace period in the agreement,
indenture or other document governing such Designated Senior Debt; or
(ii) a default, other than a payment default, on
Designated Senior Debt occurs and is continuing that then permits holders of the
Designated Senior Debt to accelerate its maturity and the Trustee receives a
notice of the default (a "Payment Blockage Notice") from a Person who may give
it pursuant to Section 10.12 hereof. If the Trustee receives any such Payment
Blockage Notice, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until (i) at least 360 days shall have
elapsed since the effectiveness of the immediately prior Payment Blockage Notice
and (ii) all scheduled payments of principal, premium, if any, and interest on
the Securities that have come due have been paid in full in cash. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice.
<PAGE> 70
The Company may and shall resume payments on and distributions
in respect of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.04(ii)
hereof, 179 days pass after notice is received if the maturity of such
Designated Senior Debt has not been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 10.05. Acceleration of Securities.
If payment of the Securities is accelerated because of an
Event of Default, the Company shall promptly notify holders of Senior Debt of
the acceleration.
SECTION 10.06. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any
payment of any Obligations with respect to the Notes at a time when the Trustee
or such Holder, as applicable, has actual knowledge that such payment is
prohibited by Section 10.04 hereof, such payment shall be held by the Trustee or
such Holder, in trust for the benefit of, and shall be paid forthwith over and
delivered, upon written request, to, the holders of Senior Debt as their
interests may appear or their Representative under this Indenture or other
agreement (if any) pursuant to which Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent necessary
to pay such Obligations in full in accordance with their terms, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt, and shall not be liable to any
such holders if the Trustee shall pay over or distribute to or on behalf of
Holders or the Company or any other Person money or assets to which any holders
of Senior Debt shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or gross negligence of the
Trustee.
SECTION 10.07. Notice by Company.
The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Notes to violate this Article 10, but failure to
give such notice shall not affect the subordination of the Notes to the Senior
Debt as provided in this Article 10.
SECTION 10.08. Subrogation.
After all Senior Debt is paid in full and until the Notes are
paid in full, Holders of Notes shall be subrogated (equally and ratably with all
other Indebtedness pari passu with the Notes) to the rights of holders of Senior
Debt to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders of Notes have been applied to the
payment of Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have
<PAGE> 71
been made to Holders of Notes is not, as between the Company and Holders, a
payment by the Company on the Notes.
SECTION 10.09. Relative Rights.
This Article 10 defines the relative rights of Holders of
Notes and holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay principal
of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and
creditors of the Company other than their rights in relation to holders of
Senior Debt; or
(3) prevent the Trustee or any Holder of Notes from exercising
its available remedies upon a Default or Event of Default, subject to the rights
of holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay
principal of or interest on a Note on the due date, the failure is still a
Default or Event of Default.
SECTION 10.10. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
SECTION 10.11. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to
holders of Senior Debt, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee and the Holders of Notes shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders of Notes for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior Debt and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
SECTION 10.12. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
<PAGE> 72
The Trustee in its individual or any other capacity may hold
Senior Debt with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights.
SECTION 10.13. Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof,
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination as provided
in this Article 10, and appoints the Trustee to act as such Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of the
time to file such claim, the lenders under the Revolving Credit Facility are
hereby authorized to file an appropriate claim for and on behalf of the Holders
of the Notes.
SECTION 10.14. Amendments.
The provisions of this Article 10 shall not be amended or
modified without the written consent of the holders of all Designated Senior
Debt.
ARTICLE 11.
NOTE GUARANTEES
SECTION 11.01. Subordination of Note Guarantee.
The Obligations of each Guarantor under its Note Guarantee
pursuant to this Article 11 shall be junior and subordinated to the Senior Debt
on the same basis as the Notes are junior and subordinated to Senior Debt
pursuant to Article 10 hereof. For the purposes of the foregoing sentence, the
Trustee and the Holders shall have the right to receive and/or retain payments
by any of the Guarantors only at such times as they may receive and/or retain
payments in respect of the Notes pursuant to this Indenture, including Article
10 hereof. The provisions of this Section 11.01 shall not be amended or modified
without the written consent of the holders of all Designated Senior Debt.
SECTION 11.02. Limitation on Guarantor Liability.
By its acceptance of Notes, each Holder hereby confirms that
it is the intention of such Holder that the Note Guarantee of any Guarantor not
constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law,
the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or
any similar federal or state law to the extent applicable to any Note Guarantee.
To effectuate the foregoing intention, the Trustee and the Holders hereby
irrevocably agree that the obligations of any Guarantor under its Note Guarantee
and this Article 11 shall be limited to the maximum amount as will, after giving
effect to such maximum amount and all other contingent and fixed liabilities of
such Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 11, result in the obligations of such Guarantor
under its Note Guarantee not constituting a fraudulent transfer or conveyance.
SECTION 11.03. Execution and Delivery of Note Guarantee.
Each transferee, acquired Restricted Subsidiary or Restricted
Subsidiary incurring Acquired Debt that is required to execute a Guarantee
pursuant to Section 4.18 hereof and each
<PAGE> 73
Additional Guarantor that is required to execute an Additional Guarantee
pursuant to Section 4.17 hereof shall execute a Note Guarantee of the
Obligations of the Company under the Notes and this Indenture in the form of
Exhibit E hereto, which shall be accompanied by a Supplemental Indenture
substantially in the form of Exhibit F hereto, along with such other opinions,
certificates and documents are required under this Indenture.
Except as provided for under this Article 11, a Guarantor
shall be subject to the provisions of this Indenture from the date of the
Supplemental Indenture to which its Note Guarantee relates.
If an Officer whose signature is on this Indenture or on the
Note Guarantee no longer holds that office at the time the Trustee authenticates
the Note on which a Note Guarantee is endorsed, the Note Guarantee shall be
valid nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Note
Guarantee set forth in this Indenture on behalf of the Guarantors.
SECTION 11.04. Guarantors May Consolidate, etc., on Certain Terms.
No Guarantor may consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) or sell, assign,
transfer convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless:
(a) the Company or a Guarantor is the surviving corporation or the
entity or the Person formed by or surviving any such consolidation or merger (if
other than a Guarantor or the Company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United States, any state
thereof or the District of Columbia;
(b) subject to Section 11.05 hereof, the entity or Person formed
by or surviving any such consolidation or merger (if other than a Guarantor or
the Company) or the entity or Person to which such sale, transfer, conveyance or
other disposition assumes all the obligations of such Guarantor under the Notes,
this Indenture and the Note Guarantee, pursuant to a supplemental indenture in
the form of Exhibit F hereto;
(c) immediately after giving effect to such transaction, no
Default or Event of Default exists; and
(d) the Company (i) will have Consolidated Net Worth immediately
after the transaction equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction and (ii) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof.
In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor Person, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the Note Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be
<PAGE> 74
signed any or all of the Note Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Note Guarantees so issued shall in all
respects have the same legal rank and benefit under this Indenture as the Note
Guarantees theretofore and thereafter issued in accordance with the terms of
this Indenture as though all of such Note Guarantees had been issued at the date
of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and
notwithstanding clauses (a) and (b) above, nothing contained in this Indenture
or in any of the Notes shall prevent any consolidation or merger of a Guarantor
with or into the Company or another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an entirety or substantially as an
entirety to the Company or another Guarantor.
SECTION 11.05. Releases Following Sale of Assets.
In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all of the capital stock of any Guarantor, then such
Guarantor (in the event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Note Guarantee; provided that
the Net Proceeds of such sale or other disposition are applied in accordance
with the applicable provisions of this Indenture, including without limitation
Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the applicable provisions
of this Indenture, including without limitation Section 4.10 hereof, the Trustee
shall execute any documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Note Guarantee.
Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 10.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
SECTION 12.02. Notices.
Any notice or communication by the Company, any Guarantor or
the Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address
If to the Company and/or any Guarantor:
Moll Industries, Inc.
<PAGE> 75
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
Telecopier No.: (423) 450-5379
Attention: Chief Financial Officer
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopier No.: (212) 735-2000
Attention: Robert M. Chilstrom, Esq.
If to the Trustee:
State Street Bank and Trust Company
Goodwin Square, 225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Telecopier No.: (860) 244-1889
Attention: Corporate Trust Department
The Company, any Guarantor or the Trustee, by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Section 313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
<PAGE> 76
SECTION 12.04. 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:
(a) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 12.05. 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 a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Person, he
or she 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 satisfied; and
(d) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been satisfied.
SECTION 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 12.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee,
incorporator or stockholder of the Company or any Guarantor, as such, shall have
any liability for any obligations of the Company or such Guarantor under the
Notes, the Note Guarantees or this Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
SECTION 12.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
<PAGE> 77
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 12.10. Successors.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 12.11. Severability.
In case any provision in this Indenture or in the Notes 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 12.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 12.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE> 78
SIGNATURES
Dated as of June 26, 1998
Moll Industries, Inc.
By: /s/ George T. Votis
-------------------
Name: George T. Votis
Title: Chairman and Chief Executive
Officer
State Street Bank and Trust Company
as Trustee
By: /s/ Steven Cimalore
-------------------
Name: Steven Cimalore
Title: Vice President
<PAGE> 79
EXHIBIT A
(Face of Note)
CUSIP/CINS
10 1/2% [Series A] [Series B] Senior Subordinated Notes due 2008
No. $
MOLL INDUSTRIES, INC.
promises to pay to Cede & Co., or registered assigns, the principal sum of
Dollars on July 1, 2008.
Interest Payment Dates: January 1, and July 1
Record Dates: December 15, and June 15
DATED: JUNE 26, 1998
MOLL INDUSTRIES, INC.
By:
Name:
Title:
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
State Street Bank and Trust Company
as Trustee
By: (Authorized Signatory)
<PAGE> 80
(Back of Note)
10 1/2% [Series A] [Series B] Senior Subordinated Notes due 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(A) (1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN
"IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN
AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY)
OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO
<PAGE> 81
THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS NOTE IN VIOLATION OF THE FOREGOING.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. Interest. Moll Industries, Inc., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 10 1/2% per annum from June 26, 1998 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on January 1 and July 1 of each year, or if any such day
is not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"). Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be January 1, 1999. The Company will pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on
the Notes (except defaulted interest) and Liquidated Damages to the Persons who
are registered Holders of Notes at the close of business on the December 15 or
June 15 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Liquidated Damages on, all Global Notes and all other Notes the Holders of which
shall have provided wire transfer instructions to the Company or the Paying
Agent. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.
3. Paying Agent and Registrar. Initially, State Street
Bank and Trust Company, the Trustee under the Indenture, will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.
4. Indenture. The Company issued the Notes under an
Indenture dated as of June 26, 1998 (the "Indenture") between the Company and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
<PAGE> 82
1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are
subject to all such terms, and Holders are referred to the Indenture and such
Act for a statement of such terms. To the extent any provision of this Note
conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are obligations of the
Company limited to $120.0 million in aggregate principal amount, plus amounts,
if any, issued to pay Liquidated Damages on outstanding Notes as set forth in
Paragraph 2 hereof.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this
Paragraph 5, the Company shall not have the option to redeem the Notes prior to
July 1, 2003. Thereafter, the Company shall have the option to redeem the Notes,
in whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on July 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003......................................................... 105.250%
2004......................................................... 103.500%
2005......................................................... 101.750%
2006 and thereafter.......................................... 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this
paragraph 5, at any time prior to July 1, 2001, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal amount of Notes
originally issued in the Offering at a redemption price of 110.5% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the redemption date, with the net cash proceeds of
one or more Public Equity Offerings; provided that at least 65% of the original
aggregate principal amount of Notes remains outstanding immediately after the
occurrence of each such redemption (excluding Notes held by the Company and its
Subsidiaries); and provided, further, that each such redemption shall occur
within 90 days of the date of the closing of such Public Equity Offering.
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall
not be required to make mandatory redemption payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Restricted Subsidiary consummates
any Asset Sales, within five days of each date on which the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company will commence an offer to all
Holders of Notes (as "Asset Sale Offer") pursuant to Section
<PAGE> 83
3.09 of the Indenture to purchase the maximum principal amount of Notes
(including any Additional Notes) that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Notes (including any Additional Notes) tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company (or such Restricted
Subsidiary) may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a pro rata basis. Holders of Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Company prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. 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 whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a
Note may be treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain
exceptions, the Indenture, the Note Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes and Additional Notes, if any, voting as a
single class, and any existing default or compliance with any provision of the
Indenture, the Note Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes and
Additional Notes, if any, voting as a single class. Without the consent of any
Holder of a Note, the Indenture, the Note Guarantees or the Notes may be amended
or supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's or Guarantor's obligations to
Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act, to provide for the Issuance of Additional Notes in accordance with the
limitations set forth in the Indenture, or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or a Note Guarantee with respect to
the Notes.
12. Defaults and Remedies. Events of Default include: (i)
default for 30 days in the
<PAGE> 84
payment when due of interest on the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (iii) failure by the Company to
comply with the provisions described under Sections 4.07, 4.09, 4.10 or 4.14 of
the Indenture (whether or not prohibited by Article 10 of the Indenture); (iv)
failure by the Company for 60 days after notice to comply with any of its other
agreements in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, if such (a)
default results in the acceleration of such Indebtedness prior to its express
maturity or shall constitute a default in the payment of such Indebtedness at
final maturity of such Indebtedness, and (b) the principal amount of any such
Indebtedness that has been accelerated or not paid at maturity, when added to
the aggregate principal amount of all other Indebtedness that has been
accelerated or not paid at maturity, exceeds $5.0 million; (vi) failure by the
Company or any of its Restricted Subsidiaries to pay final judgments aggregating
in excess of $5.0 million, which judgments are not paid, discharged or stayed
for a period of 60 days; (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Restricted Subsidiaries; and (viii) except
as permitted by the Indenture, if any Note Guarantee is issued by a Restricted
Subsidiary, such Note Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor or any Person acting on behalf of any Guarantor shall
deny or disaffirm its obligations under its Note Guarantee. If any Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, all outstanding
Notes will become due and payable without further action or notice. Holders may
not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer,
employee, incorporator or stockholder, of the Company, as such, shall not have
any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
<PAGE> 85
16. Abbreviations. Customary abbreviations may be used in
the name of a Holder 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).
17. Additional Rights of Holders of Restricted Global
Notes and Restricted Definitive Notes. In addition to the rights provided to
Holders of Notes under the Indenture, Holders of Restricted Global Notes and
Restricted Definitive Notes shall have all the rights set forth in the A/B
Exchange Registration Rights Agreement dated as of June 26, 1998, between the
Company and the parties named on the signature pages thereof (the "Registration
Rights Agreement").
18. 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 Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Moll Industries, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
Attention: Chief Financial Officer
<PAGE> 86
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face
of this Note)
SIGNATURE GUARANTEE.
<PAGE> 87
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
Section 4.10 Section 4.14
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $________
Date: Your Signature:
(Sign exactly as your name appears on the
Note)
Tax Identification No:
SIGNATURE GUARANTEE.
<PAGE> 88
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE (1)
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Amount of Principal Amount
decrease in Amount of of
Principal increase in this Global Note Signature of
Amount of Principal Amount following authorized officer
this Global of such decrease of Trustee or
Date of Exchange Note this Global Note (or increase) Note Custodian
---------------- ---- ---------------- ------------- --------------
<S> <C> <C> <C> <C>
</TABLE>
- --------
1 This should be included only if the Note is issued in global form.
<PAGE> 89
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Moll Industries, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Re: 10 1/2% Senior Subordinated Notes due 2008
Reference is hereby made to the Indenture, dated as of June
26, 1998 (the "Indenture"), between Moll Industries, Inc., as issuer (the
"Company"), and State Street Bank and Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
______________, (the "Transferor") owns and proposes to
transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in
the principal amount of $___________ in such Note[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A
GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being
effected pursuant to and in accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the beneficial interest or Definitive
Note is being transferred to a Person that the Transferor reasonably believed
and believes is purchasing the beneficial interest or Definitive Note for its
own account, or for one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A and such Transfer is in compliance with
any applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the 144A Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
2. CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the
<PAGE> 90
Securities Act, (iii) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the Regulation S
Global Note and/or the Definitive Note and in the Indenture and the Securities
Act.
3. CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST
IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE
SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being
effected in compliance with the transfer restrictions applicable to beneficial
interests in Restricted Global Notes and Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act and any applicable blue
sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance with
the prospectus delivery requirements of the Securities Act;
or
(d) such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount of Notes
at the time of transfer of less than $250,000, an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the IAI Global Note and/or the Definitive Notes and
in the Indenture and the Securities Act.
4. Check if Transferee will take delivery of a
beneficial interest in an Unrestricted Global Note or of an Unrestricted
Definitive Note.
<PAGE> 91
(a) CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i)
The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky securities
laws of any state of the United States and (ii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144,
Rule 903 or Rule 904 and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
[Insert Name of Transferor]
By:
Name:
Title:
Dated: ,
<PAGE> 92
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) a beneficial interest in the:
(i) 144A Global Note (CUSIP ), or
(ii) Regulation S Global Note (CUSIP ), or
(iii) IAI Global Note (CUSIP ); or
(b) a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) a beneficial interest in the:
(i) 144A Global Note (CUSIP ), or
(ii) Regulation S Global Note (CUSIP ), or
(iii) IAI Global Note (CUSIP ); or
(iv) Unrestricted Global Note (CUSIP ); or
(b) a Restricted Definitive Note; or
(c) an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
<PAGE> 93
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Moll Industries, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Re: 10 1/2% Senior Subordinated Notes due 2008
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of June
26, 1998 (the "Indenture"), between Moll Industries, Inc., as issuer (the
"Company"), and State Street Bank and Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
____________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
<PAGE> 94
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(c) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] 144A Global Note, Regulation S Global Note, IAI Global Note with
an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer and (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
<PAGE> 95
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
-----------------------------------
[Insert Name of Owner]
By:
---------------------------------
Name:
Title:
Dated:
-----------------------
<PAGE> 96
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Moll Industries, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Re: 10 1/2% Senior Subordinated Notes due 2008
Reference is hereby made to the Indenture, dated as of June
26, 1998 (the "Indenture"), between Moll Industries, Inc., as issuer (the
"Company"), and State Street Bank and Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) a beneficial interest in a Global Note, or
(b) a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the
Notes or any interest therein is subject to certain restrictions and conditions
set forth in the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes
have not been registered under the Securities Act, and that the Notes and any
interest therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and, if
<PAGE> 97
such transfer is in respect of a principal amount of Notes, at the time of
transfer of less than $250,000, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such transfer is in compliance with
the Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule
144(k) under the Securities Act or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing the Definitive Note or beneficial interest in a Global Note
from us in a transaction meeting the requirements of clauses (A) through (E) of
this paragraph a notice advising such purchaser that resales thereof are
restricted as stated herein.
3. We understand that, on any proposed resale of the
Notes or beneficial interest therein, we will be required to furnish to you and
the Company such certifications, legal opinions and other information as you and
the Company may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the Notes purchased
by us will bear a legend to the foregoing effect. We further understand that any
subsequent transfer by us of the Notes or beneficial interest therein acquired
by us must be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of our investment in the Notes,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Notes or beneficial interest
therein purchased by us for our own account or for one or more accounts (each of
which is an institutional "accredited investor") as to each of which we exercise
sole investment discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
--------------------------------------
[Insert Name of Accredited Investor]
By:
-----------------------------------
Name:
Title:
Dated:
-----------------------------
<PAGE> 98
EXHIBIT E
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any
successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of June 26, 1998 (the "Indenture")
between Moll Industries, Inc. (the "Company") and State Street Bank and Trust
Company, as trustee (the "Trustee"), (a) the due and punctual payment of the
principal of, premium, if any, and interest on the Notes (as defined in the
Indenture), whether at maturity, by acceleration, redemption or otherwise, the
due and punctual payment of interest on overdue principal and premium, and, to
the extent permitted by law, interest, 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 of the Indenture and (b) in case of any extension of
time of payment or renewal of any Notes 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. The obligations of the Guarantors to the Holders of
Notes and to the Trustee pursuant to the Note Guarantee and the Indenture are
expressly set forth in Article 11 of the Indenture and reference is hereby made
to the Indenture for the precise terms of the Note Guarantee. Each Holder of a
Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Note Guarantee shall cease to be so subordinated
and subject in right of payment upon any defeasance of this Note in accordance
with the provisions of the Indenture.
[Guarantor]
By:
-----------------------------------
Name:
Title:
<PAGE> 99
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
Supplemental Indenture (this "Supplemental Indenture"), dated
as of ________________, among __________________ (the "Guaranteeing
Subsidiary"), a subsidiary of Moll Industries, Inc. (or its permitted
successor), a Delaware corporation (the "Company"), the Company, the other
Guarantors (as defined in the Indenture referred to herein) and State Street
Bank and Trust Company, as trustee under the Indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of June 26, 1998 providing
for the issuance of an aggregate principal amount of up to $200.0 million of 10
1/2% Senior Subordinated Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain
circumstances the Guaranteeing Subsidiary shall execute and deliver to the
Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary
shall unconditionally guarantee all of the Company's Obligations under the Notes
and the Indenture on the terms and conditions set forth herein (the "Note
Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein
without definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary
hereby agrees as follows:
(a) Along with all other Guarantors, to jointly and
severally Guarantee to each Holder of a Note
authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective
of the validity and enforceability of the Indenture,
the Notes or the obligations of the Company hereunder
or thereunder, that:
(i) the principal of and interest on the Notes
will be promptly paid in full when due,
whether at maturity, by acceleration,
redemption or otherwise, and interest on the
overdue principal of and interest on the
Notes, if any, if lawful, 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 Notes or any of such other
obligations, that same will be promptly paid
in full when due or performed in accordance
with the terms of the extension or
<PAGE> 100
renewal, whether at stated maturity, by
acceleration or otherwise. Failing payment
when due of any amount so guaranteed or any
performance so guaranteed for whatever
reason, the Guarantors shall be jointly and
severally obligated to pay the same
immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or
enforceability of the Notes or the Indenture, the
absence of any action to enforce the same, any waiver
or consent by any Holder of the Notes 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.
(c) The following is hereby waived: 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.
(d) This Note Guarantee shall not be discharged except by
complete performance of the obligations contained in
the Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court
or otherwise to return to the Company, the
Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either
the Company or the Guarantors, any amount paid by
either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to
any right of subrogation in relation to the Holders
in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
(g) As between the Guarantors, 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 6 of the Indenture
for the purposes of this Note 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 declaration of acceleration of such
obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and
payable) shall forthwith become due and payable by
the Guarantors for the purpose of this Note
Guarantee.
(h) The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as
the exercise of such right does not impair the rights
of the Holders under the Guarantee.
(i) Pursuant to Section 10.02 of the Indenture, after
giving effect to any maximum amount and any other
contingent and fixed liabilities that are relevant
under any applicable Bankruptcy or fraudulent
conveyance laws, and after giving effect to
<PAGE> 101
any collections from, rights to receive contribution
from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other
Guarantor under Article 10 of the Indenture shall
result in the obligations of such Guarantor under its
Note Guarantee not constituting a fraudulent transfer
or conveyance.
3 Execution and Delivery. Each Guaranteeing Subsidiary
agrees that the Note Guarantees shall remain in full
force and effect notwithstanding any failure to
endorse on each Note a notation of such Note
Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on
Certain Terms.
(a) No Guarantor may consolidate with or merge with or
into (whether or not such Guarantor is the surviving Person) or sell, assign,
transfer convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless:
(i) the Company or a Guarantor is the surviving
corporation or the entity or the Person formed by or surviving
any such consolidation or merger (if other than a Guarantor or
the Company) or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made is
a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia;
(ii) subject to Section 11.05 of the Indenture, the
entity or Person formed by or surviving any such consolidation
or merger (if other than a Guarantor or the Company) or the
entity or Person to which such sale, transfer, conveyance or
other disposition assumes all the obligations of such
Guarantor under the Notes, the Indenture and the Note
Guarantee, pursuant to a supplemental indenture in the form of
Exhibit F to the Indenture;
(iii) immediately after giving effect to such
transaction, no Default or Event of Default exists; and
(iv) the Company (i) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding
the transaction and (ii) will, at the time of such transaction
and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of Section 4.09 of
the Indenture;
(b) In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in form to the
Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of the Indenture to be
performed by the Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Note Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Note Guarantees so issued shall in all
respects have the same legal rank and benefit under the Indenture as the Note
Guarantees theretofore and thereafter issued in accordance with the terms of the
<PAGE> 102
Indenture as though all of such Note Guarantees had been issued at the date of
the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the
Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in
the Indenture or in any of the Notes shall prevent any consolidation or merger
of a Guarantor with or into the Company or another Guarantor, or shall prevent
any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety to the Company or another Guarantor.
5. Releases.
(a) In the event of a sale or other disposition of all of
the assets of any Guarantor, by way of merger, consolidation or otherwise, or a
sale or other disposition of all to the capital stock of any Guarantor, then
such Guarantor (in the event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Note Guarantee; provided that
the Net Proceeds of such sale or other disposition are applied in accordance
with the applicable provisions of the Indenture, including without limitation
Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an
Officers' Certificate and an Opinion of Counsel to the effect that such sale or
other disposition was made by the Company in accordance with the provisions of
the Indenture, including without limitation Section 4.10 of the Indenture, the
Trustee shall execute any documents reasonably required in order to evidence the
release of any Guarantor from its obligations under its Note Guarantee.
(b) Any Guarantor not released from its obligations under
its Note Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor under the
Indenture as provided in Article 10 of the Indenture.
6. No Recourse Against Others. No past, present or
future director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Note
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of the Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE
OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
8. Counterparts. The parties may sign any number of
copies of this Supplemental Indenture. Each signed copy shall be an original,
but all of them together represent the same agreement.
9. Effect of Headings. The Section headings herein are
for convenience only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in
any manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
<PAGE> 103
Company.
<PAGE> 104
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Dated:
----------------------------
[Guaranteeing Subsidiary]
By:
----------------------------------
Name:
Title:
[COMPANY]
By:
----------------------------------
Name:
Title:
[EXISTING GUARANTORS]
By:
----------------------------------
Name:
Title:
[TRUSTEE]
as Trustee
By:
----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.5
PLEDGE OF SHARES
BETWEEN THE UNDERSIGNED:
- - NationsBank, N.A., acting as agent (the "Agent") on behalf and for the
account of the lenders (the "Lenders") parties from time to time to
that certain credit agreement (the "Credit Agreement") dated as of June
26, 1998, by and among Moll Industries, Inc., the Agent, the Lenders
and Anchor Holdings, Inc., the Agent having an address at 101 N. Tryon
Street, 15th floor, Charlotte, North Carolina, 28202 USA,
Hereafter called the "Pledgee"
On the one hand
AND
- - Moll Plastics, LLC, a company having its registered office at c/o Moll
Industries, Inc., 151 Hell Quaker Blvd, Lavergne, TN 37086, USA,
and
- - Moll Industries, LLC, a company having its registered office at c/o
Moll Industries, Inc., 151 Hell Quaker Blvd, Lavergne, TN 37086, USA,
Hereafter called "Pledgors"
On the other hand
WHEREAS:
Pledgors possess together 500 shares of Moll Plastics SARL (the "Company"), a
French company having its registered office at 10 chemin des Barres ZI de
Crissey 71100 Chalon sur Saone. Moll Plastics, LLC, possesses 493 shares of the
Company and Moll Industries, LLC, possesses 7 shares of the Company. The
Company's corporate purpose is taking participations, the management of the
above-mentioned participations, and more generally all industrial operations in
the field of the plastics industries. The Company has been established pursuant
to a private deed dated August 27, 1997. The Company's share capital is 50.000
<PAGE> 2
francs divided into 500 shares of 100 francs each, numbered from 1 to 500,
entirely paid-up.
A condition precedent to the making of financial accommodations by the Lenders
to Moll Industries, Inc., pursuant to the Credit Agreement is the execution and
delivery hereof by the Pledgors.
PLEDGE
By the present pledge agreement, Pledgors pledge to the Pledgee the shares of
the Company, in the proportion as follows: (i) Moll Plastics, LLC, pledges 320
shares of the Company, and (ii) Moll Industries, LLC, pledges 7 shares of the
Company.
This pledge is granted as caution reelle to secure all obligations and
liabilities of Moll Industries, Inc., to the Agent and the Lenders under, in
connection with and related to the Credit Agreement, as amended, restated,
modified and supplemented from time to time.
The present pledge is extended to all increases, products and accessories, as
well as in general to all rights proceeding from these shares or as a
complement, including the case of exchange, regroupment, or division, free
attribution, cash subscription or otherwise, these rights being automatically
incorporated in the present pledge without these operations implying a novation
to the rights and securities that the Pledgee holds from the present pledge
agreement.
Each of the Pledgors hereby expressly waives any right it may have pursuant to
articles 2021 and 2026 of the Civil Code and hereby further waives any right it
may have to be subrogated to or to be substituted in respect of the Pledgee by
virtue of any payment under this pledge agreement upon enforcement of the pledge
until the Lenders have been fully paid. It is therefor agreed that the in rem
security granted by each of the Pledgors constitutes an in solidum guarantee
(cautionnement solidaire).
REGISTRATION - NOTIFICATION
The present pledge agreement will be registered at the cost of Pledgors and will
be notified to the Company in conformity with the provisions of article 2075 of
the Civil Code.
APPROVAL OF PLEDGE
The present pledge has been authorized by an Extraordinary General Assembly of
the Company dated June 15, 1998, and a transferee of the shares so pledged has
been approved as a possible shareholder.
FORECLOSURE OF THE PLEDGE
<PAGE> 3
Upon the occurrence of "Event of Default" under the Credit Agreement and during
the continuation thereof, the Pledgee may, ten days after a simple notification,
request the realization of the present pledge in conformity with article 93 of
the French Commercial Code or article 2078 of the Civil Code.
FEES
The fees and rights resulting from the present pledge as well as those that will
arise as a result of the sale of shares if it happens will be borne by Pledgors.
GOVERNING LAW
This pledge agreement is governed and construed in accordance with French law.
Executed in New York
June 26, 1998
6 counterparts
In witness of which the parties have signed the present contract.
Nationsbank, N.A.
By: /s/ Johns N. Ellington
-------------------------
Name: Johns N. Ellington
Title: Vice President
Moll Plastics, LLC Moll Industries, LLC
By: /s/ George T. Votis By: /s/ George T. Votis
------------------- -------------------
Name: George T. Votis Name: George T. Votis
Title: Manager Title: Chairman and CEO of Moll
Industries, Inc., Manager
<PAGE> 1
EXHIBIT 4.6
MOLL INDUSTRIES, INC.
$130,000,000
10 1/2% SENIOR SUBORDINATED NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JUNE 26, 1998
DONALDSON, LUFKIN & JENRETTE NATIONSBANC MONTGOMERY
SECURITIES CORPORATION SECURITIES LLC
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made
and entered into as of June 26, 1998, by and among Moll Industries, Inc., a
Delaware corporation (the "COMPANY"), and Donaldson, Lufkin & Jenrette
Securities Corporation and NationsBanc Montgomery Securities LLC (together, the
"INITIAL PURCHASERS"), who have agreed to purchase the Company's 10 1/2% Senior
Subordinated Notes due 2008 (the "SENIOR SUBORDINATED NOTES") pursuant to the
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement,
dated June 23, 1998 (the "PURCHASE AGREEMENT"), by and among the Company and the
Initial Purchasers. In order to induce the Initial Purchasers to purchase the
Senior Subordinated Notes, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this Agreement
is a condition to the obligations of the Initial Purchasers set forth in Section
9(j) of the Purchase Agreement. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to them in the Indenture, dated June 26,
1998, between the Company and State Street Bank and Trust Company, as Trustee
(the "TRUSTEE"), relating to the Senior Subordinated Notes and the New Senior
Subordinated Notes (the "INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the
Exchange Act.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the
Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the New Senior Subordinated Notes to be issued in the Exchange
Offer, (b) the maintenance of such Exchange Offer Registration Statement
continuously effective and the keeping of the Exchange Offer open for a period
not less than the period required pursuant to Section 3(b) hereof and (c) the
delivery by the Company to the Registrar under the Indenture of New Senior
Subordinated Notes in the same aggregate principal amount as
the aggregate
<PAGE> 3
principal amount of Senior Subordinated Notes tendered by Holders thereof
pursuant to the Exchange Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EFFECTIVENESS DEADLINE: As defined in Section 3(a) and 4(a)
hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The exchange and issuance by the Company of a
principal amount of New Senior Subordinated Notes (which shall be registered
pursuant to the Exchange Offer Registration Statement) equal to the outstanding
principal amount of Senior Subordinated Notes that are tendered by such Holders
in connection with such exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration
Statement relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial
Purchasers propose to sell the Senior Subordinated Notes to certain "qualified
institutional buyers," as such term is defined in Rule 144A under the Act (a
"QIB") and to certain institutional "accredited investors," as such term is
defined in Rule 501(a)(1), (2), (3) and (7) of Regulation D under the Act (an
"IAI").
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
NEW SENIOR SUBORDINATED NOTES: The Company's 10 1/2% Senior
Subordinated Notes due 2008 to be issued pursuant to the Indenture: (i) in the
Exchange Offer or (ii) as contemplated by Section 4 hereof.
PROSPECTUS: The prospectus included in a Registration
Statement at the time such Registration Statement is declared effective, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the
Company relating to (a) an offering of New Senior Subordinated Notes pursuant to
an Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i) that
is filed pursuant to the provisions of this Agreement and (ii)
<PAGE> 4
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Senior Subordinated Note,
until the earliest to occur of (a) the date on which such Senior Subordinated
Note is exchanged in the Exchange Offer for a New Senior Subordinated Note which
is entitled to be resold to the public by the Holder thereof without complying
with the prospectus delivery requirements of the Act, (b) the date on which such
Senior Subordinated Note has been disposed of in accordance with a Shelf
Registration Statement (and the purchasers thereof have been issued New Senior
Subordinated Notes), or (c) the date on which such Senior Subordinated Note is
distributed to the public pursuant to Rule 144 under the Act (and purchasers
thereof have been issued New Senior Subordinated Notes) and each New Senior
Subordinated Note held by a Broker-Dealer until the date on which such New
Senior Subordinated Note is disposed of by a Broker-Dealer pursuant to the "Plan
of Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted
Securities (each, a "HOLDER") whenever such Person owns Transfer Restricted
Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be
permitted by applicable federal law (after the procedures set forth in Section
6(a)(i) below have been complied with), the Company shall (i) cause the Exchange
Offer Registration Statement to be filed with the Commission as soon as
practicable after the Closing Date, but in no event later than 45 days after the
Closing Date (such 45th day being the "FILING DEADLINE"), (ii) use its best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 180 days after the
Closing Date (such 180th day being the "EFFECTIVENESS DEADLINE"), (iii) in
connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause it
to become
<PAGE> 5
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the New Senior Subordinated Notes to be made under the Blue Sky
laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The Exchange
Offer shall be on the appropriate form permitting (i) registration of the New
Senior Subordinated Notes to be offered in exchange for the Senior Subordinated
Notes that are Transfer Restricted Securities and (ii) resales of New Senior
Subordinated Notes by Broker-Dealers that tendered into the Exchange Offer
Senior Subordinated Notes that such Broker-Dealer acquired for its own account
as a result of market making activities or other trading activities (other than
Senior Subordinated Notes acquired directly from the Company or any of its
Affiliates) as contemplated by Section 3(c) below.
(b) The Company shall use its best efforts to
cause the Exchange Offer Registration Statement to be effective continuously,
and shall keep the Exchange Offer open for a period of not less than the minimum
period required under applicable federal and state securities laws to Consummate
the Exchange Offer; provided, however, that in no event shall such period be
less than 20 Business Days. The Company shall cause the Exchange Offer to comply
with all applicable federal and state securities laws. No securities other than
the New Senior Subordinated Notes shall be included in the Exchange Offer
Registration Statement. The Company shall use its best efforts to cause the
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 business days thereafter (such 30th day being the "CONSUMMATION
DEADLINE").
(c) The Company shall include a "Plan of
Distribution" section in the Prospectus contained in the Exchange Offer
Registration Statement and indicate therein that any Broker-Dealer who holds
Transfer Restricted Securities that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities (other than Senior Subordinated Notes acquired directly from the
Company or any Affiliate of the Company), may exchange such Transfer Restricted
Securities pursuant to the Exchange Offer. Such "Plan of Distribution" section
shall also contain all other information with respect to such sales by such
Broker-Dealers that the Commission may require in order to permit such sales
pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Transfer Restricted Securities held by
any such Broker-Dealer, except to the extent required by the Commission as a
result of a change in policy, rules or regulations after the date of this
Agreement. See the Shearman & Sterling no-action letter (available July 2,
1993).
Because such Broker-Dealer may be deemed to be an
"underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of any New Senior Subordinated Notes received by such Broker-Dealer in the
Exchange Offer, the Company shall permit the use of the Prospectus
<PAGE> 6
contained in the Exchange Offer Registration Statement by such Broker-Dealer to
satisfy such prospectus delivery requirement. To the extent necessary to ensure
that the prospectus contained in the Exchange Offer Registration Statement is
available for sales of New Senior Subordinated Notes by Broker-Dealers, the
Company agrees to use its best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented, amended and current as required
by and subject to the provisions of Section 6(a) and (c) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of one year from the Consummation Deadline or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been sold pursuant thereto. The Company shall provide sufficient
copies of the latest version of such Prospectus to such Broker-Dealers, promptly
upon request, and in no event later than one day after such request, at any time
during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange
Offer is not permitted by applicable law or Commission policy (after the Company
has complied with the procedures set forth in Section 6(a)(i) below) or (ii) if
any Holder of Transfer Restricted Securities shall notify the Company within 20
Business Days following the Consummation Deadline that (A) such Holder was
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) such Holder may not resell the New Senior Subordinated Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such Holder is a
Broker-Dealer and holds Senior Subordinated Notes acquired directly from the
Company or any of its Affiliates, then the Company shall:
(i) cause to be filed, on or prior to
60 days after the earlier of (i) the date on which the Company
determines that the Exchange Offer Registration Statement cannot be
filed as a result of clause (a)(i) above and (ii) the date on which the
Company receives the notice specified in clause (a)(ii) above, (such
earlier date, the "FILING DEADLINE"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the
Exchange Offer Registration Statement (the "SHELF REGISTRATION
STATEMENT")), relating to all Transfer Restricted Securities, and
(ii) shall use its best efforts to cause
such Shelf Registration Statement to become effective on or prior to 90
days after the Filing Deadline for the Shelf Registration Statement
(such 90th day the "EFFECTIVENESS DEADLINE").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law (i.e.,
clause (a)(i) above), then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above;
provided that, in such event, the Company shall remain obligated to meet the
Effectiveness Deadline set
<PAGE> 7
forth in clause (y). To the extent necessary to ensure that the Shelf
Registration Statement is available for sales of Transfer Restricted Securities
by the Holders thereof entitled to the benefit of this Section 4(a) and
the other securities required to be registered therein pursuant to Section
6(b)(ii) hereof, the Company shall use its best efforts to keep any Shelf
Registration Statement required by this Section 4(a) continuously effective,
supplemented, amended and current as required by and subject to the provisions
of Sections 6(b) and (c) hereof and in conformity with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years (as extended
pursuant to Section 6(c)(i)) following the Closing Date, or such shorter period
as will terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold pursuant thereto.
(b) Provision by Holders of Certain Information
in Connection with the Shelf Registration Statement. No Holder of Transfer
Restricted Securities may include any of its Transfer Restricted Securities in
any Shelf Registration Statement pursuant to this Agreement unless and until
such Holder furnishes to the Company in writing, within 20 days after receipt of
a request therefor, the information specified in Item 507 or 508 of Regulation
S-K, as applicable, of the Act for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. No Holder of
Transfer Restricted Securities shall be entitled to liquidated damages pursuant
to Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement
is not filed with the Commission on or prior to the applicable Filing Deadline,
(ii) any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within 2 days by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective within 5 days of filing such
post-effective amendment to such Registration Statement (each such event
referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the
Company hereby agrees to pay to each Holder of Transfer Restricted Securities
affected thereby liquidated damages in an amount equal to $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities held by such Holder
for each week or portion thereof that the Registration Default continues for the
first 90-day period immediately following the occurrence of such Registration
Default. The amount of the liquidated damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages of $.50
<PAGE> 8
per week per $1,000 in principal amount of Transfer Restricted Securities;
provided that the Company shall in no event be required to pay liquidated
damages for more than one Registration Default at any given time.
Notwithstanding anything to the contrary set forth herein, (1) upon filing of
the Exchange Offer Registration Statement (and/or, if applicable, the
Shelf Registration Statement), in the case of (i) above, (2) upon the
effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the liquidated
damages payable with respect to the Transfer Restricted Securities as a result
of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders
entitled thereto, in the manner provided for the payment of interest in the
Indenture, on each Interest Payment Date, as more fully set forth in the
Indenture and the Notes. Notwithstanding the fact that any securities for which
liquidated damages are due cease to be Transfer Restricted Securities, all
obligations of the Company to pay liquidated damages with respect to securities
shall survive until such time as such obligations with respect to such
securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In
connection with the Exchange Offer, the Company shall (x) comply with all
applicable provisions of Section 6(c) below, (y) use its best efforts to effect
such exchange and to permit the resale of New Senior Subordinated Notes by
Broker-Dealers that tendered in the Exchange Offer Senior Subordinated Notes
that such Broker-Dealer acquired for its own account as a result of its market
making activities or other trading activities (other than Senior Subordinated
Notes acquired directly from the Company or any of its Affiliates) being sold in
accordance with the intended method or methods of distribution thereof, and (z)
comply with all of the following provisions:
(i) If, following the date hereof there has
been announced a change in Commission policy with respect to exchange
offers such as the Exchange Offer, that in the reasonable opinion of
counsel to the Company raises a substantial question as to whether the
Exchange Offer is permitted by applicable federal law, the Company
hereby agrees to seek a no-action letter or other favorable decision
from the Commission allowing the Company to Consummate an Exchange
Offer for such Transfer Restricted Securities. The Company hereby
agrees to pursue the issuance of such a decision to the Commission
staff level. In connection with the foregoing, the Company hereby
agrees to take all such other actions as may be requested by the
Commission or otherwise required in connection with the issuance of
such decision, including without limitation (A) participating in
telephonic conferences with the Commission, (B) delivering to the
Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded
that such an
<PAGE> 9
Exchange Offer should be permitted and (C) diligently pursuing a
resolution (which need not be favorable) by the Commission staff.
(ii) As a condition to its participation in
the Exchange Offer, each Holder of Transfer Restricted Securities
(including, without limitation, any Holder who is a Broker Dealer)
shall furnish, upon the request of the Company, prior to the
Consummation of the Exchange Offer, a written representation to the
Company (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an Affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
New Senior Subordinated Notes to be issued in the Exchange Offer and
(C) it is acquiring the New Senior Subordinated Notes in its ordinary
course of business. As a condition to its participation in the Exchange
Offer each Holder using the Exchange Offer to participate in a
distribution of the New Senior Subordinated Notes shall acknowledge and
agree that, if the resales are of New Senior Subordinated Notes
obtained by such Holder in exchange for Senior Subordinated Notes
acquired directly from the Company or an Affiliate thereof, it (1)
could not, under Commission policy as in effect on the date of this
Agreement, rely on the position of the Commission enunciated in Morgan
Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including, if applicable, any no-action
letter obtained pursuant to clause (i) above), and (2) must comply with
the registration and prospectus delivery requirements of the Act in
connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K.
(iii) Prior to effectiveness of the Exchange
Offer Registration Statement, the Company shall provide a supplemental
letter to the Commission (A) stating that the Company is registering
the Exchange Offer in reliance on the position of the Commission
enunciated in Exxon Capital Holdings Corporation (available May 13,
1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as
interpreted in the Commission's letter to Shearman & Sterling dated
July 2, 1993, and, if applicable, any no-action letter obtained
pursuant to clause (i) above, (B) including a representation that the
Company has not entered into any arrangement or understanding with any
Person to distribute the New Senior Subordinated Notes to be received
in the Exchange Offer and that, to the best of the Company's
information and belief, each Holder participating in the Exchange Offer
is acquiring the New Senior Subordinated Notes in its ordinary course
of business and has no arrangement or understanding with any Person to
participate in the distribution of the New Senior Subordinated Notes
received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above, if applicable.
<PAGE> 10
(b) Shelf Registration Statement. In connection with the
Shelf Registration Statement, the Company shall:
(i) comply with all the provisions of
Section 6(c) below and use its best efforts to effect such registration
to permit the sale of the Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof
(as indicated in the information furnished to the Company pursuant to
Section 4(b) hereof), and pursuant thereto the Company will prepare and
file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof
within the time periods and otherwise in accordance with the provisions
hereof, and
(ii) issue, upon the request of any Holder
or purchaser of Senior Subordinated Notes covered by any Shelf
Registration Statement contemplated by this Agreement, New Senior
Subordinated Notes having an aggregate principal amount equal to the
aggregate principal amount of Senior Subordinated Notes sold pursuant
to the Shelf Registration Statement and surrendered to the Company for
cancellation; the Company shall register New Senior Subordinated Notes
on the Shelf Registration Statement for this purpose and issue the New
Senior Subordinated Notes to the purchaser(s) of securities subject to
the Shelf Registration Statement in the names as such purchaser(s)
shall designate.
(c) General Provisions. In connection with any
Registration Statement and any related Prospectus required by this Agreement,
the Company shall:
(i) use its best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain an untrue statement of material fact or omit to
state any material fact necessary to make the statements therein not
misleading or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Company shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use its best efforts to cause such amendment to be declared
effective as soon as practicable.
(ii) prepare and file with the Commission
such amendments and post-effective amendments to the applicable
Registration Statement as may be necessary to keep such Registration
Statement effective for the applicable period set forth in Section 3 or
4 hereof, as the case may be; cause the Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Act, and to comply fully with
Rules 424, 430A and 462, as applicable, under the Act in a timely
manner; and comply with the provisions of the Act
<PAGE> 11
with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise each selling Holder promptly
and, if requested by such Holder, confirm such advice in writing, (A)
when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any applicable
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements
to the Prospectus or for additional information relating thereto, (C)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any fact or the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in the
Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Company shall use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact
or event contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to each Holder in connection
with such exchange or sale, if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein
or any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Holders in connection with
such sale, if any, for a period
<PAGE> 12
of at least three Business Days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to
any such Registration Statement or Prospectus (including all such
documents incorporated by reference) to which such Holders shall
reasonably object within three Business Days after the receipt thereof.
