<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 2, 1998
REGISTRATION NO. 333-60857
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 1
TO
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
<TABLE>
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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(2)
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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.
(2) Previously paid.
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 NOVEMBER 2, 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 July 4, 1998, the
Notes were subordinated to $122.6 million of Senior Debt and effectively
subordinated to $41.2 million of liabilities of the Company's subsidiaries
(other than Senior Debt). As of July 4, 1998, the Company and its subsidiaries
had $337.5 million of outstanding liabilities (including trade payables).
Subject to certain conditions, at July 4, 1998 approximately $48.8 million of
capacity was 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 13 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.
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<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, net income and EBITDA of
$414.6 million, $.7 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.
However, such contracts do not contain any minimum purchase requirements on the
part of the customer. Almost all such contracts can be terminated by the parties
thereto by mutual agreement and can also be terminated by either party giving
notice of termination upon certain occurrences, including, without limitation,
disagreement on quality, quantity and pricing issues, insolvency or dissolution
of any party thereto and upon any material breach of such contracts by any party
thereto. 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. Management believes that larger injection molders such as the Company
will benefit from continued industry
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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. The savings consist of $1.7 million in
payroll costs gained through the elimination of duplicate expenses and excessive
resources and $1.1 million in benefit costs gained through a revision of the
retirement benefits. The savings were calculated based on the salaries of the
positions eliminated and an actuarial estimation of the savings associated with
the change in the retirement plan.
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 such customers access to the Company's
European operations, operated by Moll prior to the Merger, is a
3
<PAGE> 7
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. The savings consist of $1.7 million in payroll costs gained through
the elimination of duplicate expenses and excessive resources and $1.1 million
in benefit costs gained through a revision of the retirement benefits. The
savings were calculated based on the salaries of the positions eliminated and an
actuarial estimation of the savings associated with the change in the retirement
plan. 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 July 4, 1998, the Notes
were subordinated to $122.6 million of Senior
Debt and effectively subordinated to $41.2
million of liabilities of the Company's
subsidiaries (other than Senior Debt). Subject
to certain conditions, at July 4, 1998
approximately $48.8 million of capacity was
available for borrowing under the Revolving
Credit Facility. However, after giving effect
to the most restrictive covenants contained in
the Company's loan documents, as of July 4,
1998, the maximum amount of Senior Debt that
could be incurred by the Company in addition to
the $122.6 million of Senior Debt outstanding
on such date was approximately $24 million.
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
7
<PAGE> 11
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
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."
8
<PAGE> 12
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.
9
<PAGE> 13
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 Moll (Anchor Holdings, Inc.
and its subsidiary Moll Industries, Inc. -- the Registrant), Anchor Holdings (an
acquired company) and Somomeca (an acquired company) for the periods indicated.
The summary historical financial data for the years ended 1995, 1996 and 1997
for Moll and Anchor Holdings 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 summary unaudited
interim balance sheet data and the summary unaudited statements of operations
and other data for the twenty-six weeks 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 Moll, Anchor Holdings 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 TWENTY-SIX WEEKS
DECEMBER 31, 1997 1998
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales................................................... $414,630 $199,185
Gross profit................................................ 60,048 28,691
Selling, general and administrative expenses................ 29,390 15,064
Operating income............................................ 30,458 13,527
Interest expense, net....................................... 27,006 14,009
Income (loss) before taxes and extraordinary items.......... 4,321 (1,227)
Income (loss) before extraordinary item..................... 727 (1,041)
OTHER DATA:
EBITDA(1)................................................... $ 54,807 $ 23,269
Cash flows from operating activities........................ 12,956 7,037
Cash flows from investing activities........................ (29,764) (8,532)
Cash flows from financing activities........................ 18,209 772
Depreciation and amortization............................... 23,480 10,487
Capital expenditures........................................ 15,559 7,605
Cash interest expense, net(2)............................... 25,932 13,336
Ratio of EBITDA to cash interest expense, net............... 2.1x NA
Ratio of net debt to EBITDA(3).............................. 4.1x NA
</TABLE>
SUMMARY UNAUDITED INTERIM BALANCE SHEET DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT JULY 4, 1998
<S> <C>
Cash........................................................ $ 29,668
Working capital............................................. 89,730
Total assets................................................ 339,455
Total debt.................................................. 252,600
Stockholders' equity........................................ 1,932
</TABLE>
10
<PAGE> 14
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWENTY-SIX
YEAR ENDED DECEMBER 31, WEEKS
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, ------------------------------- -------------------
MOLL INDUSTRIES, INC., THE REGISTRANT(4) 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales....................................... $90,876 $ 89,464 $116,947 $53,755 $123,169
Gross profit.................................... 16,966 16,502 19,861 11,888 21,073
Selling, general and administrative expenses.... 8,301 7,190 10,758 4,177 9,587
Operating income................................ 9,019 8,574 8,186 6,869 10,288
Interest expense, net........................... 2,414 2,518 3,405 1,423 4,979
Income before taxes and extraordinary item...... 6,485 6,037 4,645 4,956 4,532
Income before extraordinary item................ 6,485 6,037 4,563 4,956 3,788
PRO FORMA INFORMATION:
Provision for income taxes...................... $ 2,594 $ 2,415 $ 2,531 $ 1,982 $ 1,300
Income before extraordinary item................ 3,891 3,622 2,114 2,974 2,444
OTHER DATA:
EBITDA(1)....................................... $13,317 $ 12,703 $ 13,450 $ 8,736 $ 14,596
Cash flows from operating activities............ 9,709 10,802 5,506 1,472 2,725
Cash flows from investing activities............ (2,553) (11,592) (14,215) (1,347) (34,574)
Cash flows from financing activities............ (6,972) 1,336 9,595 772 59,512
Depreciation and amortization................... 4,418 4,148 5,400 2,357 5,085
Capital expenditures............................ 2,776 1,387 6,562 1,447 6,983
</TABLE>
<TABLE>
<CAPTION>
TWENTY-SIX
YEAR ENDED DECEMBER 31, WEEKS
ANCHOR HOLDINGS, INC.(5), -------------------------------- ------------------
ACQUIRED COMPANY 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales....................................... $149,366 $156,858 $161,161 $84,745 $75,810
Gross profit.................................... 24,338 27,637 25,187 13,424 8,178
Selling, general and administrative............. 9,409 11,358 10,979 5,490 5,946
Income from operations.......................... 13,267 14,749 12,510 7,269 1,503
Interest expense, net........................... 8,616 8,124 11,165 4,982 6,026
Income (loss) before taxes and extraordinary
item.......................................... 3,677 6,217 1,632 2,200 (4,625)
Income (loss) before extraordinary item......... 2,438 3,626 838 1,400 (3,233)
OTHER DATA:
EBITDA(1)....................................... $ 21,742 $ 23,627 $ 22,370 $11,916 $ 6,652
Cash flows from operating activities............ 8,822 13,076 16,037 5,877 1,365
Cash flows from investing activities............ (6,453) (8,014) (8,847) (3,481) (7,185)
Cash flows from financing activities............