A Holder shall be deemed to have reasonably objected to such filing if
such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading or fails to comply with the
applicable requirements of the Act;
(vi) promptly prior to the filing of any
document that is to be incorporated by reference into a Registration
Statement or Prospectus, provide copies of such document to each Holder
in connection with such exchange or sale, if any, make the Company's
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such Holders may reasonably
request;
(vii) make available, at reasonable times,
for inspection by each Holder and any attorney or accountant retained
by such Holders, all financial and other records, pertinent corporate
documents of the Company and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
such Holder, attorney or accountant in connection with such
Registration Statement or any post-effective amendment thereto
subsequent to the filing thereof and prior to its effectiveness;
(viii) if requested by any Holders in
connection with such exchange or sale, promptly include in any
Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such Holders
may reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as
practicable after the Company is notified of the matters to be included
in such Prospectus supplement or post-effective amendment;
(ix) furnish to each Holder in connection
with such exchange or sale without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each Holder without charge,
as many copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto as such Persons
reasonably may request; the Company hereby consents to the use (in
accordance with law) of the Prospectus and any amendment or supplement
thereto by each selling Holder in connection with the offering and the
sale of
<PAGE> 13
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) upon the request of any Holder, enter
into such agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any applicable
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder in connection with any sale or
resale pursuant to any applicable Registration Statement. In such
connection, the Company shall:
(A) upon request of any Holder,
furnish (or in the case of paragraphs (2) and (3), use its
best efforts to cause to be furnished) to each Holder, upon
Consummation of the Exchange Offer or upon the effectiveness
of the Shelf Registration Statement, as the case may be:
(1) a certificate, dated
such date, signed on behalf of the Company by (x) the
President or any Vice President and (y) a principal
financial or accounting officer of the Company,
confirming, as of the date thereof, the matters set
forth in Sections 6(y), 9(a) and 9(b) of the Purchase
Agreement and such other similar matters as such
Holders may reasonably request;
(2) an opinion, dated the
date of Consummation of the Exchange Offer or the
date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the
Company covering matters similar to those set forth
in Exhibit A to the Purchase Agreement and such other
matter as such Holder may reasonably request, and in
any event including a statement to the effect that
such counsel has participated in conferences with
officers and other representatives of the Company,
representatives of the independent public accountants
for the Company and have considered the matters
required to be stated therein and the statements
contained therein, although such counsel has not
independently verified the accuracy, completeness or
fairness of such statements; and that such counsel
advises that, on the basis of the foregoing (relying
as to materiality to the extent such counsel deems
appropriate upon the statements of officers and other
representatives of the Company) and without
independent check or verification), no facts came to
such counsel's attention that caused such counsel to
believe that the applicable Registration Statement,
at the time such Registration Statement or any
post-effective amendment thereto became effective
and, in the case of the Exchange Offer Registration
Statement, as of the date of Consummation of the
Exchange Offer, contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to
<PAGE> 14
make the statements therein not misleading, or that
the Prospectus contained in such Registration
Statement as of its date and, in the case of the
opinion dated the date of Consummation of the
Exchange Offer, as of the date of Consummation,
contained an untrue statement of a material fact or
omitted to state a material fact necessary in order
to make the statements therein, in the light of the
circumstances under which they were made, not
misleading. Without limiting the foregoing, such
counsel may state further that such counsel assumes
no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of
the financial statements, notes and schedules and
other financial data included in any Registration
Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary
comfort letter, dated the date of Consummation of the
Exchange Offer, or as of the date of effectiveness of
the Shelf Registration Statement, as the case may be,
from the Company's independent accountants, in the
customary form and covering matters of the type
customarily covered in comfort letters to
underwriters in connection with underwritten
offerings, and affirming the matters set forth in the
comfort letters delivered pursuant to Section 9(g) of
the Purchase Agreement; and
(B) deliver such other
documents and certificates as may be reasonably requested by
the selling Holders to evidence compliance with the matters
covered in clause (A) above and with any customary conditions
contained in the any agreement entered into by the Company
pursuant to this clause (xi);
(xii) prior to any public offering of
Transfer Restricted Securities, cooperate with the selling Holders and
their counsel in connection with the registration and qualification of
the Transfer Restricted Securities under the securities or Blue Sky
laws of such jurisdictions as the selling Holders may request and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the applicable Registration Statement; provided, however,
that the Company shall not be required to register or qualify as a
foreign corporation where it is not now so qualified or to take any
action that would subject it to the service of process in suits or to
taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xiii) in connection with any sale of
Transfer Restricted Securities that will result in such securities no
longer being Transfer Restricted Securities, cooperate with the Holders
to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing
any restrictive
<PAGE> 15
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the selling Holders may request at
least two Business Days prior to such sale of Transfer Restricted
Securities;
(xiv) use its best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso contained in
clause (xii) above;
(xv) provide a CUSIP number for all
Transfer Restricted Securities not later than the effective date of a
Registration Statement covering such Transfer Restricted Securities and
provide the Trustee under the Indenture with printed certificates for
the Transfer Restricted Securities which are in a form eligible for
deposit with the Depository Trust Company;
(xvi) otherwise use its best efforts to
comply with all applicable rules and regulations of the Commission, and
make generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act);
(xvii) cause the Indenture to be qualified
under the TIA not later than the effective date of the first
Registration Statement required by this Agreement and, in connection
therewith, cooperate with the Trustee and the Holders to effect such
changes to the Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute and use
its best efforts to cause the Trustee to execute, all documents that
may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xviii) provide promptly to each Holder,
upon request, each document filed with the Commission pursuant to the
requirements of Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees
by acquisition of a Transfer Restricted Security that, upon receipt of the
notice referred to in Section 6(c)(iii)(C) or any notice from the Company of the
existence of any fact of the kind described in Section 6(c)(iii)(D) hereof (in
each case, a "SUSPENSION NOTICE"), such Holder will forthwith discontinue
disposition of Transfer Restricted Securities pursuant to the applicable
Registration Statement until (i) such Holder has received copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or
(ii) such Holder is advised in writing by the Company that the use of the
Prospectus may be resumed, and has received copies of any
<PAGE> 16
additional or supplemental filings that are incorporated by reference in the
Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each Holder receiving a
Suspension Notice hereby agrees that it will either (i) destroy any
Prospectuses, other than permanent file copies, then in such Holder's possession
which have been replaced by the Company with more recently dated Prospectuses or
(ii) deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of the Suspension Notice. The time period regarding the effectiveness of
such Registration Statement set forth in Section 3 or 4 hereof, as applicable,
shall be extended by a number of days equal to the number of days in the period
from and including the date of delivery of the Suspension Notice to the date of
delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All reasonable expenses incident to the
Company's performance of or compliance with this Agreement will be borne by the
Company, regardless of whether a Registration Statement becomes effective,
including without limitation, in each case, upon written request and upon
satisfactory invoices: (i) all reasonable registration and filing fees and
expenses; (ii) all reasonable fees and expenses of compliance with federal
securities and state Blue Sky or securities laws; (iii) all reasonable expenses
of printing (including printing certificates for the New Senior Subordinated
Notes to be issued in the Exchange Offer and printing of Prospectuses),
messenger and delivery services and telephone; (iv) all reasonable fees and
disbursements of counsel for the Company and the Holders of Transfer Restricted
Securities; (v) all reasonable application and filing fees in connection with
listing the New Senior Subordinated Notes on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and (vi) all
reasonable fees and disbursements of independent certified public accountants of
the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance). The Company will, in any event,
bear its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company.
(b) In connection with any Registration
Statement required by this Agreement (including, without limitation, the
Exchange Offer Registration Statement and the Shelf Registration Statement), the
Company will reimburse the Initial Purchasers and the Holders of Transfer
Restricted Securities who are tendering Senior Subordinated Notes into in the
Exchange Offer and/or selling or reselling Senior Subordinated Notes or New
Senior Subordinated Notes pursuant to the "Plan of Distribution" contained in
the Exchange Offer Registration Statement or the Shelf Registration Statement,
as applicable, for the reasonable fees and disbursements of not more than one
counsel, who shall be Latham & Watkins, unless another firm shall be chosen by
the Holders of a majority in principal amount of the Transfer Restricted
Securities for whose benefit such Registration Statement is being prepared.
<PAGE> 17
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold
harmless each Holder, its directors, officers and each Person, if any, who
controls such Holder (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act), from and against any and all losses, claims, damages,
liabilities, judgments, (including without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto)
provided by the Company to any Holder or any prospective purchaser of New Senior
Subordinated Notes or registered Senior Subordinated Notes, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by an untrue statement or omission or alleged untrue statement or
omission that is based upon information relating to any of the Holders furnished
in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted
Securities agrees, severally and not jointly, to indemnify and hold harmless the
Company and its directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company, to the same extent as the foregoing indemnity from the Company set
forth in section (a) above, but only with reference to information relating to
such Holder furnished in writing to the Company by or on behalf of such Holder
expressly for use in any Registration Statement. In no event shall any Holder,
its directors, officers or any Person who controls such Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages that such Holder, its directors, officers or any Person who controls
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced
involving any person in respect of which indemnity may be sought pursuant to
Section 8(a) or 8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall
promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PERSON") in writing of the commencement thereof; but the failure
to so notify the indemnifying party (i) will not relieve it from liability under
Section 8(a) or 8(b) unless and to the extent it did not otherwise learn of such
action and such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in Section 8(a) or 8(b). Such indemnifying
party shall assume the defense of such action, including the employment of
counsel reasonably satisfactory to the indemnified party and the payment of all
fees and expenses of such counsel, as incurred (except that in the case of any
action in respect of which indemnity may be sought pursuant to
<PAGE> 18
both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred upon written request and upon presentation of satisfactory
invoices. Such firm shall be designated in writing by a majority of the Holders,
in the case of the parties indemnified pursuant to Section 8(a), and by the
Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if the settlement is entered into more
than twenty business days after the indemnifying party shall have received a
request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided
for in this Section 8 is unavailable to an indemnified party in respect of any
losses, claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company, on
the one hand, and the
<PAGE> 19
Holders, on the other hand, from their sale of Transfer Restricted Securities or
(ii) if the allocation provided by clause 8(d)(i) is unavailable for any reason,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause 8(d)(i) above but also the relative fault of the Company,
on the one hand, and of the Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Holder, on the other hand, 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 Company, on the one hand, or by the Holder, on the other
hand, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
judgments referred to above shall be deemed to include, subject to the
limitations set forth in the second paragraph of Section 8(a), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Holders 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 immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total discounts and commissions received by such Holder with respect
to the sale of Transfer Restricted Securities pursuant to a Registration
Statement exceeds (i) the amount paid by such Holder for such Transfer
Restricted Securities and (ii) the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' respective obligations to contribute pursuant to
this Section 8 are several in proportion to the respective principal amount of
Transfer Restricted Securities held by each Holder hereunder and not joint.
The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies that may otherwise be available to
any indemnified party at law or in equity.
SECTION 9. RULE 144A and RULE 144
<PAGE> 20
The Company agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to
make available, upon request of any Holder, to such Holder or beneficial owner
of Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Transfer Restricted Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company acknowledge and agree
that any failure by the Company to comply with its obligations under Sections 3
and 4 hereof may result in material irreparable injury to the Initial Purchasers
or the Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Sections 3 and 4 hereof. The Company further agree to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company
will not, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof. The
Company has not previously entered into any agreement granting any registration
rights with respect to its securities to any Person. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to or departures from the provisions hereof may not be given unless (i)
in the case of Section 5 hereof and this Section 10(c)(i), the Company has
obtained the written consent of Holders of all outstanding Transfer Restricted
Securities and (ii) in the case of all other provisions hereof, the Company has
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities (excluding Transfer
Restricted Securities held by the Company or its Affiliates). Notwithstanding
the foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose Transfer Restricted
Securities are being tendered pursuant to the Exchange Offer, and that does not
affect directly or indirectly the rights of other Holders whose Transfer
Restricted Securities are not being tendered pursuant to such Exchange Offer,
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall
be third party
<PAGE> 21
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(e) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company:
Moll Industries, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
Telecopier No.: (423) 450-5379
Attention: Chief Financial Officer
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopier No.: (212) 735-2000
Attention: Robert M. Chilstrom, Esq.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when receipt acknowledged, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders; provided, that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Transfer Restricted
Securities in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Transfer Restricted
Securities in any
<PAGE> 22
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
MOLL INDUSTRIES, INC.
By: /s/ George T. Votis
-------------------
Name: George T. Votis
Title: Chairman and Chief Executive Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ON BEHALF OF THE
INITIAL PURCHASERS
By: /s/ Maximillian Justicz
----------------------
Name: Maximillian Justicz
Title: Vice President
<PAGE> 1
EXHIBIT 4.8
ANCHOR ADVANCED PRODUCTS, INC.
ISSUER
ANCHOR HOLDINGS, INC.
GUARANTOR
AND
STATE STREET BANK AND TRUST COMPANY
(SUCCESSOR TO FLEET NATIONAL BANK)
TRUSTEE
FIRST SUPPLEMENTAL INDENTURE
DATED AS OF MARCH 18, 1998
TO
THE INDENTURE DATED AS OF APRIL 2, 1997
BETWEEN ANCHOR ADVANCED PRODUCTS, INC., ANCHOR HOLDINGS, INC. AND
STATE STREET BANK AND TRUST COMPANY
(AS SUCCESSOR TO FLEET NATIONAL BANK), AS TRUSTEE,
RELATING TO $100 MILLION AGGREGATE PRINCIPAL AMOUNT OF
11 3/4% SERIES B SENIOR NOTES DUE 2004
<PAGE> 2
SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE (the "Supplemental Indenture") is
made as of the 18th day of March, 1998, between Anchor Advanced Products, Inc.
(the "Issuer"), Anchor Holdings, Inc. ("Holdings") and State Street Bank and
Trust Company (as successor to Fleet National Bank), as trustee (the "Trustee").
WHEREAS, the Issuer, Holdings and the Trustee heretofore executed and
delivered an Indenture, dated as of April 2, 1997 (the "Indenture"); and
WHEREAS, pursuant to the Indenture, the Issuer issued and the Trustee
authenticated and delivered $100 million aggregate principal amount of the
Issuer's 113/4% Senior Notes due 2004 (the "Initial Notes"); and
WHEREAS, pursuant to an exchange offer registered with the Securities
and Exchange Commission on a Registration Statement No. 333-26943 on Form S-4,
the Issuer offered to, and did, exchange $100 million in aggregate principal
amount of its 11 3/4% Series B Senior Notes due 2004 (the "Exchange Notes" and,
together with the Initial Notes, the "Notes") for $100 million in aggregate
principal amount of the Initial Notes; and
WHEREAS, the Initial Notes were, and the Exchange Notes are,
unconditionally guaranteed on a senior basis by Holdings; and
WHEREAS, Section 9.02 of the Indenture provides that the Issuer, when
authorized by Board Resolution, and the Trustee, with the written consent of
the Holders of not less than a majority in aggregate principal amount of the
Notes outstanding, may amend the Indenture, subject to certain exceptions (none
of which is applicable to the amendments (the "Amendments") and waiver (the
"Waiver") contained in Sections 2.01 and 2.02, respectively, of this
Supplemental Indenture) specified in Section 9.02 of the Indenture; and
WHEREAS, Anchor Acquisition Co., a Delaware corporation, proposes to
acquire all the capital stock of Holdings (the "Acquisition"); and
WHEREAS, pursuant to its Consent Solicitation Statement, dated March 3,
1998 (the "Initial Consent Solicitation Statement"), as amended and supplemented
by Supplement No. 1 thereto, dated March 17, 1998 (the "Supplement" and,
together with the Initial Consent Solicitation Statement, the "Consent
Solicitation
<PAGE> 3
Statement"), the Issuer solicited consents of the Holders to the Amendments and
the Waiver, which if adopted would (i) waive the rights of the Holders to
require the Issuer to offer to repurchase the Notes pursuant to Section 4.14 of
the Indenture (a "Repurchase Offer") upon a "Change of Control," as such term is
defined in Section 1.01 of the Indenture, which would occur upon the
consummation of the Acquisition, (ii) to add the definition of "Moll Entity" to
Section 1.01 of the Indenture and (iii) to amend the definition of "Change of
Control" in Section 1.01 of the Indenture to provide that the occurrence of
certain transactions would not constitute a "Change of Control"; and
WHEREAS, the Holders of not less than a majority in aggregate principal
amount of the outstanding Notes have duly consented to the Amendments and the
Waiver set forth in this Supplemental Indenture in accordance with Section 9.02
of the Indenture; and
WHEREAS, the Issuer has heretofore delivered or is delivering
contemporaneously herewith to the Trustee (i) a copy of Board Resolutions
authorizing the execution, delivery and performance of this Supplemental
Indenture, (ii) evidence of the written consent of the Holders set forth in the
immediately preceding paragraph and (iii) an Opinion of Counsel in compliance
with and to the effect set forth in Sections 1.01, 9.02 and 9.06 of the
Indenture; and
WHEREAS, all conditions necessary to authorize the execution and
delivery of this Supplemental Indenture and to make this Supplemental Indenture
valid and binding have been complied with or have been done or performed;
NOW, THEREFORE, in consideration of the foregoing and notwithstanding
any provision of the Indenture which, absent this Supplemental Indenture, might
operate to limit such action, the Issuer, Holdings and the Trustee agree as
follows for the equal and ratable benefit of the Holders of the Notes:
ARTICLE I
DEFINITIONS
SECTION 1.01. GENERAL. For all purposes of the Indenture and this
Supplemental Indenture, except as otherwise expressly provided or unless the
context otherwise requires:
(a) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to the Indenture and this Supplemental Indenture as a
whole and not to any particular Article, Section or subdivision; and
(b) capitalized terms used but not defined herein shall have the
meanings assigned to them in the Indenture.
<PAGE> 4
ARTICLE II
AMENDMENTS AND WAIVER
SECTION 2.01. AMENDMENTS. Subject to Section 3.01 hereof, the
Indenture is hereby amended in the following respects:
(a) The following definition of "Moll Entity" is hereby added to
Section 1.01 of the Indenture:
"Moll Entity" means Moll PlastiCrafters Limited Partnership or
any direct or indirect Subsidiary of Moll PlastiCrafters Limited
Partnership or any successor thereof, other than Holdings or any direct
or indirect Subsidiary of Holdings or any successor thereof.
(b) The definition of Change of Control" in Section 1.01 of the
Indenture is hereby amended and restated in its entirety as follows:
"Change of Control" means the occurrence of any of the
following: (i) (a) any transaction (including a merger or
consolidation) the result of which is that any "person" or "group"
(each within the meaning of Sections 13(d) and 14(d)(2) of the Exchange
Act), other than the Principals, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of more than 50% of the total voting power of all Capital Stock of the
Issuer, the Guarantor or a successor entity normally entitled to vote
in the election of directors, managers or trustees, as applicable,
calculated on a fully diluted basis, and (b) as a result of the
consummation of such transaction, any "person" or "group" (each as
defined above) becomes the "beneficial owner" (as defined above),
directly or indirectly, of more of the voting stock of the Issuer or
the Guarantor than is at the time "beneficially owned" (as defined
above) by the Principals, or (ii) the first day on which a majority of
the members of the Board of Directors are not Continuing Directors, or
(iii) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), a series of related
transactions, of all or substantially all of the assets of the Issuer
and its Subsidiaries taken as a whole or the Guarantor and its
Subsidiaries taken as a whole, in each case, to any "person" (as such
term is used in Section 13(d)(3) of the Exchange Act) other than the
Principals or their Related Parties. For purposes of this definition,
any transfer of an Equity Interest of
<PAGE> 5
an entity that was formed for the purpose of acquiring voting stock of
the Issuer or the Guarantor shall be deemed to be a transfer of such
percentage of such voting stock as corresponds to the percentage of the
equity of such entity that has been so transferred.
Notwithstanding the foregoing, the occurrence of any of the
following shall not constitute a "Change of Control":
(i) any transfer of the capital stock of Holdings or
Anchor Acquisition, Co. to any Moll Entity as a
result of which Holdings becomes a Subsidiary of such
Moll Entity, provided that, upon giving effect to
such transfer Holdings and its Subsidiaries will not
be subject to any covenant contained in any debt or
other similar instrument of any Moll Entity; or
(ii) any merger or consolidation of Holdings into or with,
or any sale, assignment, transfer, lease, conveyance
or other disposition of all or substantially all of
Holdings' properties or assets in one or more related
transactions to, any Moll Entity, provided that,
immediately after giving effect to such transaction
or transactions, as the case may be, the entity or
Person formed by or surviving any such merger or
consolidation, or to which such sale, assignment,
transfer, lease, conveyance or other disposition
shall have been made, would have a Fixed Charge
Coverage Ratio of at least 2.5 to 1, determined on a
pro forma basis; or
(iii) any merger or consolidation of any Moll Entity into
or with, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or
substantially all of the properties or assets of any
Moll Entity, in one or more related transactions to,
any other Moll Entity;
provided, that, upon the occurrence of, and after giving
effect to, any of the transactions set forth in
clauses (i), (ii) or (iii) of this paragraph, the
Indenture shall continue to remain in full force and
effect. Any transfer of the capital stock of Holdings
or Anchor Acquisition, Co. to any Moll Entity which
does not comply with clause (i) of this paragraph or
any merger or consolidation of Holdings into or with,
or any sale, assignment, transfer, lease, conveyance
or other disposition of all or substantially all of
Holdings' properties or assets in one or more related
transactions to, any Moll Entity, which does
<PAGE> 6
not comply with clause (ii) of this paragraph shall
constitute a "Change of Control".
SECTION 2.02. WAIVER. Subject to Section 3.01 hereof, the Holders of a
majority in aggregate principal amount of the Notes outstanding hereby
permanently waive their right to require the Issuer to make any Repurchase Offer
in connection with, or upon the consummation of, the Acquisition.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. EFFECTIVENESS. This Supplemental Indenture shall become
effective upon its execution and delivery by the Issuer, Holdings and the
Trustee. Notwithstanding the execution and delivery of the Supplemental
Indenture by the Issuer, Holdings and the Trustee, the Amendments and the Waiver
shall become effective only concurrently with the consummation of the
Acquisition and the making of the Consent Payment (as defined in the Consent
Solicitation Statement). The Consent Payment will be deemed to have been paid
when made by deposit with the Depositary (as defined in the Consent Solicitation
Statement), which will act as the agent for the Holders and transmit such
payment to such Holders. The Indenture will remain in effect without giving
effect to the Amendments and the Waiver until the Acquisition is consummated and
the Consent Payment is made. Upon the execution and delivery of this
Supplemental Indenture by the Issuer, Holdings and the Trustee the Indenture
shall be supplemented in accordance herewith, and this Supplemental Indenture
shall form a part of the Indenture for all purposes, and every Holder of Notes
heretofore or hereafter authenticated and delivered under the Indenture shall be
bound thereby. Notwithstanding the foregoing provisions of this Section 3.01, if
the Acquisition is not consummated and the Consent Payment is not made on or
prior to April 30, 1998, the Amendments and the Waiver will not become effective
and this Supplemental Indenture will become null and void.
SECTION 3.02. INDENTURE REMAINS IN FULL FORCE AND EFFECT. Except as
supplemented hereby, all provisions in the Indenture shall remain in full force
and effect.
SECTION 3.03. INDENTURE AND SUPPLEMENTAL INDENTURE CONSTRUED TOGETHER.
This Supplemental Indenture is an indenture supplemental to and in
implementation of the Indenture, and the Indenture and this Supplemental
Indenture shall henceforth be read and construed together.
SECTION 3.04. CONFIRMATION AND PRESERVATION OF INDENTURE. The
Indenture as supplemented by this Supplemental Indenture is in all respects
confirmed and preserved.
SECTION 3.05. CONFLICT WITH TRUST INDENTURE ACT. If any provision of
this
<PAGE> 7
Supplemental Indenture limits, qualifies or conflicts with any provision of the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), that is
required under the Trust Indenture Act to be part of and govern any provision of
this Supplemental Indenture, the provision of the Trust Indenture Act shall
control. If any provision of this Supplemental Indenture modifies or excludes
any provision of the Trust Indenture Act that may be so modified or excluded,
the provision of the Trust Indenture Act shall be deemed to apply to the
Indenture as so modified or to be excluded by this Supplemental Indenture, as
the case may be.
SECTION 3.06. SEVERABILITY. In case any provision in this Supplemental
Indenture 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 3.07. HEADINGS. The Article and Section headings of this
Supplemental Indenture have been inserted for convenience of reference only, are
not to be considered a part of this Supplemental Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 3.08. BENEFITS OF SUPPLEMENTAL INDENTURE, ETC. Nothing in this
Supplemental Indenture or the Notes, express or implied, shall give to any
Person, other than the parties hereto and thereto and their successors hereunder
and thereunder and the Holders of the Notes, any benefit of any legal or
equitable right, remedy or claim under the Indenture, this Supplemental
Indenture or the Notes.
SECTION 3.09. SUCCESSORS. All agreements of the Issuer and Holdings
in this Supplemental Indenture shall bind their respective successors. All
agreements of the Trustee in this Supplemental Indenture shall bind its
successors.
SECTION 3.10. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The recitals
contained herein shall be taken as the statements of the Issuer and Holdings,
and the Trustee assumes no responsibility for their correctness. The Trustee
shall not be liable or responsible for the validity or sufficiency of this
Supplemental Indenture.
SECTION 3.11. CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE. In
entering into this Supplemental Indenture, the Trustee shall be entitled to the
benefit of every provision of the Indenture relating to the conduct or affecting
the liability or affording protection to the Trustee, whether or not elsewhere
herein so provided.
SECTION 3.12. GOVERNING LAW. The internal law of the State of New
York shall govern and be used to construe this Supplemental Indenture.
SECTION 3.13. COUNTERPART ORIGINALS. The parties may sign any number
of copies of this Supplemental Indenture. Each signed copy shall be an original,
but all of them together represent the same agreement.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date and year first
above written.
ANCHOR ADVANCED PRODUCTS, INC.
By: /s/ Francis H. Olmstead
---------------------------
Name: Francis H. Olmstead
Title: President
(SEAL)
Attest: /s/ Phyllis Best
--------------------
Name: Phyllis Best
Title: Senior Vice President Finance
ANCHOR HOLDINGS, INC.
By: /s/ Francis H. Olmstead
---------------------------
Name: Francis H. Olmstead
Title: President
(SEAL)
Attest: /s/ Phyllis Best
--------------------
Name: Phyllis Best
Title: Senior Vice President Finance
STATE STREET BANK AND TRUST
COMPANY, AS TRUSTEE
By: /s/ Michael Hopkins
-----------------------
Name: Michael Hopkins
Title: Vice President
(SEAL)
<PAGE> 1
EXHIBIT 4.9
NOTE GUARANTEE
Each of the Guarantors set forth below, which in accordance with
Section 4.16 of the Indenture, dated as of April 2, 1997 (the "Indenture"), are
required to guarantee the obligations of Anchor Advanced Products, Inc. (the
"Issuer") under the 11 3/4% Senior Notes due 2004 (the "Notes") hereby
unconditionally guarantees, to the fullest extent permitted by law, (i) the due
and punctual payment of the principal of, interest and Liquidated Damages, if
any, on the Notes, whether at the maturity or interest payment date, by
acceleration, call for redemption or otherwise, and of interest on the overdue
principal of, interest and Liquidated Damages, if any, on the Notes and all
other obligations of the Issuer to the Holders or the Trustee under the
Indenture or the Notes and (ii) in case of any extension of time of payment or
renewal of any Notes 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 maturity, by acceleration or otherwise. The
obligations of each such Guarantor under this Note Guarantee are joint and
several obligations.
The obligations of each Guarantor to the Holders and to the Trustee
pursuant to this Note Guarantee and the Indenture are as expressly set forth in
Article 10 of the Indenture and in such other provisions of the Indenture as are
applicable to Guarantors, and reference is hereby made to such Indenture for the
precise terms of this Note Guarantee. The terms of Article 10 of the Indenture
(including, without limitation, Section 10.04 of the Indenture) and such other
provisions of the Indenture as are applicable to Guarantors are incorporated
herein by reference.
Each of the Guarantors may provide a substitute guarantee in
substitution for this Note Guarantee, in such form as shall be appropriate under
the laws of its jurisdiction of incorporation, and upon such substitution, such
substitute guarantee shall be effective from and after the date of this Note
Guarantee as if it had been in effect from the date hereof, and, upon such
substitution, this Note Guarantee shall terminate and thereafter be of no force
or effect as to such Guarantor.
This is a continuing guarantee and shall remain in full force and
effect and shall be binding upon each Guarantor and its successors and assigns
until full and final payment of all of the Issuer's obligations under the Notes
and the Indenture and shall inure to the benefit of the successors and assigns
of the Trustee and the Holders and, in the event of any transfer or assignment
of rights by any Holder or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions hereof. This is
a guarantee of payment and not a guarantee of collection.
<PAGE> 2
This Note Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which this Note
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
In case any provision in this Note 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.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS NOTE GUARANTEE.
[Signature on following page]
<PAGE> 3
MOLL INDUSTRIES UK, LIMITED
MOLL INDUSTRIES PADERBORN GmbH & CO. KG
MOLL INDUSTRIES, LLC
HANNING-KUNSTOFFE GmbH & CO.
HANNING-KUNSTOFFE BETEILIGUNGS-GmbH & CO.
PB HANNING GmbH
PB HANNING GmbH & CO. HANDELSGESELLSCHAFT
MOLL PLASTICS, LLC
MOLL PLASTICS SARL
SOMOMECA INDUSTRIES SARL
SAPI SARL
SOMOPLAST LORRAINE SARL
2BI SARL
SOMOPLAST SARL
SERIM SARL
SEMIP SARL
STAPHANE SARL
PROMOLDE LDA
By: /s/ George T. Votis
---------------------
Authorized Signatory
Dated: June 26, 1998
<PAGE> 1
EXHIBIT 4.10
SUBSTITUTE NOTE GUARANTEE
WHEREAS, on June 26, 1998, George T. Votis executed, on behalf
of certain subsidiaries (collectively, the "Subsidiary Guarantors") of Moll
Industries, Inc. (formerly known as Anchor Advanced Products, Inc.), a Delaware
corporation (the "Issuer"), the Note Guarantee (the "Note Guarantee") pursuant
to Section 4.16 of the Indenture (as defined below); and
WHEREAS, each of the undersigned (collectively, the
"Guarantors") is one of the Subsidiary Guarantors;
WHEREAS, each Guarantor wishes to execute this guarantee (the
"Substitute Note Guarantee") in substitution for the Note Guarantee to the
extent the Note Guarantee was executed on behalf of such Guarantor (the
"Original Note Guarantee"), in the manner contemplated by the Note Guarantee;
and
WHEREAS, concurrently with the execution of this Substitute
Note Guarantee, each of the other Subsidiary Guarantors is executing a guarantee
in substitution for the Note Guarantee to the extent the Note Guarantee was
executed on behalf of such Subsidiary Guarantor (such guarantees, together with
this Substitute Note Guarantee, are hereinafter collectively referred to as the
"Substitute Guarantees"), in the manner contemplated by the Note Guarantee.
Capitalized terms used but not defined herein shall have the
meanings given them in the Indenture.
IN WITNESS WHEREOF:
Each Guarantor set forth below, which in accordance with
Section 4.16 of the Indenture, dated as of April 2, 1997, as supplemented by the
First Supplemental Indenture, dated as of March 18, 1998 (as so supplemented,
the "Indenture"), by and among the Issuer, Anchor Holdings, Inc., a Delaware
corporation and State Street Bank and Trust Company (as successor to Fleet
National Bank), as trustee, is required to guarantee the obligations of the
Issuer under the 11 3/4% Senior Notes due 2004 (the "Notes") hereby
unconditionally guarantees, to the fullest extent permitted by law, (i) the due
and punctual payment of the principal of, interest and Liquidated Damages, if
any, on the Notes, whether at the maturity or interest payment date, by
acceleration, call for redemption or otherwise, and of interest on the overdue
principal of, interest and Liquidated Damages, if any, on the Notes and all
other obligations of the Issuer to the Holders or the Trustee under the
<PAGE> 2
Indenture or the Notes and (ii) in case of any extension of time of payment or
renewal of any Notes 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 maturity, by acceleration or otherwise. The
obligations of the Subsidiary Guarantors, including, without limitation, the
Guarantors, under the Substitute Guarantees are joint and several obligations.
The obligations of each Guarantor to the Holders and to the
Trustee pursuant to this Substitute Note Guarantee and the Indenture are as
expressly set forth in Article 10 of the Indenture and in such other provisions
of the Indenture as are applicable to Guarantors (as defined in the Indenture),
and reference is hereby made to such Indenture for the precise terms of this
Substitute Note Guarantee. The terms of Article 10 of the Indenture (including,
without limitation, Section 10.04 of the Indenture) and such other provisions of
the Indenture as are applicable to Guarantors (as defined in the Indenture) are
incorporated herein by reference.
This Substitute Note Guarantee is being executed in
substitution for the Original Note Guarantee, and upon the execution hereof (i)
this Substitute Note Guarantee shall be effective from and after the date of the
Original Note Guarantee as if it had been in effect from the date of the
Original Note Guarantee, and (ii) the Original Note Guarantee shall terminate
and be of no force or effect and (iii) each Guarantor shall be released from any
and all liability under the Original Note Guarantee.
This is a continuing guarantee and shall remain in full force
and effect and shall be binding upon each Guarantor and its successors and
assigns until full and final payment of all of the Issuer's obligations under
the Notes and the Indenture and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This is a guarantee of payment and not a guarantee of collection.
In case any provision in this Substitute Note 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.
This Substitute Note Guarantee may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute one and the same instrument.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUBSTITUTE NOTE GUARANTEE.
[Signatures on following page]
<PAGE> 3
MOLL INDUSTRIES, LLC MOLL PLASTICS, LLC
By: /s/ George T. Votis By: /s/ George T. Votis
------------------------- -------------------------
Authorized Signatory Authorized Signatory
Dated: June 26, 1998
<PAGE> 1
EXHIBIT 4.11
SUBSTITUTE NOTE GUARANTEE
WHEREAS, on June 26, 1998, George T. Votis executed, on behalf of
certain subsidiaries (collectively, the "Subsidiary Guarantors") of Moll
Industries, Inc. (formerly known as Anchor Advanced Products, Inc.), a Delaware
corporation (the "Issuer"), a certain Note Guarantee (the "Note Guarantee")
pursuant to Section 4.16 of the Indenture (as defined below); and
WHEREAS, each of the undersigned (collectively, the "Guarantors") is
one of the Subsidiary Guarantors;
WHEREAS, each Guarantor wishes to execute this guarantee (the
"Substitute Note Guarantee") in substitution for the Note Guarantee to the
extent the Note Guarantee was executed on behalf of such Guarantor (the
"Original Note Guarantee"), in the manner contemplated by the Note Guarantee;
and
WHEREAS, concurrently with the execution of this Substitute Note
Guarantee, each of the other Subsidiary Guarantors is executing a guarantee in
substitution for the Note Guarantee to the extent the Note Guarantee was
executed on behalf of such Subsidiary Guarantor (such guarantees, together with
this Substitute Note Guarantee, are hereinafter collectively referred to as the
"Substitute Guarantees"), in the manner contemplated by the Note Guarantee.
Capitalized terms used but not defined herein shall have the meanings
given them in the Indenture.
IN WITNESS WHEREOF:
Each Guarantor set forth below, which in accordance with Section 4.16
of the Indenture, dated as of April 2, 1997, as supplemented by the First
Supplemental Indenture, dated as of March 18, 1998 (as so supplemented, the
"Indenture"), by and among the Issuer, Anchor Holdings, Inc., a Delaware
corporation and State Street Bank and Trust Company (as successor to Fleet
National Bank), as trustee, is required to guarantee the obligations of the
Issuer under the 11 3/4% Senior Notes due 2004 (the "Notes") hereby
unconditionally guarantees, to the fullest extent permitted by law, (i) the due
and punctual payment of the principal of, interest and Liquidated Damages, if
any, on the Notes, whether at the maturity or interest payment date, by
acceleration, call for redemption or otherwise, and of interest on the overdue
principal of, interest and Liquidated Damages, if any, on the Notes and all
other obligations of the Issuer to the Holders or the Trustee under the
<PAGE> 2
Indenture or the Notes and (ii) in case of any extension of time of payment or
renewal of any Notes 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 maturity, by acceleration or otherwise. The
obligations of the Subsidiary Guarantors, including, without limitation, the
Guarantors, under the Substitute Guarantees are joint and several obligations.
The obligations of each Guarantor to the Holders and to the Trustee
pursuant to this Substitute Note Guarantee and the Indenture are as expressly
set forth in Article 10 of the Indenture and in such other provisions of the
Indenture as are applicable to Guarantors (as defined in the Indenture), and
reference is hereby made to such Indenture for the precise terms of this
Substitute Note Guarantee. The terms of Article 10 of the Indenture (including,
without limitation, Section 10.04 of the Indenture) and such other provisions of
the Indenture as are applicable to Guarantors (as defined in the Indenture) are
incorporated herein by reference.
Under the laws of Germany normally applicable to the transactions of
the type contemplated by this Substitute Note Guarantee, each of the Guarantors
is not liable under this Substitute Note Guarantee and/or the Indenture if and
to the extent that the settlement of such liability by the Guarantor and/or one
or more of its affiliated partnerships and/or companies, which are liable for
the Guarantor's obligations, would cause a reduction of its net assets
(Reinvermogen) and/or the net assets of an affiliated German Limited Liability
Company below the amount of the statutory share capital (Stammkapital) as
provided for in Section 30 (1) of the German Act on Limited Liability Companies
(GmbH-Gesetz) and/or would constitute a violation of Section 30 (1) GmbH-Gesetz.
This Substitute Note Guarantee is being executed in substitution for
the Original Note Guarantee, and upon the execution hereof (i) this Substitute
Note Guarantee shall be effective from and after the date of the Original Note
Guarantee as if it had been in effect from the date of the Original Note
Guarantee, and (ii) the Original Note Guarantee shall terminate and be of no
force or effect and (iii) each Guarantor shall be released from any and all
liability under the Original Note Gurarantee.
This is a continuing guarantee and shall remain in full force and
effect and shall be binding upon each Guarantor and its successors and assigns
until full and final payment of all of the Issuer's obligations under the Notes
and the Indenture and shall inure to the benefit of the successors and assigns
of the Trustee and the Holders and, in the event of any transfer or assignment
of rights by any Holder or the Trustee, the rights and privileges herein
conferred upon that party shall automatically
<PAGE> 3
extend to and be vested in such transferee or assignee, all subject to the terms
and conditions hereof. This is a guarantee of payment and not a guarantee of
collection.
In case any provision in this Substitute Note 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.
This Substitute Note Guarantee may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute one and the same instrument.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS SUBSTITUTE NOTE GUARANTEE.
[Signatures on following page]
<PAGE> 4
MOLL PLASTICRAFTERS GmbH "PB" HANNING GmbH
By: /s/ George T. Votis By: /s/ George T. Votis
------------------------------- -------------------------------
Authorized Signatory Authorized Signatory
HANNING-KUNSTSTOFFE "PB" HANNING GmbH & CO.
BETEILIGUNGS-GmbH HANDELSGESELLSCHAFT
By: /s/ George T. Votis By: "PB" HANNING GmbH, its
------------------------------- general partner
Authorized Signatory
By: /s/ George T. Votis
--------------------------
HANNING-KUNSTSTOFFE Authorized Signatory
GmbH & CO.
By: HANNING-KUNSTSTOFFE
BETEILIGUNGS-GmbH, its
general partner
By: /s/ George T. Votis
--------------------------
Authorized Signatory
Dated: June 26, 1998
<PAGE> 1
EXHIBIT 4.12
SUBSTITUTE NOTE GUARANTEE
WHEREAS, on June 26, 1998, George T. Votis executed, on behalf of
certain subsidiaries (collectively, the "Subsidiary Guarantors") of Moll
Industries, Inc. (formerly known as Anchor Advanced Products, Inc.), a Delaware
corporation (the "Issuer"), the Note Guarantee (the "Note Guarantee") pursuant
to Section 4.16 of the Indenture (as defined below); and
WHEREAS, the undersigned (the "Guarantor") is one of the Subsidiary
Guarantors;
WHEREAS, the Guarantor wishes to execute this guarantee (the
"Substitute Note Guarantee") in substitution for the Note Guarantee to the
extent the Note Guarantee was executed on behalf of the Guarantor (the "Original
Note Guarantee"), in the manner contemplated by the Note Guarantee; and
WHEREAS, concurrently with the execution of this Substitute Note
Guarantee, each of the other Subsidiary Guarantors is executing a guarantee in
substitution for the Note Guarantee to the extent the Note Guarantee was
executed on behalf of such Subsidiary Guarantor (such guarantees, together with
this Substitute Note Guarantee, are hereinafter collectively referred to as the
"Substitute Guarantees"), in the manner contemplated by the Note Guarantee.
Capitalized terms used but not defined herein shall have the meanings
given them in the Indenture.
IN WITNESS WHEREOF:
The Guarantor set forth below, which in accordance with Section 4.16 of
the Indenture, dated as of April 2, 1997, as supplemented by the First
Supplemental Indenture, dated as of March 18, 1998 (as so supplemented, the
"Indenture"), by and among the Issuer, Anchor Holdings, Inc., a Delaware
corporation and State Street Bank and Trust Company (as successor to Fleet
National Bank), as trustee, is required to guarantee the obligations of the
Issuer under the 11 3/4% Senior Notes due 2004 (the "Notes") hereby
unconditionally guarantees, to the fullest extent permitted by law, (i) the due
and punctual payment of the principal of, interest and Liquidated Damages, if
any, on the Notes, whether at the maturity or interest payment date, by
acceleration, call for redemption or otherwise, and of interest on the overdue
principal of, interest and Liquidated Damages, if any, on the Notes and all
other obligations of the Issuer to the Holders or the Trustee under the
<PAGE> 2
Indenture or the Notes and (ii) in case of any extension of time of payment or
renewal of any Notes 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 maturity, by acceleration or otherwise. The
obligations of the Subsidiary Guarantors, including without limitation, the
Guarantor, under the Substitute Guarantees are joint and several obligations.
The obligations of the Guarantor to the Holders and to the Trustee
pursuant to this Substitute Note Guarantee and the Indenture are as expressly
set forth in Article 10 of the Indenture and in such other provisions of the
Indenture as are applicable to Guarantors (as defined in the Indenture), and
reference is hereby made to such Indenture for the precise terms of this
Substitute Note Guarantee. The terms of Article 10 of the Indenture (including,
without limitation, Section 10.04 of the Indenture) and such other provisions of
the Indenture as are applicable to Guarantors (as defined in the Indenture) are
incorporated herein by reference.
This Substitute Note Guarantee is being executed in substitution for
the Original Note Guarantee, and upon the execution hereof (i) this Substitute
Note Guarantee shall be effective from and after the date of the Original Note
Guarantee as if it had been in effect from the date of the Original Note
Guarantee, and (ii) the Original Note Guarantee shall terminate and be of no
force or effect and (iii) the Guarantor shall be released from any and all
liability under the Original Note Gurarantee.
This is a continuing guarantee and shall remain in full force and
effect and shall be binding upon the Guarantor and its successors and assigns
until full and final payment of all of the Issuer's obligations under the Notes
and the Indenture and shall inure to the benefit of the successors and assigns
of the Trustee and the Holders and, in the event of any transfer or assignment
of rights by any Holder or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions hereof. This is
a guarantee of payment and not a guarantee of collection.
In case any provision in this Substitute Note 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.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS SUBSTITUTE NOTE GUARANTEE.
[Signature on following page]
<PAGE> 3
MOLL INDUSTRIES U.K. LIMITED
By: /s/ George T. Votis
------------------------------
Authorized Signatory
Dated: June 26, 1998
<PAGE> 1
EXHIBIT 4.14
SUBSTITUTE NOTE GUARANTEE
WHEREAS, on June 26, 1998, George T. Votis executed, on behalf
of certain subsidiaries (collectively, the "Subsidiary Guarantors") of Moll
Industries, Inc. (formerly known as Anchor Advanced Products, Inc.), a Delaware
corporation (the "Issuer"), the Note Guarantee (the "Note Guarantee") pursuant
to Section 4.16 of the Indenture (as defined below); and
WHEREAS, each of the undersigned (collectively, the
"Guarantors") is one of the Subsidiary Guarantors;
WHEREAS, each Guarantor wishes to execute this guarantee (the
"Substitute Note Guarantee") in substitution for the Note Guarantee to the
extent the Note Guarantee was executed on behalf of such Guarantor (the
"Original Note Guarantee"), in the manner contemplated by the Note Guarantee;
and
WHEREAS, concurrently with the execution of this Substitute
Note Guarantee, each of the other Subsidiary Guarantors is executing a guarantee
in substitution for the Note Guarantee to the extent the Note Guarantee was
executed on behalf of such Subsidiary Guarantor (such guarantees, together with
this Substitute Note Guarantee, are hereinafter collectively referred to as the
"Substitute Guarantees"), in the manner contemplated by the Note Guarantee.
Capitalized terms used but not defined herein shall have the
meanings given them in the Indenture.
IN WITNESS WHEREOF:
Each Guarantor set forth below, which in accordance with
Section 4.16 of the Indenture, dated as of April 2, 1997, as supplemented by the
First Supplemental Indenture, dated as of March 18, 1998 (as so supplemented,
the "Indenture"), by and among the Issuer, Anchor Holdings, Inc., a Delaware
corporation and State Street Bank and Trust Company (as successor to Fleet
National Bank), as trustee, is required to guarantee the obligations of the
Issuer under the 11 3/4% Senior Notes due 2004 (the "Notes") hereby
unconditionally guarantees, to the fullest extent permitted by law, (i) the due
and punctual payment of the principal of, interest and Liquidated Damages, if
any, on the Notes, whether at the maturity or interest payment date, by
acceleration, call for redemption or otherwise, and of interest on the overdue
principal of, interest and Liquidated Damages, if any, on the Notes and all
other obligations of the Issuer to the Holders or the Trustee under the
<PAGE> 2
Indenture or the Notes and (ii) in case of any extension of time of payment or
renewal of any Notes 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 maturity, by acceleration or otherwise. The
obligations of the Subsidiary Guarantors, including, without limitation, the
Guarantors, under the Substitute Guarantees are joint and several obligations.
The obligations of each Guarantor to the Holders and to the
Trustee pursuant to this Substitute Note Guarantee and the Indenture are as
expressly set forth in Article 10 of the Indenture and in such other provisions
of the Indenture as are applicable to Guarantors (as defined in the Indenture),
and reference is hereby made to such Indenture for the precise terms of this
Substitute Note Guarantee. The terms of Article 10 of the Indenture (including,
without limitation, Section 10.04 of the Indenture) and such other provisions of
the Indenture as are applicable to Guarantors (as defined in the Indenture) are
incorporated herein by reference.
This Substitute Note Guarantee is being executed in
substitution for the Original Note Guarantee, and upon the execution hereof (i)
this Substitute Note Guarantee shall be effective from and after the date of the
Original Note Guarantee as if it had been in effect from the date of the
Original Note Guarantee, and (ii) the Original Note Guarantee shall terminate
and be of no force or effect and (iii) each Guarantor shall be released from any
and all liability under the Original Note Guarantee.
This is a continuing guarantee and shall remain in full force
and effect and shall be binding upon each Guarantor and its successors and
assigns until full and final payment of all of the Issuer's obligations under
the Notes and the Indenture and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This is a guarantee of payment and not a guarantee of collection.
In case any provision in this Substitute Note 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.
This Substitute Note Guarantee may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute one and the same instrument.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUBSTITUTE NOTE GUARANTEE.
[Signatures on following page]
<PAGE> 3
MOLL PLASTICS SARL SOMOMECA INDUSTRIES SARL
By: /s/ George T. Votis By: /s/ George T. Votis
--------------------- ----------------------
Authorized Signatory Authorized Signatory
2BI SARL SERIM SARL
By: /s/ George T. Votis By: /s/ George T. Votis
--------------------- ----------------------
Authorized Signatory Authorized Signatory
SOMOPLAST SARL STAPHANE SARL
By: /s/ George T. Votis By: /s/ George T. Votis
--------------------- ----------------------
Authorized Signatory Authorized Signatory
SEMIP SARL SOMOPLAST LORRAINE SARL
By: /s/ George T. Votis By: /s/ George T. Votis
--------------------- ----------------------
Authorized Signatory Authorized Signatory
SAPI SARL
By: /s/ George T. Votis
---------------------
Authorized Signatory
Dated: June 26, 1998
<PAGE> 1
EXHIBIT 5.1
August 7, 1998
Moll Industries, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919-4048
Re: Moll Industries, Inc.
Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as special counsel to Moll Industries, Inc., a
Delaware corporation (the "Company"), in connection with the public offering of
$130,000,000 aggregate principal amount of the Company's 10 1/2% Senior
Subordinated Notes due 2008 (the "Notes"). The Notes are to be issued pursuant
to an exchange offer (the "Exchange Offer") in exchange for a like principal
amount of the issued and out standing 10 1/2% Senior Subordinated Notes due 2008
of the Company (the "Old Notes") under the Indenture, dated as of June 26, 1998
(the "Indenture"), by and between the Company and State Street Bank and Trust
Company, as Trustee (the "Trustee"), as contemplated by the Registration Rights
Agreement, dated June 26, 1998 (the "Registration Rights Agreement"), by and
among the Company, Donaldson, Lufkin & Jenrette Securities Corporation and
NationsBanc Montgomery Securities LLC.
This opinion is being furnished in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of
1933, as amended (the "Act").
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Registration
<PAGE> 2
Moll Industries, Inc.
August 7, 1998
Page 2
Statement on Form S-4 as filed with the Securities and Exchange Commission (the
"Commission") on August 7, 1998 under the Act (the "Registration Statement");
(ii) an executed copy of the Registration Rights Agreement; (iii) an executed
copy of the Indenture; (iv) the Restated Certificate of Incorporation of the
Company, as amended to date; (v) the By-Laws of the Company, as amended to date;
(vi) certain resolutions adopted by the Board of Directors of the Company
relating to the Exchange Offer, the issuance of the Old Notes and the Notes, the
Indenture and related matters; (vii) the Form T-1 of the Trustee filed as an
exhibit to the Registration Statement; and (viii) the form of the Notes. We have
also examined originals or copies, certified or otherwise identified to our
satisfaction, of such records of the Company and such agreements, certificates
of public officials, certificates of officers or other representatives of the
Company and others, and such other documents, certificates and records as we
have deemed necessary or appropriate as a basis for the opinions set forth
herein.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. In making our
examination of documents executed or to be executed by parties other than the
Company, we have assumed that such parties had or will have the power, corporate
or other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity and
binding effect thereof. As to any facts material to the opinions expressed
herein which we have not independently established or verified, we have relied
upon statements and representations of officers and other representatives of the
Company and others.
Members of our firm are admitted to the bar in the State of
New York, and we do not express any opinion as to the laws of any other
jurisdiction other than the General Corporation Law of the State of Delaware
(the "Delaware General Corporation Law").
In rendering the opinion set forth below, we have assumed that
the execution and delivery by the Company of the Notes do not and will not
violate, conflict with or constitute a default under (i) any agreement or
instrument to which the
<PAGE> 3
Moll Industries, Inc.
August 7, 1998
Page 3
Company or its properties is subject (except that we do not make the assumption
set forth in this clause (i) with respect to the Company's Restated Certificate
of Incorporation, the Company's By-Laws, the Indenture, or the Registration
Rights Agreement), (ii) any law, rule, or regulation to which the Company is
subject (except that we do not make the assumption set forth in this clause (ii)
with respect to the Delaware General Corporation Law and those laws, rules and
regulations of the State of New York and the United States of America, in each
case, which, in our experience, are normally applicable to transactions of the
type contemplated by the Exchange Offer (other than the United States federal
securities laws, state securities or Blue Sky laws, antifraud laws and the rules
and regulations of the National Association of Securities Dealers, Inc.), but
without our having made any special investigation with respect to any other
laws, rules or regulations), (iii) any judicial or regulatory order or decree of
any governmental authority or (iv) any consent, approval, license,
authorization or validation of, or filing, recording or registration with any
governmental authority.
Based upon and subject to the foregoing, we are of the opinion
that when the Notes have been duly executed and authenticated in accordance with
the terms of the Indenture and have been delivered upon consummation of the
Exchange Offer in accordance with the terms of the Exchange Offer, the Notes
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except to the extent that
enforcement thereof may be limited by (1) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and (2) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. We also consent to the
reference to our firm under the caption "Legal Matters" in the Registration
Statement. In giving this consent, we do not thereby admit that we are included
in the category of persons whose consent is required under Section 7 of the Act
or the rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
<PAGE> 1
EXHIBIT 10.1
MOLL INDUSTRIES, INC.
$130,000,000.00
10 1/2% Senior Subordinated Notes Due 2008
Purchase Agreement
June 23, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
NATIONSBANC MONTGOMERY SECURITIES LLC
<PAGE> 2
$130,000,000
10 1/2% Senior Subordinated Notes Due 2008
of
MOLL INDUSTRIES, INC.
PURCHASE AGREEMENT
June 23, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION and
NATIONSBANC MONTGOMERY SECURITIES LLC
c/o DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
MOLL INDUSTRIES, INC., a Delaware corporation (the "COMPANY"), proposes
to issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation and
NationsBanc Montgomery Securities LLC (together, the "INITIAL PURCHASERS") an
aggregate of $130,000,000 in principal amount of its 10 1/2% Senior Subordinated
Notes Due 2008 (the "SENIOR SUBORDINATED NOTES"), subject to the terms and
conditions set forth herein. The Senior Subordinated Notes are to be issued
pursuant to the provisions of an indenture (the "INDENTURE"), to be dated as of
the Closing Date (as defined below), among the Company and State Street Bank and
Trust Company, as trustee (the "TRUSTEE"). The Senior Subordinated Notes and the
New Senior Subordinated Notes (as defined below) issuable in exchange therefor
are collectively referred to herein as the "NOTES." Capitalized terms used but
not defined herein shall have the meanings given to such terms in the Indenture.
1. OFFERING MEMORANDUM. The Senior Subordinated Notes will be
offered and sold to the Initial Purchasers pursuant to one or more exemptions
from the registration requirements under the Securities Act of 1933, as amended
(the
<PAGE> 3
"ACT"). The Company has prepared a preliminary offering memorandum, dated June
11, 1998 (the "PRELIMINARY OFFERING MEMORANDUM") and a final offering
memorandum, dated July 23, 1998 (the "OFFERING MEMORANDUM"), relating to the
Senior Subordinated Notes.
Upon original issuance thereof, and until such time as the
same is no longer required pursuant to the Indenture, the Senior Subordinated
Notes (and all securities issued in exchange therefor, in substitution thereof
or upon conversion thereof) shall bear the following legend:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (I) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT) (A "QIB"), (II)
IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE ACT, OR (III) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3), OR (7) OR REGULATION D UNDER THE ACT (AN
"IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
NOTE EXCEPT (I) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES,
(II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) IN
AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR 904 OF THE ACT, (IV) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE ACT, (V) TO AN IAI THAT,
PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED
FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN
<PAGE> 4
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE ACT, (VI) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY) OR (VII) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE
TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and each Initial Purchaser agrees,
severally and not jointly, to purchase from the Company, the principal amount of
Senior Subordinated Notes set forth opposite the name of such Initial Purchaser
on Schedule I hereto at a purchase price equal to 100% of the principal amount
thereof (the "PURCHASE PRICE").
3. TERMS OF OFFERING. The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers (the "EXEMPT RESALES") of
the Senior Subordinated Notes purchased hereunder on the terms set forth in the
Offering Memorandum, as amended or supplemented, solely to (i) persons whom the
Initial Purchasers reasonably believe to be "qualified institutional buyers" as
defined in Rule 144A under the Act ("QIBS"), and (ii) to persons permitted to
purchase the Senior Subordinated Notes in offshore transactions in reliance upon
Regulation S under the Act (each, a "REGULATION S PURCHASER") (such persons
specified in clauses (i) and (ii) being referred to herein as the "ELIGIBLE
PURCHASERS"). The Initial Purchasers will offer the Senior Subordinated Notes to
Eligible Purchasers initially at a price equal to ___% of the principal amount
thereof. Such price may be changed at any time without notice.
<PAGE> 5
Holders (including subsequent transferees) of the Senior
Subordinated Notes will have the registration rights set forth in the
registration rights agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be dated
the Closing Date, in substantially the form of Exhibit A hereto, for so long as
such Senior Subordinated Notes constitute "TRANSFER RESTRICTED SECURITIES" (as
defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, the Company will agree to file with the Securities and
Exchange Commission (the "COMMISSION") under the circumstances set forth
therein, (i) a registration statement under the Act (the "EXCHANGE OFFER
REGISTRATION STATEMENT") relating to the Company's 10 1/2% New Senior
Subordinated Notes Due 2008 (the "NEW SENIOR SUBORDINATED NOTES"), to be offered
in exchange for the Senior Subordinated Notes (such offer to exchange being
referred to as the "EXCHANGE OFFER") and (ii) a shelf registration statement
pursuant to Rule 415 under the Act (the "SHELF REGISTRATION STATEMENT" and,
together with the Exchange Offer Registration Statement, the "REGISTRATION
STATEMENTS") relating to the resale by certain holders of the Senior
Subordinated Notes and to use its best efforts to cause such Registration
Statements to be declared and remain effective and usable for the periods
specified in the Registration Rights Agreement and to consummate the Exchange
Offer. This Agreement, the Indenture, the Notes and the Registration Rights
Agreement are hereinafter sometimes referred to collectively as the "OPERATIVE
DOCUMENTS."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the
Senior Subordinated Notes shall be made at the offices of Latham & Watkins, 885
Third Avenue, Suite 1000, New York, New York 10022 or such other location as may
be mutually acceptable. Such delivery and payment shall be made at 9:00 a.m. New
York City time, on June 26, 1998 or at such other time on the same date or such
other date as shall be agreed upon by the Initial Purchasers and the Company in
writing. The time and date of such delivery and the payment for the Senior
Subordinated Notes are herein called the "CLOSING DATE."
(b) One or more of the Senior Subordinated Notes in definitive
global form, registered in the name of Cede & Co., as nominee of the Depository
Trust Company ("DTC"), having an aggregate principal amount corresponding to
the aggregate principal amount of the Senior Subordinated Notes (collectively,
the "GLOBAL NOTE"), shall be delivered by the Company to the Initial Purchasers
(or as the Initial Purchasers direct) in each case with any transfer taxes
thereon duly paid by the Company against payment by the Initial Purchasers of
the Purchase Price thereof by wire transfer in same day funds to the order of
the
<PAGE> 6
Company. The Global Note shall be made available to the Initial Purchasers for
inspection not later than 9:30 a.m., New York City time, on the business day
immediately preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY. The Company hereby agrees with
the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing, (i) of the
issuance by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Senior Subordinated Notes
for offering or sale in any jurisdiction designated by the Initial Purchasers
pursuant to Section 5(e) hereof, or the initiation of any proceeding by any
state securities commission or any other federal or state regulatory authority
for such purpose and (ii) of the happening of any event during the period
referred to in Section 5(c) below that makes any statement of a material fact
made in the Preliminary Offering Memorandum or the Offering Memorandum untrue or
that requires any additions to or changes in the Preliminary Offering Memorandum
or the Offering Memorandum in order to make the statements therein not
misleading. The Company shall use its best efforts to prevent the issuance of
any stop order or order suspending the qualification or exemption of any Senior
Subordinated Notes under any state securities or Blue Sky laws and, if at any
time any state securities commission or other federal or state regulatory
authority shall issue an order suspending the qualification or exemption of any
Senior Subordinated Notes under any state securities or Blue Sky laws, the
Company shall use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
or supplements thereto, as the Initial Purchasers may reasonably request for the
time period specified in Section 5(c). Subject to the Initial Purchasers'
compliance with their representations and warranties and agreements set forth in
Section 7 hereof, the Company consents to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto required pursuant hereto, by the Initial Purchasers in connection with
Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers (i) not to make any
<PAGE> 7
amendment or supplement to the Offering Memorandum of which the Initial
Purchasers shall not previously have been advised or to which the Initial
Purchasers shall reasonably object within five business days after being so
advised and (ii) to prepare promptly upon the Initial Purchasers' reasonable
request, any amendment or supplement to the Offering Memorandum which may be
necessary or advisable in connection with such Exempt Resales.
(d) If, during the period referred to in Section 5(c) above,
any event shall occur or condition shall exist as a result of which, in the
opinion of counsel to the Initial Purchasers, it becomes necessary to amend or
supplement the Offering Memorandum in order to make the statements therein, in
the light of the circumstances when such Offering Memorandum is delivered to an
Eligible Purchaser, not misleading, or if, in the opinion of counsel to the
Initial Purchasers, it is necessary to amend or supplement the Offering
Memorandum to comply with any applicable law, forthwith to prepare an
appropriate amendment or supplement to such Offering Memorandum so that the
statements therein, as so amended or supplemented, will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such Offering
Memorandum will comply with applicable law, and to furnish to the Initial
Purchasers and such other persons as the Initial Purchasers may designate such
number of copies thereof as the Initial Purchasers may reasonably request.
(e) Prior to the sale of all Senior Subordinated Notes
pursuant to Exempt Resales as contemplated hereby, to cooperate with the Initial
Purchasers and counsel to the Initial Purchasers in connection with the
registration or qualification of the Senior Subordinated Notes for offer and
sale to the Initial Purchasers and pursuant to Exempt Resales under the
securities or Blue Sky laws of such jurisdictions as the Initial Purchasers may
request and to continue such registration or qualification in effect so long as
required for Exempt Resales and to file such consents to service of process or
other documents as may be necessary in order to effect such registration or
qualification; provided, however, that the Company shall not be required in
connection therewith to qualify as a foreign corporation in any jurisdiction in
which it is not now so qualified or to take any action that would subject it to
general consent to service of process or taxation other than as to matters and
transactions relating to the Preliminary Offering Memorandum, the Offering
Memorandum or Exempt Resales, in any jurisdiction in which it is not now so
subject.
(f) So long as the Notes are outstanding, (i) to mail and make
generally available as soon as practicable after the end of each fiscal year to
the record holders of the Notes a financial report of the Company and its
subsidiaries on a consolidated basis (and a similar financial report of all
unconsolidated subsidiaries, if any), all such financial reports to include a
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a
<PAGE> 8
consolidated statement of shareholders' equity as of the end of and for such
fiscal year, together with comparable information as of the end of and for the
preceding year, certified by the Company's independent public accountants and
(ii) to mail and make generally available as soon as practicable after the end
of each quarterly period (except for the last quarterly period of each fiscal
year) to such holders, a consolidated balance sheet, a consolidated statement of
operations and a consolidated statement of cash flows (and similar financial
reports of all unconsolidated subsidiaries, if any) as of the end of and for
such period, and for the period from the beginning of such year to the close of
such quarterly period, together with comparable information for the
corresponding periods of the preceding year.
(g) So long as the Notes are outstanding, to furnish to the
Initial Purchasers as soon as available copies of all reports or other
communications furnished by the Company to its security holders or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company and/or its subsidiaries as the Initial
Purchasers may reasonably request.
(h) So long as any of the Senior Subordinated Notes remain
outstanding and during any period in which the Company is not subject to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), to make available to any holder of Senior Subordinated Notes in
connection with any sale thereof and any prospective purchaser of such Senior
Subordinated Notes from such holder, the information ("RULE 144A INFORMATION")
required by Rule 144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of the obligations of the Company
under this Agreement, including: (i) the fees, disbursements and expenses of
counsel to the Company and accountants of the Company in connection with the
sale and delivery of the Senior Subordinated Notes to the Initial Purchasers and
pursuant to Exempt Resales, and all other fees and expenses in connection with
the preparation, printing, filing and distribution of the Preliminary Offering
Memorandum, the Offering Memorandum and all amendments and supplements to any of
the foregoing (including financial statements), including the mailing and
delivering of copies thereof to the Initial Purchasers and persons designated by
them in the quantities specified herein, (ii) all costs and expenses related to
the transfer and delivery of the Senior Subordinated Notes to the Initial
Purchasers and pursuant to Exempt Resales, including any transfer or other taxes
payable thereon, (iii) all costs of printing or
<PAGE> 9
producing this Agreement, the other Operative Documents and any other agreements
or documents in connection with the offering, purchase, sale or delivery of the
Senior Subordinated Notes, (iv) all expenses in connection with the registration
or qualification of the Senior Subordinated Notes for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any preliminary and supplemental Blue Sky memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Initial Purchasers in connection with such registration or qualification and
memoranda relating thereto), (v) the cost of printing certificates representing
the Senior Subordinated Notes, (vi) all expenses and listing fees in connection
with the application for quotation of the Senior Subordinated Notes in the
National Association of Securities Dealers, Inc. ("NASD") Automated Quotation
System - PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee and the
Trustee's counsel in connection with the Indenture and the Notes, (viii) the
costs and charges of any transfer agent, registrar and/or depositary (including
DTC), (ix) any fees charged by rating agencies for the rating of the Notes, (x)
all costs and expenses of the Exchange Offer and any Registration Statement, as
set forth in the Registration Rights Agreement, and (xi) and all other costs and
expenses incident to the performance of the obligations of the Company hereunder
for which provision is not otherwise made in this Section.
(j) To use its best efforts to effect the inclusion of the
Senior Subordinated Notes in PORTAL and to maintain the listing of the Senior
Subordinated Notes on PORTAL for so long as the Senior Subordinated Notes are
outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of
the Notes, and to comply with all of its agreements set forth in the
representation letters of the Company and the Guarantors to DTC relating to the
approval of the Notes by DTC for "book-entry" transfer.
(l) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell, contract to
sell or otherwise transfer or dispose of any debt securities of the Company or
any warrants, rights or options to purchase or otherwise acquire debt securities
of the Company substantially similar to the Notes (other than (i) the Notes and
(ii) commercial paper issued in the ordinary course of business), without the
prior written consent of the Initial Purchasers.
(m) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Senior Subordinated Notes to the
Initial Purchasers or pursuant to Exempt Resales in a manner that would require
the registration of any such sale of the Senior Subordinated Notes under the
Act.
<PAGE> 10
(n) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of any
Notes.
(o) To cause the Exchange Offer to be made in the appropriate
form to permit New Senior Subordinated Notes registered pursuant to the Act to
be offered in exchange for the Senior Subordinated Notes and to comply with all
applicable federal and state securities laws in connection with the Exchange
Offer.
(p) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(q) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by it prior
to the Closing Date and to satisfy all conditions precedent to the delivery of
the Senior Subordinated Notes.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
As of the date hereof, the Company represents and warrants to, and agrees with,
the Initial Purchasers that:
(a) The Preliminary Offering Memorandum, at the date thereof,
did not contain any untrue statement of a material fact or omit to state any
material fact (other than pricing terms and other financial terms intentionally
left blank) necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Offering
Memorandum, at the date hereof, does not, and at the Closing Date will not (and
any amendment or supplement thereto, at the date thereof and at the Closing
Date, will not), contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that the Company makes no representation or warranty as to the information
contained in, or omitted from, the Preliminary Offering Memorandum or the
Offering Memorandum, or any amendment or supplement thereto, in reliance upon
and in conformity with information relating to any Initial Purchaser furnished
in writing to the Company by or on behalf of the Initial Purchasers specifically
for inclusion therein. To the Company's knowledge, as of the date hereof, no
stop order preventing the use of the Preliminary Offering Memorandum or the
Offering Memorandum, or any amendment or supplement thereto, or any order
asserting that any of the transactions contemplated by this
<PAGE> 11
Agreement are subject to the registration requirements of the Act, has been
issued.
(b) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation and, where applicable, in
good standing, under the laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business, as it is currently being
conducted, and to own, lease and operate its properties, in each case, as
described in the Preliminary Offering Memorandum and the Offering Memorandum,
and each is duly qualified and, where applicable, is in good standing, as a
foreign corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified or, where applicable,
in good standing, would not have a material adverse effect on the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT").
(c) The Company and its affiliates and all persons acting on
their behalf (other than the Initial Purchasers, as to whom the Company makes no
representation) have complied with and will comply in all material respects with
the offering restrictions requirements of Regulation S in connection with the
offering of the Senior Subordinated Notes outside the United States and, in
connection therewith, the Offering Memorandum will contain the disclosure
required by Rule 902(h).
(d) The Company is not a "reporting issuer" as defined in Rule
902 under the Act.
(e) Except as disclosed in the Preliminary Offering Memorandum
and the Offering Memorandum, all outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid, and
non-assessable.
(f) The entities listed on Schedule II hereto are the only
subsidiaries, direct or indirect, of the Company. All of the outstanding shares
of capital stock of each of the Company's subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable, and are owned by the
Company, directly or indirectly through one or more subsidiaries, free and clear
of any security interest, claim, lien, encumbrance or adverse interest of any
nature (each, a "LIEN").
(g) This Agreement has been duly authorized, executed and
delivered by the Company.
(h) The Indenture has been duly authorized by the Company and
when duly executed and delivered by the Company and duly authorized, executed
and delivered by the Trustee will be the valid and legally
<PAGE> 12
binding agreement of the Company, enforceable against the Company in accordance
with its terms; except to the extent that (i) the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability. On the Closing Date, the Indenture will conform in all
material respects to the requirements of the Trust Indenture Act of 1939, as
amended (the "TIA" or "TRUST INDENTURE ACT"), and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder.
(i) The Senior Subordinated Notes have been duly authorized by
the Company, and when (i) the Senior Subordinated Notes have been duly executed
and authenticated in accordance with the terms of the Indenture, (ii) the Senior
Subordinated Notes have been delivered to and paid for by the Initial Purchasers
as contemplated by this Agreement and (iii) the Indenture has been duly executed
and delivered by the Company (assuming the due authorization, execution and
delivery thereof by the Trustee), the Senior Subordinated Notes will be valid
and legally binding obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their terms,
except to the extent that (i) the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
(j) On the Closing Date, the New Senior Subordinated Notes
will have been duly authorized by the Company. When the New Senior Subordinated
Notes are issued, executed and authenticated in accordance with the terms of the
Exchange Offer and the Indenture, the New Senior Subordinated Notes will be
entitled to the benefits of the Indenture and will be the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
(k) The Registration Rights Agreement has been duly authorized
by the Company and when duly executed and delivered by the Company (assuming the
due authorization, execution and delivery thereof by the Initial Purchasers),
will be the valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except to the extent that (i) the
<PAGE> 13
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
(l) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws or in default in the performance
of any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument in each case
that is material to the Company and its subsidiaries, taken as a whole, to which
the Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or their respective property is bound.
(m) The execution, delivery and performance of this Agreement
and the other Operative Documents by the Company, compliance by the Company with
all material provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (i) require any consent,
approval, authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states), (ii) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the charter or
by-laws of the Company or any of its subsidiaries or any indenture, loan
agreement, mortgage, lease or other agreement or instrument in each case that is
material to the Company and its subsidiaries, taken as a whole, to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective property is bound, (iii) violate or
conflict with any applicable law or any rule, regulation, judgment, order or
decree of any court or any governmental body or agency having jurisdiction over
the Company, any of its subsidiaries or their respective property, (iv) result
in the imposition or creation of (or the obligation to create or impose) a Lien
under, any agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective property is bound, or (v) result in the termination, suspension
or revocation of any Authorization (as defined below) of the Company or any of
its subsidiaries or result in any other impairment of the rights of the holder
of any such Authorization.
(n) Except as otherwise set forth in the Preliminary Offering
Memorandum and the Offering Memorandum, there are no material legal or
governmental proceedings pending or, to the knowledge of the Company,
threatened to which the Company or any of its subsidiaries is a party or to
which any of their respective property is subject, which, to the knowledge of
the Company, if determined adversely to the Company or any of its subsidiaries,
might result, singly or in the aggregate, in a Material Adverse Effect.
<PAGE> 14
(o) Neither the Company nor any of its subsidiaries has
violated any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), any
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any provisions of the Foreign Corrupt Practices Act or the rules
and regulations promulgated thereunder, except for such violations which, singly
or in the aggregate, would not have a Material Adverse Effect.
(p) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a Material Adverse Effect.
(q) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "AUTHORIZATION") of, and has made all material filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without limitation,
under any applicable Environmental Laws, as are currently necessary to be
procured by them in order to engage in the respective businesses currently
conducted by each of them and to own, lease, license and operate its respective
properties each as set forth in the Preliminary Offering Memorandum and the
Offering Memorandum, except where the failure to have any such Authorization or
to make any such filing or notice would not, singly or in the aggregate, have a
Material Adverse Effect. Each such Authorization is valid and in full force and
effect and each of the Company and its subsidiaries is in compliance with all
the material terms and conditions thereof and with the rules and regulations of
the authorities and governing bodies having jurisdiction with respect thereto;
and no event has occurred (including, without limitation, the receipt of any
notice from any authority or governing body) which allows or, after notice or
lapse of time or both, would allow, revocation, suspension or termination of any
such Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; and, except as described in the Preliminary Offering Memorandum
and the Offering Memorandum, such Authorizations contain no restrictions that
are burdensome to the Company or any of its subsidiaries; except where such
failure to be valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction would not,
singly or in the
<PAGE> 15
aggregate, have a Material Adverse Effect.
(r) The accountants, Arthur Andersen, L.L.P., that have
certified the financial statements included in the Preliminary Offering
Memorandum and the Offering Memorandum are independent public accountants with
respect to the Company, as required by the Act and the Exchange Act.
(s) The historical financial statements, together with related
notes forming part of the Offering Memorandum (and any amendment or supplement
thereto), present fairly in all material respects the consolidated financial
position, results of operations and changes in financial position of the Company
and its subsidiaries on the basis stated in the Offering Memorandum at the
respective dates or for the respective periods to which they apply; such
statements and related notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein and except that the unaudited interim
financial statements are subject to normal year end adjustments; and the other
financial and statistical information and data set forth in the Offering
Memorandum (and any amendment or supplement thereto) are, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company.
(t) The pro forma financial statements included in the
Preliminary Offering Memorandum and the Offering Memorandum have been prepared
on a basis consistent with the historical financial statements of the Company
and its subsidiaries and give effect to assumptions used in the preparation
thereof on a reasonable basis and in good faith and present fairly in all
material respects the historical and proposed transactions contemplated by the
Preliminary Offering Memorandum and the Offering Memorandum; and such pro forma
financial statements comply as to form in all material respects with the
requirements applicable to pro forma financial statements included in
registration statements on Form S-1 under the Act. The other pro forma financial
and statistical information and data included in the Offering Memorandum are,
in all material respects, accurately presented and prepared on a basis
consistent with the pro forma financial statements.
(u) The Company is not and, after giving effect to the
offering and sale of the Senior Subordinated Notes and the application of the
net proceeds thereof as described in the Offering Memorandum, will not be, an
"investment company," as such term is defined in the Investment Company Act of
1940, as amended.
(v) Other than the Registration Rights Agreement, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement
<PAGE> 16
under the Act with respect to any securities of the Company or to require the
Company to include such securities with the Notes registered pursuant to any
Registration Statement.
(w) Neither the Company nor any of its subsidiaries nor any
agent thereof acting on the behalf of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of the
Senior Subordinated Notes to violate Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the
Board of Governors of the Federal Reserve System.
(x) No "nationally recognized statistical rating organization"
as such term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed the Company that it is considering imposing) any
condition (financial or otherwise) on the Company's retaining any rating
assigned to the Company, any securities of the Company or (ii) has indicated to
the Company that it is considering (a) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (b) any change in
the outlook for any rating of the Company or any securities of the Company.
(y) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there has not occurred any material adverse change
in the condition, financial or otherwise, or the earnings, business, management
or operations of the Company and its subsidiaries, taken as a whole, (ii) there
has not been any material adverse change in the capital stock or in the
long-term debt of the Company or any of its subsidiaries and (iii) neither the
Company nor any of its subsidiaries has incurred any material liability or
obligation, direct or contingent.
(z) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the information specified in,
and meeting the requirements of, Rule 144A(d)(4) under the Act.
(aa) When the Senior Subordinated Notes are issued and
delivered pursuant to this Agreement, the Senior Subordinated Notes will not be
of the same class (within the meaning of Rule 144A under the Act) as any
security of the Company that is listed on a national securities exchange
registered under Section 6 of the Exchange Act or that is quoted in a United
States automated inter-dealer
<PAGE> 17
quotation system.
(bb) No form of general solicitation or general advertising
(as defined in Regulation D under the Act) was used by the Company or any of
their respective representatives (other than the Initial Purchasers, as to whom
the Company makes no representation) in connection with the offer and sale of
the Senior Subordinated Notes in the United States. No securities of the same
class as the Senior Subordinated Notes have been issued and sold by the Company
within the six-month period immediately prior to the date hereof.
(cc) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the TIA.
(dd) Neither the Company nor any of its respective affiliates
or any person acting on its or their behalf (other than the Initial Purchasers,
as to whom the Company makes no representation) has engaged or will engage in
any directed selling efforts within the meaning of Regulation S under the Act
("REGULATION S") with respect to the Senior Subordinated Notes.
(ee) The Senior Subordinated Notes offered and sold in
reliance on Regulation S have been and will be offered and sold only in offshore
transactions.
(ff) The sale of the Senior Subordinated Notes pursuant to
Regulation S is not part of a plan or scheme to evade the registration
provisions of the Act.
(gg) No registration under the Act of the Senior Subordinated
Notes is required for the sale of the Senior Subordinated Notes to the Initial
Purchasers as contemplated hereby or for the Exempt Resales assuming the
accuracy of the Initial Purchasers' representations and warranties and
agreements set forth in Section 7 hereof.
(hh) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or counsel for the Initial Purchasers shall
be deemed to be a representation and warranty by the Company to the Initial
Purchasers as to the matters covered thereby.
The Company acknowledges that the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section
<PAGE> 18
9 hereof, counsel to the Company and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.
7. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. The Initial
Purchasers represent and warrant to, and agree with, the Company:
(a) Each such Initial Purchaser is a QIB, with such knowledge
and experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Senior Subordinated Notes.
(b) Each such Initial Purchaser (A) is not acquiring the
Senior Subordinated Notes with a view to any distribution thereof or with any
present intention of offering or selling any of the Senior Subordinated Notes in
a transaction that would violate the Act or the securities laws of any state of
the United States or any other applicable jurisdiction and (B) will be
reoffering and reselling the Senior Subordinated Notes only to (i) QIBs in
reliance on the exemption from the registration requirements of the Act provided
by Rule 144A, and (ii) in offshore transactions in reliance upon Regulation S
under the Act.
(c) Each such Initial Purchaser agrees that it has not offered
or sold and will not offer or sell the Senior Subordinated Notes in the United
States or to, or for the benefit or account of, a U.S. Person, in each case, as
defined in Rule 902 under the Act (i) as part of its distribution at any time or
(ii) otherwise until 40 days after the later of the commencement of the offering
of the Senior Subordinated Notes pursuant hereto and the Closing Date, other
than in accordance with Regulation S of the Act or another exemption from the
registration requirements of the Act. Each such Initial Purchaser agrees that,
during such 40-day restricted period, it will not cause any advertisement with
respect to the Senior Subordinated Notes (including any "tombstone"
advertisement) to be published in any newspaper or periodical or posted in any
public place and will not issue any circular relating to the Senior Subordinated
Notes, except such advertisements as permitted by and include the statements
required by Regulation S.
(d) Each such Initial Purchaser agrees that, at or prior to
confirmation or a sale of Senior Subordinated Notes by it to any distributor,
dealer or person receiving a selling concession, fee or other remuneration
during the 40-day distribution compliance period referred to in rule 902(f)
under the Act, it will send to such distributor, dealer or person receiving a
selling concession, fee or other remuneration a confirmation or notice to
substantially the following effect:
The Senior Subordinated Notes covered hereby have not been registered
under the U.S. Securities Act of 1933, as amended (the "ACT"), and may
not be offered and sold within the United States or to,
<PAGE> 19
or for the account or benefit of, U.S. persons (i) as part of your
distribution at any time or (ii) otherwise until 40 days after the
later of the commencement of the Offering and the Closing Date, except
in either case in accordance with Regulation S under the Act (or Rule
144A or to Accredited Institutions in transactions that are exempt from
the registration requirements of the Act), and in connection with any
sale by you of the Senior Subordinated Notes covered hereby in reliance
on Regulation S during the period referred to above to any distributor,
dealer or person receiving a selling concession, fee or other
remuneration, you must deliver a notice to substantially the foregoing
effect. Terms used above have the meanings assigned to them in
Regulation S.
(e) Each such Initial Purchaser agrees that the Senior
Subordinated Notes offered and sold in reliance on Regulation S will be
represented upon issuance by a global security that may not be exchanged for
definitive securities until the expiration of the 40-day distribution compliance
period referred to in Rule 902(f) of the Act and only upon certification of
beneficial ownership of such Senior Subordinated Notes by non-U.S. persons or
U.S. persons who purchased such Senior Subordinated Notes in transactions that
were exempt from the registration requirements of the Act.
(f) Each such Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D under
the Act) has been or will be used by such Initial Purchaser or any of its
Affiliates or any person acting on its or their behalf in connection with the
offer and sale of the Senior Subordinated Notes pursuant hereto, including, but
not limited to, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(g) Each such Initial Purchaser agrees that, in connection
with Exempt Resales, such Initial Purchaser will solicit offers to buy the
Senior Subordinated Notes only from, and will offer to sell the Senior
Subordinated Notes only to, Eligible Purchasers. Each Initial Purchaser further
agrees that it will offer to sell the Senior Subordinated Notes only to, and
will solicit offers to buy the Senior Subordinated Notes only from (A) Eligible
Purchasers that the Initial Purchaser reasonably believes are QIBs and (B)
Regulation S Purchasers, in each case, that agree that (x) the Senior
Subordinated Notes purchased by them may be resold, pledged or otherwise
transferred within the time period referred to under Rule 144(k)
<PAGE> 20
(taking into account the provisions of Rule 144(d) under the Act, if applicable)
under the Act, as in effect on the date of the transfer of such Senior
Subordinated Notes, only (I) to the Company or any of its subsidiaries, (II) to
a person whom the seller reasonably believes is a QIB purchasing for its own
account or for the account of a QIB in a transaction meeting the requirements of
Rule 144A under the Act, (III) in an offshore transaction (as defined in Rule
902 under the Act) meeting the requirements of Rule 904 of the Act, (IV) in a
transaction meeting the requirements of Rule 144 under the Act, (V) to an IAI
that, prior to such transfer, furnishes the Trustee a signed letter containing
certain representations and agreements relating to the registration of transfer
of such Senior Subordinated Note (the form of which may be obtained from the
Trustee) and, if such transfer is in respect of an aggregate principal amount of
Senior Subordinated Notes less than $250,000, an opinion of counsel acceptable
to the Company that such transfer is in compliance with the Act, (VI) in
accordance with another exemption from the registration requirements of the Act
(and based upon an opinion of counsel acceptable to the Company) or (VII)
pursuant to an effective registration statement and, in each case, in accordance
with the applicable securities laws of any state of the United States or any
other applicable jurisdiction and (y) they will deliver to each person to whom
such Senior Subordinated Notes or an interest therein is transferred a notice
substantially to the effect of the foregoing.
(h) Each such Initial Purchaser and its affiliates or any
person acting on its or their behalf have not engaged or will not engage in any
directed selling efforts within the meaning of Regulation S with respect to the
Senior Subordinated Notes.
(i) The Senior Subordinated Notes offered and sold by such
Initial Purchasers pursuant hereto in reliance on Regulation S have been and
will be offered and sold only in offshore transactions.
(j) The sale of the Senior Subordinated Notes offered and sold
by such Initial Purchasers pursuant hereto in reliance on Regulation S is not
part of a plan or scheme to evade the registration provisions of the Act.
Each such Initial Purchaser acknowledges that the Company and, for
purposes of the opinions to be delivered to each Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchasers
will rely upon the accuracy and truth of the foregoing representations and each
such Initial Purchaser hereby consents to such reliance.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Initial Purchasers, their directors, their officers and each person, if any, who
controls such Initial Purchaser within the meaning of Section 15 of the Act or
<PAGE> 21
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and judgments (including, without limitation, any legal or
other expenses incurred in connection with investigating or defending any
matter, including any action, that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto), the Preliminary Offering Memorandum or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Initial Purchasers furnished in
writing to the Company by such Initial Purchaser; provided, however, that the
foregoing indemnity agreement with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of any Initial Purchaser who failed to
deliver an Offering Memorandum (as then amended or supplemented, provided by
the Company to the several Initial Purchasers in the requisite quantity and on a
timely basis to permit proper delivery on or prior to the Closing Date) to the
person asserting any losses, claims, damages and liabilities and judgments
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Offering Memorandum, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, if such material
misstatement or omission or alleged material misstatement or omission was cured
in the Offering Memorandum.
(b) Each Initial Purchaser, severally and not jointly, agrees
to indemnify and hold harmless the Company, and its directors, its officers and
each person, if any, who controls (within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) the Company, to the same extent as the
foregoing indemnity from the Company to the Initial Purchasers but only with
reference to information relating to such Initial Purchaser furnished in writing
to the Company by or on behalf of such Initial Purchaser expressly for use in
the Preliminary Offering Memorandum or the Offering Memorandum (or any amendment
or supplement thereto).
(c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in
writing of the commencement thereof, but the failure to so notify the
indemnifying party (i) will not relieve it from liability under Section 8(a) or
8(b) unless and to the extent it
<PAGE> 22
did not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses and (ii)
will not, in any event, relieve the indemnifying party from any obligations to
any indemnified party other than the indemnification obligation provided in
Section 8(a) or 8(b). Such indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel, as
incurred (except that in the case of any action in respect of which indemnity
may be sought pursuant to both Sections 8(a) and 8(b), the Initial Purchasers
shall not be required to assume the defense of such action pursuant to this
Section 8(c), but may employ separate counsel and participate in the defense
thereof, but the fees and expenses of such counsel, except as provided below,
shall be at the expense of the Initial Purchasers). Any indemnified party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such counsel shall
have been specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred upon
written request and upon presentation of satisfactory invoices. Such firm shall
be designated in writing by Donaldson, Lufkin & Jenrette Securities Corporation,
in the case of the parties indemnified pursuant to Section 8(a), and by the
Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if the settlement is entered into more
than twenty business days after the indemnifying party shall have received a
request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified
<PAGE> 23
party is or could have been a party and indemnity or contribution may be or
could have been sought hereunder by the indemnified party, unless such
settlement, compromise or judgment (i) includes an unconditional release of the
indemnified party from all liability on claims that are or could have been the
subject matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Initial Purchasers on the other hand from the
offering of the Senior Subordinated Notes or (ii) if the allocation provided by
clause 8(d)(i) above is unavailable for any reason, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company, on the one hand, and
the Initial Purchasers, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and the Initial Purchasers,
on the other hand, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Senior Subordinated Notes (after underwriting
discounts and commissions, but before deducting expenses) received by the
Company, and the total discounts and commissions received by the Initial
Purchasers bear to the total price to investors of the Senior Subordinated
Notes, in each case as set forth in the table on the cover page of the Offering
Memorandum. The relative fault of the Company, on the one hand, and the Initial
Purchasers, on the other hand, 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 Company, on the one hand, or the Initial Purchasers, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses incurred
by such indemnified party in connection with investigating or defending any
matter, including any action, that could have
<PAGE> 24
given rise to such losses, claims, damages, liabilities or judgments.
Notwithstanding the provisions of this Section 8, the Initial Purchasers shall
not be required to contribute any amount in excess of the amount by which the
total discounts and commissions received by such Initial Purchasers exceeds the
amount of any damages which the Initial Purchasers have otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The Initial
Purchasers' respective obligations to contribute under this Section 8 are
several in proportion to the respective principal amount of Senior Subordinated
Notes they have purchased hereunder, and not joint.
(e) The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations of
each of the Initial Purchasers to purchase the Senior Subordinated Notes under
this Agreement are subject to the satisfaction of each of the following
conditions:
(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
on the Closing Date with the same force and effect as if made on and as of the
Closing Date.
(b) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any notice have
been given of any potential or intended downgrading, suspension or withdrawal
of, or of any review (or of any potential or intended review) for a possible
change that does not indicate the direction of the possible change in, any
rating of the Company or any securities of the Company (including, without
limitation, the placing of any of the foregoing ratings on credit watch with
negative or developing implications or under review with an uncertain direction)
by any "nationally recognized statistical rating organization" as such term is
defined for purposes of Rule 436(g)(2) under the Act, (ii) there shall not have
occurred any material adverse change, nor shall any notice have been given of
any potential or intended material adverse change, in the outlook for any rating
of the Company or any securities of the Company by any such rating organization
and (iii) no such rating organization shall have given notice that it has
assigned (or is considering assigning) a lower rating to the Notes than that on
which the Notes were marketed.
<PAGE> 25
(c) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there shall not have occurred any change or any
development involving a prospective change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company
and its subsidiaries, taken as a whole, (ii) there shall not have been any
change or any development involving a prospective change in the capital stock or
in the long-term debt of the Company or any of its subsidiaries and (iii)
neither the Company nor any of its subsidiaries shall have incurred any
liability or obligation, direct or contingent, the effect of which, in any such
case described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in the judgment of the
Initial Purchasers, is so material and adverse as to make it impracticable to
market the Senior Subordinated Notes on the terms and in the manner contemplated
in the Offering Memorandum.
(d) The Initial Purchasers shall have received on the Closing
Date a certificate dated the Closing Date, signed by the President and the Chief
Financial Officer of the Company, confirming the matters set forth in Sections
6(y), 9(a) and 9(b) and stating that the Company has complied with all the
agreements and satisfied all of the conditions herein contained and required to
be complied with or satisfied on or prior to the Closing Date.
(e) The Initial Purchasers shall have received on the Closing
Date the opinions (satisfactory to the Initial Purchasers and counsel for the
Initial Purchasers), dated the Closing Date, of each of (i) Skadden, Arps,
Slate, Meagher & Flom LLP, special counsel for the Company, in substantially the
form attached hereto as Annex A and (ii) Skadden, Arps, Slate, Meagher & Flom
LLP, as special French counsel for the Company, in substantially the form
attached hereto as Annex B.
(f) The Initial Purchasers shall have received, at the time
this Agreement is executed and at the Closing Date, letters dated the date
hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchasers from Arthur Andersen, L.L.P., independent
public accountants for the Company and Coopers & Lybrand L.L.P., independent
publishers accountants for Anchor, containing the information and statements of
the type ordinarily included in accountants' "comfort letters" to the Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
<PAGE> 26
(g) The Senior Subordinated Notes shall have been approved by
the NASD for trading and duly listed in PORTAL.
(h) The Initial Purchasers shall have received a counterpart,
conformed as executed, of the Indenture which shall have been entered into by
the Company and the Trustee.
(i) The Company shall have executed the Registration Rights
Agreement and the Initial Purchasers shall have received an original copy
thereof, duly executed by the Company.
(j) The Company shall not have failed at or prior to the
Closing Date to perform or comply with any of the agreements herein contained
and required to be performed or complied with by the Company, as the case may
be, at or prior to the Closing Date.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to
the Closing Date by the Initial Purchasers by written notice to the Company if
any of the following has occurred: (i) any outbreak or escalation of hostilities
or other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere that,
in the judgment of Donaldson, Lufkin & Jenrette Securities Corporation, is
material and adverse and, in the judgment of Donaldson, Lufkin & Jenrette
Securities Corporation, makes it impracticable to market the Senior Subordinated
Notes on the terms and in the manner contemplated in the Offering Memorandum,
(ii) the suspension or material limitation of trading in securities or other
instruments on the New York Stock Exchange, the American Stock Exchange, the
Chicago Board of Options Exchange, the Chicago Mercantile Exchange, the Chicago
Board of Trade or the Nasdaq National Market or limitation on prices for
securities or other instruments on any such exchange or the Nasdaq National
Market, (iii) the suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in the opinion of
DLJ Securities Corporation materially and adversely affects, or will materially
and adversely affect, the business, prospects, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole, (v) the declaration of a banking moratorium by either federal or New
York State authorities or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
the opinion of DLJ Securities Corporation has a material adverse effect on the
financial markets in the United
<PAGE> 27
States.
11. MISCELLANEOUS. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to Moll
Industries, Inc., 1111 Northshore Drive, Suite N-600, Knoxville, TN 37919-4048,
(423) 450-5300 and (ii) if to the Initial Purchasers, Donaldson, Lufkin &
Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10172,
Attention: Syndicate Department, or in any case to such other address as the
person to be notified may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company and the Initial
Purchasers set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery of and payment
for the Senior Subordinated Notes, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of the Initial
Purchasers, the officers or directors of the Initial Purchasers, any person
controlling the Initial Purchasers, the Company, the officers or directors of
the Company, or any person controlling the Company, (ii) acceptance of the
Senior Subordinated Notes and payment for them hereunder and (iii) termination
of this Agreement.
If for any reason the Senior Subordinated Notes are not
delivered by or on behalf of the Company as provided herein (other than as a
result of any termination of this Agreement pursuant to Section 10), the Company
agrees to reimburse the Initial Purchasers for all reasonable out-of-pocket
expenses (including reasonable fees and disbursements of counsel) incurred by
them in connection with the proposed purchase and sale of Senior Subordinated
Notes against appropriate receipts therefor. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse the
Initial Purchasers and its officers, directors and each person, if any, who
controls such Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act for reasonable fees and expenses (including
without limitation reasonable fees and expenses of counsel) incurred by them in
connection with enforcing their rights under this Agreement (including without
limitation its rights under Section 8) against appropriate receipts therefor.
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Initial Purchasers, the Initial Purchasers' directors and officers, any
controlling persons
<PAGE> 28
referred to herein, the directors of the Company and their respective successors
and assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successors and assigns" shall not include a purchaser of any of the Senior
Subordinated Notes from the Initial Purchasers merely because of such purchase.
This Agreement shall be governed and construed in accordance
with the laws of the State of New York.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the
agreement among the Company and the Initial Purchasers.
<PAGE> 29
The foregoing Purchase
Agreement is hereby
confirmed and accepted as
of the date first above
written.
MOLL INDUSTRIES, INC.
By: /s/ George T. Votis
----------------------
Name: George T. Votis
Title: Chairman and Chief Executive
Officer
<PAGE> 30
The foregoing Purchase
Agreement is hereby
confirmed and accepted as
of the date first above
written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ON BEHALF OF THE
INITIAL PURCHASERS:
By: /s/ Maximillian Justicz
---------------------------
Name: Maximillian Justicz
Title: Vice President
<PAGE> 31
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount of
Senior Subordinated Notes
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation.............................. $110,500,000
NationsBanc Montgomery Securities LLC............... $19,500,000
Total............................................... $130,000,000.00
</TABLE>
<PAGE> 32
SCHEDULE II
SUBSIDIARIES
Moll Industries UK, Limited
Moll Industries Paderborn GmbH & Co. KG
Cepillos De Matamoros S.A. de C.V.
Anchor Advanced Products Foreign Sales Corporation
Moll Industries, LLC
Hanning-Kunstoffe GmbH & Co.
Hanning-Kunstoffe Beteiligungs-GmbH & Co.
PB Hanning GmbH
PB Hanning GmbH & Co. Handelsgesellschaft
Moll Plastics, LLC
Moll Plastics SARL
Somomeca Industries SARL
Sapi SARL
Somoplast Lorraine SARL
2BI SARL
Somoplast SARL
Serim SARL
Semip SARL
Staphane SARL
<PAGE> 33
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE> 1
EXHIBIT 10.7
THOMAS H. LEE COMPANY
75 State Street
Boston, Massachusetts 02109
Anchor Acquisition Co.
Attn: Mr. George T. Votis
March 19, 1998
Dear Mr. Votis:
In connection with the proposed sale of the capital stock of Anchor
Holdings, Inc. (the "Company") to Anchor Acquisition Co. ("Acquisition Co.")
(the "Transaction"), Acquisition Co., provided that the closing of the
Transaction occurs, hereby agrees to cause the Company (and any successor
thereto) to pay to Geoffrey A. de Rohan a stay bonus in the amount of Four
Hundred Thousand Dollars ($400,000) (the "Stay Bonus"). Such Stay Bonus shall be
payable One Hundred Fifty Thousand Dollars ($150,000) within one week of the
closing of the Transaction, and the remaining Two Hundred Fifty Thousand Dollars
($250,000) in equal monthly payments in arrears for the twelve months following
the close of the Transaction. All such payments shall be subject to all
applicable tax withholding.
All payments provided for herein shall be made in full by the Company
unless (i) Mr. de Rohan voluntarily terminates his employment with the Company
other than as permitted by Section 4(a) of the Employment Agreement dated April
1, 1996 by and between Mr. de Rohan and the Company (the "Employment Agreement")
or (ii) the Company terminates Mr. de Rohan's employment for "just cause" as
defined in the Employment Agreement. In the event of the occurrence of either of
the events described in (i) or (ii) above, Acquisition Co. shall be released
from all obligations hereunder.
THOMAS H. LEE COMPANY
By: /s/ Scott A. Schoen
--------------------------------
Name:
Title:
AGREED AND ACCEPTED THIS
19 DAY OF MARCH, 1998
ANCHOR ACQUISITION CO.
By: /s/ George T. Votis
----------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AND CONSULTING AGREEMENT
This Employment and Consulting Agreement ("Agreement") is made and
entered into this 9th day of June, 1998 George T. Votis ("Votis"), Richard P.
Fackler ("Fackler"), Anchor Advance Products, Inc., a Delaware corporation
("Anchor Advanced"), and Moll PlastiCrafters Limited Partnership, a Delaware
limited partnership ("Moll") (Anchor Advanced and Moll collectively referred to
as the "Companies" and each a "Company").
WHEREAS, due to the knowledge, experience and expertise of Fackler in
the custom injection molded plastics business in general and in the Companies'
business in particular (collectively, the "Business"), each of the Companies
desires to continue to make use of Fackler's expertise.
WHEREAS, Fackler desires to work for the Companies on the terms and
conditions set forth herein.
WHEREAS, to induce Fackler to enter into that certain Take-Out Agree-
ment, of even date herewith, to which Fackler, Votis and other the other
signatories thereto are parties ("Take-Out Agreement"), the parties agree to
enter into and perform this Agreement.
Capitalized terms used herein and not otherwise defined shall have the
same meanings herein as in the Take-Out Agreement.
NOW THEREFORE, in consideration of the mutual agreements contained
herein, the parties agree as follows:
1. Employment Services.
(a) Employment Duties. During the Employment Term (as defined
below), Fackler shall be employed by the Companies and serve the
Companies faithfully and to the best of his abilities in performing the
duties of Chief Operating Officer of each of the Companies. If, on July
16, 1998, Fackler owns equity in any of the Companies other than the
Excluded Interests, then Fackler shall be elected as one of two
directors on the Board of Directors of each Company.
<PAGE> 2
(b) Term of Employment. Subject to Section 5, the term of
employment ("Employment Term") shall commence on the date of this
Agreement and continue so long as Fackler owns equity in any of the
Companies other than the Excluded Interests, except that the
Employment Term shall terminate upon the date the Notes are paid in
full provided that as of such date no Event of Default (as such term is
defined in the Notes) has occurred with respect thereto.
(c) Employment Consideration. Fackler shall receive from the
Companies at least the same compensation, including, without
limitation, base salary, bonus, health insurance, dental disability,
salary continuance, life, accidental death and travel accident
insurance, car, expenses, retirement benefits, fringe benefits and
other prerequisites (collectively "Compensation"), as Fackler receives
on the date hereof. In addition, Fackler shall receive such increases
to such compensation and such additional Compensation as is at least
equal to that received, in the aggregate, by Votis from the Companies
from time to time (and if Votis is not then the chief executive officer
("CEO") of any Company, then the CEO of such Company.
2. Consulting Services.
(a) Consulting Duties. During the Consultancy Term (as defined
below), Fackler will provide to any of the Companies advice and
consultation on issues relating to the Business as mutually agreeable
to Fackler and Votis, both in terms of time and location, including at
his home, up to a maximum of two hundred fifty (250) hours per year, in
the aggregate.
(b) Terms of Consultancy. The term of consultancy (the
"Consultancy Term") shall be for the five (5) year period commencing
on the last date of the Employment Term, unless sooner terminated in
accordance with Section 5. Each of the Companies and Fackler
acknowledge that Fackler, in his capacity as a consultant to the
Companies, is not an employee, agent or representative of the
Companies, and that in Fackler's performance hereunder, Fackler is
acting in the capacity of an independent contractor.
3. Confidentiality and Non-Solicitation.
(a) Confidentiality. During the Employment Term and Consul-
tancy Term, Fackler shall not, directly or indirectly, disclose,
divulge or make
2
<PAGE> 3
use of any trade secrets or other confidential and proprietary
information of any Company, including, without limitation, information
of others that any Company has agreed to keep confidential and of which
Fackler has been advised in writing by such Company to keep
confidential. No information shall be deemed for purposes hereof to
constitute trade secrets or confidential and proprietary information if
such information was or becomes public knowledge or generally available
to the public other than by breach of this Agreement or Fackler, or was
or becomes available to Fackler on a non-confidential basis prior to
disclosure to Fackler by any Company, or was or becomes available to
Fackler on a non-confidential basis from a source other than any
Company or its agents or employees. Nothing herein shall preclude
Fackler and Fackler shall be authorized as necessary to file tax
returns or other required reports with governmental agencies or to
divulge trade secrets or other confidential and proprietary information
as may otherwise be required by any law, rule, regulation, order or
other legal requirement as determined by Fackler's counsel.
Notwithstanding the foregoing, in the event Fackler is requested (by
oral questions, interrogatories, requests form information or
documents, subpoena, civil investigative demand or similar process) to
disclose confidential and proprietary information, he shall use all
reasonable efforts to notify the applicable Company promptly of such
request so that such Company my seek an appropriate protective order.
In addition, Fackler agrees not to copy or take with him upon
termination of the Employment Term any documents reflecting or
containing confidential and proprietary information relating to the
Companies; provided, however, that the Companies recognize that Fackler
has accumulated knowledge and expertise relating to the business of all
of the Companies over the years, which the parties agree cannot be
readily identified, and, accordingly, the parties agree that nothing
contained in this Agreement shall be construed to prevent Fackler from
utilizing such knowledge and expertise during and after the Employment
Term and Consultancy Term in a manner which does not violate Section
3(b) below. The parties further acknowledge and agree that this Section
3(a) of this Agreement shall not preclude Fackler from engaging in any
business, whether directly or indirectly, which is not prohibited by
Section 3(b).
(b) Noncompetition. During the Employment Term and Consul-
tancy Term, (i) Fackler will not, directly or indirectly, as a
stockholder, partner, employee, consultant or other owner or
participant in any business entity other than the Companies, engage in
or assist any other person or entity
3
<PAGE> 4
to engage in any business which operates a custom injection thermal
plastic molding business at a plant located within a 300-mile radius or
within the state of any plant located in the United States and owned or
operated by any Company on the date hereof (each such area being called
"Restricted Area") and (ii) Fackler will not solicit or endeavor to
entice away from any Company any person who has been a customer of any
Company within the past two years; provided, however, that nothing
contained herein shall (A) preclude Fackler from owning less than five
percent (5%) of any class of publicly-traded securities of any
corporation, (B) preclude Fackler, whether as a stockholder, partner,
employee, consultant, or other owner or participant, or in any other
capacity, from engaging in the business of any entity which conducts or
owns a business which would be prohibited by clause (i) if such entity
also owns or conducts one or more other material businesses and Fackler
provides no advice, consultation, financial resources or services
whatsoever to such entity's business which would be prohibited by
clause (i), or (C) preclude Fackler from soliciting a customer
described in clause (ii) above if such customer also has operations
outside the Restricted Area relating to the Company plant which ships
to such customer and such customer is being solicited solely for sales
to be delivered to a location outside the Restricted Area relating to
such plant.
(c) Non-Solicitation. During the Employment Term and Consul-
tancy Term, as the case may be, Fackler will not, directly or
indirectly, solicit or endeavor to entice away from any Company or
induce or attempt to induce the termination of relationships with any
Company, any person who is an employee of any Company or was an
employee within one year of such solicitation and whose employment is
terminated other than by the Company or with the Company's consent.
Nothing contained herein shall preclude Fackler from hiring any
relative of his, whether as employee, consultant, independent
contractor or otherwise, notwithstanding that such relative may also be
an employee, consultant or independent contractor of any Company.
(d) Injunctive Relief. Fackler acknowledges that any breach or
threatened breach of the provisions of this Section 3 will cause
irreparable injury to any of the Companies for which an adequate
monetary remedy does not exist. Accordingly, at any time after such
breach, any Company shall be entitled, in addition to the exercise of
other remedies, to seek and (subject to court approval), obtain
injunctive relief, without necessity of posting a bond, restraining
Fackler from committing such further breach.
4
<PAGE> 5
4. Consultancy Consideration.
(a) Compensation. During the Consultancy Term, the Companies
shall be obligated to pay Fackler an amount equal to $250,000, in
aggregate, per annum, as payment in full for such consultancy services
to be rendered, payable no less frequently than monthly. The foregoing
consideration is being paid to Fackler in part for the opportunity to
consult with Fackler, whether or not any of the Companies avails itself
of the opportunity.
(b) Health Benefits. During the Consultancy Term, Fackler and
Fackler's family shall be entitled to health insurance benefits equal
to those made available from time to time to Votis (or other senior
executive officers of the Companies) under the health insurance plans
of the Companies or their successors and assigns.
(c) Expenses. Each of the Companies or their successors and
assigns will reimburse Fackler for Fackler's reasonable expenses
incurred in the performance of Fackler's consulting duties hereunder,
pursuant to the Companies ordinary reimbursement policies.
5. Resignation and Termination.
(a) Voluntary Resignation. Fackler shall have the right to
voluntarily resign from his employment or consultancy at any time upon
at least (3) months' prior notice to Moll, as representative of the
Companies. In such event, Fackler shall perform his employment or
consultancy duties during the three-month period thereafter, and if
Fackler resigns from his employment, the Consultancy Term shall
commence. If, however, Fackler resigns from his consultancy, the
Consultancy Term shall end and Fackler shall have no continuing
obligation under this Agreement, including, without limitation, Section
3; provided, however, that if no Company is in breach of this Agree-
ment and there is no breach by any Company ("as defined in the Take-Out
Agreement") (or their affiliates) under the Take-Out Agreement or any
other agreement contemplated by the Take-Out Agreement at the time of
Fackler's resignation from his consultancy (for purposes hereof, breach
means a breach which is incapable of cure or which has not been cured
within 30 days of such occurrence), and the Companies wish to cause
Fackler to continue to be bound by Section 3 following his resignation,
then Fackler shall continue to
5
<PAGE> 6
be bound by Section for one year following the date of his resignation
so long as the Companies perform hereunder and Fackler receives during
such one year term the compensation and other benefits provided for in
Section 4 of this Agreement.
(b) Termination of Cause. The Companies may only terminate
Fackler's employment or consultancy for Cause. If Fackler's employment
or consultancy is terminated for Cause, Fackler shall only be entitled
to the accrued and unpaid Compensation due him through the effective
date of such termination and reimbursement of all expenses incurred
prior to the effective date of termination in accordance with the terms
hereof, except that if the Companies wish for Fackler to remain bound
by Section 3 of this Agreement, the Companies shall continue to pay and
provide him with the amounts and benefits provided in Section 4. The
term "Cause" shall mean the commission of a felony involving fraudulent
acts or embezzlement against any Company as proven in a court of
competent jurisdiction.
(c) Termination on Death or Disability. If Fackler dies or be
comes Disabled during the Employment or Consultancy Term, Fackler, his
legal representative or the beneficiary selected by Fackler in the
event of Fackler's death, (i) shall be entitled to accrued and unpaid
Compensation due and owing him through the effective date of such
termination and reimbursement of all expenses incurred prior to the
effective date of termination in accordance with the terms hereof and
(ii) shall continue to receive all amounts and all benefits set forth
in Section 4 for the duration of the Consultancy Term, provided, that,
if such death or Disability occurs during the Employment Term, the
Consultancy Term shall commence on the date of Fackler's death or the
date such Disability is determined by a physician mutually acceptable
to Fackler and Votis. The term "Disability" or "Disabled" shall mean
the complete and permanent physical or mental complete and permanent
inability to perform the essential functions of Fackler's obligations
under this Agreement for a consecutive six (6) month period.
6. Miscellaneous.
(a) Amendments and Waivers. No failure or delay by any of the
parties hereto in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise preclude any other or future exercise of any rights, power or
privilege. This Agree-
6
<PAGE> 7
ment contains the full, final and exclusive statement of our agreement
with respect to the matters contained herein, and no promises,
agreements or presentation shall be binding upon us unless set forth
herein. This Agreement may be amended or modified in whole or in part
only by an instrument in writing signed by Fackler and an authorized
representative of each of the Companies.
(b) Successors and Assigns. This Agreement shall inure to the
benefit of, and be binding upon each of the Companies and any of its
successors and assigns and Votis and Fackler, and their legal
representatives and heirs.
(c) Assignment. Fackler shall have the right to assign and
delegate Fackler's rights and obligations relating to the Consultancy
Term to a corporation or limited liability company wholly-owned by
Fackler; provided, however, that Fackler shall nonetheless remain
personally obligated to perform services hereunder on behalf of such
entity as expressly provided herein. Except as provided in the
foregoing, no party may assign this Agreement without the prior
written consent of the parties hereto.
(d) Limitation of Scope of Agreement. If any provision of this
Agreement shall be found by a court of competent jurisdiction to be
invalid or unenforceable, the invalidity or unenforceability of such
provision shall not affect the other provisions of this Agreement and
all provisions not affected by such invalidity shall remain in full
force and effect. If any one or more of the provisions contained in
this Agreement shall for any reason be held to be excessively broad as
to duration, geographical scope, activity or subject, such provision
shall be construed by limiting and reducing it so as to be enforceable
to the maximum extent compatible with applicable law.
(e) Obligations of the Companies. All obligations of the
Companies shall be joint and several obligations of each Company.
(f) Governing Law. The provisions of this Agreement shall be
construed according to the laws of the State of Illinois, without
regard to the laws of conflict.
(g) Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall together constitute one and the
same
7
<PAGE> 8
instrument, and shall become effective when counterparts have been
signed by Moll and Fackler.
7. Indemnity. The Companies hereby agree, jointly and severally, to
indemnify and hold harmless Fackler from acts or omissions, regardless of when
the claim is asserted, relating to Fackler's serving as an officer, director,
employee, consultant or fiduciary of any Company, to the maximum extent
permitted under applicable state laws of the relevant jurisdiction under which
such Company is organized.
8. Survival. All obligations which are contemplated to be performed
after the end of the Employment Term and/or Consultancy Term shall survive for
the period specified herein, if any, and otherwise, indefinitely.
[Signatures appear on the following page.]
8
<PAGE> 9
IN WITNESS WHEREOF, the undersigned have hereunto executed this
Agreement on the date first written above.
MOLL PLASTICRAFTERS LIMITED
PARTNERSHIP
By: Textek Plastics, Inc.,
its general partner
By: /s/ George T. Votis
-----------------------------------
George T. Votis, President and CEO
ANCHOR ADVANCED PRODUCTS, INC.
By: /s/ George T. Votis
-----------------------------------
Title: CEO
/s/ Richard P. Fackler
----------------------------------------
RICHARD P. FACKLER
/s/ George T. Votis
----------------------------------------
GEORGE T. VOTIS
9
s
<PAGE> 1
EXHIBIT 10.9
Page 1
ROLLS NO. 1734/1997
Enacted at Dusseldorf this 7th August 1997
Before me, the undersigned notary public in the district of the Court of Appeal
of Dusseldorf
Dr. Norbert Zimmermann
with registered place of office at Blumenstrasse 28, 40212 Dusseldorf
appeared today
1. George T. Votis born 22nd September 1961, residing at 3140 South Ocean
Boulevard, Palm Beach, Florida, 33480 USA, not acting for himself,
but in his capacity
a) as sole general manager of Moll PlastiCrafters GmbH, a company
duly incorporated under the laws of the Federal Republic of
Germany, currently registered in the Commercial Register of
the Local Court at Wiesbaden under HRB 10329 (transfer of
registered place of office to Paderborn resolved and applied
for registration but not yet registered);
- hereinafter referred to as the "BUYER D1" -;
b) as sole general manager of G & R Grundverwaltung GmbH, a
company duly incorporated under the laws of the Federal
<PAGE> 2
Page 2
Republic of Germany, currently registered in the Commercial
Register of the Local Court at Wiesbaden under HRB 10365
(transfer of registered place of office to Paderborn resolved
and applied for but not yet registered);
- hereinafter referred to as the "BUYER D2" -;
c) as President and CEO of Textek Plastics, Inc. which in turn
acts in its capacity as general partner of Moll PlastiCrafters
Limited Partnership, a limited partnership duly organized
under the laws of the State of Delaware in the United States
- hereinafter referred to as the "BUYER US" -;
d) as director and chairman of Moll PlastiCrafters UK, Ltd., a
private limited company duly incorporated under English law.
- hereinafter referred to as the "BUYER UK" -;
2. Mr. Adolf Robert Hanning, born 6th October 1940, residing at
Handelstrasse 14, 33604 Bielefeld, acting
a) on his own behalf
- hereinafter referred to as "SELLER ARH" -,
b) on behalf of Mrs. Marianne Hanning, born Becker, residing at
Viale Marco 46, Ch-6911 Campione, on the basis of a notarized
general power of attorney dated 29th November 1993 (Rolls No.
722/1993 of the Notary Public Dr. Manfred Streitborger)
- hereinafter referred to as "SELLER MAH" -;
<PAGE> 3
Page 3
c) in his capacity as joint general manager of
Hanning-Kunststoffe Beteiligungs-GmbH, a company duly
incorporated under the laws of the Federal Republic of
Germany, registered in the Commercial Register of the Local
Court at Paderborn under HRB 248, which in turn is acting as
general partner of Hanning Kunststoffe GmbH & Co, a company
duly incorporated under the laws of the Federal Republic of
Germany, registered in the Commercial Register of the Local
Court at Paderborn under HRA 472
- Hanning-Kunststoffe Beteiligungs-GmbH hereinafter referred to as
"HK-GmbH" -
- Hanning-Kunststoffe GmbH & Co. hereinafter referred to as "HK-KG" -
d) in his capacity as joint general manager of "PB" Hanning GmbH,
a company duly incorporated under the laws of the Federal
Republic of Germany, registered in the Commercial Register of
the Local Court at Paderborn under HRB 1503, which in turn is
acting on its own behalf and as general partner of "PB"
Hanning GmbH & Co. Handelsgesellschaft, a company duly
incorporated under the laws of the Federal Republic of
Germany, registered in the Commercial Register of the Local
Court at Paderborn under HRA 1736
- "PB" Hanning GmbH & Co. Handelsgesellschaft hereinafter referred to
as "PB HANNING KG" - ;
- "PB" Hanning GmbH hereinafter referred to as "PB HANNING GmbH" -
e) in his capacity as director of Hanning Corporation, a company
duly incorporated under the laws of the state of New York in
the United States
- hereinafter referred to as "HANNING CORPORATION" -;
<PAGE> 4
Page 4
f) in his capacity as director of AMH Management, Inc., which in
turn is acting in its capacity as general partner of Hanning
Property Associates L.P., a limited partnership duly organized
under the laws of the state of Delaware in the United States;
- hereinafter referred to as "HANNING PROPERTIES ASSOCIATES";
g) in his capacity as director of Hanning Plastic Ltd., a company
duly incorporated under English law;
- hereinafter referred to as "HANNING UK-COMPANY" - .
3. Mr. Michael Hanning, born 24th October 1945, residing at Holter
Strasse 120, 33813 Oerlinghausen, acting
a) on his own behalf
- hereinafter referred to as "SELLER MH" -,
b) on behalf of Mrs. Marianne Hanning, born Becker, residing at
Viale Marco 46, Ch-6911 Campione, on the basis of a notarized
general power of attorney dated 29th November 1993 (Rolls No.
722/1993 of the Notary Public Dr. Manfred Streitborger)
- hereinafter referred to as "SELLER MAH" -;
c) in his capacity as joint manager of HK-GmbH, which in turn is
acting as general partner of HK-KG;
d) in his capacity as joint general manager of PB Hanning GmbH,
which in turn is acting on its own behalf and as general
partner of PB Hanning KG;
<PAGE> 5
Page 5
e) in his capacity as director of Hanning Corporation;
f) in his capacity as director of AMH Management, Inc. which in
turn is acting as general partner of Hanning Property
Associates;
g) in his capacity as director of Hanning UK-Company.
The persons appearing before the notary public proved their identity by
presenting their passport, identity cards ("Bundespersonalausweis").
The persons appearing requested the notarization of the following:
COMBINED SHARE AND ASSET PURCHASE AGREEMENT
P R E A M B L E :
WHEREAS: HK-KG, the Hanning UK-Company and Hanning Corporation - collectively
hereinafter "HANNING OPERATING COMPANIES" - are currently engaged in the
manufacture and sale of plastic products (hereinafter the "Business").
WHEREAS: the HK-KG portion of the Business is operated in Germany on real
property owned by PB Hanning KG which will be sold to Buyer D2.
WHEREAS: the Hanning UK-Company portion of the Business is operated in the
United Kingdom on leased property which will be leased by assignment to Buyer
UK.
WHEREAS: the Hanning Corporation portion of the Business is operated in
<PAGE> 6
Page 6
the United States on sub-leased property formerly owned by Hanning Property
Associates which will be subleased by assignment to the Buyer US. Hanning
Property Associates has recently purchased real property in Perinton, New York,
United States, which will be sold to the Buyer US hereunder for the purpose of
constructing a new facility for the Hanning Corporation portion of the Business.
WHEREAS: PB Hanning KG and Hanning Property Associates are hereinafter referred
to collectively as the "HANNING REAL ESTATE HOLDING COMPANIES".
WHEREAS: Seller ARH, Seller MH and Seller MAH are hereinafter referred to
collectively as the "SHARE SELLERS".
WHEREAS: Seller ARH and Seller MH are hereinafter referred to collectively as
the "PB HANNING SHARE SELLERS".
WHEREAS: Hanning UK Company and PB Hanning KG (in relation to the assets
currently leased by PB Hanning KG to Hanning UK Company)are hereinafter referred
to collectively as the "UK-SELLERS".
WHEREAS: HK-KG, HK-GmbH, PB Hanning KG and PB Hanning GmbH are hereinafter
collectively referred to as the "COMPANIES".
WHEREAS: PB Hanning KG, Hanning Property Associates, Hanning Corporation, and
Hanning UK-Company are hereinafter referred to collectively as the "ASSET
SELLERS".
WHEREAS: The Share Sellers and the Asset Sellers are hereinafter referred to
collectively as the "SELLERS".
WHEREAS: The Buyer D1, the Buyer D2, the Buyer US and the Buyer UK are
hereinafter referred to collectively as the "BUYERS";
WHEREAS: The Asset Sellers wish to sell and the Buyer D2, the Buyer US and the
Buyer UK wish to buy, substantially all of the assets of each of the Asset
Sellers (but with regard to the assets owned by PB Hanning KG,
<PAGE> 7
Page 7
restricted to its real property and all of the assets currently leased by PB
Hanning KG to Hanning UK Company as set forth in Schedule A.I.Section 2.1).
WHEREAS: PB Hanning KG first wishes to sell and transfer its real property to
Buyer D 2 and Buyer D 2 wishes to accept such sale and transfer.
WHEREAS: The Share Sellers thereafter wish to sell and transfer and the Buyer D1
wishes to buy and accept the transfer of all of the limited partnership
interests in HK-KG and all of the shares in HK-GmbH.
WHEREAS: Following the above sales and transfers, the PB Hanning Share Sellers
finally wish to sell and transfer all of their limited and partnership interests
in PB Hanning KG and all of the shares in PB Hanning GmbH to HK-KG which wishes
to accept such sale and transfer.
NOW; THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements hereinafter set forth, and other good and valuable
consideration, the parties hereto agree as follows:
A. SALE AND TRANSFER OF ASSETS
I. OBJECT OF SALE
Section 1
Transfer of Business
1.1 The object of this part A. of this Agreement is the sale and transfer
of the Hanning Corporation and Hanning UK-Company portions of the
Business with a view to the Buyers carrying on that part of the
Business as a going concern by acquiring certain assets as defined in
section A.I.Section 2 below, including the real estate of the Hanning
Real Estate Holding Companies, and by assuming certain liabilities.
1.2 Hanning Corporation has caused its wholly owned subsidiary Hanning
<PAGE> 8
Page 8
FSC Corporation to assign to Hanning Corporation all accounts
receivable to which Hanning FSC Corporation has or will have any claim
to any right, title or interest (which shall not be subject to any
deductions of whatsoever kind, including, without limitation, any and
all deductions for commission) as of 7th August 1997, 00:00 hours, and
with effect as of the same date.
Section 2
Assets
2.1 The Asset Sellers hereby sell, convey, transfer, assign and deliver to
the Buyers (other than the Buyer D1) as of the Closing Date and the
Buyers (other than the Buyer D1) hereby purchase and accept the
transfer, conveyance, assignment and delivery from the Asset Sellers as
of the Closing Date of all of the Asset Sellers' right, title and
interest in and to all of the assets of the Business (other than the UK
Purchased Assets as defined in section A.I.Section 2.2. below) and
other than as set out in section A.I.Section 2.3. below (the "NON-UK
PURCHASED ASSETS") and with respect to the assets owned by PB Hanning
KG, limited to its real property and to all of the assets currently
leased by PB Hanning KG to Hanning UK Company as set forth in Schedule
A.I.Section 2.1 (for the avoidance of doubt, all such assets leased by
PB Hanning KG to Hanning UK Company are UK Purchased Assets), free and
clear of all liens, charges, encumbrances or restrictions, except for
"PERMITTED ENCUMBRANCES" (permitted encumbrances include typical real
estate related items such as covenants, easements, and restrictions of
record in each case as set forth in Schedule D.II.Section 1.9.1 and any
liens arising out of liabilities that are being assumed by the Buyers
in this transaction such as retention of title in the usual course of
business as conducted by a proper merchant). The UK-Purchased Assets
and the Non-UK Purchased Assets are herein collectively referred to as
the "PURCHASED ASSETS".
For the purpose of this Agreement, the Purchased Assets sold and
transferred
<PAGE> 9
Page 9
- by PB Hanning KG shall be acquired with respect to its real
property by the Buyer D2 and with respect to the assets
currently leased by PB Hanning KG to Hanning UK Company by the
Buyer UK,
- by Hanning UK Company shall be acquired by the Buyer UK,
- by Hanning Corporation and by Hanning Property Associates
shall be acquired by the Buyer US.
The Non-UK Purchased Assets shall include without limitation the
following:
2.1.1 all tangible assets, including without limitation machinery and
equipment, parts and spare parts therefor, tools, fixtures, automobiles
and trucks, office furniture and equipment;
2.1.2 all inventories, of whatever kind or nature owned by the Asset Sellers
or used in their Business (other than those owned by the Companies)
including without limitation raw material, work in process, finished
goods, goods in transit, supplies and packaging materials;
2.1.3 all accounts receivable;
2.1.4 all financial, accounting and operating data and records;
2.1.5 all computer and electronic data processing programs and software as
far as such sale and transfer, conveyance, assignment and delivery is
legally and/or contractually permissible;
2.1.6 all patents and copyrights including applications and rights to apply
therefor, all commercial and technical trade secrets, engineering,
production technology, inventions, processes, know-how, confidential
information and other proprietary property, rights and interests
(collectively the "INTELLECTUAL PROPERTY");
<PAGE> 10
Page 10
2.1.7 all rights under all leases, license agreements, contracts, agreements,
sale orders, purchase orders, open bids and other commitments,
warranties and warranty claims and awards, prepaid expenses, deposits
and retentions, guarantees and indemnities;
2.1.8 all licenses, franchises, permits, authorizations, approvals and
similar items;
2.1.9 all real property and improvements thereon including any leasehold or
sub-leasehold interest;
2.1.10 the goodwill of the Business with the exclusive right to carry on the
Business in succession of the Asset Sellers; and
2.1.11 any other property and assets of the Asset Sellers used in connection
with the Business except those referred to in section A.I.Section 2.3
below.
2.2 In accordance with section A.II.Section 1 the UK-Sellers shall, convey,
transfer, assign and deliver to the Buyer UK and the Buyer UK shall
purchase and accept the transfer, conveyance, assignment and delivery
from the UK-Sellers of all of the UK-Sellers' right, title and interest
in and to all of the assets of the Business set out below (the "UK
PURCHASED ASSETS"), free and clear of all liens, charges, encumbrances
or restrictions except for retention of title in the usual course of
business as conducted by a proper merchant:
The UK Purchased Assets shall comprise all assets of Hanning UK Company
and all assets of PB Hanning KG currently leased to Hanning UK Company
as set forth in Schedule A.I.Section 2.1 and shall include without
limitation the following:
2.2.1 all tangible assets, including without limitation machinery and
equipment, parts and spare parts therefor, tools, fixtures, automobiles
and trucks, office furniture and equipment (the "UK Equipment");
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2.2.2 all inventories, of whatever kind or nature used in its Business (other
than those owned by the Companies) including without limitation raw
material, work in progress, finished goods, goods in transit, supplies
and packaging materials (the "UK INVENTORIES");
2.2.3 all accounts receivable;
2.2.4 all financial, accounting and operating data and records;
2.2.5 all computer and electronic data processing programs and software as
far as such sale and transfer, conveyance, assignment and delivery is
legally and/or contractually possible;
2.2.6 all rights under all leases (other than leases of real property),
license agreements, contracts, agreements, sale orders, purchase
orders, open bids and other commitments, warranties and warranty claims
and awards, prepaid expenses, deposits and retentions, guarantees and
indemnities;
2.2.7 all licenses, franchises, permits, authorizations, approvals and
similar items;
2.2.8 the goodwill of the Business with the exclusive right to carry on the
Business in succession to Hanning UK Company (the "UK GOODWILL"); and
2.2.9 any other property and assets of the Asset Sellers used in connection
with the Business except those referred to in section A.I.Section 2.3
below.
Property and risk in the UK Purchased Assets shall vest in the Buyer on
the Closing Date, in accordance with section A.II.Section 1.
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2.3 The Purchased Assets do not include:
2.3.1 any of the Asset Sellers' corporate seals, certificates of
incorporation, minute books, tax returns, books of account and/or other
records relating to the corporate organization of the Sellers;
2.3.2 the Asset Sellers' bank accounts, cash in hand and in banks or
otherwise;
2.3.3 trademarks, trade names, service marks, service names;
2.3.4 all rights of the Asset Sellers with respect to any policies or
contracts of insurance and claims of any Asset Seller under any such
policies or contracts;
2.3.5 all the rights to any of the Asset Sellers' claims for federal, state,
local, or foreign tax refunds;
2.3.6 any and all accounts receivable of any Company and any Asset Seller
against the Share Sellers or any Affiliate (as defined below) thereof.
Except for the Companies and the Asset Sellers, an "AFFILIATE" is any
company which is under direct, or indirect, through one or more
intermediaries, control of the Share Sellers.
2.3.7 the other items set forth in Schedule A.I.Section 2.3.7
- hereinafter collectively the "EXCLUDED ASSETS" -;
2.3.8 all of the issued and outstanding capital stock of Hanning FSC
Corporation.
Section 3
Liabilities
3.1 The respective Buyers assume from and agree vis-a-vis the respective
Asset Sellers in the relationship described in section A.I.Section 2.1,
para. 2 to pay when due, perform and discharge in accordance with the
terms
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hereof, the following liabilities and obligations of the Asset Sellers
(the "ASSUMED LIABILITIES"):
3.1.1 all liabilities and obligations of each of the Asset Sellers for future
performance as of the Closing under all leases, license agreements,
contracts and agreements (except the Benefit Plans in the US as defined
below and any other item listed in Schedule D.II.Section 1.8 which is
marked with an asterisk) either
3.1.1.1 listed in Schedule D.II.Section 1.8 or
3.1.1.2 not required to be listed in Schedule D.II.1.8 but relating to the
operations of the Business and arising in the ordinary course of
business, such as product sale orders unfilled as of the Closing Date
and purchase orders for materials, services and supplies outstanding as
of the Closing Date;
3.1.2 all accounts payable, customer deposits, other accruals, other accounts
payable, and advanced payments of the Asset Sellers relating to the
Business existing as of the Closing Date and reflected on the
respective Closing Balance Sheets.
3.2 Notwithstanding the above, the Assumed Liabilities shall not include
3.2.1 any liability of any Asset Seller or any subsidiary thereof for or
relating to taxes for periods (or portions thereof) ending on or prior
to the Closing,
3.2.2 any liability of any Asset Seller or any subsidiary thereof for or
relating to income, transfer, sales, use, value added, and other taxes
arising in connection with the consummation of the transactions
contemplated hereby,
3.2.3 any liability of any Asset Seller or any subsidiary thereof for the
unpaid taxes of any person or entity as a member of a combined,
affiliated, consolidated or comparable group for tax purposes or as a
transferee or
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successor or by contract or otherwise,
3.2.4 all liabilities and obligations of the Companies or the Asset Sellers
owed to the Share Sellers or any Affiliate hereof,
3.2.5 all liabilities in respect of money borrowed from any financial
institution;
3.2.6 any liability of Hanning FSC Corporation.
3.3 Except with respect to the Assumed Liabilities and as set forth in this
Agreement, it is agreed that the Buyers shall not assume and shall not
in any way be responsible for any of the debts, liabilities, or
obligations of the Asset Sellers.
II. TRANSFER/EXECUTION
Section 1
Transfer/Assignment of Property
1.1 The title to the Purchased Assets as well as the possession, benefit,
risk and burden of the Purchased Assets and Assumed Liabilities shall
pass to the Buyers by delivery where possible at the Closing Date
provided that the Closing Purchase Price has been paid.
1.1.1 The Buyer UK hereby agrees to pay the stamp duty (if any) payable on
the transfer of any of the Purchased Assets to the Buyer UK under or
pursuant to this Agreement.
1.1.2 The delivery of the Purchased Assets and Assumed Liabilities shall take
place on the Closing Date at the respective premises of the respective
Asset Sellers by representatives of the parties.
1.1.3.1 Should the consent of a third party be needed for the transfer,
conveyance and/or assignment of assets or liabilities (e.g.: claims
which must not be assigned; liabilities; taking over of a contract) on
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the Buyers' request the Asset Sellers will use their best efforts to
obtain the written consent of the third party. Should, however, the
consent not be granted, the parties shall act amongst themselves with
effect from the Closing Date as if the third party had given its
consent.
1.1.3.2 Should the consent of any lessor or sub-lessor not be granted, the
Asset Sellers will sublease the real property to the Buyer concerned.
Should a consent for the sublease be necessary and should it not be
granted, this Agreement has to be adjusted in accordance with section
D.IV.Section 6.10.
1.2. Each Asset Seller shall deliver to the Buyers such bills of sale,
assignments and other instruments of transfer in substantially the form
set forth in Schedule A.II.Section 1.2 and shall do all such other
things as the Buyers may reasonably require to transfer to them good
and marketable title to the Purchased Assets, free and clear of all
liens, security interests, mortgages, encumbrances and restrictions of
every kind, unless the encumbrances etc. are based on Assumed
Liabilities, including without limitation, the documents attached
hereto as follows:
1.2.1 with respect to the real property owned by PB Hanning KG, PB Hanning KG
as Seller and the Buyer D2 shall enter into the notarial real property
transfer deed ("Auflassung") as attached (Schedule A.II.Section 1.2.1).
Moreover, the Asset Sellers shall provide the necessary documents
("Loschungsbewilligung") and any other prerequisites required for the
transfer of the real property clear of all mortgages and other
encumbrances, except for the mortgages serving as security for the
Deferred Purchase Price, for the payment for the Overdue Account
Receivable according to Section D.I.Section 2.8.2 and for the payment
according to section D.I.Section 3.1.2.
1.2.2 with respect to the real property owned by the Hanning Property
Associates, the latter shall deliver to the Buyer US such deeds, bills
of sale, assignments and other instruments of transfer in substantially
the form set forth in Schedule A.II.Section 1.2.2 as the Buyer US may
reasonably
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require to transfer to it good and marketable title to the respective
real property.
1.2.3 J & P Properties, L.L.C. as Landlord/Lessor and Advanced Mold and
Tooling as Sub-Lessor for the US leased real property and shall have
executed and delivered to Buyer US a lease or sub-lease, as the case
may be, in substantially the form set forth in Schedule A.II.Section
1.2.3
1.3 With respect to the leasehold property the subject of a lease dated
June 6, 1996 between Bessemer Trust Limited, Hanning UK Company and
HK-KG, the Hanning UK Company shall deliver to the Buyer UK an
assignment of lease in substantially the form set forth in Schedule
A.II.Section 1.3 duly executed by each of Hanning UK Company and
Bessemer Trust Limited.
Section 2
Employees
2.1.1 The Asset Sellers and the Buyers acknowledge and agree that under the
Transfer of Undertakings (Protection of Employment) Regulations 1981
(The "Employment Regulations") contracts of employment between the
Hanning UK Company and the individuals employed by the Hanning UK
Company in the business and named in Schedule D.II.Section 1.16.3 (The
"UK Employees") will have effect after the Closing as if originally
made between the Buyer UK and the UK Employees. On or as soon as
practicable after the Closing the Hanning UK Company and the Buyer UK
shall jointly issue to each UK Employee a notice substantially in the
form set out in Schedule A.II.Section 2.1.1.
2.1.2 The Hanning UK Company shall perform and discharge all its obligations
in respect of all the UK Employees for its own account up to and
including the Closing (including, without limitation, discharging all
remuneration and other costs) and shall indemnify the Buyer UK against
all liabilities arising from the Hanning UK Company's failure so to
discharge.
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2.1.3 The Buyer UK shall on and from the Closing assume responsibility as the
employer of the UK Employees for its own account from the day following
the date of the Closing. The Buyers shall jointly indemnify the Asset
Sellers against all liabilities arising from the Buyer UK's failure to
discharge any liability relating to an UK Employee arising after the
Closing.
2.1.4 The Asset Sellers shall indemnify the Buyers against any liabilities
which:
a) arise out of any act or omission by the Asset Sellers or any other
event, matter or circumstance occurring or having its origin
before the Closing and relating to the employees (including the
fact of the parties proposing to enter into, or having entered
into, this Agreement and/or the identity of the Buyer UK); or
b) arise out of a claim made by or in respect of any person employed
or formerly employed by the Hanning UK Company other than an UK
Employee for which it may be alleged the Buyer is liable by virtue
of the operation of this agreement and/or the Employment
Regulations; or
c) arise out of a complaint of failure to comply with any requirement
of Regulation 10 of the Employment Regulations or in respect of an
award of compensation under Regulation 11 thereof; or
2.1.5 The Asset Sellers have informed the Buyer UK that all individuals named
in Schedule D.II.Section 16.3 are employed by the Hanning UK Company.
If after Closing this information is found to be incorrect and a named
individual is found to have not been an employee of the Hanning UK
Company prior to Closing, then the Asset Sellers shall indemnify the
Buyers for any claim, liability and/or cost which may arise in
connection with the individual concerned.
2.1.6 If any contract of employment relating to a person other than UK
Employee, or any collective agreement not disclosed in writing to the
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Buyers, has effect as if originally made between the Buyer UK and that
person, or between the Buyer UK and the relevant trade union, as the
case may be:
(a) the Buyer UK may, on becoming aware of that effect, terminate
the contract of collective agreement; and
(b) the Asset Sellers shall indemnify the Buyer UK against any
liabilities arising out of such termination and against any
sum payable to or in respect of that employee in respect of
this employment following the Closing or any liabilities
incurred to or on behalf of the relevant trade union.
2.1.7 Nothing in this Section shall have the effect of imposing on the Asset
Sellers any liability to the Buyer UK in respect of:
(a) any claim by an UK Employee in respect of the termination of
his employment by the Buyer UK on or after the Closing unless:
(i) the particulars relating to that UK Employee set out in
Schedule D.II.Section 1.16.3 are incorrect; or
(ii) the Asset Sellers have been in breach of any obligation owed
to or in relation to that UK Employee; or
(b) any claim for accrued holiday pay unless it exceeds the amount
specified in relation to the relevant UK Employee in section
D.II.Section 1.15-1.16.
2.1.8 In this section:
"Beneficiary" means, in relation to an indemnity, the person receiving
the benefit of the indemnity;
"claim" includes a claim by any person (including a trade union, a
governmental or statutory or local authority or commission);
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"Covenantor" means, in relation to an indemnity, the person undertaking
to indemnify the Beneficiary; and
"liability" and "liabilities" includes any award, compensation,
damages, fine, loss, order, payment made by way of settlement, costs
and expenses (including legal expenses on an indemnity basis) properly
incurred in connection with a claim and also includes the costs and
expenses of any investigation by the Equal Opportunities Commission
which may arise from any such investigation.
2.1.9 If the Beneficiary becomes aware of any matter which might give rise to
a claim for an indemnity under this Section from the Covenantor the
following provisions shall apply:
(a) the Beneficiary shall immediately give written notice to the
Covenantor of the matter in respect of which the indemnity is
being claimed (stating in reasonable detail the nature of the
matter and, so far as practicable, the amount claimed) and shall
consult with the Covenantor with respect to the matter. If the
matter has become the subject of any proceedings the Beneficiary
shall give the notice within sufficient time to enable the
Covenantor time to contest the proceedings before any first
instance judgement in respect of such proceedings is given:
(b) the Beneficiary shall:
(i) take such action and institute such proceedings, and give such
information and assistance, as the Covenantor or its insurers may
reasonably request to dispute, resist, appeal, compromise, defend,
remedy or mitigate the matter or enforce against any person (other
than the Covenantor) the rights of the Beneficiary or its insurers
in relation to the matter;
(ii) in connection with any proceedings related to the matter (other
than against the Covenantor) use professional advisers nominated
by the
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Covenantor or its insurers and, if the Covenantor or its
insurers so requests, allow the Covenantor or its insurers the
exclusive conduct of the proceedings in each case on the basis
that the Covenantor shall fully indemnify the Beneficiary for
all costs incurred as a result of any request or nomination by
the Covenantor or its insurers; and
(iii) not admit liability in respect of or settle the matter without
the prior written consent of the Covenantor, such consent not
to be unreasonably withheld or delayed; and
(c) if the Covenantor has conduct of any litigation and
negotiations in connection with a claim the Covenantor shall
promptly take all proper action to deal with the claim so as
not, by any act or omission in connection with the claim, to
cause the Beneficiary to be in breach of its obligations to
its current or past employees or to cause the Beneficiary's
business interests to be materially prejudiced.
2.1.10 If the Covenantor does not elect to have conduct of any litigation and
negotiations in connection with a claim by notice in writing to the
Beneficiary within seven days of the Beneficiary giving notice of the
matter which might give rise to a claim for an indemnity under this
section the Beneficiary shall be at liberty to take such action in
relation to that matter as it considers expedient.
2.1.11 If the Inland Revenue brings into any charge to taxation any sum
payable under any of the indemnities contained in this Section, the
amount so payable shall be grossed up by such amount (such amount being
referred to as the "gross-up amount") as will ensure that after
deduction of the tax so chargeable there shall remain a sum equal to
the amount that would otherwise have been payable under such indemnity.
To the extent that the Beneficiary subsequently obtains any tax credit,
allowance, repayment or relief as a result of the Covenantor paying to
it the gross-up amount, it shall pay to the Covenantor so much of the
economic benefit from that tax credit allowance repayment or relief
which it has received as does not exceed the gross-up amount
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(any question as to the accrual or amount of any such economic benefit,
the order and manner of making any claim for any tax credit, allowance,
repayment or relief, and the timing of any payment, being determined by
the Beneficiary's auditors).
2.1.12 Any failure by any party to exercise any rights under this section will
not operate as a waiver by that party of any such rights nor should it
prevent that party from exercising the same right.
2.2 The Buyer US will offer employment to all of Hanning Corporation's
employees listed on Schedule D.II.Section 1.16.3 with pay and benefits
substantially similar to their pay and benefits prior to the Closing.
The Buyer US shall not assume any of Hanning Corporation's US Benefit
Plans (as defined in Section D.II.Section 1.15.2 (a) existing as of the
closing). Up to and after the Closing, Hanning Corporation shall be
responsible for, and shall pay when due, all benefits to past and
present employees to which they are entitled pursuant to the US Benefit
Plans.
B. SALE AND TRANSFER OF PARTNERSHIP INTERESTS/SHARES IN HK-KG
Section 1
Object of Sale
1.1 HK-KG whose total registered partnership capital amounts to DM
1,000,000 has the following partners who hold limited partnership
interests in HK-KG as follows:
Seller ARH as limited partner: partnership interest in the nominal
amount of DM 450,000
Seller MH as limited partner: partnership interest in the nominal
amount of DM 450,000
Seller MAH as limited partner: partnership interest in the nominal
amount of DM 100,000
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The limited partnership interests in HK-KG are hereinafter referred to
as the "HK-KG-INTERESTS".
1.2 HK-GmbH whose total share capital amounts to DM 50,000 has the
following shareholders who hold the following shares in HK-GmbH:
Seller ARH: one share in the nominal amount of DM 22,500
Seller MH: one share in the nominal amount of DM 22,500
Seller MAH: one share in the nominal amount of DM 5,000
The shares in HK-GmbH are hereinafter referred to as the "HK-SHARES".
Section 2
Sale and Transfer
2.1 The Share Sellers hereby sell and transfer to Buyer D1 as of the
Closing Date and the Buyer D1 hereby purchases and accepts the transfer
of the HK-KG-Interests.
2.2 The Share Sellers hereby sell and transfer to Buyer D1 as of the
Closing Date and Buyer D1 hereby purchases and accepts the transfer of
the HK-Shares.
2.3 The sale of the HK-Shares and of the HK-KG-Interests includes all
ancillary rights relating thereto including the profit rights for the
current fiscal year.
2.4 The effectiveness of the transfer of the HK-KG-Interest and the
HK-Shares is subject to the payment of the Closing Purchase Price and
as far as the HK-KG Interest are concerned subject also to the
recording of the transfer to Buyer D1 in the Commercial Register.
Thereafter, the parties hereto agree with regard to the limited partnership
interests in PB Hanning KG and the shares in PB Hanning GmbH as follows:
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C. SALE AND TRANSFER OF PARTNERSHIP INTERESTS/SHARES IN PB HANNING KG
Section 1
Object of Sale
1.1 PB Hanning KG whose total registered partnership capital amounts to DM
1,000,000 has the following partners who hold limited partnership
interests in PB Hanning KG as follows:
Seller ARH as limited partner: limited partnership interest in the
nominal amount of DM 500,000
Seller MH as limited partner: limited partnership interest in the
nominal amount of DM 500,000
The limited partnership interests in PB Hanning KG are hereinafter
referred to as the "PB HANNING KG-INTERESTS".
1.2 PB Hanning GmbH whose total share capital amounts to DM 50,000 has the
following shareholders who hold the following shares in PB Hanning
GmbH:
Seller ARH: one share in the nominal amount of
DM 25,000
Seller MH: one share in the nominal amount of
DM 25,000
The shares in PB Hanning GmbH are hereinafter referred to as the "PB
HANNING SHARES".
Section 2
Sale and Transfer
2.1 The PB Hanning Share Sellers hereby sell and transfer to HK-KG (the
company name Hanning Kunststoffe GmbH & Co. to be changed within one
year after the Closing) as of the Closing Date, but after the sale
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and transfer of the Purchased Assets according to sections A.I.Section
2 and A.II.Section 1 of this Agreement, and HK-KG hereby purchases and
accepts the transfer of the PB Hanning KG Interests.
2.2 The PB Hanning Share Sellers hereby sell and transfer to HK-KG as of
the Closing Date, but after the sale and transfer of the real property
according to sections A.I.Section 2. and A.II.Section.1 of this
Agreement, and HK-KG hereby purchases and accepts the transfer of the
PB Hanning Shares.
2.3 The sale of the PB Hanning KG-Interests and of the PB Hanning Shares
includes all ancillary rights relating thereto including the profit
rights for the current fiscal year.
2.4 The effectiveness of the transfer of the PB Hanning KG-Interests and
the PB Hanning Shares is subject to the payment of the Closing Purchase
Price and as far as the PB Hanning KG-Interests are concerned subject
also to the recording of the transfer in the Commercial Register.
D. GENERAL PROVISIONS
I. CLOSING/PURCHASE PRICE
Section 1
Closing
The Closing (the "CLOSING") of the purchase and sale of the Purchased Assets,
the HK-Shares and the PB Hanning-Shares (hereinafter collectively the "SHARES"),
the HK-KG-Interests and the PB Hanning KG-Interests (hereinafter collectively
the "INTERESTS") (the "OBJECTS OF PURCHASE") and the effective time of the
transfer of all Purchased Assets and Assumed Liabilities, Shares and
KG-Interests hereunder, by delivery, transfer or assignment, shall take place in
Dusseldorf at 00.00 a.m. (local time) on 8th August 1997. The date of the
Closing is referred hereinafter to as the "CLOSING DATE".
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Section 2
Initial Purchase Price and Due Date
2.1 The initial purchase price (the "INITIAL PURCHASE PRICE") for the
Objects of Purchase shall be DM 16,985,700 (German marks sixteen
million nine hundred eighty-five thousand seven hundred) (equal to USD
9,000,000 (United States Dollars nine million), converted into German
marks in accordance with section D.IV.Section 5 hereof) plus - if
applicable - VAT, subject to adjustment in accordance with section
D.I.Section 3 of this Agreement. The amount of USD 9,000,000 equals the
Net Book Value (as defined below) as of 31st December 1996 for Hanning
Property Associates and Hanning UK Company and as of 31st March 1997
for the Companies and Hanning Corporation (the "1996 NET BOOK VALUE")
multiplied by the factor 1.44 (the "FACTOR") (1996 Net Book Value x
Factor = USD 9,000,000 = Initial Purchase Price).
2.2 NET BOOK VALUE shall mean the aggregate net book value of the Objects
of Purchase appearing on the Balance Sheets attached as Schedule
D.I.Section 2.2.a and described in lines 2, 10, 11, 12, 13, 21, 28 (as
defined below), minus the amount of Assumed Liabilities appearing on
the Balance Sheets attached as Schedule D.I.Section 2.2.b and described
in lines 3, 4, 10, 12, 13. The Schedules shall also apply to HK-GmbH
and PB Hanning GmbH mutatis mutandis. For the avoidance of doubt the
remaining positions appearing on the Balance Sheets of the Companies
and of the Asset Sellers and not expressly set forth in this section
D.I.Section 2.2 shall not be taken into consideration for the purpose
of the determination of the Net Book Value.
2.3 The "BALANCE SHEETS" shall be a balance sheet of each of the Companies
and of each of the Asset Sellers prepared as of the date to which the
balance sheet refers, and in accordance with generally accepted
accounting principles on a basis consistent with those formerly used in
the preparation of the applicable Balance Sheet, but showing with
regard to the Asset Sellers as assets only the Purchased Assets
transferred to the Buyers, which shall be shown at their book values
net of depreciation, amortization and reserves, and showing as
liabilities
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only the Assumed Liabilities.
2.4 A portion of the Initial Purchase Price in the amount of DM 14,154,750
(German marks fourteen million one hundred fifty-four thousand seven
hundred and fifty) (equal to USD 7,500,000 (United States Dollars seven
million five hundred thousand), converted into German marks in
accordance with section D.IV.Section 5 hereof, hereinafter referred to
as the "CLOSING PURCHASE PRICE") shall be paid by the Buyers to the
Sellers on the Closing Date by wire transfer. One portion of the
Closing Purchase Price in the amount of DM 7,200,000 (German marks
seven million two hundred thousand) shall be paid into the account no.
030 5920 01 with the Deutsche Bank Bielefeld, bank code 480 700 20. The
remainder of the Closing Purchase Price in the amount of DM 6,954,750
(German marks six million nine hundred fifty-four thousand seven
hundred and fifty) (equal to USD 3,685,030 (United States Dollars three
million six hundred eighty-five thousand and thirty), converted into
United States Dollars in accordance with section D.IV.Section 5 hereof)
shall be paid into the account no. 030 5920 USD with the Deutsche Bank
Bielefeld, bank code 480 700 20
2.5 The remaining portion of the Initial Purchase Price (the "DEFERRED
PURCHASE PRICE") amounts to DM 2,830,950 (German marks two million
eight hundred thirty thousand nine hundred and fifty) (equal to USD
1,500,000 (United States Dollars one million five hundred thousand),
converted into German marks in accordance with section D.IV.Section 5
hereof), such amount to be increased 1:1 for any increase of the
Initial Purchase Price due to the adjustment to the Final Purchase
Price as defined in section D.I.Section 3 hereof, provided, however,
that the Final Purchase Price may not exceed USD 10,000,000 (United
States Dollars ten million) and the Deferred Purchase Price may not
exceed USD 2,500,000 (United States Dollars two million five hundred
thousand).
The Deferred Purchase Price shall be paid in German marks by the Buyers
to the Sellers in three equal portions, the first portion to be paid
two years after the Closing Date and the remaining portions to be paid
three years and four years after the Closing Date. The respective
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payments shall be made into the Sellers' account no. 030 5920 01 with
Deutsche Bank Bielefeld, bank code: 480 700 20. The Deferred Purchase
Price shall bear interest of 8% per annum as of the Closing Date until
payment is made. The interest shall be paid out annually on the
anniversary date of the Closing.
2.6.1 The payment of the Deferred Purchase Price and the payment for the
Overdue Account Receivable according to Section D.I.section 2.8.2, if
any, shall be secured by a mortgage on the real property acquired by
the Buyer D2 from PB Hanning KG hereunder as follows: The Sellers
undertake to have eliminated any and all mortgages and other
encumbrances, as the case may be, existing on the real property to be
acquired by the Buyer D2 hereunder, except for mortgages held by Seller
ARH and Seller MH in the aggregate amount of DM 4,000,000 (German marks
four million) and except for Permitted Encumbrances set forth in
Schedule D.I.Section 2.6.1.
2.6.2 As soon as the Deferred Purchase Price has been bindingly determined as
a result of the adjustment of the Initial Purchase Price in accordance
with section D.I.Section 2.5 above and section D.I.Section 3 below,
Seller ARH and Seller MH shall immediately release any mortgage in
excess of the bindingly determined Deferred Purchase Price plus, if
applicable, any outstanding amounts pursuant to Section D.I.Section
3.1.2 at their own cost.
2.7 The value added tax issues relating to the UK Purchased Assets shall be
treated in accordance with the provision as set forth in Schedule
D.I.Section 2.7.
2.8 The accounts receivable to be transferred in accordance with section
A.I.Section 2.1.3 and A.I.Section 2.2.3 of this Agreement shall, if not
paid by the respective debtor within one hundred and twenty (120) days
from the date of invoice (the "OVERDUE ACCOUNTS RECEIVABLE"), be
treated as follows:
2.8.1 The amount of any Overdue Account Receivable net of value added tax and
net of the amount reserved for doubtful accounts shall be deducted
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in full from the Initial Purchase Price. The Asset Sellers shall make
corresponding cash payments to the Buyers no later than ten (10) German
banking days after the respective Buyers have notified the Asset
Sellers of the amount of an Overdue Account Receivable. The Buyers
undertake to assign the Overdue Account Receivable to the Asset Sellers
concurrently against the corresponding cash payments.
2.8.2 If and to the extent an Overdue Account Receivable is paid to the
Buyers after the Asset Sellers have made a corresponding cash payment
in accordance with section D.I.Section 2.8.1 above, the Buyers shall
within ten (10) German banking days forward such amount as paid by the
debtor to the Asset Sellers on a joint account of the Asset Sellers to
be designated by them.
2.8.3 If the Asset Sellers elect to collect an Overdue Account Receivable,
they may request the respective Buyers to do so, and the Buyers shall
use all reasonable endeavors to collect such Overdue Account
Receivable, provided that the Asset Sellers shall hold the Buyers
harmless from any and all costs relating to the collection of the
Overdue Account Receivable as far as caused by any judicial
enforcement.
2.8.4 If and to the extent the Overdue Accounts Receivable collected by the
Buyers in accordance with Section D.I.Section 2.8.3 above exceed the
amount of the Overdue Accounts Receivable net of value added tax and
net of the amounts reserved for doubtful accounts, such exceeding
amount shall be equally shared among the Asset Sellers and the Buyers.
The breakdown for the determination of such exceeding amount shall be
finalized no later than by 31st March 1999 on the basis of the balance
sheet per end of the fiscal year 1998.
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Section 3
Adjustment of the Purchase Price
3.1 The Initial Purchase Price (as amended by any payments under section
D.I.Section 2.8 above) shall be adjusted to the final purchase price
(the "FINAL PURCHASE PRICE") as follows:
3.1.1 The Sellers shall set up Balance Sheets of each of the respective
Asset Sellers and the Companies prepared as of the Closing Date in
accordance with the principles set out in section D.I.Section 2.3 above
(the "CLOSING BALANCE SHEETS") but that inventory amount shall be based
on a physical inventory performed on 26th and 27th July 1997 and
adjusted as of the Closing Date based on computerized data and books
and shall be valued in accordance with the principle of
"Lower-of-Cost-or-Market-Value" notwithstanding the valuation basis
formerly used by the companies and the Asset Sellers in the preparation
of their balance sheets.
3.1.2 At the Closing Date the Companies shall neither have any assets except
for those appearing on the Balance Sheets attached as Schedule
D.I.Section 2.2.a and described in lines 2, 10, 11, 12, 13, 21, 28 nor
any liabilities except for those appearing on the Balance Sheets
attached as Schedule D.I.Section 2.2.b and described in lines 3, 4, 10,
12, 13. If at the Closing Date the Companies do have such assets and/or
liabilities, notwithstanding the above, the book value of such assets
and liabilities shall be set-off against each other.
In case the book value of those liabilities exceeds the book value of
those assets, such balance shall be equalized by the Sellers by making
cash payments to the Buyers in the amount of the respective balance and
vice versa. The payment shall be made into the Buyers' account no. 793
1506 with Bank of America, Chicago, Illinois 60601, USA and into the
Sellers' account no. 030 5920 USD with Deutsche Bank Bielefeld, bank
code 480 700 20 no later than ten (10) German banking days after the
final determination of the Closing Net Book Value.
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Alternatively, the Sellers may settle the respective balance directly
with any third party in cooperation with the Buyers.
For the avoidance of doubt, the portion of the Purchase Price allocated
to the Assets sold and transferred by PB Hanning to the Buyer D2 and to
the Buyer UK is owed to the Share Sellers.
3.1.3 Within sixty (60) days after the Closing Date, the Sellers will
deliver to the Buyers the Closing Balance Sheets. In order to do so,
the Sellers or their representatives may remain on the business
premises during normal business hours until sixty (60) days after the
Closing Date. At the Buyers' expense the Sellers or their
representatives are entitled to all support one can reasonably expect
in order to draw up the Closing Balance Sheets. For this purpose they
are entitled to inspect the books and accounts of the Asset Sellers and
the Companies for the periods prior to Closing.
3.1.4 If the Buyers deliver a written notice (the "DISPUTED ITEMS NOTICE") to
the Sellers within ninety (90) days after receipt by the Buyers of the
Closing Balance Sheets, stating that the Buyers object to any item on
the Closing Balance Sheets (the "DISPUTED ITEM"), specifying the basis
for such objection, the Buyers and the Sellers will attempt to resolve
the Disputed Item as promptly as practicable.
3.1.5 If the Buyers and the Sellers are unable to agree upon the Disputed
Item within thirty (30) days after delivery of the Disputed Items
Notice, the Buyers and the Sellers will select a mutually acceptable
independent accounting firm (among Deloitte & Touche, Ernst & Young,
KPMG or Price Waterhouse, and to be chosen by lot if the parties cannot
agree on a firm) to resolve the Disputed Item. Such resolution will be
made within sixty (60) days after such selection and will be final and
binding upon the parties. The fees and costs and expenses of the
accounting firm so selected will be borne in whole or in part by the
party or parties whose position in whole or in part did not prevail in
such determination as far as the parties did not prevail.
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3.1.6 If the Buyers do not deliver the Disputed Items Notice to the Sellers
within ninety (90) days after receipt by the Buyers of the Closing
Balance Sheets, the Closing Balance Sheets will be conclusively
presumed to be true and correct in all respects and will be binding
upon the parties.
3.2 The aggregate Net Book Value shown in the Closing Balance Sheets (the
"CLOSING NET BOOK VALUE") shall be multiplied with the Factor to arrive
at the Final Purchase Price (Closing Net Book Value x Factor = Final
Purchase Price), provided, however, that the Final Purchase Price shall
not exceed USD 10,000,000 (United States Dollars ten million).
3.3 If the Final Purchase Price is lower than the Initial Purchase Price,
such balance shall be equalized by the Sellers by making a cash payment
to the Buyers into the Buyers' account no. 793 1506 with Bank of
America, Chicago, Illinois 60601, USA no later than ten (10) German
banking days after the final determination of the Closing Net Book
Value. The Deferred Purchase Price shall not be decreased in any event.
Section 4
Allocation of the Purchase Price
4.1 It is agreed between the parties that the Purchase Price shall be
allocated in two steps as follows:
4.1.1 In the first step, the Initial Purchase Price shall be allocated as set
forth in Schedule D.I.Section 4.1.1 ("INITIAL PURCHASE PRICE
ALLOCATION"). The Initial Purchase Price Allocation has been prepared
on the basis of the Balance Sheets as of April 30, 1997 (with regard to
Hanning UK-Company as of December 31, 1996). The principle of the
Initial Purchase Price Allocation is based on arm's-lengths terms and
reflects, as to the parties' judgment, the fair market value of the
Purchased Assets, the HK-KG-Interests, the HK-Shares, the PB Hanning
KG-Interests and the PB Hanning Shares transferred pursuant to this
Agreement. The Initial Purchase Price Allocation shall be binding
between the parties with respect to the allocation principle but not
with
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respect to the figures arrived at.
4.1.2 In the second step, the Final Purchase Price shall be allocated in
accordance with the principles set forth in D.I.Section 4.1.1 above
("FINAL PURCHASE PRICE ALLOCATION"). The Final Purchase Price
Allocation will be based on the Initial Purchase Price Allocation which
will be revised accordingly to reflect the figures set out in the
Closing Balance Sheets.
4.2 The parties undertake to mutually agree on the Final Purchase Price
Allocation as soon as reasonably possible after the Closing Date, but
no later than December 31, 1997. Such agreement on the Final Purchase
Price Allocation shall be in writing but shall not require notarial
form to be binding. The written agreement of the Final Purchase Price
Allocation shall be binding on all parties for tax purposes in
connection with the purchase and sale of the Objects of Purchase, and
will be consistently reflected by each party on its tax returns. With
respect to the sale of the Purchased Assets by the Hanning
US-Companies, the Buyer will prepare and file a U.S. Form 8594 and the
Hanning US Companies will file such form consistent with the allocation
set forth in Schedule D.I.Section 4.1.1.
II. REPRESENTATIONS AND WARRANTIES
Section 1
Representations of the Sellers
1.0 The Sellers jointly and severally represent and warrant to the Buyers
as of the date of this Agreement and the Closing Date as follows:
1.1.1 The Companies have been duly incorporated and are validly existing
under the laws of Germany.
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1.1.2 There has been no proposal made or resolution adopted for the
dissolution or liquidation of any of the Companies or a merger of any
of the Companies with any other company.
1.1.3 No application is pending to declare that any of the Companies is
bankrupt and no application for composition proceedings is pending.
This applies accordingly for comparable proceedings outside Germany.
1.1.4 The Articles of Association or Partnership Agreements of the Companies
read in conformity with the copies thereof attached as Schedule
D.II.Section 1.1.4 and no shareholders or partners' resolutions exist
relating to the change thereof.
1.1.5 The excerpts from the Commercial Register for the Companies attached as
Schedule D.II.Section 1.1.5 are correct and complete. All shareholders'
and partners' resolutions, actions or other circumstances capable of
being registered are correctly and completely reflected in those
excerpts.
1.1.6 None of the Companies is bound by inter-company-agreements
("Unternehmensvertrage") within the meaning of section 291 et seq.
German Stock Corporation Act.
1.2.1 The factual information relating to the shareholders and partners,
Shares and KG-Interests given in section A.Section 1 above is complete
and correct.
1.2.2 The Share Sellers hold jointly 100% of all Shares and Interests in the
Companies.
1.2.3 All Shares in the Companies have been fully paid in and they have not
been reduced in whole or in part by distributions.
1.2.4 Except as reflected in the Closing Balance Sheets, the Companies do not
hold, and have not during the last five years held, any shares or
interests in any other company, partnership or similar entity except
for
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the participation of Hanning Corporation in FSC Corporation, a company
duly organized under the Laws of the Virgin Islands, USA.
1.2.5 No resolution has been adopted to increase the registered share or
partnership capital of any of the Companies or to issue additional
shares; no rights, including options, have been granted, relating to
the Shares and Interests.
1.2.6 The Shares and Interests are free and clear of any rights of pledge,
charges, liens, attachments, usufructs or any other encumbrances or
obligatory rights of third persons, including, but not limited to
option rights and rights of first refusal in favor of any third party.
The Share Sellers can dispose of the Shares and Interests without the
cooperation, approval or violation of rights of third persons.
1.2.7 Since January 1, 1997 no (interim) dividends or partnership
distributions have been declared on the Shares or Interests nor have
any rights to a future dividend or other rights with respect to the
Companies' profits been committed, transferred or pledged to third
parties.
1.2.8 No restrictions on the transfer of the Shares and Interests other than
those set forth in the Articles of Association or in the Partnership
Agreement of the Companies are in effect.
1.3 The Asset Sellers jointly and severally represent and warrant to the
Buyers as of the date of this Agreement and the Closing Date as
follows. For the avoidance of doubt, all of the following
representations and warranties are given only by the Asset Sellers but
not by the Share Sellers.
1.3.1 The audited financial statements (in the case of Hanning Corporation
and Hanning Property Associates the reviewed financial statements)
("Jahresabschlusse") (hereinafter the "AUDITED FINANCIAL STATEMENTS")
of the Companies and the Asset Sellers as of December 31, 1994, 1995
and 1996 (such dates hereinafter the "BALANCE SHEET DATES"):
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1.3.1.1 have been prepared in accordance with all applicable laws and generally
accepted accounting principles as applicable in the respective
countries with respect to the preparation of annual accounts and
applied on a consistent basis during the preceding five business years;
1.3.1.2 provide such insight into the financial position of the Companies and
the Asset Sellers that a responsible judgment can be made regarding the
assets and the results and also regarding the solvability and liquidity
of the Companies and the Asset Sellers;
1.3.1.3 present, in as far as the profit and loss accounts with the notes
("Erlauterungen") are concerned, correctly, clearly and consistently
the results of the Companies and the Asset Sellers;
1.3.1.4 present, in as far as the balance sheets are concerned, correctly,
clearly and consistently the financial position of the Companies and
the Asset Sellers (the nature and amount of the Companies' and the
Asset Sellers' assets, liabilities and shareholders' equity) at the
Balance Sheet Date.
1.4.1 The Audited Financial Statements of the Companies and the Asset Sellers
have been furnished with an unrestricted auditor's certificate by the
Companies' and the Asset Sellers' respective auditor, however, with
respect to the Audited Financial Statements of HK-KG and PB Hanning KG
restricted by an explicit statement made by the respective auditor of
their insufficient profitability.
1.4.2 All accounts, books, ledgers, financial and other records of the
Companies and the Asset Sellers (including financial information and
data stored electronically):
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1.4.2.1 are in the possession of the Companies and the Asset Sellers, except as
disclosed in Schedule D.III.Section 5.3;
1.4.2.2 have been properly and accurately maintained;
1.4.2.3 contain materially true, complete and accurate records of all matters
required to be entered in them by the law; and
1.4.2.4 have been held for the period required by law.
1.4.3 On the relevant Balance Sheet Dates for the Audited Financial
Statements, the Companies and the Asset Sellers had no liabilities or
commitments, contingent or otherwise, matured or unmatured, not
included or provided for in the Audited Financial Statements. There was
no need to provide for additional provisions or increase existing
provisions.
1.4.4 All accounts receivable reflected in the Audited Financial Statement or
in the Closing Balance Sheet will be collected in full, within one
hundred and twenty (120) days from the Closing Date, except in as far
as provisions will be made in this respect in the Closing Balance
Sheet.
1.4.5 All supplies and stocks of the Companies and Asset Sellers taken
as a whole have been valued on the basis of the list prices as of the
Balance Sheet Dates except for the supplies and stocks of Hanning
Corporation which have been valued with respect to work in process and
finished goods according to the principle of Lower-of-Cost-or-
Market-Value and with respect to other supplies and stocks on the basis
of actual costs.
1.4.6 The Companies and the Asset Sellers will have no contingent liabilities
other than those wholly reflected in the Closing Balance Sheets.
1.4.7 Since December 31, 1996, and except as disclosed in Schedule D.
II.Section 1.4.7:
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1.4.7.1 There have been no changes in the condition, financial or otherwise of
the Companies and Asset Sellers, which have had a material adverse
effect on its net worth or in general its business, results or
financial condition and are not reflected in the Balance Sheets;
1.4.7.2 the Companies and the Asset Sellers have not entered into any
transactions or incurred any liability or obligation which individually
or in the aggregate was material to their business other than
transactions concluded and/or liabilities or obligations incurred in
the ordinary course of business of the Companies or the Asset Sellers,
in particular no direct or indirect payments have been made to the
Share Sellers or entities controlled by the Share Sellers or its
shareholders, except as expressly provided for in this Agreement;
1.4.7.3 there has not been any damage, destruction, or other casualty loss
(whether or not covered by insurance), affecting the business or the
assets of any of the Companies or the Asset Sellers which have had or
would reasonably be expected to have a material adverse effect on any
of the Companies and Asset Sellers;
1.4.7.4 there has not been any occurrence, assumption or guarantee by any of
the Companies or the Asset Sellers of any indebtedness for borrowed
money other than in the ordinary course of business and in amounts and
on terms consistent with past practices or in excess of DM 15,000 or
equivalent;
1.4.7.5 there has not been any change in any method of accounting practice by
any of the Companies or the Asset Sellers;
1.4.7.6 there have not been any (i) grant of any severance or termination
payment to any managing director or other employee of the Companies or
the Asset Sellers except as set forth in Schedule D.II.Section 1.4.7.6,
(ii) increase in benefits payable under the severance or termination
policy of any of the Companies or the Asset Sellers or any employment
agreement or (iii) increase in compensation, bonus or other benefits
payable to the managing directors or other
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employees of the Companies or the Asset Sellers by any of the Companies
or the Asset Sellers, other than in the ordinary course of business
consistent with past practice except as disclosed in Schedule
D.II.Section 1.4.7.6.
1.4.8 Schedule D.II.Section 1.4.8 lists completely all bank loans and other
loans taken out by the Companies and the Asset Sellers together with
their respective pay terms and conditions. The total amount outstanding
under these loans does not exceed the equivalent of DM 8,241,000.
1.4.9 Schedule D.II.Section 1.4.9 lists and describes all indebtedness of the
Companies and the Asset Sellers to related companies and individuals,
except for those arising in the ordinary course of business.
1.4.10 None of the loan facilities granted to the Companies or the Asset
Sellers is dependent on the guarantee or support or indemnity of, or
any security provided by, a third party other than the Companies or the
Asset Sellers.
1.4.11 The Companies or the Asset Sellers have not factored or encumbered
their receivables.
1.4.12 The balances of the partners' accounts of HK-KG as of the date of this
Agreement are as set out in Schedule D.II.Section 1.4.12.
1.5 Each Asset Seller is duly organized, validly existing and with respect
to the Hanning UK-Company and the Hanning US-Companies is in good
standing under the laws of the respective jurisdiction; and has all
requisite power and authority (corporate and otherwise) to own, lease
and operate its properties and to carry on the Business.
1.6 The execution, delivery and performance of this Agreement by each
Seller is within the power (corporate or otherwise) of each Seller,
have been duly authorized by all necessary action (corporate or
otherwise)
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and do not contravene or constitute a default under any provision of
any Seller's charter, governing documents or by-laws. This Agreement
is, and each of the other agreements and instruments of the Sellers
contemplated hereby will be, the valid and binding obligation of each
Seller, enforceable in accordance with their respective terms.
1.7 The execution, delivery and performance of this Agreement and the other
instruments and agreements contemplated hereby by each Seller will not
result in any violation of, be in conflict with or constitute a default
under any law, statute, regulation, ordinance, judgment, decree or
order to which any Seller is a party or by which any of the Sellers,
the Objects of Purchase or the Business is bound nor will it result in
the creation or imposition of any lien, charge or encumbrance of any
nature on any of the Objects of Purchase.
1.8 Schedule D.II.Section 1.8 is a complete and accurate list of all
1.8.1 contracts under which the amount payable by the Asset Sellers or the
Companies with respect to the Business is dependent on the revenues or
income or similar measure of that Asset Seller or Company;
1.8.2 licenses, leases, contracts or other arrangements with a value of DM
15,000 per year with respect to any material property of each Asset
Seller or Company,
1.8.3 other contracts (written or unwritten) with respect to which any Asset
Seller or Company has any liability or obligation involving more than
DM 50,000,00 per year contingent or otherwise, or which may otherwise
have any continuing effect after the date of this Agreement on the
Purchased Assets or the Business, or which place any material
limitation on the method of conducting or scope of the Business, and
any other material contracts, instruments, commitments, plans or
arrangements of any Asset Seller or Company except for orders of raw
material and purchased parts in the ordinary course of business.
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All the foregoing are hereinafter called "MATERIAL CONTRACTS".
The Sellers have no reason to believe that the parties to any
Material Contract will not fulfill their obligations thereunder in
all material respects. The Material Contracts are valid and
binding and in full force and effect. Neither the Companies nor
the Sellers have breached any Material Contracts. The Buyers (as
successor to the Sellers) will not be required after Closing to
undertake any work or supply any goods or services relating to the
Business except on normal commercial terms under a Material
Contract (or a contract not required to be listed in Schedule
D.II.Section 1.8 but relating to the operations of the Business
and arising in the ordinary course of business). No offer, tender
or the like in respect of the Business which is capable of being
converted into an obligation of the Sellers or the Companies by an
acceptance or other act of some other person is outstanding,
except in the ordinary course of business.
1.9.1 Schedule D.II.Section 1.9.1 sets forth each interest in real
property (including all land, buildings, easements and other real
property rights) owned by any Asset Seller and Company (the "OWNED
PROPERTY"). Each Asset Seller and Company that owns Owned Property
has good and marketable title to the Owned Property, free and
clear of all mortgages, liens, tenancy rights to use or occupancy,
restrictions and encumbrances of any kind, except as specified in
Schedule D.II.Section 1.9.1.
1.9.2 There is neither pending, nor to the knowledge of the Sellers,
threatened, any condemnation, eminent domain or similar proceeding
with respect to the Owned Property. The real estate located at
Perinton, County of Monroe, New York owned by Hanning Property
Associates ("PERINTON INDUSTRIAL ESTATES OWNED PROPERTY") is a
buildable lot provided that the Buyers satisfy all requirements of
the Town of Perinton and all other agencies in such jurisdiction.
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1.9.3 All of the Owned Property is in compliance in all material
respects with all building, zoning, subdivision, health, safety
and other applicable laws and regulations. Seller has not entered
into any contracts, agreements or understandings with respect to
the Owned Property, except as disclosed in Schedule D.II.Section
1.9.3.
1.9.4 Schedule D.II.Section 1.9.4 sets forth each interest in real
property leased or sub-leased by any Asset Seller and Company, the
lessor and lessee or sub-lessor and sub-lessee of such leased or
sub-leased property and any lease, sublease or any other
arrangement under which such property is leased or sub-leased.
Each lease or sublease is in good standing and full force and
effect. Each Asset Seller and Company enjoys peaceful and quiet
possession of its leased or sub-leased premises, is not in
material default or received any notice of default under any such
leasehold or sub-leasehold and have not been informed that the
lessor or sub-lessor under any of the leases or sub-leases has
taken action or threatened to terminate the lease or sub-lease
before the expiration date specified in the lease or sub-lease.
1.10. Each Asset Seller has and will transfer to the Buyers at the Closing,
good and marketable title to the Purchased Assets, free and clear of
any liens, mortgages, except for the mortgages serving as security for
the Deferred Purchase Price and for the payment of the Overdue Account
Receivable, security interest, restrictions or encumbrances of every
kind, nature and description, except for Assumed Liabilities and except
for Permitted Encumbrances. With respect to the real property it is
sufficient that the Sellers provide all necessary documents and do any
other things necessary to transfer clear title.
1.11 The Purchased Assets and the assets of the Companies include all assets
currently used in the Business or necessary for the operation of the
Business as currently conducted and include all assets reflected in the
Balance Sheets (except the Excluded Assets) and to be reflected in the
Closing Balance Sheets.
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1.12 The Purchased Assets and the assets of the Companies are in normal
operating condition and repair and have been properly serviced and
maintained.
1.13.1 Each Asset Seller and each Company and its respective
subsidiaries, if any, has prepared and filed when due all tax and
all information returns, reports, statements etc. required by law
to be filed (or will do so in case such preparation and filing is
due after the Closing but relates to taxes for periods prior to
and including the Closing), and has paid when due all taxes,
assessments and other governmental charges owed by them (whether
or not shown on any tax return, report, statement, etc.) or levied
upon any of their properties, assets, income or franchises (or
will pay such taxes, assessments and other governmental charges in
case payment is due after the Closing but relates to periods prior
to and including the Closing). All such tax and/or information
returns, reports, statements, etc. are true and correct in all
respects and show all taxes owed for the relevant periods. There
are no unpaid assessments, and there is no basis for the
assessment of any additional taxes, penalties or interest for any
fiscal period or audit by any taxing authority. For the avoidance
of doubt, PB Hanning KG undertakes to file for and pay when due
any and all taxes accruing from any gain with respect to both the
sale and transfer of the real estate from PB Hanning KG to the
Buyer D2 and the sale and transfer of the assets currently owned
by PB Hanning KG and leased by Hanning UK Company to Buyer UK.
1.13.2 All taxes and other assessments and levies which any Asset Seller
or any Company or any subsidiary thereof, if any, is required by
law to withhold or to collect for payment have been duly withheld
or collected and paid to the proper governmental entity.
1.13.3 There are no tax liens or claims pending or threatened against any
Asset Seller, any Company or any subsidiary thereof, if any, or
their assets or properties.
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1.14. Schedule D.II.Section 1.14 sets forth all licenses, permits and
authorizations of governmental authorities held by each Asset Seller
and each Company which are material to the Business. Each Asset Seller
and Company is in material compliance with all such licenses, permits
and authorizations, all of which are in full force and effect and is
not aware of anything that might in any way prejudice the transfer or
assignment of those licenses, permits and authorizations to the Buyers
or the continuance or renewal of any of them by or in the name of the
Buyers. However, it is up to the Buyers to apply for the transfer or
renewal of the respective licenses, permits and authorizations after
the Closing Date.
1.15.1 Schedule D.II.Section 1.15.1 lists all collective labor agreements
applicable to the employees and all existing agreements concluded
with trade unions or the works' council.
1.15.2 Except as set forth in Schedule D.II.Section 1.15.2 no Asset
Seller or Company is a party to or bound by, or has any liability
in respect of any bonus, profit-sharing, deferred or incentive
compensation, stock compensation, stock purchase or stock option
purchase, retirement, supplemental pension, benefit, health,
welfare, supplemental unemployment benefit, hospitalization,
insurance, medical, dental, legal, disability, insurance,
severance or similar plan, arrangement, agreement or practice,
formal or informal, written or oral, with respect to any of its
employees, former employees or others and including the US Benefit
Plans defined below (collectively the "Benefit Plans").
(a) Schedule D.II.Section 1.15.2(a) sets forth all employee benefit
plans, agreements, commitments, practices or arrangements of any
type (including, but not limited to, plans described in Section 3
(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) offered, maintained or contributed to by the
Hanning Corporation for the benefit of current or former employees
or directors of the Hanning Corporation, or with respect to which
the Hanning Corporation has or may have a liability, whether
direct or
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indirect, actual or contingent (including, but not limited to,
liabilities arising from affiliation under Section 414(b), (c),
(m) or (o) of the Code or Section 4001 of ERISA) (collectively,
the "US Benefit Plans"). There are no material benefit plans,
agreements, commitments, practices or arrangements of any type
providing benefits to employees or directors of the Hanning
Corporation, other than the US Benefit Plans.
(b) With respect to each US Benefit Plan: (i) if intended to qualify
under Section 401(a) of the Code, such plan is subject to a
request for a determination letter from the Internal Revenue
Service (the "Service") which will be submitted to the Service
within sixty (60) days after the Closing and, if necessary to make
such plan qualify, all amendments will be made to such plan
including retroactive amendments; (ii) such plan has been
administered and enforced in accordance with its terms and all
applicable laws in all material respects; (iii) no breach of
fiduciary duty has occurred with respect to which the Hanning
Corporation or any US Benefit Plan may be liable or otherwise
damaged in any material respect; (iv) no material disputes are
pending or threatened; (v) no "prohibited transaction" (within the
meaning of either Section 4975(c) of the Code or Section 406 of
ERISA) has occurred with respect to which the Hanning Corporation
or any US Benefit Plan may be liable or otherwise damaged in any
material respect; (vi) all contributions, premiums, and other
payment obligations have been accrued on the consolidated
financial statements of the Hanning Corporation in accordance with
generally accepted accounting principles, and, to the extent due,
have been made on a timely basis, in all material respects; and
(vii) the Hanning Corporation has expressly reserved in itself the
right to amend, modify or terminate such plan, or any portion of
it, without liability to itself.
(c) No US Benefit Plan is, or has ever been, subject to Title IV of
ERISA.
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(d) With respect to each US Benefit Plan which provides welfare
benefits of the type described in Section 3 (1) or ERISA, (i) no
such plan provides medical or death benefits with respect to
current or former employees or directors of the Hanning
Corporation beyond their termination of employment, other than
coverage mandated by Sections 601-608 of ERISA and 4980B(f) of the
Code, and (ii) each such plan has been administered in compliance
with Sections 601-608 of ERISA and 4980B(f) of the Code.
1.15.3 Correct and complete copies of the Benefit Plans are set out in
Schedule D.II.Section 1.15.3 and all related documents, as amended
as of the date hereof, have been provided to the Buyers.
1.16.1 Except as set forth in Schedule D.II.Section 1.16.1, each Asset
Seller and each Company is in material compliance with all
applicable laws and regulations relating to employment and
employment practices, and terms and conditions of employment and
wages and hours. To the knowledge of the Sellers, the majority of
HK-KG's employees are represented by a union.
1.16.2 There are no employment or consulting contracts or arrangements
(other than those terminable at will) with any executives or
consultants of or associated with any of the Asset Sellers or the
Companies other than as described in Schedule D.II.Section 1.16.2.
1.16.3 Schedule D.II.Section 1.16.3 sets forth the complete list of all
employees (as far as not listed in Schedule D.II.Section 1.8) and
consultants to each Asset Seller and the Companies showing date of
hire, hourly rate or salary or other basis of compensation or
other benefits accrued as of December 31, 1996, each increase and
bonus granted since January 1996, and job function of salaried
employees.
1.17 The Asset Sellers and the Companies own or possess adequate licenses or
other rights to use all Intellectual Property used or needed in the
Business as currently conducted. Schedule D.II.Section 1.17 sets forth
all patents, trade marks, service marks, trade names, copyrights,
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franchises, licenses, and all royalty agreements and other rights with
respect to the foregoing owned or used by each of the Asset Sellers and
Companies as well as all applications thereto.
1.18 Since December 31, 1996, each Asset Seller and each Company has
conducted its portion of the Business only in the usual and ordinary
course of the business and to the best of knowledge of the Sellers
there has been no event or condition which could have a material
adverse effect on the Business.
1.19 All of the accounts receivable of each Asset Seller and each Company as
of the Closing Date will be valid and enforceable claims fully
collectible, net of the amount reserved for doubtful accounts on the
applicable Closing Balance Sheet, within one hundred and twenty (120)
days from the date of invoice and subject to no set-off or counter
claim, except where the counter claim is entered in the liabilities'
side of the respective Closing Balance Sheet. Except as set forth in
Schedule D.II.Section 1.19, all accounts receivable arose out of bona
fide transactions in the ordinary course of business.
1.20 The inventory of each Asset Seller and each Company consists and of the
Closing Date will consist of manufactured and purchased parts and
finished goods salable within one (1) year in the ordinary course of
business as far as and to the extent that there are no reserves with
respect to these items, provided that the Buyers shall apply the
FIFO-method and that the Sellers shall be given by the Buyers the
reasonable opportunity to verify the proper application of such method.
1.21 Each Asset Seller and each Company are in material compliance with all
statutes, laws, ordinances, judgments, decrees, audits or governmental
rules, regulations, policies and guidelines applicable to them. There
are no notices from any governmental or regulatory authority or
otherwise regarding any alleged violation or non-compliance.
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1.22 Schedule D.II.Section 1.22 lists all insurance policies under which
each Asset Seller and each Company is insured, all of which are valid
and in full force until the Closing Date. All premiums due to date
under such policies have been paid, and no default exists thereunder.
The insurance listed in Schedule D.II.Section 1.22 is an amount
adequate to cover losses on physical assets, and in amounts sufficient
to avoid the operation of any coinsurance provision. No Asset Seller or
Company has received any notice of any proposed increase in the
premiums payable for coverage, or proposed reduction in the scope (or
discontinuation entirely) of coverage, under any of such insurance
policies.
1.23 Except as set forth in Schedule D.II.Section 1.23, there is no action,
suit, proceeding or investigation before any court, arbitrator or
governmental authority, presently taking place, pending or threatened
against any Asset Seller or Company, against any officer, director or
employee thereof in relation to the affairs of any Asset Seller or
Company and no Seller is aware of any matter which is likely to give
rise to an investigation or arbitration proceeding by or against the
Asset Sellers or the Companies affecting the Business. No Asset Seller
or Company is the subject of any investigation, inquiry or enforcement
proceedings or process by any governmental, administrative or
regulatory body in relation to the Business and no Seller is aware of
anything which is likely to give rise to such investigation, inquiry
proceedings or process.
1.24 Except as set forth in Schedule D.II.Section 1.24 the Sellers have no
knowledge that any of the suppliers material to each Asset Seller or
Company will not continue to sell to the Asset Buyers or the Companies
after the Closing the lines of products presently sold to them, or that
any customer material to the Business will not continue purchasing from
the Buyers after the Closing.
1.25 Except as disclosed in Schedule D.II.Section 1.25 no claims in excess
of DM 10,000 for defective products and no claims for product liability
have been filed or notified against any of the Companies or the Asset
Sellers nor have the Asset Sellers any reason to believe that any such
claims
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will be brought forward. There are no serial defects.
1.26 The ownership of each Asset Seller's and each Companies' premises and
assets (including the Purchased Assets), the occupancy and operation
thereof, and the conduct of the Business are in material ("wesentlich")
compliance with all applicable laws, ordinances, regulations, standards
and requirements relating to safety, health, pollution, environmental
protection, hazardous substances and related matters. There is no
liability attaching to such premises or assets or the ownership or
operation thereof as a result of any hazardous substance that may have
been discharged on or released from such premises, or disposed of
on-site or off-site, or any other circumstance occurring prior to the
Closing Date or existing as of the Closing Date. For the purposes of
this Section, "hazardous substance" shall mean all or any other
substance which is included within the definition of the "hazardous
substance", "pollutant", "toxic substance", "toxic waste", "hazardous
waste", "contaminant" or other words of similar import in any
environmental law, ordinance or regulation in the relevant country.
1.27 The representations and warranties of each Seller contained in this
Agreement and the other documents, certificates and written statements
furnished to the Buyers by or on behalf of each Asset Seller and each
Company pursuant thereto, taken as a whole, do not contain any untrue
statement or omission of a material fact necessary in order to make the
statements contained herein and therein not misleading as of the date
hereof.
Section 2
No further Representations
Unless mentioned in this Agreement there are no further representations and
warranties of the Sellers.
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III. LIABILITIES/INDEMNIFICATION
Section 1
Remedy
1.1 Should any of the representations or warranties of this Agreement be
incorrect or incomplete, the respective Seller whose representation or
warranty was incorrect or incomplete shall place the Buyers in the
position it would have been in, had the representations been correct
and/or complete. Should the Seller be unable to establish a condition
which is in full compliance with the representations and warranties
within one month after the Buyers have requested such remediation, it
shall pay damages in money.
1.2 With regard to the representations and warranties as set forth in
section D.II.Section 1.26, the liability of the Asset Sellers is
limited to sixty-five per cent (65%) of all costs, expenses and other
payables of whatever nature as they are incurred from time to time, in
particular of clean-up measures and related costs. For the avoidance of
doubt, and in view of section D.II.Section 5.3 hereof, the Sellers and
the Buyers are not aware of, and the Sellers have not disclosed to the
Buyers or their representatives, any specific deviation from the
representation and warranty set out in section D.II.Section 1.26
hereof.
1.3 Any claim for rescission of the sale, or for consequential damages or
losses is excluded.
1.4 The Sellers are not liable for the earning value of the sold Business.
Section 2
Liability
2.1 The Sellers are jointly and severally liable for the damages of the
Buyers which are caused by non-performance or delayed performance of
this Agreement, however, the Share Sellers only with respect to the
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representations and warranties as set forth in sections D.II.Section
1.0 to D.II.Section 1.2.8.
2.2 The liability of the Sellers is excluded, as far as the value of a
single claim is below DM 20,000.00. This exclusion is not valid, if and
as far as the total value of the claims including single claims below
DM 20,000.00 exceeds the amount of DM 100,000.00
2.3 The liability of the Sellers is excluded if and as far as the liability
arises from an act or omission on the part of the Buyers.
2.4 All further claims, whether based on contract or statute, for
rescission, reduction, as well as all claims for consequential damages
are excluded. The Sellers are especially not liable for circumstances
to the extent of payments made to the Buyers in respect thereof by any
insurance company or any third party or to the extent of any liability
reserves in the Closing Balance Sheets.
2.5 The liability of the Sellers is limited to the amount of the Final
Purchase Price. However, the liability of the Share Sellers is limited
to USD 3,000,000 (United States Dollars three million).
2.6 The above mentioned exclusions and limitations of liability are not
applicable, if the damages are caused by intentional or grossly
negligent actions of any of the Sellers. Nothing shall exclude or limit
liability for fraud.
Section 3
Indemnification by Asset Sellers
The Asset Sellers agree to defend, indemnify, and hold harmless the Buyers from
or against any and all claims, liabilities and obligations of every kind and
description arising out of or related to the operation of the Business prior to
the Closing Date (except those as to which the Buyers are expressly liable to
the Sellers under sections D.III.Section 1 and D.III.Section 2 hereof).
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Section 4
Indemnification by Buyer
4.1 The Buyers jointly agree to defend, indemnify, and hold harmless the
Sellers from or against:
Any and all claims, liabilities, and obligations of every kind and
description arising out of or related to the operation of the Business
following the Closing (except those as to which the Sellers are
expressly liable to the Buyer hereunder) or arising out of the Buyers'
failure to perform the obligations of the Sellers assumed by the Buyers
pursuant to this Agreement.
Section 5
Limitation of Action / Procedure
5.1 All claims except for claims arising from a breach of a warranty
relating to the transfer of title or a tax representation or
environmental matters are timebarred after two years after the Closing
Date. Claims arising from a breach of a warranty relating to the
transfer of title shall be timebarred after thirty years after the
Closing Date, for tax representations after ten years after the Closing
Date, and for environmental matters after four years after the Closing
Date.
5.2 The period of limitation can be interrupted by the Buyers by giving a
Claim Notice, as defined hereinafter. However, if the Sellers
reasonably object within a one month period, expressly referring to
this provision, the Statute of Limitation is only suspended for a
period from the mailing of the Claim Notice until four (4) weeks after
receipt by the Buyers of the objection. The same shall apply mutatis
mutandis to the Sellers.
5.3 Notice must be given within a reasonable time after discovery of any
fact or circumstance on which the Buyers could claim indemnification
(the "CLAIM"). The application of Sections 439, 460 and 464 of the
German Civil Code and Sections 377, 378 of the German Commercial Code
shall be
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excluded. However, the Buyers can neither raise a claim with respect to
deviations from the representations and warranties which have been
disclosed in the Schedules to this Agreement or in the disclosure list
which is attached to this Agreement as Schedule D.III.Section 5.3, nor
can they raise a claim in the event that the Sellers prove the positive
knowledge of certain competent persons, such as Mr. George Votis, Mr.
Richard Welton or Mr. Richard Fackler.
The notice (the "CLAIM NOTICE") shall describe the nature of the Claim,
if the Claim is determinable, the amount of the Claim, or if it is not
determinable, an estimate of the amount of the Claim. The Buyers agree
to use all reasonable efforts to minimize the amount of the loss or
injury for which it is entitled to indemnification. If the party, in
order to fulfill its obligations to the other party must take legal
action or if the party is involved in legal action, the outcome of
which could give rise to its seeking indemnification, one party shall
consult with the other party with respect to such legal action and
allow it to participate therein.
5.4 Tax matters of the Companies and the Asset Sellers (including the
filing of any legal remedy) relating to the period prior to the Closing
Date are to be dealt with by mutual agreement between the Sellers and
the Buyers. In particular, the Sellers shall be given timely notice of
any tax audit of the respective revenue service and the opportunity to
participate in the respective process. Binding statements made by the
Buyers, by the Asset Sellers or by the Companies vis-a-vis the revenue
service which could affect the Sellers - directly or indirectly - are
subject to a mutual agreement with the Sellers.
5.5 No Claim for which indemnification is asserted shall be settled or
compromised without the written consent of the Sellers and the Buyers;
provided, however, if a party does not consent to a bona fide
settlement proposed by the other, the non-consenting party shall be
liable for indemnification only to the lesser of the final judgment or
the amount to be paid in settlement.
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5.6. Subject to the provisions of this Section, neither party shall have
recourse for indemnification until the Claims are fully and finally
resolved. For a period of thirty (30) days following the giving of the
notice of such Claim, the Buyers and the Sellers shall attempt to
resolve any differences they may have with respect to such Claim. If a
resolution is not reached within the thirty (30) day period (unless the
parties agree to extend the period), the matter may be submitted to the
Arbitration Tribunal contemplated in Schedule D.III.Section 5.6.
5.7 A Claim shall be deemed finally resolved without any possibility to
appeal in the event a matter is submitted to the Arbitration Tribunal,
upon the entry of the Arbitration judgment.
5.8 The Buyers shall be entitled to set-off against the Deferred Purchase
Price any amounts for which they are entitled to indemnification and
any amounts to which they are entitled in connection with claims
arising out of breaches of the representations and warranties contained
in this Agreement. If there is any outstanding claim while the payment
of any portion of the Deferred Purchase Price is due the Buyers are
entitled to withhold the respective payment in the amount of the
outstanding claim until the outstanding claim is fully and finally
resolved.
IV. MISCELLANEOUS
Section 1
Noncompetition / Confidentiality
1.1 Each of the Sellers covenants that they will not, directly or
indirectly, for a period of two years after the Closing Date
1.1.1 engage, or assist any other person or entity to engage, in the plastic
manufacture business or any business that competes with the Business
anywhere in the United States, Germany and the United Kingdom; or
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1.1.2 solicit or endeavor to entice away from the Buyers, or otherwise
materially interfere with the business relationship of the Buyers with
any person who is employed by or associated with any of the Sellers or
the Buyers or the Business or any person or entity who is a customer,
client of or supplier to any of the Sellers or the Buyers or the
Business.
1.2 The parties shall hold in confidence the provisions of this Agreement
and all knowledge and information of a secret or confidential nature
with respect to the Business, and each party shall not, directly or
indirectly, disclose, publish or make use of the same without the
express written consent of the other parties, except to the extent that
such information shall have become public knowledge other than by
breach of this Agreement by any of the parties, and except as necessary
to file tax returns or other required reports with governmental
agencies or as otherwise required by law.
1.3 Each party acknowledges that any breach or threatened breach of
provisions of sections D.IV.Section 1.1 or D.IV.Section 1.2 above will
cause irreparable injury to the other parties for which an adequate
monetary remedy may not exist. Accordingly, in the event of any such
breach or threatened breach, the parties shall be entitled, in addition
to the exercise of other remedies, to seek and (subject to court
approval) obtain injunctive relief, without necessity of posting a
bond, restraining any other party from committing such breach or
threatened breach.
Section 2
Use of the Name and the Logo "HK"
2.1 For the twelve months following the Closing, the Buyers shall have the
right to use the names "Hanning Kunststoffe" and/or "Hanning Plastics"
in connection with their operation of the Business and the Sellers
agree to take all reasonable actions, to allow the Buyers to exercise
such rights. The name "Hanning" must not be used in any other way but
in connection with either the word "Plastics" or "Kunststoffe".
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2.2 The Buyers obligate that they will take care and ensure that after the
twelve month period the name "Hanning" is not used anymore by
themselves, their subsidiaries and/or their affiliates, be it as name,
company name trade mark or otherwise, be it alone or in connection with
other words.
2.3 The permission to use the name "Hanning" does not include the use of
the trademarks listed in Schedule D.IV.Section 2.3.
2.4 The Buyers shall have the right indefinitely to use any items,
including in particular any tools, which bear the logo "HK" (capital K
on larger capital H - the "LOGO"). The Buyers may, however, not
reproduce any such items, except for plastic products of any kind which
are manufactured by the use of tools which bear the Logo. However, the
Buyers shall rework all tools immediately following the Closing in such
a fashion that, without limiting their functionality, it will be
possible to determine whether the products manufactured with the
reworked tools have been manufactured before or after the Closing.
Section 3
Maintenance of Records/Data Processing
3.1 For a period of ten (10) years after the Closing Date the Sellers shall
maintain and not dispose of and make available to the Buyers all
corporate and tax records, books of account, contracts and other
material documents relating to the Business except for those being
returned to the Buyers in any form. The documents will be maintained in
Germany.
3.2 As far as the Buyers receive possession of the books, record, notes
pursuant to B.I.Section 2.1.4. the Buyers shall for a period of ten
years after the Closing maintain and not dispose of and make available
to the Sellers all of these materials if and to the extent they are
required for tax reporting or reporting to any other governmental
agency or for any other statutory reporting requirement.
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3.3 As far as data relating to the Business is presently processed on
computer hardware that does not form part of the Purchased Assets, the
Sellers undertake to continue to process such data for the Buyers for a
time period of up to six months after the Closing Date against a
service fee. Details of such arrangement shall be agreed upon in a
separate service agreement.
Section 4
Cancellation of Lease Agreement regarding certain Assets
With effect as of the Closing Date, the lease agreement dated February 29, 1996
between PB Hanning KG and Hanning UK Company regarding the lease of certain
assets including any obligations arising thereunder between the parties has been
canceled by mutual consent with effect as of 7th August 1997, 00.00 hours.
Section 5
Currency Conversion Clause
For the purpose of this Agreement the exchange rates of the currencies United
Stated Dollars, Pound Sterling and Deutsche Mark shall be as follows:
5.1 US-Dollar: D-Mark = 1:1.8873
5.2 Pound Sterling: US-Dollar = 1:1.5984
5.3 Pound Sterling: D-Mark: = 1:3.0167
For the purpose of this currency conversion clause the official mean rate of
Frankfurt (as published on the Closing Date in the Frankfurter Allgemeine
Zeitung under the heading "Devisenmarkt: Crossrates") shall be binding.
Section 6
Notices
6.1 Any notices or other communications required or permitted to be given
hereunder shall be sufficiently given if delivered in person or sent by
internationally recognized expedited delivery service, addressed as
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follows:
To the Buyers: Moll PlastiCrafters Limited Partnership
1571 Heil Quaker Boulevard
LaVergne, Tennessee 37086
Attention: Chief Financial Officer
with a copy to: Stephen M. L. Cohen, Esq.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
To any Seller: Personlich / Vertraulich
A. R. und M. Hanning
Holter Strasse 90
33813 Oerlinghausen
Germany
with a copy to: Rechtsanwalte
Streitborger, Maass, Stange & Gordes
Artur - Ladebeck - Strasse 51
33617 Bielefeld
Germany
For purpose of any claim, dispute or litigation arising out of this
Agreement, the parties agree that delivery of any complaint, claim or
legal notice according to this section D.IV.Section 5.1 shall be deemed
to constitute adequate service of process under applicable laws and
regulations.
6.2 This Agreement shall be binding upon and shall inure to the benefit of
the parties and their respective heirs, successors and assigns. The
Sellers and the Buyers shall not assign the rights granted and
obligations assumed under this Agreement except that the Buyers are
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entitled to assign their rights hereunder to their secured lenders. The
Buyers or their nominees shall have the right to assign any and all
rights granted and any and all obligations assumed under this Agreement
to their successors, in relation to the Business or portion of the
Business, however, with the Buyers jointly and severally remaining
liable for the performance of the obligations vis-a-vis the Sellers
with regard to the assigned item.
6.3 This Agreement may be modified or amended only in writing signed by the
Buyers and the Sellers, unless notarization is required. No waiver of
any term or provision hereof shall be effective unless in writing
signed by the party waiving such term or provision.
6.4 The occurrence or non-occurrence of an event associated with the
Economic and Monetary Union of the European Community, in particular
the introduction of the "Euro" as single and unified European currency
in the member states of the European Monetary Union, shall not affect
the validity of this Agreement and the rights and obligations of the
parties thereunder nor shall it give any party the right to
unilaterally alter or terminate this Agreement or any transaction in
connection thereof, unless the parties mutually agree in writing for
such alteration or termination.
Any rights and obligations of the parties which are expressed in German
marks ("DM") and are not completely fulfilled by the date of the
introduction of the "Euro" as exclusive currency in Germany shall be
considered exchanged by the respective applicable amount in "Euro" in
the amount according to the officially fixed exchange rate of the date
of the exclusive validity of the "Euro" as national currency in
Germany. The same shall apply mutatis mutandis with regard to any
rights and obligations which are expressed in Pound Sterling.
6.5 This Agreement may be executed in two or more counterparts.
6.6.1 This Agreement shall be governed by and construed in accordance with
the laws of the Federal Republic of Germany. Each of the transfer and
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assumption documents, however, referred to in this Agreement shall be
governed by and construed in accordance with the laws of the Country
stated therein, and jurisdiction for any and all disputes arising out
of any such document shall lie as stated therein.
6.6.2 Any dispute, which may arise between the contracting parties out of or
in connection with this Agreement shall be decided by the Arbitration
Tribunal as established in Schedule D.III.Section 5.6. Insofar as the
Arbitration Tribunal pursuant to Schedule D.III.Section 5.6 is
competent pursuant to this Schedule D.III.Section 5.6, the jurisdiction
of the courts of law shall be ousted.
6.7 This writing, together with Exhibits and Schedules hereto, embodies the
entire agreement and understanding between the parties with respect to
this transaction and supersedes all prior discussions, understandings
and agreements concerning the matters covered hereby. This does not
apply to the Confidentiality Agreement dated 20th January 1997 between
Galt Industries and Adolf Robert Hanning and Michael Hanning.
6.8 Following the Closing, the Sellers will at the Buyers' expense execute
and deliver to the Buyers such documents and take such other actions as
the Buyers may reasonably request in order to consummate the
transactions contemplated hereby.
6.9 Neither the Buyers nor the Sellers shall issue any press release or
public announcement concerning this Agreement or the transactions
contemplated hereby without the prior written consent of the other
party hereto, unless required by law.
6.10 The notary fees and the costs for the performance of this Agreement
including transaction taxes (the latter including but not limited to
the real estate transfer tax and the New York transfer tax) shall be
borne by the Buyers. Each contracting party shall bear the costs of its
advisers.
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6.11 Wherever the expression "knowledge of", "awareness of" or a similar
expression is used, the knowledge of the management (Geschaftsfuhrer,
President and/or Board of Directors) is meant.
6.12 If a provision of this Agreement or a provision subsequently added to
this Agreement should be or become invalid in whole or in part or if
this Agreement should contain a contractual gap, this shall not affect
the validity of the remaining provisions. Instead of the invalid
provision, such reasonable provision shall apply which, as far as
legally permissible, best approximates what the parties to this
Agreement have intended. For the purpose of filling a contractual gap
such reasonable provision shall apply which the parties had intended in
view of the purpose of this Agreement if they had considered the issue.
If the invalidity of a provision is caused by the extent of a
performance or time (deadline or date) determined therein, such extent
of performance shall be deemed to be agreed which comes closest to the
originally agreed extent of performance or time (deadline or date)
which is legally permissible.
All schedules mentioned in this deed are those contained in the Reference Deeds
referred to hereafter.
The acting notary presented to the individuals present the original of the
acting notary's notarial deeds of 7th August 1997 - No.: 1721/1997 and 1730/1997
of the roll of deeds - (hereinafter referred to as the "Reference Deeds")
containing agreements and/or documents which shall form part of the Combined
Share and Asset Purchase Agreement contained in this deed.
The individuals present stated that they knew the contents of the Reference
Deeds to which they hereby refer ("verweisen") in the meaning of section 13 a
Notarization Act ("Beurkundungsgesetz").
The individuals present waived their rights having the Reference Deeds read to
them and having them attached to this deed. They stated further, that they
hereby, acting as aforesaid, ratify ("genehmigen") all of the declarations given
and accepted in the Reference Deeds in their name and on their behalf by
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Ms. Nadine Frenzel, Ms. Vanessa Glaser and Ms. Silke Tastarczyk, respectively.
This notarial deed was read out to the persons who appeared in the presence of
the Notary Public, was approved by them and was signed by them and the Notary
Public in their own hands as follows:
/s/ Adolf Robert Hanning
/s/ Michael Hanning
/s/ George T. Votis
/s/ Zimerman, Notary
<PAGE> 1
EXHIBIT 10.10
Page 1 of 3
AMENDMENT AGREEMENT
BY AND BETWEEN
MOLL PLASTICRAFTERS GmbH
(represented by George T. Votis)
G & R GRUNDVERWALTUNG GmbH,
(represented by George T. Votis)
PLASTICRAFTERS LIMITED PARTNERSHIP,
(represented by its general partner Textec Plastics
Inc.
which in turn is represented by George T. Votis)
MOLL PLASTICRAFTERS UK, LTD.,
(represented by George T. Votis)
MR. ADOLF ROBERT HANNING,
MR. MICHAEL HANNING,
MRS. MARIANNE HANNING, BORN BECKER,
(represented by Adolf Robert Hanning and Michael Hanning)
HANNING-KUNSTSTOFFE BETEILIGUNGS GmbH
(represented by George T. Votis)
HANNING-KUNSTSTOFFE GmbH & CO.,
(represented by Hanning-Kunststoffe Beteiligungs GmbH
which in turn is represented by George T. Votis)
"PB" HANNING GmbH
(represented by George T. Votis)
"PB" HANNING GmBH & CO. HANDELSGESELLSCHAFT,
(represented by "PB" Hanning GmbH
which in turn is represented by George T. Votis)
HANNING CORPORATION,
(represented by Adolf Robert Hanning and Michael Hanning)
HANNING PROPERTY ASSOCIATES L.P.
(represented by AMH Management Inc.
which in turn is represented by Adolf Robert Hanning and Michael Hanning)
<PAGE> 2
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and
HANNING PLASTIC LTD.
(represented by Adolf Robert Hanning and Michael Hanning)
WHEREAS, the Parties have on 7th August 1997 entered into the COMBINED SHARE AND
ASSET PURCHASE AGREEMENT, Deed Rolls No. 1734/1997 of Notary Dr. Norbert
Zimmermann, Dusseldorf (the "Agreement").
WHEREAS, the Parties now by mutual agreement wish to amend the Agreement by
entering into this amendment agreement (the "Amendment").
NOW; THEREFORE, the Parties agree as follows:
1. Defined terms used in this Amendment shall have the same meaning as in
the Agreement.
2. The Parties have in Art. B Section 2.4 of the Agreement provided that
"The effectiveness of the transfer of the HK-KG-Interests and
the HK-Shares is subject to the payment of the Closing
Purchase Price and as far as the HK-KG Interests are concerned
subject also to the recording of the transfer to Buyer D1 in
the Commercial Register."
3. The Parties hereby amend Art. B Section 2.4 of the Agreement and hereby
agree that the condition of the recording of the transfer of the
HK-KG-Interests to the Buyer D1 in the Commercial Register shall be
waived with immediate effect. Accordingly,
the effectiveness of the transfer of the HK-KG-Interests to
Buyer
<PAGE> 3
Page 3 of 3
D1 shall not be subject to the recording of the transfer of
the HK-KG-Interests to the Buyer D1 in the Commercial
Register.
4. The remainder of the Agreement shall not be affected by this Amendment.
New York, this ..... day of September 1997
/s/ George T. Votis
- -------------------------------------------
(George T. Votis)
Paderborn, this 23 day of September 1997
/s/ Adolf Robert Hanning
- -------------------------------------------
(Adolf Robert Hanning)
Paderborn, this 23 day of September 1997
/s/ Michael Hanning
- -------------------------------------------
(Michael Hanning)
<PAGE> 1
EXHIBIT 10.11
STOCK PURCHASE AGREEMENT
BETWEEN
ROLAND STAPHANE AND ANGELE STAPHANE
AND
MOLL PLASTICS SARL
DATED OCTOBER 28, 1997
RELATED TO
SALE AND PURCHASE
OF
100% OUTSTANDING SHARES
OF
SOMOMECA INDUSTRIES SA
<PAGE> 2
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") made as of
this 28th day of October, 1997, between MOLL PLASTICS SARL, a corporation
organized under the laws of France, whose head office is located at 38 rue de
Berri 75008 Paris (the "Buyer") and Roland STAPHANE and Angele STAPHANE
(collectively, the "Seller").
W I T N E S S E T H :
WHEREAS, Seller and the minority shareholders as listed in
Exhibit I attached hereto (collectively the "Minority Shareholders") are the
owners of 500,000 shares (the "Shares"), representing 100% of the outstanding
shares, of SOMOMECA INDUSTRIES, a French societe anonyme (the "Company") having
a corporate capital of FF 25,000,000 (twenty-five million French Francs),
divided into 500,000 shares of FF 50 (fifty French Francs) par value per share,
whose head office is located at Z.I. de Crissey - 10, chemin des Barres, Chalon
sur Saone (71100) France and which is registered with the Registry of Commerce
and Companies of Chalon sur Saone under the number B 341 543 031;
WHEREAS, the Company through its direct and indirect
subsidiaries listed in Schedule 2.1.6 attached hereto (the "Subsidiaries")
conducts a business (the "Business") engaged in the manufacture and sale of
injection molded plastic products, tool molds and tools (the "Products") (the
Company and its Subsidiaries shall be referred herein collectively as the "SI
Group");
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, the Shares, for the purchase price and upon the terms and
conditions hereinafter set forth; and
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, the parties hereto agree as follows:
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<PAGE> 3
ARTICLE 1 - PURCHASE AND SALE OF SHARES
1.1 Sale of Shares. Upon the terms and subject to the
conditions hereof, Seller agrees to sell, assign and transfer to Buyer and Buyer
agrees to purchase from Seller, at the Closing (as defined in Section 5.1
hereof), the Shares.
1.2 Purchase Price and Payment.
1.2.1 Share Purchase Price.
Upon the terms and subject to the conditions hereof,
Buyer shall pay to Seller FF 77,000,0 00 (seventy-seven million French Francs)
in cash for the 500,000 Shares (the "Share Purchase Price"), less the Deposit
Amount provided for in Section 1.2.8 be low.
1.2.2 Additional Consideration.
(a) Subject to the provisions set forth below, the
Buyer agrees to pay additional consideration (the "Additional Consideration")
for the Shares in the event that the EBIT (as defined in sub-section (iii)
below) for the period beginning September 1, 1997 and ending August 31, 1998
(the "Earn-out Period") exceeds FF 30,000,000 (thirty million French Francs).
(i) The Additional Consideration,
if any, will be determined as follows:
FF 3,000,000 + [EBIT - FF 30,000,000] = Additional Consideration
(ii) In the event that the EBIT for
the Earn-out Period exceeds FF 40,000,000 (forty million French Francs)
the Additional Consideration shall be FF 13,000,000 (thirteen million
French Francs).
(iii) For the purposes
of this Section 1.2.2(b), EBIT shall mean the earnings of the Company
and its consolidated Subsidiaries (excluding earnings from exceptional
events such as sales of assets), before charges for (1) interest, (2)
taxes, (3) management fees, (4) employee profit sharing, and (5)
redundancies ("EBIT"). Exhibit II hereto contains the list of prin-
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<PAGE> 4
ciples and rules which will be applied to the determination of EBIT.
Other than pursuant to Section 1.2.2(c) below, the Additional
Consideration provided for herein shall be paid by Buyer to Seller
within (30) thirty calendar days of the receipt by Buyer of the audited
consolidated financial statements of the Company for the Earn-out
Period (the "August 31, 1998 Financial Statements"). The August 31,
1998 Financial Statements shall be delivered to the Buyer no later than
on November 30, 1998.
(b) Within five (5) business days of receipt by the
Buyer of the August 31, 1998 Financial Statements, Buyer shall deliver to Seller
(i) a copy of the August 31, 1998 Financial Statements, and (ii) a certificate
(the "Additional Consideration Certificate") setting forth the Additional
Consideration, if any, due to the Seller and the calculations utilized to
determine the Additional Consideration, if any. Seller shall have twenty (20)
calendar days after the delivery to Seller of the August 31, 1998 Financial
Statements and the Additional Consideration Certificate in which to review such
documents. The Additional Consideration Certificate shall be conclusive and
binding on Seller unless Seller notifies Buyer in writing within such twenty
(20) calendar day period of any good faith objection to the Additional Consider-
ation Certificate, specifying in reasonable detail the items and amounts subject
to such objection (the "Earn-out Disputed Items"). If within such twenty (20)
calendar day period Seller notifies Buyer in writing of any such objection, then
Seller and Buyer shall use reasonable efforts during twenty (20) calendar days
after the expiration of such initial twenty (20) calendar day period to resolve
in good faith their differences and agree upon any adjustments to the Additional
Consideration Certificate. Any Earn-out Disputed Items which are not resolved by
the mutual agreement of Buyer and Seller within such twenty (20) calendar day
period shall be submitted for resolution to the Paris office of KPMG, or, if
KPMG shall not accept such mission, to another internationally recognized
independent certified public accounting firm mutually acceptable to Seller and
Buyer (the "Earn-out Independent Accounting Firm"). If within ten (10) calendar
days following the date on which KPMG shall have refused its mission, Seller and
Buyer cannot agree on the choice of such Earn-out Independent Accounting Firm,
either party shall be entitled
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<PAGE> 5
within ten (10) calendar days following such ten (10) calendar day period to
request the designation of an Earn-out Independent Accounting Firm by the
President of the Court of Commerce of Paris. Seller and Buyer shall instruct the
Earn-out Independent Accounting Firm to limit its examination to the unresolved
Earn-out Disputed Items, to resolve any such unresolved Earn-out Disputed Items
affecting the Additional Consideration Certificate, and to use its best efforts
to make its determination thereon within twenty (20) calendar days after its
engagement hereunder. The resolution of any such previously unresolved Earn-out
Disputed Items by such accounting firm shall be made in a writing delivered to
Buyer and Seller and shall be final, conclusive and binding upon Seller and
Buyer in accordance with Articles 1592 and 2044 et seq. of the French Civil
Code. The fees and expenses charged by the Earn-out Independent Accounting Firm
with respect to Earn-out Disputed Items shall be borne equally by Seller and
Buyer.
(c) The Additional Consideration, if any, as finally
determined pursuant to Section 1.2.2 (a) or (b) above, shall be paid by Buyer to
Seller within four (4) business days of its final determination.
1.2.3 Base Balance Sheet. Attached hereto as
Schedule 1.2.3 is the balance sheet of the Company and its consolidated
Subsidiaries as of February 28, 1997 ("Base Balance Sheet"), prepared inter-
nally by the SI Group. The shareholders' equity shown on the Base Balance Sheet
will be referred to herein as the "Base Shareholders' Equity".
1.2.4 Closing Balance Sheet.
(a) As soon as practicable and, in any event, not
later than thirty (30) business days after the Closing, Seller shall deliver to
Buyer a balance sheet of the Company and its consolidated Subsidiaries as at the
end of the Closing Date including notes ("Closing Balance Sheet") setting forth
the shareholders' equity as of the Closing Date. In the event the Closing
occurs on a date which is not the last day of a calendar month, the balance
sheet as of the last day of the immediately preceding calendar month shall be
the Closing Balance Sheet. The joint physical counting of the inventory
provided for in Section 1.2.4(b) below shall be done as of November 30, 1998.
4
<PAGE> 6
(b) The Closing Balance Sheet shall be prepared
internally on a basis consistent with the Base Balance Sheet. Arthur Andersen,
Buyer's independent, certified public accountants, on behalf of Buyer, shall
have access to all work papers in connection with the preparation of the Base
Balance Sheet and the Closing Balance Sheet. Seller and Arthur Andersen, on
behalf of Buyer, shall participate at the Closing Date in a joint physical
counting of the inventory.
1.2.5 Disputes Regarding the Closing Balance Sheet.
(a) Buyer shall have thirty (30) business days after
the delivery to Buyer of the Closing Balance Sheet in which to review such
documents. The Closing Balance Sheet shall be conclusive and binding on Buyer
unless Buyer notifies Seller in writing with in such thirty (30) business day
period of any good faith objection to the Closing Balance Sheet, specifying in
reasonable detail the items and amounts subject to such objection (the
"Disputed Items"), it being agreed that the quantity of the inventory, counted
jointly by the parties in accordance with the provisions of Section 1.2.4 of
this Agreement, shall control and shall not be a Disputed Item. If within such
thirty (30) business day period Buyer notifies Seller in writing of any such
objection, then Buyer and Seller shall use reasonable efforts during twenty (20)
business days after the expiration of such initial thirty (30) business day
period to resolve in good faith their differences and agree upon any adjustments
to the Closing Balance Sheet. Any Disputed Items which are not resolved by the
mutual agreement of Buyer and Seller within such twenty (20) business day period
shall be submitted for resolution to the Paris office of KPMG, or, if KPMG shall
not accept such mission, to another internationally recognized independent
certified public accounting firm mutually acceptable to Seller and Buyer (the
"Independent Accounting Firm"). If within ten (10) business days following the
date on which KPMG shall have refused its mission, Seller and Buyer cannot agree
on the choice of such Independent Accounting Firm, either party shall be
entitled within ten (10) business days following such ten (10) business day
period to request the designation of an Independent Accounting Firm by the
President of the Court of Commerce of Paris. Seller and Buyer shall instruct the
Independent Accounting Firm to limit its examination to the unresolved Disputed
Items, to resolve any such unresolved
5
<PAGE> 7
Disputed Items affecting the Closing Balance Sheet, and to use its best efforts
to make its determination thereon within twenty (20) business days after its
engagement hereunder. The resolution of any such previously unresolved Disputed
Items by such accounting firm shall be made in a writing delivered to Buyer and
Seller and shall be final, conclusive and binding upon Seller and Buyer in
accordance with Articles 1592 and 2044 et seq. of the French Civil Code. The
fees and expenses charged by the Independent Accounting Firm with respect to
Disputed Items shall be borne equally by Seller and Buyer.
(b) The Closing Balance Sheet to which Buyer does
not object, or to which Seller and Buyer agree, or as otherwise conclusively
determined pursuant to Section 1.2.5(a) hereof (such final form of the Closing
Balance Sheet being referred to herein as the "Final Closing Balance Sheet")
shall be used in deter mining the Adjustment Amount referred to in Section 1.2.6
hereof. The shareholders' equity shown on the Final Closing Balance Sheet shall
be referred to herein as the "Closing Shareholders' Equity".
1.2.6 Determination of any Adjustment Amount. If the
Closing Shareholders' Equity of the SI Group is less than the Base Shareholders'
Equity of the SI Group, Seller shall pay the difference to Buyer on a franc for
franc basis within four (4) business days. The amount of this post-closing
adjustment, if any, shall be referred to herein as the "Adjustment Amount".
1.2.7 Method of Payment. All cash payments under
this Agreement shall be made to the receiving party by bank wire transfer of
the required amount in immediately available funds in an account of the
receiving party designated by it for such purpose no later than four (4)
business days before the date on which such payment must be made.
1.2.8 Deposit. On the date hereof or promptly after
the execution hereof, Buyer has deposited or shall deposit in escrow in an
account with Credit Agricole - Indosuez (the "Escrow Agent") French FF 5,000,000
(five million French Francs) or the equivalent thereof in United States dollars
(the "Deposit Amount") subject to an escrow agreement substantially in the
form attached hereto as Exhibit III (the "Escrow Agreement"). The Escrow Agent
shall be entitled to invest the Deposit Amount in OPCVM's managed
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<PAGE> 8
by the Escrow Agent. The flat fee payable to the Escrow Agent shall be borne
equally by the parties hereto. The Deposit Amount will be disbursed as follows:
(a) If the Closing shall occur on or before December
15, 1997, the Deposit Amount plus capital gains net of taxes upon disposition of
OPCVM' s, if any, will be paid to the Seller and the Share Purchase Price will
be reduced accordingly.
(b) If the Closing does not occur on or before
December 15, 1997 as a result of the failure of the Seller to satisfy the
conditions to the obligations of the Buyer in this Agreement, the Deposit
Amount plus capital gains upon disposition of OPCVM's, if any, will be paid to
the Buyer; provided, that in the event the Closing does not occur as a result of
the failure the satisfy the condition provided for in Section 4.1.4 hereof, the
Deposit Amount and capital gains upon disposition of OPCVM's, if any, shall be
paid in equal parts to the Seller and to the buyer.
(c) If the Closing does not occur on or before
December 15, 1997 as a result of the failure of the Buyer to satisfy the
conditions to the obligations of the Seller in this Agreement the Deposit
Amount plus capital gains upon disposition of OPCVM's, if any, will be paid to
the Seller.
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Seller. Except in the
case of representations and warranties made as of a specific date, which shall
be deemed made as of such date, Seller represents and warrants to Buyer, as of
the date hereof and as of the Closing, as follows:
2.1.1 Status.
(a) Seller. Roland STAPHANE and Angele STAPHANE are
French nationals married with a common estate settlement.
(b) Company and Subsidiaries. The Company and the
Subsidiaries are corporations duly organized and validly existing under the laws
of France or Portugal, as the case may be, and have all requisite corporate
power and authority to own the
7
<PAGE> 9
properties and carry on the Business as it is now being conducted and to own,
use, lease and operate the properties and assets of the Business owned, used,
leased and operated by or in connection with the Business. The copy of the
Company's and each Subsidiaries' statutes (articles and by-laws) as of the date
hereof, delivered to Buyer on the date hereof, is complete and correct and
presently in effect.
2.1.2 Share Capital.
(a) The share capital of the Company is FF
25,000,000 (twenty-five million French Francs), consisting of 500,000 shares, of
FF 50 (fifty French Francs) par value per share.
(b) The Shares of the Company and the shares of its
Subsidiaries are validly issued, fully paid and are not subject to any rights of
first refusal, buy-out or similar rights, calls or assessments. There is no
outstanding security convertible into or exchangeable for capital stock of the
Company or any of its Subsidiaries. There are no (i) options, war rants or other
rights to purchase or subscribe to capital stock of the Company or any of its
Subsidiaries, (ii) contracts, commitments, agreements, under standings or
arrangements of any kind relating to the issuance or disposition of capital
stock of the Company or any of its Subsidiaries or the issuance or disposition
of any security convertible into or exchange able for (A) capital stock of the
Company or any of its Subsidiaries, or (B) any option, warrant or right to
purchase or subscribe to capital stock of the Company or any of its
Subsidiaries. None of the Shares of the Company or the shares any of its
Subsidiaries were issued in violation of the preemptive rights of any
shareholder.
2.1.3 Title to Shares. Except as set forth in
Schedule 2.1.3, Seller has good and market able title to the Shares and to all
of the rights afforded thereby, free of all encumbrances, security interests,
charges, pledges, options, restrictions on transfer, voting trusts, voting
agreements, guarantees and any other adverse claims of any kind (the "Encum-
brances"). Except as set forth in Schedule 2.1.3, the Company has good and
marketable title to the shares of its direct and indirect Subsidiaries and to
all of the rights afforded thereby, free of Encumbrances.
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<PAGE> 10
2.1.4 Authority.
(a) Seller has full power and authority to enter
into, execute and deliver this Agreement and the other documents contemplated
hereby and to carry out the transactions contemplated hereby, including without
limitation, the transfer, assignment and delivery of the Shares as provided in
this Agreement, and such delivery will convey to Buyer good and marketable
title to the Shares free of any Encumbrances. This Agreement and the other
agreements executed in connection with this transaction constitute the valid and
binding obligations of Seller, enforceable in accordance with their respective
terms.
(b) Seller represents that the Minority Shareholders
have full power and authority to enter into, execute and deliver the stock
powers and all other documents necessary to transfer, assign and de liver their
Shares to Seller and such delivery will convey to Seller good and marketable
title to the Shares free of any Encumbrances. All such documents constitute the
valid and binding obligations of the Minority Shareholders, enforceable in
accordance with their respective terms.
(c) Seller represents that the minority shareholders
of the Subsidiaries have full power and authority to enter into, execute and
deliver the stock powers and all other documents necessary to transfer, assign
and deliver their shares to the Company and such delivery will convey to the
Company good and marketable title to the shares free of any Encumbrances. All
such documents constitute the valid and binding obligations of the minority
shareholders, enforceable in accordance with their respective terms.
2.1.5 Financial Statements.
(a) The Audited Consolidated Financial Statements
(as defined in Section 2.1.5(f) hereof) as of August 31, 1996 attached hereto as
Schedule 2.1.5( a), have been prepared in accordance with French generally
accepted accounting principles ("French GAAP") on a basis consistent with prior
years, and are true, complete and accurate and fairly present the financial
position of the SI Group as of such date and have been certified without
qualification by the Cabinet Amyot et Associes, the SI Group's independent
accountants, whose reports thereon are included therewith.
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(b) The Audited Financial Statements (as defined in
Section 2.1.5(h) hereof) as of August 31, 1994, 1995 and 1996 attached hereto as
Schedule 2.1.5(b), have been prepared in accordance with French GAAP on a basis
consistent with prior years, and are true, complete and accurate and fairly
present the financial position of the respective entities as of such date and
have been certified without qualification by the Cabinet Amyot et Associes, the
SI Group's independent accountants, whose reports thereon are included
therewith.
(c) The Unaudited Consolidated Financial Statements
(as defined in Section 2.1.5(g) hereof) as of February 28, 1997 and as of the
Closing Date have been or will be prepared in accordance with French GAAP
subject for specific accounting principles set forth in Schedule 2.1.5(c), and
are or will be true, complete and accurate and fairly present or will fairly
present the financial position of the SI Group as of such date.
(d) There are no liabilities of the SI Group which
were not fully reflected or reserved against in the Unaudited Consolidated
Financial Statements as of February 28, 1997, except as set forth in Schedule
2.1.5(d) hereto.
(e) Neither the Company nor any member of the SI
Group has suspended its payments nor is it in judicial liquidation, receivership
or moratorium; nor has it made an amicable settlement with its creditors
(reglement amiable); nor is it in judicial reorganization (redressement
judiciaire) or judicial liquidation (liquidation judiciaire); nor has it been
the object of any proceedings for the reorganization or collective discharge of
its liabilities; nor is it under the threat of any such proceedings.
(f) As used in this Agreement, "Audited Consolidated
Financial Statements" means the balance sheet, income statement and statement
of changes in financial position of the Company and its consolidated
Subsidiaries, together with the notes and annexes thereto, prepared in
accordance with French GAAP in effect on the date thereof and applied
consistently with prior periods as certified by SI Group's independent
accountants.
(g) As used in this Agreement, "Unaudited
Consolidated Financial Statements" means the
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<PAGE> 12
balance sheet, the income statement and statement of changes in financial
position of the Company and its consolidated Subsidiaries, together with the
notes thereto, prepared or to be prepared in accordance with French GAAP and the
principles disclosed in Schedule 2.1.5(c) in effect on the date thereof and
applied consistently with prior periods, except for normally recurring year-end
adjustments, which adjustments are not material either individually or in the
aggregate.
(h) As used in this Agreement, "Audited Financial
Statements" means the balance sheet, in come statement and statement of changes
in financial position of, separately, each of the Company and its Subsidiaries,
together with the notes and annexes thereto, prepared in accordance with French
GAAP in effect on the date thereof and applied consistently with prior periods
as certified by SI Group's independent accountants.
2.1.6 Subsidiaries. Except as set forth in Schedule
2.1.6 hereto, the Company has no subsidiaries and does not directly or
indirectly own any capital stock of or equity interests in any corporation,
partnership, or other person. Except as set forth in Schedule 2.1.6 hereto, the
Company is not a member of or a participant in any partnership, joint venture,
Groupement d'Interet Economique or similar enterprise.
2.1.7 Actions Since February 28, 1997. Except as set
forth in Schedule 2.1.7, since February 28, 1997, the SI Group has conducted the
Business only in accordance with its ordinary and usual course, consistent with
its past practice, and no member of the SI Group has:
(a) created, incurred or assumed any long-term debt
(including obligations in respect of capital leases), or created, incurred,
assumed, maintained or permitted to exist any short-term debt other than in its
ordinary and usual course of business, consistent with its past practice;
(b) assumed, guaranteed, endorsed or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person, other than in its ordinary and usual course
of business, consistent with its past practice;
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(c) permitted or allowed any Real Property (as
defined in Section 2.1.9 hereof) or any Movable Property (as defined in Section
2.1.10 hereof) to be mortgaged, pledged or subjected to any other Encumbrance
except for any Permitted Encumbrances (as defined in Section 8.11(f) hereof);
(d) sold, transferred or otherwise disposed of, or
agreed to sell, transfer or otherwise dispose of any of its assets (other than
its inventory);
(e) acquired any other business or entered into any
licensing arrangement or joint venture pertaining to the operation of the
Business;
(f) entered into other agreements, commitments or
contracts, except agreements, commitments or contracts made in the ordinary and
usual course of business, consistent with its past practice and in an amount not
to exceed FF 50,000 (fifty thou sand French Francs) individually;
(g) entered into any transaction with Seller or any
affiliate of Seller (other than another member of the SI Group), other than in
the ordinary and usual course of business, consistent with its past practice;
(h) declared, set aside or paid any dividend or
other distribution in kind in respect of the Shares;
(i) redeemed or otherwise acquired any Shares;
(j) made any other payment to Seller or any of its
affiliates (other than another member of the SI Group);
(k) made or committed to make any capital
expenditures in an amount greater than FF 50,000 (fifty thousand French Francs)
per item;
(l) suffered any damage or destruction, whether or
not covered by insurance, adversely affecting the Business;
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<PAGE> 14
(m) satisfied and discharged any Encumbrances, or
paid any obligation or liability other than current liabilities incurred in the
ordinary and usual course of business, consistent with its past practice;
(n) sold, assigned or granted rights under any
patent, trade name, trademark or copyright, or any application therefor, or any
trade secrets or designs for any products currently manufactured or services
provided by the Business;
(o) knowingly waived any rights of material value;
(p) made any general wage or salary increase to
Employees (as defined in Section 2.1.19 hereof) (except for annual increases and
annual bonuses in the ordinary and usual course of business, consistent with
its past practice); made any increase in compensation not consistent with its
past practice payable or to become payable to any of the cadres of the SI Group;
made or suffered any termination of employment of any of the Key Employees (as
defined in Section 3.1.9 hereof), or received notice of any expression or
intention by any of the Key Employees to terminate his or her employment;
(q) become involved or threatened with any labor
dispute which has had or could have an ad verse effect on the Business;
(r) suffered any casualty loss not in the ordinary
and usual course of business, consistent with its past practice;
(s) amended the articles of incorporation or by-
laws, entered into any agreement or merger, consolidation, or reorganization,
dissolved or entered into any plan of liquidation or dissolution, purchased or
issued any shares or other securities, or entered into any commitments or
arrangement for the voting, purchase, redemption or issuance of shares of
capital stock or other securities, made any change in the number of issued
shares of its capital stock, granted any right or option or made any commitment
or agreement relating to its capital stock, or acquired or created any
subsidiary;
(t) made or suffered any cancellation or termination
of any insurance policy; or
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<PAGE> 15
(u) experienced any other event or condition of any
character which is, or with the lapse of time or occurrence of such event or
condition could be, materially adverse to the financial condition, business,
assets, results of operations or prospects of the Business.
2.1.8 Industrial Property.
(a) Except as set forth in Schedule 2.1.8(a), the SI
Group has no Industrial Property (de fined in Section 8.11(h) below). The
Industrial Property listed in Schedule 2.1.8(a) is hereinafter referred to as
the "SI Group Industrial Property".
(b) The SI Group has a valid contractual right to
use the SI Group Industrial Property disclosed in paragraph (a) above; except as
set forth in Schedule 2.1.8(b), all of the SI Group Industrial Property is held
free and clear of any Encumbrances.
(c) The SI Group Industrial Property constitutes all
of the Industrial Property used in the conduct of the Business, and is
sufficient for each member of the SI Group on a stand-alone basis to conduct
its Business, as heretofore conducted. No registration or application therefor
has lapsed, expired or been abandoned or cancelled.
(d) No SI Group Industrial Property is the subject
of any pending or threatened opposition, cancellation, interference or similar
proceeding be fore any registration authority, and there are no claims pending,
or threatened (nor does Seller know of any valid basis for any claim), before
any court or registration office challenging (i) the registrability, validity,
renewal or enforceability of the SI Group Industrial Property, (ii) the SI
Group's owner ship rights therein (with respect to owned SI Group Industrial
Property), or (iii) the SI Group's use of the SI Group Industrial Property on
the grounds of infringement upon the proprietary rights of a third party. The
SI Group's use of the SI Group Industrial Property has not and does not infringe
upon the Industrial Property rights of any third party and there are no
infringements of the SI Group Industrial Property by any third party. The
consummation of the transactions contemplated by this Agreement by Seller will
not result in the loss, termination or impairment of any of the SI Group
Industrial Property. Except as set forth in Schedule 2.1.8(d), the SI Group is
not a
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party to any agreement by which it agrees to maintain the secrecy or
confidentiality of any SI Group Industrial Property.
2.1.9 Real Property; Leases of Real Property.
(a) Schedule 2.1.9(a) hereto contains a full
description of all real property (including plants, buildings, structures and
fixtures) used in the operation of the Business and which is owned by the SI
Group (the "Owned Real Property") or leased or used by the SI Group (the "Leased
Real Property") (the Owned Real Property and the Leased Real Property are
collectively referred to herein as the "Real Property").
(b) There are no contracts or agreements with any
person with regard to the sale or granting by any member of the SI Group of any
interest in the Owned Real Property. The SI Group has all easements and rights
of ingress and egress necessary for maintenance of utilities and services and
for all operations conducted on the Real Property.
(c) The copies of all documents relating to title
(including thirty year root of title (origine de propriete trentenaire)), or
rental (including leasing agreements (credit-bail)), of Real Property which
will be delivered to Buyer at the Closing will be valid, complete, correct and
in full force and effect.
(d) Except as disclosed in Schedule 2.1.18 (b) and
as set forth in the Environmental Report (as defined in Section 2.1.18(b) below
and contained in Schedule 2.1.18 (b)), all of the Real Property is in good
working condition with no known (i) required maintenance and repairs, and (ii)
material defects, and is adequate for the uses to which it is being put, subject
to routine maintenance and repairs which are not material in nature or cost,
provided that normal wear and tear is excepted. Neither Seller nor any member of
the SI Group has received any notification that it is in violation of any
applicable regulation and no such violation exists, with respect to the Real
Property.
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2.1.10 Movable Property.
(a) Schedule 2.1.10(a)(i) contains a list of all
assets used by the SI Group in the conduct of the Business as heretofore
conducted including all movable property (the "Movable Property"). Schedule
2.1.10(a)(ii) contains the list of all items of Movable Property which are
excluded from the indemnification by Seller under the provision of Section 6
for breach of representations and warranties made by Seller in Section
2.1.10(c) below.
(b) All of the Movable Property is sufficient to
conduct the business of the SI Group on a stand-alone basis.
(c) Except for items of Movable Property set forth
in Schedule 2.1.10(a)(ii) above, all of the Movable Property is in good working
condition with no known material defects and is adequate for the uses to which
it is being put, subject to routine maintenance and repairs which are not
material in nature or cost, provided that normal wear and tear is excepted. None
of such Movable Property is in need of maintenance or repairs except ordinary
routine maintenance and repairs which are not material in nature or cost. With
respect to each item of Movable Property, neither Seller nor any member of the
SI Group has received any notification that it is in violation of any applicable
regulation and, with respect to each piece of Movable Property, no such
violation exists.
2.1.11 Title to Property. Except as set forth in
Schedule 2.1.11, the SI Group has good and marketable title pertaining to all
Owned Real Property (including the origine de propriete trentenaire) and to all
Movable Property purported to be owned by it, subject to no Encumbrances, except
for Permitted Encumbrances. Except as set forth in Schedule 2.1.11, the
Business is not subject to a nantissement de fonds de commerce or equivalent
lien in any jurisdiction.
2.1.12 Contracts and Commitments.
Except as set forth in Schedule 2.1.12:
(a) All contracts, leases and agreements entered
into by any member of the SI Group pertaining to the operation of the Business
(the "Contracts") are valid, in full force and effect, and enforceable in all
respects by the SI Group. The SI
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Group has performed all of its material obligations required to be performed
thereunder, and no member of the SI Group is in default or violation thereof.
(b) There are no contracts with respect to which the
performance of this Agreement by Seller will constitute a default or an event of
acceleration or will give the other contracting party a right to terminate,
renegotiate or amend such contracts.
(c) There are no outstanding purchase contracts or
purchase commitments of any member of the SI Group which involve payments by any
member of the SI Group of more than FF 50,000 (fifty thousand French Francs)
individually or which continue for a period of more than twelve (12) months.
(d) There are no outstanding sales orders, contracts
or commitments of any member of the SI Group which involve payment to any member
of the SI Group of more than FF 50,000 (fifty thousand French Francs)
individually or which continue for a period of more than twelve (12) months.
(e) There are no outstanding contracts, agreements
or arrangements with (i) officers, Employees, agents, consultants, advisors,
salesmen or sales representatives of the SI Group providing for annual payments
in excess of FF 50,000 (fifty thousand French Francs) or (ii) sales or other
agents, franchisees, distributors or dealers of the SI Group, in each case,
which are not cancellable by the SI Group on notice of not longer than ninety
(90) calendar days without liability, penalty or premium (imposed by contract)
or which provide for the payment of any bonus or commission based on sales or
earnings.
(f) No member of the SI Group is in default under
any contract made or obligation owed by it in connection with the Business.
(g) No member of the SI Group is restricted from
carrying on the Business anywhere in the world.
2.1.13 Inventory. All of the inventories of the SI
Group as of the Closing Date (the "Inventories") except for inventory for which
there is a specific reserve on the Closing Balance Sheet, will consist of a
quality and quantity usable and salable
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in the ordinary and usual course of business consistent with past practice and
with the specifications for such Inventories as described in the SI Group's
product sales documentation, and will be owned by the SI Group. The Inventories
consist of (i) raw materials; (ii) on-going works; (iii) semi-finished products,
and (iv) finished products. The Inventories of the SI Group consisting of
finished products are saleable within a period of twelve (12) months.
2.1.14 Receivables. All accounts receivable of the
SI Group as of the Closing Date (the "Receivables") will represent sales
actually made in the ordinary and usual course of business, consistent with past
practice and will represent the legal, valid and binding obligations of the
obligors thereon. Except as set forth in Schedule 2.1.14, ninety-five percent
(95%) of the Receivables shown in the Closing Balance Sheet will be collectable
within one hundred eighty (180) calendar days of the Closing Date. One hundred
percent (100%) of the Receivables shown in the Closing Balance Sheet less any
specific reserve therefor will be collectable within nine (9) months of the
Closing Date.
2.1.15 Litigation. Except as set forth in Schedule
2.1.15, there is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation or investigation, proceeding or demand
letter pending or threatened, against any member of the SI Group, nor is there
any such action against an officer, director or senior manager of any member of
the SI Group, relating to the Business. No member of the SI Group has received
any notice that it is subject to any judgement, order or decree, entered in any
lawsuit or proceeding which is likely to affect its ability to conduct the
Business in all respects as presently being conducted.
2.1.16 No Broker. There is no broker, finder or
financial advisor other than Jean-Jacques de Boissieu of CNPA (Centre National
de Partenariat et d'Acquisition), who is acting or has acted on Seller's behalf,
nor is there any person, firm or corporation entitled to receive any brokerage,
commission or finder's or financial advisory fee from Seller, in connection
with the transactions contemplated by this Agreement. Any fees and expenses for
any such broker, including fees owed to Jean-Jacques de Boissieu of CNPA
(Centre National de Partenariat et d'Acquisition), will be paid by Seller.
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2.1.17 Governmental Permits; Compliance with Laws.
(a) The operation of the Business as heretofore
conducted does not require any permits, licenses or authorizations (other than
Environmental Permits, as defined in Section 2.1.18(a)).
(b) Each member of the SI Group is in all material
respects in compliance with all applicable laws, regulations, orders and
permits of all authorities or agencies applicable to the Business (including
without limitation, those relating to anti trust and trade regulation, health
and safety, labor, employment, and zoning and building codes, but excluding
Environmental Laws, as defined in Section 6.10(b) and referred to specifically
in Section 2.1.18). No notices have been received by any member of the SI Group
relating to termination or cancellation of, and no member of the SI Group is in
violation of the terms and conditions of, any such permits or authorizations. No
member of the SI Group has received any complaint, citation or notice of
violation from any Governmental Entity (as defined in Section 8.11(g) hereof)
and none is threatened, alleging that any member of SI Group has violated any
laws or regulations of Governmental Entities applicable to the Business other
than Environmental Laws.
2.1.18 Environmental Matters. The Seller and the
Buyer acknowledge that the purchase price for the Shares has been reduced by FF
5,000,000 (five million French Francs) in order to exempt Seller from liability
for environmental issues, except as specifically provided herein.
(a) Except as set forth in Schedule 2.1.18(a) or
Schedule 2.1.18(b), neither the Seller, nor to the best of Seller's knowledge
the Company, has received any written communication indicating that (i) any
member of the SI Group has failed to obtain any permit, license or other
authorization ("Environmental Permits") which are required under the
Environmental Laws for the ownership and use of Real Property and the operation
of the Business; (ii) any of such Environmental Permits have ceased to be in
effect; (iii) an appeal or any other action is pending to revoke any such
Environmental Permit; or (iv) any member of the SI Group has failed to be in
full compliance with all terms and conditions of any such Environmental Permit.
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(b) Schedule 2.1.18(b) hereto contains an
environmental audit report prepared for Buyer (the "Environmental Report"). The
Environmental Report contains:
(i) an accurate and complete list
of Environmental Permits necessary to the conduct of the Business;
(ii) an accurate and complete list
of Hazardous Substances (as defined in Section 6.10(c) hereof) used or
generated by the SI Group;
(iii) an accurate and complete
description of the waste disposal practices of the SI Group,
including the names of owners or operators of each location to which
wastes have been sent for treatment, storage or disposal;
(iv) an accurate and complete
description of material environmental instructions by Governmental
Entities received by the SI Group, with respect to the Business;
(v) an accurate and complete
description of material environmental risks and hazards tied to the
Business as required by Law no 76-663 of July 19, 1976 on
regulated facilities (installations classees); and
(vi) except as otherwise set forth
in Schedule 2.1.18(b)(vi), an accurate and complete description of any
underground storage tanks, asbestos, equipment using PCBs, underground
injection wells, or septic tanks in which process wastewater or any
Hazardous Substances have been disposed.
(c) Seller has heretofore delivered to Buyer
accurate and complete copies of all environmental studies made in the last five
years relating to the Real Property or any other property or facility previously
owned, operated or leased by the SI Group.
(d) Neither the Seller, nor to the best of the
Seller's knowledge the Company, has received any written communication
indicating that (i)
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there is any pending or threatened, claim, lawsuit, or administrative proceeding
against any member of the SI Group with respect to the Business under any
Environmental Law; (ii) there is a violation of any applicable Environmental
Law; (iii) that any member of the SI Group may otherwise be liable under any
applicable Environmental Law, including, but not limited to, a Cleanup (as
defined in Section 6.10(a) hereof), which violation or liability is unresolved;
or (iv) there has been any release, spill or discharge of Hazardous Substances
on or underneath any of the Real Property, that would be reasonably likely to
have a material adverse effect on the Business.
2.1.19 Employees; Employee Benefits; Health and
Safety.
(a) Seller has heretofore delivered to Buyer an
accurate and complete (i) list identifying by age, seniority and classification
the employees of each member of the SI Group (the "Employees") as of the date
hereof, (ii) schedule of remuneration by classification as of the date hereof,
(iii) description of all the standard employment practices and policies and
(iv) summary of all important modifications since the Base Balance Sheet, in the
general level of compensation paid to the Employees.
(b) Schedule 2.1.19(b) contains an accurate and
complete description of each of the non-statutory employee benefits provided to
Employees (in cash or in kind). Except as set forth in Schedule 2.1.19(b)
hereto, there are no pension or retirement benefits, bonus, profit sharing,
stock purchase or stock option plans, company savings plans or employee funds of
each member of the SI Group beyond mandatory statutory or regulatory obligations
(collectively, the "Benefit Plans") with respect to which each member of the SI
Group has or could incur any obligation or liability or which are maintained,
contributed to or sponsored by each member of the SI Group for the benefit of
any current or former employee, officer or director of each member of the SI
Group. Each member of the SI Group is in compliance with all statutory or
regulatory requirements with respect to the Employees. Except as set forth in
Schedule 2.1.19(b) hereto, all Benefit Plans are fully funded or amounts due
pursuant thereto are fully insured or adequate resources there for have been
made in the Base Balance Sheet, in accordance with French GAAP, or will be made
on the Closing Balance Sheet. All payments of social securi-
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ty contributions and contributions to the various social and retirement and
related organizations required to be made by each member of the SI Group have
been duly made. Each member of the SI Group has duly and timely filed all
returns with the social security and retirement and related organizations and
authorities, such returns have been accurately prepared, and no member of the
SI Group is, or may become, liable for any adjustment or penalty related to any
such filings or on account of any payments made for any past period.
(c) Except as set forth in Schedule 2.1.19(c), with
respect to the Employees:
(i) there are no agreements or
arrangements with any present or former Employees that are not in the
ordinary and usual course of business, consistent with past
practice;
(ii) there is no Employee whose
termination would require payment by each member of the SI Group of an
amount exceeding that provided by law or by the applicable collective
bargaining agreement or internal collective workers' agreements;
(iii) there is no Employee whose
compensation or other benefits are based on the profits, results or
turn over of the SI Group, or any member of the SI Group, in any manner
exceeding that provided by law or the applicable collective
bargaining agreement or internal collective workers' agreements;
(iv) there is no Employee who has
the right to employment benefits or rights or pensions or other
retirement benefits exceeding those provided by law or the applicable
collective bargaining agreement or internal collective labor
agreements; and
(v) there is no Employee who is or
may be entitled to any compensation as a result of the consummation of
the transactions contemplated by this Agreement.
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(d) Except as set forth in Schedule 2.1.19(d), there
is no lawsuit, arbitration or proceeding pending or threatened, against any
member of the SI Group, in connection with any Employee or former employee.
(e) Each member of the SI Group is in compliance
with all health and safety laws and regulations, including without limitation,
work councils, workers representatives and collective bargaining agreements,
issued by any and all Governmental Entities, and there are no worker safety and
health reports, studies, investigations and audits which identify material
liabilities with respect to the Business.
(f) Seller has heretofore delivered to Buyer an
accurate and complete copy of all collective bargaining agreements, trade union
agreements, internal collective labor agreements and company-wide agreements
applicable to each member of the SI Group as well as all trade-unions
represented in the SI Group.
2.1.20 Loans to or from Directors, Officers and
Employees. Except as set forth in Schedule 2.1.20, there are no outstanding
material loans or open account advances payable to any member of the SI Group by
any current or former officer, director, or employee of any member of the SI
Group, and there are no guarantees, endorsements or other obligations of any
member of the SI Group with respect to any indebtedness, obligation or
liability of any of the foregoing persons. There are no outstanding loans or
open account advances payable by any member of the SI Group to any current or
former officer, director, or employee of any member of the SI Group.
2.1.21 Taxes.
(a) Each member of the SI Group has, within the time
and in the manner prescribed by law:
(i) duly filed with the appropriate
taxing authorities all Tax Returns (as defined in Section 2.1.21(g)
hereof) required to be filed by or with respect to such member of the
SI Group or with respect to or attributable to the Business or the
assets of such member of the SI Group,
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and all such Tax Returns are accurate, correct and complete in all
material respects;
(ii) timely paid in full or has
made adequate provision on the Base Balance Sheet for all Taxes (as
defined in Section 2.1.21(f) hereof) shown to be due on such Tax
Returns or otherwise due and payable with respect to the SI Group or
the Business or the assets of the SI Group; and
(iii) complied with all applicable
laws, rules and regulations relating to the withholding of Taxes and
the payment of withheld Taxes.
(b) The Tax Returns referred to in paragraph (a)
above are not currently the subject of any audit or other proceeding by a tax
administration or any local or foreign governmental authority. There are no
outstanding waivers or comparable consents or extensions given by any member of
the SI Group regarding the application of the statute of limitations with
respect to such Tax Returns. No such audit or proceeding is threatened against
any member of the SI Group.
(c) There are no Encumbrances for Taxes upon the
assets of any member of the SI Group.
(d) Neither Seller nor any member of the SI Group
has received any notice of deficiency or assessment from any national, local or
foreign governmental authority with respect to any liability for Taxes of any
member of the SI Group or with respect to the Business or the assets of any
member of the SI Group, which liability has not been fully paid or finally
settled. No administrative, judicial or other proceeding is presently pending
with respect to any Taxes or Tax Returns of any member of the SI Group or with
respect to the Business or the assets of any member of the SI Group.
(e) No member of the SI Group is a party to any
written agreement providing for the allocation or sharing of Taxes, and no
member of the SI Group shall have any continuing obligations or liabilities
under any such agreement after the Closing Date.
(f) For purposes of this Agreement, the term "Tax"
or "Taxes" shall mean all direct or
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<PAGE> 26
indirect taxes, charges, fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, social security, unemployment, excise, estimated, severance,
property or other taxes, duties, fees, assessments or charges of any kind
whatsoever, including any interest, penalties or additional amounts attributable
thereto imposed by any national, local or foreign governmental authority.
(g) For purposes of this Agreement, the term "Tax
Return" shall mean any return, report, information return, statement,
declaration or other document (including any related or supporting information)
filed or required to be filed with any national, local or foreign governmental
authority in connection with any determination, assessment or collection of any
Tax or other administration of any laws, regulations or administrative
requirements.
2.1.22 Restrictions and Authorizations. Except as
set forth in Schedule 2.1.22, the consummation of the transactions contemplated
by this Agreement and the other documents contemplated hereby or thereby will
not result in a breach of, or constitute a default under, or give rise to a
right of termination of, any Contract, permit or authorization to which any
member of the SI Group is subject or a party, or violate any of the provisions
of the by-laws of any member of the SI Group, and no approval, consent, or
authorization, or filing or registration with, any Governmental Entity, or any
third party with respect to the Contracts, is required on the part of Seller or
any member of the SI Group in connection with the execution, delivery and
performance of this Agreement and the other documents contemplated hereby and
thereby. Contracts, permits or authorizations listed in Schedule 2.1.22 shall be
hereinafter referred to as "Specific Contracts".
2.1.23 Powers of Attorney; Bank Accounts.
(a) No person, corporation, firm, association or
business entity holds a proxy, general or special power of attorney, or other
similar instrument from any member of the SI Group.
(b) Schedule 2.1.23(b) hereto identifies each bank
or other financial institution at which
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any member of the SI Group has an account and the names of all persons having
signature authority over any such account.
2.1.24 Product Liability.
Except as set forth in Schedule 2.1.24:
(a) Since 1990, there have been no civil, criminal
or administrative actions, suits, notices of violation, notices of investigation
or notices of proceedings which were or are pending or threatened, and there
have not been any written demands or claims (and since 1990 there have been no
oral demands or claims) against any member of the SI Group, and there have been
no oral demands or claims made to agents acting on behalf of the SI Group, in
each case relating to any alleged hazard or alleged defect in design,
manufacture, materials or workmanship, including, without limitation, any
alleged failure to warn or alleged breach of express or implied warranties or
representations, relating to any product manufactured, distributed, or sold by
the SI Group.
(b) Since 1990, there have not been any product
recalls, reworks, or post-sale warnings (the "Recalls") issued by any member of
the SI Group and, there have been no oral Recalls issued by agents acting on
behalf of any member of the SI Group, relating to any product designed,
manufactured, distributed, or sold by the SI Group or any investigation or
consideration of, or decision concerning, whether or not to undertake any such
Recall.
2.1.25 Insurance. The SI Group maintains insurance
policies equal to or in excess of the average coverage for companies operating
in a similar line of business and in a similar geographical location. All
insurance policies currently maintained by the SI Group and which cover
properties, assets, businesses and operations of the SI Group are valid and in
full force as of the date of this Agreement and shall remain in effect in
accordance with their terms. All current premiums have been paid. No member of
the SI Group is in breach in any material respect of the terms of any such
policies and has timely served proper and accurate notice of all events or
information required in connection with such policies in a timely manner. The
consummation of the transactions contemplated by this Agreement shall not
constitute a default or an event of acceleration or otherwise entitle
26
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insurers to terminate, renegotiate or amend the current insurance policies.
2.2 Representations and Warranties of Buyer. Except in the
case of representations and warranties made as of a specific date, which shall
be deemed made as of such date, Buyer represents and warrants to seller as of
the date hereof and as of the Closing Date, as follows:
2.2.1 Corporate Status. Buyer is a corporation duly
organized and validly existing under the laws of France, and has all requisite
corporate power to own its properties and carry on its business as now being
conducted.
2.2.2 Execution and Effect of Agreement. Buyer has
the full corporate power and authority to enter into this Agreement and the
other documents contemplated hereby. The execution and delivery of this
Agreement and the other documents contemplated hereby and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
the necessary corporate action of Buyer, and no other proceedings will be
necessary to authorize this Agreement or the other documents contemplated hereby
or the consummation of the transactions contemplated hereby or thereby, and this
Agreement constitutes the valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms.
2.2.3 No Lawsuits; Consents. There is no lawsuit,
arbitration or proceeding pending or, to the knowledge of Buyer, threatened
against Buyer which might prevent the consummation of any of the transactions
contemplated by this Agreement, and no approval or authorization of any
Governmental Entity or of any third party is required in connection with the
execution, delivery and performance by Buyer of this Agreement and the other
documents contemplated hereby and thereby.
2.2.4 No Broker. There is no broker, finder or
financial advisor, acting or who has acted on Buyer's behalf, nor is there any
person, firm or corporation entitled to receive any brokerage or finder's or
financial advisory fee from any party other than Buyer in connection with the
transactions contemplated by this Agreement.
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ARTICLE 3 - COVENANTS
3.1 Covenants of Seller.
3.1.1 Business in Ordinary Course. Except as
contemplated by this Agreement, during the period from the date hereof to the
Closing, Seller shall cause each member of the SI Group to conduct the Business
in accordance with the ordinary and usual course of business, consistent with
past practice, (specifically including, without limitation, the collection of
"accounts receivable" and the payment of "accounts payable"). Without limiting
the generality of the foregoing and except as otherwise expressly provided in
this Agreement, during the period from the date hereof to the Closing, Seller
covenants that no member of the SI Group will take, without the prior written
consent of Buyer, any exceptional action, including, without limitation, an
action which will cause the representations and warranties contained in Section
2.1.7 hereof not to be true and correct as of the Closing.
3.1.2 Perform Contracts. Between the date hereof and
the Closing, Seller shall cause each member of the SI Group to perform all
obligations to be performed under all the Contracts, leases and documents
relating to the properties and the Business, consistently with past practice.
3.1.3 Employment Agreement with Seller. At the
Closing Date Seller shall enter into the employment agreement with Buyer
substantially in a form attached hereto as Exhibit IV (the "Employment
Agreement").
3.1.4 Non-Competition.
(a) Seller covenants and agrees that, for the period
of his employment under the Employment Agreement and for the three years
following the termination of the Employment Agreement, he will not and will not
permit, in the European Union and North America, any corporation, partnership
or other person in which Seller will be involved to, directly or indirectly,
hire, solicit or attempt to hire or solicit any Employee; or
(i) engage in;
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(ii) have any ownership or
equity interest in any business, firm, corporation, joint venture or
other entity engaged in; or
(iii) consult with or assist any
person or entity who or which is engaged in;
any business which competes, directly or indirectly, with the Business (A) as
conducted on the Closing, (B) as conducted anytime within the three (3) year
period prior to the Closing, and (C) after giving effect to such new products,
additives or other items as the SI Group plans on the date of this Agreement to
introduce in the period ending on the third anniversary of the Closing in any
jurisdiction or market in which the Business or the SI Group operates or engages
in sales activities directly or through its agents, distributors, brokers or
affiliates.
(b) If any provision of paragraph (a)
of this Section 3.1.4 shall be adjudged to be excessively broad as to duration,
geographical scope, activity or subject, the parties intend that any such
provision shall be deemed modified to the minimum degree necessary to make such
provisions valid and enforceable under applicable law and that the provision
shall thereafter be enforced to the fullest extent possible. The existence of
any claim which Seller may allege against Buyer, whether based on this
Agreement or otherwise, will not prevent the enforcement of this Section 3.1.4.
Seller agrees that monetary damages will not be a sufficient remedy for a
breach of this covenant, and that Buyer shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Section 3.1.4 and to
enforce specifically the terms and provisions hereof, in addition to any other
remedy to which Buyer may be entitled.
3.1.5 Directors. Effective Closing, Seller shall
cause the directors of the Company and each member of the SI Group to submit
their written resignations from such positions.
3.1.6 Customers/Suppliers Transition.
(a) Between the date hereof and the Closing, Seller
shall take or shall cause each member of the SI Group to take such commercially
reasonable
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steps as Buyer may require, to ensure a smooth business transition for each
member of the SI Group and the distributors and major suppliers and customers of
the SI Group including, as appropriate the arranging of joint visits to such
distributors and major suppliers and customers. To this effect, Seller shall de-
liver to Buyer, as promptly as possible and no later than five business days
after the date hereof, a list of major customers and major suppliers of the
Business. Between the date hereof and the Closing, without the prior written
consent of Seller, which consent shall not be unreasonably withheld, the Buyer
will not communicate with any of the customers of the Business.
(b) Seller shall assist the Buyer at the Closing to
send jointly signed letters to the major customers and suppliers and to make
joint announcements.
(c) Between the date hereof and the Closing, Seller
shall take or shall cause each member of the SI Group to take such commercially
reasonable steps as Buyer may require, including joint visits to the relevant
customers, to ensure that the Specific Contracts are not terminated or otherwise
adversely affected by the completion of the transactions contemplated by this
Agreement.
3.1.7 Shares.
(a) Prior to Closing, Seller shall purchase from the
Minority Shareholders the Shares owned by the Minority Shareholders in the
Company which have not been transferred to Seller on the date of this Agreement.
(b) Prior to Closing, Seller shall cause the Company
to purchase from SDR Centrest the shares of Financiere Somomeca SA owned by SDR
Centrest.
(c) Prior to Closing, Seller shall cause the Company
to purchase from the minority shareholders (including, directors) the shares
owned by such minority shareholders in the Subsidiaries.
3.1.8 Access to Information. Between the date of this
Agreement and the Closing, Seller will cause each member of the SI Group, upon
reasonable notice from Buyer and during normal business hours:
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<PAGE> 32
(i) to give Buyer and its
authorized representatives reasonable access to all books, records,
offices and other facilities and properties of the SI Group,
(ii) permit Buyer and its
authorized representatives to make such inspections thereof as Buyer
may reasonably request, and
(iii) cause its officers to
furnish Buyer with such financial and operating data and other
information with respect to business and properties of each member of
the SI Group as Buyer may from time to time reasonably request; pro-
vided, however, that any such access shall be conducted in such a
manner as not to interfere with the operation of the Business.
3.1.9 Key Employees. Seller shall use best efforts
to ensure the continuance of the employment of the key employees of
the SI Group listed on Schedule 3.1.9 hereto (the "Key Employees").
3.2 Covenant of Buyer.
3.2.1 Regulatory Filings. Promptly the Closing, Buyer
shall cause the relevant members of the SI Group to notify the Prefecture of the
change in control of the Business as required by Article 34 of the Decree no
77-1133 dated September 21, 1977. Any such request for approval and notification
and any subsequent report form and supplemental information shall be in
compliance with the applicable legal requirements.
3.3 Mutual Covenants. Each of Seller and covenants and
agrees as follows:
3.3.1 Publicity. Seller and Buyer agree that, from
the date hereof through the Closing, no public release or announcement
concerning the transactions contemplated hereby shall be issued by either party
without the prior consent of the other party, except as such release or
announcement may be required by law or the rules or regulations of any
Governmental Entity, in which case the party required to make the release or
announcement shall allow the
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other party reasonable time to comment on such release or announcement in
advance of such issuance.
3.3.2 Commercially Reasonable Efforts. Subject to the
terms and conditions of this Agreement, each party shall use its commercially
reasonable efforts to cause each of the conditions to Closing to be fulfilled
and the Closing to occur.
3.3.3 Cooperation.
(a) Seller and Buyer shall keep each other apprised
of the status of any communication with, and any inquiries or requests for
additional information from, any foreign or domestic antitrust or competition
authority or Governmental Entity, and shall comply promptly with any such
inquiries or requests.
(b) Each of Seller and Buyer shall use its best
efforts to obtain any clearance required under any applicable legislation, rules
or regulations for the purchase and sale of the Shares. All such requisite
consents of Governmental Entities as may be so required are set forth in
Schedule 3.3.3 hereto (collectively, the "Governmental Consents").
(c) Neither party shall be required by this Section
3.3.3 to take any action that would unreasonably interfere with the conduct of
its business or unreasonably disrupt its normal operations (or, in the case of
Buyer, the business or operations of any member of the SI Group).
3.3.4 Access to Information. After the Closing each
of Buyer and Seller shall furnish or cause to be furnished, upon reasonable
written notice, to the other and its employees, counsel, auditors and
representatives access, during normal business hours, such information and
assistance relating to the SI Group as is reasonably necessary for financial
reporting and accounting matters, the preparation and filing of any tax
returns, reports or forms or the defense of any tax claim or assessment as well
as the preparation of any filing or submission which is necessary under any
applicable legislation, rules or regulations.
3.3.5 Records. At the Closing, Seller shall cause to
be delivered to Buyer all agreements, documents, books, records and files,
including records and files stored on computer disks or tapes or any
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other storage medium (collectively, the "Records") and all copies thereof, in
the possession of Seller, directly relating to the Business.
3.3.6 Confidentiality.
(a) Seller covenants that, after the Closing, it will
not, without the prior written consent of Buyer, disclose to any person
confidential information relating to or concerning the SI Group, the Business,
or Buyer (the "Confidential Information"), unless Seller is legally obligated
to disclose such information.
(b) In the event that Seller is requested or required
by documents subpoena, civil investigative demand, interrogatories, requests for
information, or other similar process to disclose any Confidential Information,
Seller will provide Buyer with prompt notice of such request or demand or other
similar process so that Buyer may seek an appropriate protective order or, if
such request, demand or other similar process is not mandatory, waive compliance
with the provisions of this Section 3.3.6, as appropriate.
(c) The term "Confidential Information" does not
include information which:
(i) becomes generally available to
the public other than as a result of disclosure by Seller in violation
of the preceding paragraph,
(ii) was available on a
nonconfidential basis prior to its disclosure by Seller, or
(iii) becomes available to Seller
on a nonconfidential basis from a source other than the Business,
provided that such source is not bound by a confidentiality agreement
with the Company or any member of the SI Group, Buyer or their re-
spective representatives.
3.3.7 Taxes. With regard to Taxes, Buyer and Seller
agree to cause the SI Group to prepare and timely file all required Tax Returns
of the SI Group or relating to the business or the assets of
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the SI Group for any taxable year or period which ends on or before the Closing.
ARTICLE 4 - CONDITIONS
4.1 Conditions to Obligations of Buyer. The obligations of
Buyer to complete the purchase of the Shares on the Closing are subject to the
following conditions:
4.1.1 Representations and Warranties True and
Correct. Seller's representations and warranties made in this Agreement shall
be true and correct as of the date hereof, and as of the Closing (except to the
extent such representations and warranties expressly relate to an earlier date,
in which case they shall have been true and correct as of such date), and Seller
shall deliver certificates to Buyer executed by the chief financial officer or
other appropriate officers of the Company to this effect.
4.1.2 Compliance with Agreement. Seller shall have
performed and complied in all material respects with all of their obligations
under this Agreement, or shall have cured any instance of material
non-performance or non-compliance, at or before the Closing, and Seller shall
deliver a certificate to Buyer executed by Seller to this effect.
4.1.3 No Regulatory Impediment. No statute, rule,
regulation, executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated, enforced or
issued or other legal restraint or prohibition preventing the purchase of the
Shares shall be in effect.
4.1.4 Financing. Buyer shall have obtained from the
banks sufficient funds to pay to Seller the Share Purchase Price and the
maximum amount of Additional Consideration provided for herein.
4.1.5 Shares.
(a) Seller shall have purchased the Shares owned by
the Minority Shareholders in the company and Seller shall have valid, good and
marketable titles to such Shares free of any Encumbrances.
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(b) The Company shall have purchased the shares of
Financiere Somomeca SA owned by SDR Centrest.
(c) The Company shall have purchased the shares of
its Subsidiaries from the minority shareholders of such Subsidiaries.
4.1.6 No Material Adverse Change. From the date of
the Base Balance Sheet to the Closing, no member of the SI Group shall have
suffered any material adverse change in its business, prospects, financial
condition, working capital, assets, liabilities (absolute, accrued, contingent
or otherwise), reserves or operations, provided, that changes in financial
ratios shall not constitute a material adverse change.
4.1.7 Work Councils. Any and all consultations shall
have occurred with the work councils of the relevant members of the SI Group.
4.1.8 Bank Support. The Seller shall have delivered a
bank letter of credit or bank guarantee as provided in Section 6.2(a) hereof.
4.2 Conditions to Obligations of Seller. The obligations of
Seller to complete the sale of the Shares on the Closing are subject to the
following conditions:
4.2.1 Representations and Warranties True and
Correct. Buyer's representations and warranties made in this Agreement shall be
true and correct in all material respects as of the date hereof and as of the
Closing (except to the extent such representations and warranties expressly
relate to an earlier date, in which case they shall have been true and correct
as of such date).
4.2.2 Compliance with Agreement. Buyer shall have
performed and complied in all respects with all of its obligations under this
Agreement or shall have cured any instance of material non-performance or
non-compliance, at or before the Closing.
4.3 Mutual Conditions. The obligations of
Buyer and Seller to complete the purchase and the sale
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of the Shares on the Closing are subject to the following mutual conditions.
4.3.1 Governmental Consents. All Governmental
Consents shall have been obtained.
4.3.2 Escrow Agreement. The parties and the Bank
shall have executed the Escrow Agreement.
4.3.3 Employment Agreement. The parties shall have
executed the Employment Agreement.
ARTICLE 5 - CLOSING
5.1 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 68 rue du Faubourg St. Honore, 75008 Paris on
December 15, 1997 or at such other place and at such other time and date as may
be mutually agreed upon in writing by Buyer and Seller, provided, however, that
the Closing shall take place no later than the last business day of the month
during which all of the conditions to Closing set forth in Article 4 hereof
shall have been fulfilled (the "Closing Date").
5.2 Deliveries. At the Closing:
5.2.1 Seller's Deliveries. Seller shall deliver, or
shall cause to be delivered, to Buyer the following:
(a) Duly signed and completed stock powers (ordres de
mouvement) in favor of Buyer or its designee(s) for the Shares.
(b) The stock transfer register (registre des
mouvements de titres) and the stockholder register (registre des comptes
d'actionnaires) of the Company.
(c) A letter of resignation signed by each of the
directors of each member of the SI Group effective upon the appointment of new
directors in accordance with paragraph (d) hereafter.
(d) The minutes of a duly called meeting of the
board of directors or of the shareholders' meeting of each member of the SI
Group, as the case
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may be, a draft of which shall have been delivered by Seller to Buyer reasonably
in advance of the Closing, including provisions with respect to, inter alia,
appointing new directors.
(e) The bank letter of credit or bank guarantee as
provided in Section 6.2(a) hereof.
5.2.2 Buyer's Deliveries. Buyer shall deliver, or
shall cause to be delivered, to Seller the Share Purchase Price minus the
Deposit Amount and capital gains net of taxes upon disposition of OPCVM's, if
any.
ARTICLE 6 - INDEMNIFICATION
6.1 General Indemnification by Seller.
(a) Subject to the terms and conditions of this
Agreement, Seller agrees to indemnify, defend and hold harmless Buyer, from and
against expenses resulting from any and all liabilities, obligations, damages,
deficiencies, losses, claims, actions, lawsuits, proceedings, judgments,
demands, costs and penalties (including reasonable attorneys' fees) (the
"Indemnifiable Losses") asserted against, suffered or incurred by Buyer or any
member of the SI Group resulting from (i) any breach of Seller's representa-
tions or warranties contained herein, or (ii) any breach of Seller's covenants
contained herein.
(b) Without limiting the generality of the foregoing,
the term "Indemnifiable Losses" shall include any penalty, late payment
interest, increase or fine which may fall or be deemed to be due as a result of
any Tax audit as well as of any audit or other action or administrative
proceeding by any Governmental Entity, as well as any penalty, late payment
interest, surcharge or fine or cost or expense of compliance with any order,
decree, directive or judgement which may fall or be deemed to be due as a result
of any claim, proceeding, order, directive or judgment relating, directly or
indirectly, to the domestic or international operations or activities of the SI
Group.
(c) Without limiting the generality of the foregoing,
the parties hereto agree that the term "Indemnifiable Losses" shall include
losses resulting from third parties claiming, on the basis of Articles
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1382, 1383, 1384 and from 1146 to 1156 of the French Civil Code, civil and
contractual responsibility (responsabilite civile) of the SI Group arising from
activities of the SI Group prior to the Closing.
6.2 Limitation of Liability.
(a) The indemnification obligations of Seller for any
Indemnifiable Loss incurred by Buyer or the SI Group in respect of any breach of
the representations and warranties contained in this Agreement (other than with
respect to Taxes) shall not exceed in the aggregate FF 10,000,000 (ten million
French Francs). Seller shall provide Buyer with a bank letter of credit or bank
guarantee in the amount of FF 10,000,000 (ten million French Francs), in either
case in a form, and issued by a bank, reasonably acceptable to the Buyer.
(b) Buyer shall not be entitled to make a claim for
any Indemnifiable Loss incurred in respect of any breach of the representations
and warranties contained in this Agreement unless and until the aggregate
amount of claims for Indemnifiable Losses exceeds one hundred thousand French
Francs (FF 100,000); provided, that when the amount claimed exceeds FF 100,000
(one hundred thousand French Francs), the claim shall be made for the entire
amount then claimed.
(c) The limitations set forth in paragraphs (a) and
(b) above shall not apply to any indemnification obligation of Seller under
Section 2.1.21 hereof, nor any breach of the covenants of Seller contained in
this Agreement.
6.3 Survival of Seller's Representations, Warranties
and Covenants.
(a) The representations and warranties under Sections
2.1.1, 2.1.2, 2.1.3, 2.1.4 and 2.1.16 hereof shall survive indefinitely.
(b) Claims for indemnification in respect of any
breach of representations and warranties of Seller under Section 2.1.21 of this
Agreement shall be made within the applicable statute of limitations plus sixty
(60) business days.
(c) Claims for indemnification in respect of any
breach of representations and warranties
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of Seller under this Agreement, other than those referred to in paragraphs (a)
and (b) above, shall be made within a period of three (3) years after the
Closing; provided, that on the third anniversary of the Closing, any amount then
claimed by Buyer will be sought whether or not it exceeds FF 100,000 (one hun-
dred thousand French Francs).
(d) The covenants of Seller contained herein shall
survive after the Closing. Claims for indemnification in respect of any breach
of a covenant of Seller under this Agreement shall be made within the time
period, if any, specified within such covenant, or within the applicable
statute of limitations for contractual claims, if no time period for making a
claim is specified within such covenant.
6.4 Third Party Claim. Under this Agreement, the obligation
of Seller to indemnify (the "Indemnifying Party") and the entitlement to
indemnification of Buyer (the "Indemnified Party") in respect of, arising out
of or involving a claim or demand made by third parties (the "Third Party
Claims") will be subject to the following terms and conditions:
(i) Upon receipt of written notice
of any Third Party Claim asserted against, resulting to, imposed upon
or incurred by an Indemnified Party, such Indemnified Party will
undertake the defense thereof, by counsel of its own choosing, which
counsel shall be reasonably satisfactory to the Indemnifying Party,
provided that (A) the Indemnified Party agrees to consult with the
Indemnifying Party in a timely manner on all important strategic
matters relating to any such Third Party Claim, (B) the Indemnified
Party shall not settle any Third Party Claim without the prior consent
of the Indemnifying Party, which consent shall not be unreasonably
withheld, taking into account the balance of interests between the
legal merits of the claim and any bona-fide commercial interest of the
Indemnified Party to agree to a prompt settlement, and (C) that the
Indemnified Party shall have a good faith duty to mitigate any loss in
a commercially reason able manner, including taking all commercially
reasonable steps to recover amounts due to the Indemnified Party as a
result of
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the relevant Third Party Claim. The Indemnifying Party shall pay the
reason able legal fees and legal expenses incurred by the Indemnified
Party in the defense of such claims.
(ii) The Indemnifying Party will
provide the Indemnified Party against whom a Third Party Claim is
asserted with access to all records and documents relating to any
Third Party Claim. The Indemnified Party will provide the Indemnifying
Party with access to all records and documents of the Indemnified
Party relating to any Third Party Claim.
6.5 Notices. Buyer shall notify Seller in, and in
reasonable detail, of the nature of the claim if possible
(i) within thirty (30) business
days after receipt by Buyer of written notice of any Third Party Claim,
(ii) within thirty (30) business
days after a determination by Buyer that any facts or circumstances of
which it has learned give rise to a claim, and
(iii) with respect to Taxes,
within ten (10) business days of receipt of any Tax assessment notice
(including a notice of proposed assessment);
failure to provide such notice in writing within such ten (10) or thirty (30)
business day period shall only reduce indemnification to the extent the failure
to notify on a timely basis shall have increased the amount of the otherwise
Indemnifiable Loss.
6.6 When Payable. Indemnification under this Agreement shall
be payable with respect to any claim concerning an Indemnifiable Loss (as
defined in Section 6.1(b) and (c) hereof) upon the earliest of:
(i) the date any payment is
required to be made to any Tax or other administrative authority with
respect to any claim from such authority with respect to which no
further appeal may be made;
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(ii) the resolution of such claim
by mutual agreement between Seller and Buyer;
(iii) the issuance of a final
judgment, award, order or other ruling (which is not subject to appeal
or with respect to which the time for appeal has elapsed) by a court
or arbitral tribunal having jurisdiction over the appropriate parties
and the subject matter of such claim or to which such claim was
submitted for resolution by joint agreement between Seller and Buyer;
or
(iv) the final settlement of a
Third Party Claim.
6.7 Miscellaneous Provisions.
(a) The amount of any indemnity payable hereunder on
account of an Indemnifiable Loss shall be reduced by any insurance proceeds
actually received by the Indemnified Party with respect thereto.
(b) The amount of any indemnity payable hereunder on
account of an Indemnifiable Loss shall be further reduced by the amount of
specific re serves, other than the floating (general) reserves, booked on the
Closing Balance Sheet.
(c) The amount of any indemnity payable hereunder on
account of an Indemnifiable Loss shall be net of any actual cash tax saving for
the SI Group resulting from such Indemnifiable Loss.
(d) Any amount owed to Buyer by Seller for
Indemnifiable Losses shall be treated for accounting purposes as an adjustment
to the Share Purchase Price referred to in Section 1.2.1(a) hereof.
6.8 Environmental Indemnification by Seller. Seller shall
defend, indemnify, and hold harmless Buyer from and against any and all damages
resulting from a civil, criminal or administrative litigation relating to:
(i) Cleanup of Hazardous
Substances released, disposed of or discharged: (A) on, beneath or
adjacent to the
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Real Property on or prior to the Closing; or (B) at any other location
if such substances were generated, used, stored, treated, transported
or released by or on behalf of the Business or any predecessor thereto
on or prior to the Closing; and
(ii) Loss of life, injury to
persons or property, or damage to natural resources caused by the
actual or alleged release, storage, transportation, treatment, disposal
or generation of Hazardous Substances generated, stored, used, dis-
posed of, treated, handled or shipped by Seller on or prior to the
Closing;
except to the extent that the environmental liability or cost arose from
activities of Buyer after the Closing.
6.9 Responsibility for Cleanup. Indemnification shall be
available under this Section 6.9 only with respect to those specific claims for
which Buyer has provided written notice to Seller by the fifth anniversary of
the Closing, provided, however, that Buyer may provide notice under this
Section, prior to the fifth anniversary of the Closing, for claims for a Cleanup
resulting from the generation, storage, use, disposal, treatment, handling,
shipping or release of Hazardous Substances prior to the Closing, even if a
Cleanup has not yet been required by a Governmental Entity.
6.10 Definitions. As used in this Agreement:
(a) A "Cleanup" means all actions required to:
(i) cleanup, remove, treat or
remediate Hazardous Substances in the outdoor environment;
(ii) prevent the Release of Hazardous
Substances so that they do not migrate, endanger or threaten to en-
danger public health or welfare or the outdoor environment;
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(iii) perform pre-remedial studies
and investigations and post-remedial monitoring and care;
(iv) respond to any government
requests for information or documents in any way relating to a
cleanup, removal, treatment or remediation or potential cleanup,
removal, treatment or remediation of Hazardous Substances in the
outdoor environment; or
(v) any legal or administrative
proceedings related to items (i) through (iv), including, but not
limited to, actions brought by third-parties to recover costs incurred
with respect to a Cleanup.
(b) "Environmental Laws" means all applicable
treaties, laws, regulations, directives, circulars, orders, decrees, judgements,
injunctions, permits, approvals, authorizations, permissions or notices
including, without limitation, all restrictions, conditions, standards,
limitations, prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any regulation, code, plan,
order, decree, judgment, in junction, notice or demand letter issued, entered,
promulgated or approved thereunder, relating to pollution or protection of the
environment, including, without limitation, laws relating to releases or
threatened releases of Hazardous Substances into the indoor or outdoor
environment (including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, release,
transport or handling of Hazardous Substances.
(c) "Hazardous Substances" means all substances or
materials regulated as explosive, flammable, toxic or radioactive under any
Environmental Law including, but not limited to, petroleum, asbestos, or
polychlorinated biphenyls.
ARTICLE 7 - TERMINATION
7.1 Termination. This Agreement may only terminated (a)
by mutual written consent of the hereto; (b) by Buyer, if any of the conditions
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provided for in Sections 4.1 or 4.3 of this Agreement has not been met by
December 31, 1997, and has not been waived by Buyer by such date; (c) by Seller,
if any of the conditions provided for in Sections 4.2 or 4.3 of this Agreement
has not been met by December 31, 1997, and has not been waived by Seller by such
date.
7.2 Consequences. If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in this Article 7:
(i) this Agreement shall become
void and of no further force or effect, except for the provisions of
(A) Section 8.5 relating to certain expenses, (B) Section 3.3.1
relating to publicity, (C) Sections 2.1.16 and 2.2.4 relating to
brokers' fees and (D) this Section 7.2;
(ii) all confidential information
provided by either party to the other shall be returned to such first
party or, upon such first party's instruction, destroyed; and
(iii) neither party shall be liable
to the other party for any damages by virtue of any breach of this
Agreement.
ARTICLE 8 - MISCELLANEOUS
8.1 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if in writing and personally
delivered or sent by registered or certified mail, return receipt requested,
postage prepaid, or if sent by facsimile transmission with confirmation of
receipt addressed as follows or to such other address as the parties shall have
given notice of pursuant hereto:
Buyer: MOLL PLASTICS SARL
C/O GALT INDUSTRIES, INC.
767 Fifth Avenue - 5th Floor Suite 506 New York, NY
10153 U.S.A.
Attn: George T. Votis
Telecopy: 1 (212) 758-1336
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With copy to: Skadden, Arps, Slate, Meagher
& Flom, LLP
68 rue du Faubourg St. Honore
75008 Paris, France
Attn: Thomas R. Bateman
Telecopy: 33 (0) 1 55-27-11-99
Seller: Roland and Angele STAPHANE
Parc des Chenevres
5, rue des Cedres
Givry (Saone et Loire), France
With copy to: Jurifib SA
37, rue de la Republique
69002 Lyon, France
Attn: Bernard Jacquet
Telecopy: 33 (0) 4 74-60-25-16
8.2 Entire Agreement. This Agreement, the Schedules and
Exhibits hereto represent the entire understanding and agreement of the parties
and supersede all prior agreements, understandings of arrangements among the
parties hereto with respect to the subject matter hereof and can be amended,
supplemented or changed, only by written instrument making specific reference to
this Agreement signed by the party against whom enforcement of such amendment,
supplement or modification. Buyer acknowledges that Seller has made no
representation or warranty to Buyer, and that Buyer has relied on no
representation or warranty, other than those specifically set forth herein.
8.3 Section Headings. The section headings in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.4 Applicable Law/Governing Language.
(a) This Agreement shall be governed by and construed
and enforced in accordance with the laws of France.
(b) The parties acknowledge that the negotiations
were conducted, and the Agreement prepared and executed, in French and English.
8.5 Expenses. Whether or not the transactions contemplated
hereby are consummated, the parties
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hereto shall pay their own respective expenses provided that all transfer taxes
in connection with the purchase of the Shares and all notarial costs and
expenses in connection with the transactions contemplated by this Agreement
shall be borne by Buyer.
8.6 Waiver.
(a) Any party may, by written notice the other party:
(i) extend the time for the
performance of any of the obligations or other actions of such other
party;
(ii) waive any inaccuracies in the
representations of such other party contained in this Agreement; or
(iii) waive compliance with any of
the agreements of such other party contained in this Agreement or waive
or consent to the modification of performance of any of the obligations
of such other party.
(b) No failure or delay by a party in exercising any
right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder.
8.7 Severability. If at any time subsequent to the date
hereof, any provisions of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of no
force and effect. The invalidity or non-enforceability of any provision of this
Agreement, in whole or in part, shall not affect the validity or enforceability
of any other provision of this Agreement, all of which shall to the full extent
consistent with law continue in full force and effect.
8.8 Incorporation by Reference. The Schedules and the
Exhibits to this Agreement constitute integral parts of this Agreement and are
hereby incorporated into this Agreement by this reference.
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8.9 Counterparts. This Agreement shall be executed in two
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
8.10 Assignment. The rights and obligations under this
Agreement may not be assigned or delegated by any party hereto, in whole or in
part, to any third party without the prior written consent of the other party
hereto, provided, however, that without such prior consent, Buyer shall have
the right to assign all or any part of its rights and obligations under this
Agreement to (i) any Buyer's affiliate or, (ii) by way of security, guarantee or
pledge, to any person procuring credit to Buyer; provided, further, that Buyer
irrevocably and unconditionally guarantees the prompt and complete performance
by such transferee of Buyer's obligations hereunder.
8.11 Certain Definitions. For purposes of Agreement, the
term:
(a) "affiliate" of any corporate person means any
other person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the first mentioned
person. A person shall be deemed to control another person if such first
mentioned person owns, directly or indirectly, 50% or more of the voting rights
of the second mentioned person;
(b) "enforceability", "binding and enforceable in
accordance with its terms" or terms of similar import, where they describe an
obligation of a party to any agreement, shall be deemed in all cases to be
subject to applicable bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect or
by legal or equitable principles relating to or limiting creditors' rights
generally;
(c) "business day" means any day other than a
Saturday, Sunday or a public bank holiday in France;
(d) "person" means an individual, corporation,
partnership, association, trust or any unincorporated organization;
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(e) "material" when used in connection with the
Business shall mean material to the Business as a whole;
(f) "Permitted Encumbrances" shall mean,
collectively, encumbrances for current taxes or assessments not delinquent,
builder, contractor, workmen, repairmen, carrier encumbrances or other similar
encumbrances also arising and continuing in the ordinary and usual course of
business, consistent with past practice, for obligations which are not delin-
quent, and which do not materially affect the value of the property or the
usefulness thereof to the Business.
(g) "Governmental Entity" means any local, regional,
or national, or European department, division or other body, or any court of
competent jurisdiction, administrative agency or commission or other
governmental authority or instrumentality domestic or foreign, including any
legislative body, administrative agency, court, commission, council or other
organ of the European Union and including without limitation the Prefecture,
the Ministere de l'Environnement, the Direction Regionale de l'Industrie, de la
Recherche et de l'Environnement (the "DRIRE") and the Direction Departementale
des Affaires Sanitaires et Sociales.
(h) "Industrial Property" means patents, patent
applications, registered copyrights and applications therefor, registered
trademarks and applications therefor, registered trade name and design and
applications therefor; unregistered copyrights and trademarks, know-how, trade
secrets and proprietary technology; licenses and other agreements relating to
the items listed above.
8.12 Dispute Resolution.
(a) Except as provided in Sections 1.2.2 and 1.2.5
hereof, any dispute, controversy or claim arising out of or in connection with
this Agreement or the breach, termination or validity thereof (a "Dispute"),
shall be finally settled by arbitration under the Rules of Arbitration of the
International Chamber of Commerce (the "ICC") then in effect (the "Rules"),
except as modified herein. The arbitration shall be held in Paris, France. The
arbitration proceedings shall be conducted in English or French as decided by
the arbitration tribunal, documentary exhibits
48
<PAGE> 50
may be admissible in French or English without translation into French or
English, as the case may be, and the award shall be rendered in both the English
and French languages.
(b) There shall be three arbitrators of whom Buyer
shall select one and Seller shall select one within twenty (20) business days of
defendant's receipt of the request for arbitration. The two arbitrators thus
appointed shall select the third arbitrator to act as Chair of the tribunal
within twenty (20) business days of the selection of the second arbitrator. If
any arbitrator has not been appointed within the time limits specified herein,
such appointment shall be made by the ICC upon the written request of either
party within twenty (20) business days of such request. Each arbitrator shall be
fluent in both English and French.
(c) The parties hereby waive any rights of
application or appeal to the courts of France to the fullest extent permitted by
law in connection with any question of law arising in the course of the
arbitration or with respect to any award made, except for actions to enforce an
arbitral award and actions seeking interim, interlocutory or other provisional
relief in any court of competent jurisdiction.
(d) The award shall be final and binding upon the
parties, and shall be the sole and exclusive remedy between the parties
regarding any claims, counterclaims, issues, or accounting presented to the
arbitral tribunal. Judgment upon any award may be entered in any court having
jurisdiction.
(e) The parties shall each bear its own costs and
expenses and an equal share of the arbitrators' and administrative fees of the
arbitration.
(f) Any monetary award shall be made and promptly
payable in French Francs free of any tax, deduction or offset, and the arbitral
tribunal shall be authorized in its discretion to grant pre-award and post-award
interest at commercial rates. Any costs, fees, or taxes incident to enforcing
the award shall, to the maximum extent permitted by law, be charged against the
Party resisting such enforcement.
(g) This Agreement and the rights and obligations of
the Parties shall remain in full force
49
<PAGE> 51
and effect pending the award in any arbitration proceeding hereunder.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the day and year first above written.
SELLER
By: /s/ Roland Staphane
------------------------------
Roland STAPHANE
By: /s/ Angele Staphane
------------------------------
Angele STAPHANE
BUYER
By: /s/ George T. Votis
-------------------------------
Title: Chairman and Chief Executive Officer
50
<PAGE> 52
LIST OF EXHIBITS
EXHIBIT I: List of Minority Shareholders
EXHIBIT II: EBIT calculation
EXHIBIT III: Escrow Agreement
EXHIBIT IV: Employment Agreement
I
<PAGE> 53
LIST OF SCHEDULES
Schedule 1.2.3: Base Balance Sheet
Schedule 2.1.3 Title to Shares
Schedule 2.1.5(a): Audited Consolidated
Financial Statements
Schedule 2.1.5(b): Audited Financial Statements
Schedule 2.1.5(c): Specific Accounting
Principles
Schedule 2.1.5(d): Off Balance Sheet Liabilities
Schedule 2.1.6: Subsidiaries
Schedule 2.1.7: Actions since February 28,
1997
Schedule 2.1.8(a): List of the SI Group
Industrial Property
Schedule 2.1.8(b): Encumbrances on the SI Group
Industrial Property
Schedule 2.1.8(d): Secrecy and confidentiality
agreements with respect to
the SI Group Industrial
Property
Schedule 2.1.9(a): List and Description of Real
Property
Schedule 2.1.10(a)(i): Movable Property
Schedule 2.1.10(a)(ii): Excluded Items of the Movable
Property
Schedule 2.1.11: Title to Property
Schedule 2.1.12: Contracts
Schedule 2.1.14: Certain Receivables
Schedule 2.1.15: Litigation
Schedule 2.1.18(a): Environmental Permits
II
<PAGE> 54
Schedule 2.1.18(b): Environmental Report
Schedule 2.1.19(b): Non-Statutory Employee Benefits
Schedule 2.1.19(c): Arrangements with Employees
out of the ordinary course
Schedule 2.1.19(d): Litigation with Employees
Schedule 2.1.20: Loans to Directors, etc.
Schedule 2.1.22: Restrictions and
Authorizations
Schedule 2.1.23(b): List of Bank Accounts
Schedule 2.1.24: Product Liability
Schedule 3.1.9: Key Employees
Schedule 3.3.3: Governmental Consents
III
<PAGE> 55
TABLE OF CONTENTS
Page
ARTICLE 1 - PURCHASE AND SALE OF SHARES 2
1.1 Sale of Shares................................................... 2
1.2 Purchase Price and Payment....................................... 2
1.2.1 Share Purchase Price....................... 2
1.2.2 Additional Consideration................... 2
1.2.3 Base Balance Sheet......................... 4
1.2.4 Closing Balance Sheet...................... 4
1.2.5 Disputes Regarding the Closing
Balance Sheet.............................. 5
1.2.6 Determination of any Adjustment
Amount..................................... 6
1.2.7 Method of Payment.......................... 6
1.2.8 Deposit.................................... 6
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES 7
2.1 Representations and Warranties of Seller......................... 7
2.1.1 Status..................................... 7
2.1.2 Share Capital.............................. 8
2.1.3 Title to Shares............................ 8
2.1.4 Authority.................................. 9
2.1.5 Financial Statements....................... 9
2.1.6 Subsidiaries............................... 11
2.1.7 Actions Since February 28, 1997............ 11
2.1.8 Industrial Property........................ 14
2.1.9 Real Property; Leases of Real Prop-
erty....................................... 15
2.1.10 Movable Property........................... 16
2.1.11 Title to Property.......................... 16
2.1.12 Contracts and Commitments.................. 16
2.1.13 Inventory.................................. 17
2.1.14 Receivables................................ 18
2.1.15 Litigation................................. 18
2.1.16 No Broker.................................. 18
2.1.17 Governmental Permits; Compliance with
Laws....................................... 19
2.1.18 Environmental Matters...................... 19
2.1.19 Employees; Employee Benefits; Health
and Safety................................. 21
2.1.20 Loans to or from Directors, Officers
and Employees.............................. 23
2.1.21 Taxes...................................... 23
2.1.22 Restrictions and Authorizations............ 25
2.1.23 Powers of Attorney; Bank Accounts.......... 25
2.1.24 Product Liability.......................... 26
2.1.25 Insurance.................................. 26
i
<PAGE> 56
2.2 Representations and Warranties of Buyer.......................... 27
2.2.1 Corporate Status........................... 27
2.2.2 Execution and Effect of Agreement.......... 27
2.2.3 No Lawsuits; Consents...................... 27
2.2.4 No Broker.................................. 27
ARTICLE 3 - COVENANTS 28
3.1 Covenants of Seller.............................................. 28
3.1.1 Business in Ordinary Course................ 28
3.1.2 Perform Contracts.......................... 28
3.1.3 Employment Agreement with Seller........... 28
3.1.4 Non-Competition............................ 28
3.1.5 Directors.................................. 29
3.1.6 Customers/Suppliers Transition............. 29
3.1.7 Shares..................................... 30
3.1.8 Access to Information...................... 30
3.2 Covenant of Buyer................................................ 31
3.2.1 Regulatory Filings......................... 31
3.3 Mutual Covenants................................................. 31
3.3.1 Publicity.................................. 31
3.3.2 Commercially Reasonable Efforts............ 32
3.3.3 Cooperation................................ 32
3.3.4 Access to Information...................... 32
3.3.5 Records.................................... 32
3.3.6 Confidentiality............................ 33
3.3.7 Taxes...................................... 33
ARTICLE 4 - CONDITIONS 34
4.1 Conditions to Obligations of Buyer............................... 34
4.1.1 Representations and Warranties True
and Correct................................ 34
4.1.2 Compliance with Agreement.................. 34
4.1.3 No Regulatory Impediment................... 34
4.1.4 Financing.................................. 34
4.1.5 Shares..................................... 34
4.1.6 No Material Adverse Change................. 35
4.1.7 Work Councils.............................. 35
4.1.8 Bank Support............................... 35
4.2 Conditions to Obligations of Seller.............................. 35
4.2.1 Representations and Warranties True
and Correct................................ 35
4.2.2 Compliance with Agreement.................. 35
4.3 Mutual Conditions................................................ 35
4.3.1 Governmental Consents...................... 36
4.3.2 Escrow Agreement........................... 36
ii
<PAGE> 57
ARTICLE 5 - CLOSING 36
5.1 Closing.......................................................... 36
5.2 Deliveries....................................................... 36
5.2.1 Seller's Deliveries........................ 36
5.2.2 Buyer's Deliveries......................... 37
ARTICLE 6 - INDEMNIFICATION 37
6.1 General Indemnification by Seller................................ 37
6.2 Limitation of Liability.......................................... 38
6.3 Survival of Seller's Representations, Warranties
and Covenants.................................................... 38
6.4 Third Party Claim................................................ 39
6.5 Notices.......................................................... 40
6.6 When Payable..................................................... 40
6.7 Miscellaneous Provisions......................................... 41
6.8 Environmental Indemnification by Seller.......................... 41
6.9 Responsibility for Cleanup....................................... 42
6.10 Definitions...................................................... 42
ARTICLE 7 - TERMINATION 43
7.1 Termination...................................................... 43
7.2 Consequences..................................................... 44
ARTICLE 8 - MISCELLANEOUS 44
8.1 Notices.......................................................... 44
8.2 Entire Agreement................................................. 45
8.3 Section Headings................................................. 45
8.4 Applicable Law/Governing Language................................ 45
8.5 Expenses......................................................... 45
8.6 Waiver........................................................... 46
8.7 Severability..................................................... 46
8.8 Incorporation by Reference....................................... 46
8.9 Counterparts..................................................... 47
8.10 Assignment....................................................... 47
8.11 Certain Definitions.............................................. 47
8.12 Dispute Resolution............................................... 48
LIST OF EXHIBITS I
LIST OF SCHEDULES II
iii
<PAGE> 1
EXHIBIT 12.1
MOLL INDUSTRIES
CALCULATION OF RATIOS
<TABLE>
<CAPTION>
Year-end Quarter end
1993 1994 1995 1996 1997 Mar-97 Mar-98
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGE RATIO:
Moll PlastiCrafters:
Fixed Charges:
Interest expense, net 1,613,590 1,940,937 2,413,607 2,518,005 3,405,386 675,840 2,336,695
1/3 of rent expense 342,667 390,400 458,333 593,333 945,000 194,945 297,629
Total 1,956,257 2,331,337 2,871,940 3,111,338 4,350,386 870,785 2,634,324
Net Income 2,469,959 6,472,528 6,485,415 6,036,570 4,645,191 2,169,413 1,449,649
Fixed Charges 1,956,257 2,331,337 2,871,940 3,111,338 4,350,386 870,785 2,634,324
4,426,216 8,803,865 9,357,355 9,147,908 8,995,577 3,040,198 4,083,973
Fixed Charge Ratio 2.3 3.8 3.3 2.9 2.1 3.5 1.6
Anchor Advanced Products:
Fixed Charges:
Interest expense, net 5,385,000 5,984,000 8,616,000 8,124,000 11,165,000 2,072,000 2,967,000
1/3 of rent expense 129,000 248,000 400,000 593,000 314,000 79,000 79,000
Total 5,514,000 6,232,000 9,016,000 8,717,000 11,479,000 2,151,000 3,046,000
Net Income 5,830,000 3,617,000 3,677,000 6,217,000 1,632,000 1,837,000 159,000
Fixed Charges 5,514,000 6,232,000 9,016,000 8,717,000 11,479,000 2,151,000 3,046,000
11,344,000 9,849,000 12,693,000 14,934,000 13,111,000 3,988,000 3,205,000
Fixed Charge Ratio 2.1 1.6 1.4 1.7 1.1 1.9 1.1
Pro Forma:
Fixed Charges:
Interest expense, net 27,006,350
1/3 of rent expense 1,700,625
Total 28,706,975
Net Income 4,321,434
Fixed Charges 28,706,975
33,028,409
Fixed Charge Ratio 1.2
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
Year-end
1997
<S> <C>
RATIO OF EBITDA TO CASH INTEREST EXPENSE:
Calculation of Pro Forma EBITDA:
Net income before extraordinary items 23,727,200
Depreciation and amortization 23,479,519
Interest, net 27,006,350
Taxes 3,594,214
54,807,283
Calculation of cash interest expense:
Interest, net 27,006,350
Less amortization of debt costs (1,074,000)
25,932,350
Ratio of EBITDA to Cash Interest Expense 2.1
RATIO OF NET DEBT TO EBITDA:
Calculation of Net Debt:
Debt 251,668,833
Cash (25,598,925)
226,069,908
Ratio of Net Debt to EBITDA 4.1
</TABLE>
2
<PAGE> 1
EXHIBIT 16.1
[Letterhead of PricewaterhouseCoopers LLP]
August 3, 1998
Securities and Exchange Commission
450 5th Street, NW
Washington, DC 20549
Gentlemen;
We have read, and agree with, the statements concerning our Firm made by Moll
Industries, Inc. in the section entitled "Experts" in the Prospectus
constituting part of this Registration Statement on Form S-4 of Moll Industries,
Inc.
Very truly yours,
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
DTW/RGT
<PAGE> 1
EXHIBIT 21.1
<TABLE>
<CAPTION>
JURISDICTION OF
SUBSIDIARIES OF MOLL INDUSTRIES, INC. INCORPORATION
- ------------------------------------- -------------
<S> <C>
Moll Industries, LLC Delaware
Moll Plastics, LLC Delaware
Moll Plastics SARL France
Somomeca Industries SARL France
SAPI SARL France
SERIM SARL France
Somoplast Lorraine SARL France
Somoplast SARL France
2BI SARL France
SEMIP SARL France
SCI Bonnevalaise France
IAC SARL France
SCI Terreau Brenot France
Promolde LDA Portugal
Staphane SARL France
Moll PlastiCrafters GmbH Germany
Hanning-Kunststoffe Beteiligungs - GmbH Germany
Hanning-Kunststoffe GmbH & Co. Germany
"PB" Hanning GmbH Germany
"PB" Hanning GmbH & Co. Handelsgesellschaft Germany
Moll Industries U.K., Limited United Kingdom
Cepillos De Matamaros S.A. de C.V. Mexico
Anchor Advanced Products Foreign Sales Corporation Barbados
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Moll Industries, Inc. of our report dated
February 20, 1998 relating to the final statements of Anchor Holdings, Inc.,
which appears in such Prospectus. We also consent to the references to us under
the heading "Experts" in such prospectus.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Knoxville, Tennessee
August 3, 1998
<PAGE> 1
EXHIBIT 23.2
[Letterhead of Arthur Andersen LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
on the financial statements of Moll PlastiCrafters Limited Partnership, The
Hanning Companies and Somomeca Industries, and to all references to our firm
included in or made a part of this registration statement of Moll Industries,
Inc., relating to the registration if its 10.5% Senior Subordinated Notes due
2008.
/s/ Arthur Andersen LLP
Nashville, Tennessee
August 3, 1998
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
MOLL INDUSTRIES, INC
(Exact name of obligor as specified in its charter)
DELAWARE 62-1427775
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1111 NORTHSHORE DRIVE
KNOXVILLE, TN 37919-4048
(Address of principal executive offices) (Zip Code)
10 -1/2% SENIOR SUBORDINATED NOTES DUE 2008
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with
the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated herein
by reference thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of HARTFORD and The
STATE OF CONNECTICUT, on the JULY 20, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Michael M. Hopkins
_____________________________________
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the proposed issuance by MOLL INDUSTRIES,
INC of its 10 -1/2% SENIOR SUBORDINATED NOTES DUE 2008, we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Michael M. Hopkins
_____________________________________
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
DATED: JULY 20, 1998
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................ 1,144,309
Interest-bearing balances ......................................... 9,914,704
Securities ................................................................. 10,062,052
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ............................... 8,073,970
Loans and lease financing receivables:
Loans and leases, net of unearned income .......................... 6,433,627
Allowance for loan and lease losses ............................... 88,820
Allocated transfer risk reserve ................................... 0
Loans and leases, net of unearned income and allowances ........... 6,344,807
Assets held in trading accounts ............................................ 1,117,547
Premises and fixed assets .................................................. 453,576
Other real estate owned .................................................... 100
Investments in unconsolidated subsidiaries ................................. 44,985
Customers' liability to this bank on acceptances outstanding ............... 66,149
Intangible assets .......................................................... 263,249
Other assets ............................................................... 1,066,572
-----------
Total assets ............................................................... 38,552,020
===========
LIABILITIES
Deposits:
In domestic offices ............................................... 9,266,492
Noninterest-bearing ...................................... 6,824,432
Interest-bearing ......................................... 2,442,060
In foreign offices and Edge subsidiary ............................ 14,385,048
Noninterest-bearing ...................................... 75,909
Interest-bearing ......................................... 14,309,139
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ............................... 9,949,994
Demand notes issued to the U.S. Treasury and Trading Liabilities ........... 171,783
Trading liabilities ........................................................ 1,078,189
Other borrowed money ....................................................... 406,583
Subordinated notes and debentures .......................................... 0
Bank's liability on acceptances executed and outstanding ................... 66,149
Other liabilities .......................................................... 878,947
Total liabilities .......................................................... 36,203,185
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus .............................. 0
Common stock ............................................................... 29,931
Surplus .................................................................... 450,003
Undivided profits and capital reserves/Net unrealized holding gains (losses) 1,857,021
Net unrealized holding gains (losses) on available-for-sale securities ..... 18,136
Cumulative foreign currency translation adjustments ........................ (6,256)
Total equity capital ....................................................... 2,348,835
-----------
Total liabilities and equity capital ....................................... 38,552,020
===========
</TABLE>
4
<PAGE> 6
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
MOLL INDUSTRIES, INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Moll Industries, Inc., a Delaware corporation (the "Company")
made pursuant to the Prospectus, dated [ ], 1998 (the "Prospectus"), if
certificates for the outstanding 10 1/2% Senior Subordinated Notes due 2008 of
the Company (the "Old Notes") are not immediately available or if the procedure
for book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach State Street Bank and Trust Company, as
exchange agent (the "Exchange Agent") prior to [ ] P.M., New York City time,
on the Expiration Date of the Exchange Offer. Such form may be delivered or
transmitted by facsimile transmission, mail or hand delivery to the Exchange
Agent as set forth below. In addition, in order to utilize the guaranteed
delivery procedure to tender Old Notes pursuant to the Exchange Offer, a
completed, signed and dated Letter of Transmittal (or facsimile thereof) must
also be received by the Exchange Agent prior to [ ] P.M., New York City
time, on the Expiration Date. Capitalized terms not defined herein are defined
in the Prospectus.
DELIVERY TO: STATE STREET BANK AND TRUST COMPANY, EXCHANGE AGENT
<TABLE>
<S> <C>
By Mail: By Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
Kellie Mullen Kellie Mullen
By Hand: in New York (as Drop Agent) By Hand: in Boston
State Street Bank and Trust Company, N.A. State Street Bank and Trust Company
61 Broadway, 15th Floor Two International Place
Corporate Trust Window Fourth Floor, Corporate Trust
New York, New York 10006 Boston, Massachusetts 02110
Attention: Corporate Trust Department
Kellie Mullen
</TABLE>
For Information Call:
(617) 664-5587
By Facsimile Transmission
(for Eligible Institutions only):
(617) 664-5290
Attention: Corporate Trust Department
Confirm by Telephone:
(617) 664-5587
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
<PAGE> 2
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Old Notes set forth below pursuant to the
guaranteed delivery procedure described in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus.
Principal Amount at Maturity of Old Notes Tendered. $----------------------- *
Certificate Nos. (if available):
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$
------------------------------------------------------------------------------
TOTAL PRINCIPAL AMOUNT AT MATURITY REPRESENTED BY OLD NOTES CERTIFICATE(S)
If Old Notes will be delivered by book-entry transfer to The Depository Trust
Company, provide account number.
Account Number:
------------------------------------------------------------------------------
-----------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
PLEASE SIGN HERE
<TABLE>
<S> <C>
X
------------------------------------- ---------------------------------------------------
X
---------------------------------------------------- -------------------------------------
Signature(s) of Owner(s) or Authorized Signatory Date
</TABLE>
Area Code and Telephone Number:
Must be signed by the holder(s) of Old Notes as their name(s) appear(s)
on certificates for Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by endorsement and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person
must set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Capacity:
------------------------------------------------------------------------------
Address(es):
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the certificates representing the principal amount of Old Notes tendered
hereby in proper form for transfer, or timely confirmation of the book-entry
transfer of such Old Notes into the Exchange Agent's account at The Depository
Trust Company pursuant to the procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus, together with
any required signature guarantee and any other documents required by the Letter
of Transmittal, will be received by the Exchange Agent at the address set forth
above, no later than three New York Stock Exchange trading days after the date
of execution of this Notice of Guaranteed Delivery.
<TABLE>
<S> <C>
- ----------------------------------------------------- -----------------------------------------------------
Name of Firm Authorized Signature
- ----------------------------------------------------- -----------------------------------------------------
Address Title
Name: ---------------------------------------------
- -----------------------------------------------------
Zip Code (Please Type or Print)
Area Code and Tel. No. --------------------------- Dated: ---------------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED
LETTER OF TRANSMITTAL.
3
<PAGE> 1
EXHIBIT 99.3
MOLL INDUSTRIES, INC.
OFFER FOR ALL OUTSTANDING
10 1/2% SENIOR SUBORDINATED NOTES DUE 2008
IN EXCHANGE FOR
10 1/2% SENIOR SUBORDINATED NOTES DUE 2008,
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933,
AS AMENDED
TO OUR CLIENTS:
Enclosed for your consideration is a Prospectus, dated [ ], 1998
(the "Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of Moll Industries,
Inc., a Delaware corporation (the "Company") to exchange its 10 1/2% Senior
Subordinated Notes due 2008, which have been registered under the Securities Act
of 1933, as amended (the "New Notes"), for its outstanding 10 1/2% Senior
Subordinated Notes due 2008 (the "Old Notes"), upon the terms and subject to the
conditions described in the Prospectus and the Letter of Transmittal. The
Exchange Offer is being made in order to satisfy certain obligations of the
Company contained in the Registration Rights Agreement dated June 26, 1998, by
and among the Company, and the initial purchasers referred to therein.
This material is being forwarded to you as the beneficial owner of the Old
Notes held by us for your account but not registered in your name. A TENDER OF
SUCH OLD NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at [ ]
P.M., New York City time, on [ ], 1998, unless extended by the
Company. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in
the Prospectus in the section captioned "The Exchange Offer Certain
Conditions to the Exchange Offer."
3. Any transfer taxes incident to the transfer of Old Notes from the
holder to the Company will be paid by the Company, except as otherwise
provided in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at [ ] P.M., New York City time, on
[ ], 1998, unless extended by the Company.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY
AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD NOTES.
<PAGE> 2
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Moll
Industries, Inc. with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the account
of the undersigned, upon and subject to the terms and conditions set forth in
the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated below:
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT OF OLD NOTES
---------------------------------------
<S> <C>
10 1/2% Senior Subordinated Notes due 2008...
[ ] Please do not tender any Old Notes held
by you for my account.
Dated: ____________________, 1998
---------------------------------------------
SIGNATURE(S)
---------------------------------------------
---------------------------------------------
PLEASE PRINT NAME(S) HERE
---------------------------------------------
---------------------------------------------
ADDRESS(ES)
---------------------------------------------
AREA CODE AND TELEPHONE NUMBER
---------------------------------------------
TAX IDENTIFICATION OR SOCIAL SECURITY NO(S).
</TABLE>
None of the Old Notes held by us for your account will be tendered unless
we receive written instructions from you to do so. Unless a specific contrary
instruction is given in the space provided, your signature(s) hereon shall
constitute an instruction to us to tender all the Old Notes held by us for your
account.
2
<PAGE> 1
EXHIBIT 99.4
MOLL INDUSTRIES, INC.
OFFER FOR ALL OUTSTANDING
10 1/2% SENIOR SUBORDINATED NOTES DUE 2008
IN EXCHANGE FOR
10 1/2% SENIOR SUBORDINATED NOTES DUE 2008,
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933,
AS AMENDED
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Moll Industries, Inc., a Delaware corporation (the "Company") is offering,
upon and subject to the terms and conditions set forth in the Prospectus, dated
[ ], 1998 (the "Prospectus"), and the enclosed Letter of Transmittal (the
"Letter of Transmittal"), to exchange (the "Exchange Offer") its 10 1/2% Senior
Subordinated Notes due 2008, which have been registered under the Securities Act
of 1933, as amended, for its outstanding 10 1/2% Senior Subordinated Notes due
2008 (the "Old Notes"). The Exchange Offer is being made in order to satisfy
certain obligations of the Company contained in the Registration Rights
Agreement dated June 26, 1998, by and among the Company and the initial
purchasers referred to therein.
We are requesting that you contact your clients for whom you hold Old Notes
regarding the Exchange Offer. For your information and for forwarding to your
clients for whom you hold Old Notes registered in your name or in the name of
your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated [ ], 1998;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available or time
will not permit all required documents to reach the Exchange Agent prior to
the Expiration Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose
account you hold Old Notes registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to State Street Bank and Trust Company,
the Exchange Agent for the Exchange Offer.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT [ ]
P.M., NEW YORK CITY TIME, ON [ ], 1998, UNLESS EXTENDED BY THE COMPANY
(THE "EXPIRATION DATE"). OLD NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY
BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Old Notes should be delivered
to the Exchange Agent, all in accordance with the instructions set forth in the
Letter of Transmittal and the Prospectus.
If a registered holder of Old Notes desires to tender, but such Old Notes
are not immediately available, or time will not permit such holder's Old Notes
or other required documents to reach the Exchange Agent
<PAGE> 2
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected by following the
guaranteed delivery procedures described in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes pursuant to the Exchange Offer, except
as set forth in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed State Street
Bank and Trust Company, the Exchange Agent for the Exchange Offer, at its
address and telephone number set forth on the front of the Letter of
Transmittal.
Very truly yours,
MOLL INDUSTRIES, INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
2
<PAGE> 1
EXHIBIT 99.5
EXCHANGE AGENT AGREEMENT
July 31, 1998
State Street Bank and Trust Company
Corporate Trust Administration
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Ladies and Gentlemen:
Moll Industries, Inc. (the "Company") proposes to make an offer (the
"Exchange Offer") to exchange its 10 1/2% Senior Subordinated Notes due 2008
(the "Old Notes") for its 10 1/2% Senior Subordinated Notes due 2008 which have
been registered under the Securities Act of 1933, as amended (the "New Notes").
The terms and conditions of the Exchange Offer as currently contemplated are set
forth in a prospectus, dated _____, 1998 (the "Prospectus"), proposed to be
distributed to all record holders of the Old Notes. The Old Notes and the New
Notes are collectively referred to herein as the "Notes". Any capitalized terms
used herein and not otherwise defined herein shall have the meanings ascribed to
such terms in the Prospectus.
The Company hereby appoints State Street Bank and Trust Company to act
as exchange agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "you" shall refer to State Street Bank and Trust Com-
pany.
The Exchange Offer is expected to be commenced by the Company on or
about _____, 1998. The Letter of Transmittal accompanying the Prospectus is to
be used by the holders of the Old Notes to accept the Exchange Offer, and
contains instructions with respect to the delivery of certificates for Old Notes
tendered.
The Exchange Offer shall expire at 5:00 P.M., New York City time, on
______, 1998, or on such later date or time to which the Company may extend the
Exchange Offer (the "Expiration Date"). Subject to the terms and conditions set
forth in the Prospectus, the Company expressly reserves the right to extend the
<PAGE> 2
Exchange Offer from time to time and may extend the Exchange Offer by giving
oral (confirmed in writing) or written notice to you before 9:00 A.M., New York
City time, on the business day following the previously scheduled Expiration
Date.
The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified in the Prospectus under the caption "The Exchange Offer
- -- Certain Conditions to the Exchange Offer." The Company will give oral
(confirmed in writing) or written notice of any amendment, termination or nonac-
ceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer" or as specifically set forth herein; provided, however, that in no way
will your general duty to act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the Old Notes at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Exchange Offer within two business days after the date of the Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of the Old Notes by causing the
Book- Entry Transfer Facility to transfer such Old Notes into your account in
accordance with the Book-Entry Transfer Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal and certifi-
cates for Old Notes (or confirmation of book-entry transfer into your account at
the Book-Entry Transfer Facility) and any other documents delivered or mailed to
you by or for holders of the Old Notes to ascertain whether: (i) the Letters of
Transmittal and any such other documents are duly executed and properly
completed in accordance with instructions set forth therein and (ii) the Old
Notes have otherwise been properly tendered. In each case where the Letter of
Transmittal or any other document has been improperly completed or executed or
any of the certificates for Old Notes are not in proper form for transfer or
some other irregularity in connection with the acceptance of the Exchange Offer
exists, you will endeavor to inform
2
<PAGE> 3
the presenters of the need for fulfillment of all requirements and to take any
other action as may be necessary or advisable to cause such irregularity to be
corrected.
4. With the approval of the President, Chief Financial Officer or any
Vice President of the Company (such approval, if given orally, to be confirmed
in writing) or any other party designated by such an officer in writing, you are
authorized to waive any irregularities in connection with any tender of Old
Notes pursuant to the Exchange Offer.
5. Tenders of Old Notes may be made only as set forth in the Letter of
Transmittal and in the section of the Prospectus captioned "The Exchange Offer
- -- Procedures for Tendering Old Notes," and Old Notes shall be considered
properly tendered to you only when tendered in accordance with the procedures
set forth therein.
Notwithstanding the provisions of this paragraph 5, Old Notes which the
President, Chief Financial Officer or any Vice President of the Company shall
approve as having been properly tendered pursuant to paragraph 4 above shall be
considered to be properly tendered (such approval, if given orally, shall be
confirmed in writing).
6. You shall advise the Company with respect to any Old Notes received
subsequent to the Expiration Date and accept its instructions with respect to
disposition of such Old Notes (such advice, if given orally, shall be confirmed
in writing).
7. You shall accept tenders:
(a) in cases where the Old Notes are registered in two or more
names, only if signed by all named holders;
(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity,
only when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Old Notes
provided that customary transfer requirements, including the payment by such
persons of any applicable transfer taxes, are fulfilled.
3
<PAGE> 4
8. Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will notify you (such notice if given orally, to be confirmed
in writing) of its acceptance, promptly after the Expiration Date, of all Old
Notes properly tendered and you, on behalf of the Company, will exchange such
Old Notes for New Notes and cause such Old Notes to be cancelled. Delivery of
New Notes will be made on behalf of the Company by you at the rate of $1,000
principal amount of New Notes for each $1,000 principal amount of the
corresponding series of Old Notes tendered promptly after notice (such notice if
given orally, to be confirmed in writing) of acceptance of said Old Notes by the
Company; provided, however, that in all cases, Old Notes tendered pursuant to
the Exchange Offer will be exchanged only after timely receipt by you of
certificates for such Old Notes (or confirmation of book-entry transfer into
your account at the Book-Entry Transfer Facility), a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and any other required documents. You shall issue New Notes
only in denominations of $1,000 or any integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except that,
subject to the terms and upon the conditions set forth in the Prospectus and the
Letter of Transmittal, Old Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date.
10. The Company shall not be required to exchange any Old Notes
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company not to exchange any Old Notes tendered
shall be given (and confirmed in writing) by the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not accept for
exchange all or part of the Old Notes tendered because of an invalid tender, the
occurrence of certain other events set forth in the Prospectus under the caption
"The Exchange Offer -- Certain Conditions of the Exchange Offer" or otherwise,
you shall as soon as practicable after the expiration or termination of the
Exchange Offer return those certificates for unaccepted Old Notes (or effect
appropriate book-entry transfer), together with any related required documents
and the Letters of Transmittal relating thereto that are in your possession, to
the persons who deposited them.
12. All certificates for reissued Old Notes, unaccepted Old Notes or
for New Notes shall be forwarded by (a) first-class certified mail, return
receipt
4
<PAGE> 5
requested under a blanket surety bond protecting you and the Company from loss
or liability arising out of the non-receipt or non-delivery of such certificates
or (b) registered mail insured separately for the replacement value of each of
such certificates.
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons or
to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth in the Prospectus or set forth herein or as may be
subsequently agreed to in writing by you and the Company;
(b) will be regarded as making no representations and having
no responsibilities as to the validity, sufficiency, value or genuineness of any
of the certificates or the Old Notes represented thereby deposited with you
pursuant to the Exchange Offer, and will not be required to and will make no
representation as to the validity, value or genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal action hereunder
which might in your reasonable judgment involve any expense or liability, unless
you shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be protected in acting in
reliance upon any certificate, instrument, opinion, notice, letter, telegram or
other document or security delivered to you and reasonably believed by you to be
genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement, request,
comment, agreement or other instrument whatsoever not only as to its due execu-
tion and validity and effectiveness of its provisions, but also as to the truth
and accuracy of any information contained therein, which you shall in good faith
believe to be genuine or to have been signed or represented by a proper person
or persons;
(f) may rely on and shall be protected in acting upon written
or oral instructions from any officer of the Company;
5
<PAGE> 6
(g) may consult with your counsel with respect to any
questions relating to your duties and responsibilities and the advice or opinion
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by you hereunder in
good faith and in accordance with the advice or opinion of such counsel; and
(h) shall not advise any person tendering Old Notes pursuant
to the Exchange Offer as to the wisdom of making such tender or as to the market
value or decline or appreciation in market value of any Old Notes.
15. You shall take such action as may from time to time be requested by
the Company or its counsel (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery (as defined in the Prospectus) or such other forms
as may be approved from time to time by the Company, to all persons requesting
such documents and to accept and comply with telephone requests for information
relating to the Exchange Offer, provided that such information shall relate only
to the procedures for accepting (or withdrawing from) the Exchange Offer. The
Company will furnish you with copies of such documents at your request. All
other requests for information relating to the Exchange Offer shall be directed
to the Company, Attention: [Phyllis Best, Chief Financial Officer].
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to [Phyllis Best, Chief Financial
Officer], of the Company and such other person or persons as it may request,
daily (and more frequently during the week immediately preceding the Expiration
Date and if otherwise requested) up to and including the Expiration Date, as to
the number of Old Notes which have been tendered pursuant to the Exchange Offer
and the items received by you pursuant to this Agreement, separately reporting
and giving cumulative totals as to items properly received and items improperly
received. In addition, you will also inform, and cooperate in making available
to, the Company or any such other authorized person or persons upon oral request
made from time to time prior to the Expiration Date of such other information as
it or he or she reasonably requests. Such cooperation shall include, without
limitation, the granting by you to the Company and such person as the Company
may request of access to those persons on your staff who are responsible for
receiving tenders, in order to ensure that immediately prior to the Expiration
Date, the Company shall have received information in sufficient detail to enable
it to decide whether to extend the Exchange Offer. You shall prepare a final
list of all persons whose
6
<PAGE> 7
tenders were accepted, the aggregate principal amount of Old Notes tendered, the
aggregate principal amount of Old Notes accepted and deliver said list to the
Company.
17. Letters of Transmittal and Notices of Guaranteed Delivery shall be
stamped by you as to the date and the time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time you
preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Company.
18. You hereby expressly waive any lien, encumbrance or right of
set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or
credit agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation as set forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal and further acknowledge that you have examined each of them. Any
inconsistency between this Agreement, on the one hand, and the Prospectus and
the Letter of Transmittal (as they may be amended from time to time), on the
other hand, shall be resolved in favor of the latter two documents, except with
respect to the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.
21. The Company covenants and agrees to indemnify and hold you harmless
in your capacity as Exchange Agent hereunder against any loss, liability, cost
or expense, including reasonable attorneys' fees and expenses, arising out of or
in connection with any act, omission, delay or refusal made by you in reliance
upon any signature, endorsement, assignment, certificate, order, request,
notice, instruction or other instrument or document reasonably believed by you
to be valid, genuine and sufficient and in accepting any tender or effecting any
transfer of Old Notes reasonably believed by you in good faith to be authorized,
and in delaying or refusing in good faith to accept any tenders or effect any
transfer of Old Notes; provided, however, that the Company shall not be liable
for indemnification or otherwise for any loss, liability, cost or expense to
the extent arising out of your gross negligence or willful misconduct. In no
case shall the Company be
7
<PAGE> 8
liable under this indemnity with respect to any claim against you unless the
Company shall be notified by you, by letter or cable or by facsimile confirmed
by letter, of the written assertion of a claim against you or of any other
action commenced against you, promptly, but in any event within enough time to
file an answer to such claim, after you shall have received any such written
assertion or notice of commencement of action. Failure to so notify the Company
shall not relieve the Company of any liability which it may have otherwise than
on account of this Agreement except such liability which is a result of your
failure to notify promptly. The Company shall be entitled to participate at its
own expense in the defense of any such claim or other action, and, if the
Company so elects, the Company shall assume the defense of any suit brought to
enforce any such claim. In the event that the Company shall assume the defense
of any such suit, the Company shall not be liable for the fees and expenses of
any additional counsel retained by you, which fees and expenses are incurred
thereafter, so long as the Company shall retain counsel reasonably satisfactory
to you to defend such suit except for any reasonable fees and expenses of your
counsel incurred in representing you that are necessary and appropriate as a
result of the need to have separate representation because the Company's counsel
has reasonably determined a conflict of interest exists between the Company and
you.
22. You shall arrange to comply with all requirements under the tax
laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required to deduct 31% on
payments to holders who have not supplied their correct Taxpayer Identification
Number or required certification. Such funds will be turned over to the Internal
Revenue Service in accordance with applicable regulations.
23. You shall deliver or cause to be delivered, in a timely manner to
each governmental authority to which any transfer taxes are payable in respect
of the exchange of Old Notes, your check in the amount of all transfer taxes so
payable, and the Company shall reimburse you for the amount of any and all
transfer taxes payable in respect of the exchange of Old Notes; provided,
however, that you shall reimburse the Company for amounts refunded to you in
respect of your payment of any such transfer taxes, at such time as such refund
is received by you.
24. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the laws of the State of
8
<PAGE> 9
New York applicable to agreements made and to be performed entirely within such
state, and without regard to conflicts of law principles, and shall inure to the
benefit of, and the obligations created hereby shall be binding upon, the
successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
26. In case any provision of this Agreement 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.
27. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party to be
charged.
This Agreement may not be modified orally.
28. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed to it, at its
address or telecopy number set forth below:
If to the Company:
Moll Industries, Inc.
1111 Nothshore Drive, Suite N-600
Knoxville, TN 37919-4048
Facsimile: (423) 450-5379
Attention: Phyllis C. Best
With a copy to:
Robert M. Chilstrom
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile: 212-735-2000
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If to the Exchange Agent:
State Street Bank and Trust Company
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Facsimile: (860) 244-1896
Attention: Corporate Trust Administration
29. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Paragraphs 19, 21, and 23 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver to
the Company any certificates for Notes, funds or property then held by you as
Exchange Agent under this Agreement.
30. This Agreement shall be binding and effective as of the date
hereof. Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
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MOLL INDUSTRIES, INC.
By: /s/ George T. Votis
-------------------------------------
Name: George T. Votis
Title: Chairman and Chief
Executive Officer
Accepted as of the date first above written:
STATE STREET BANK AND TRUST COMPANY, as Exchange Agent
By: /s/ Elizabeth C. Hammer
--------------------------------
Name: Elizabeth C. Hammer
Title: Vice President
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SCHEDULE I
FEES
12
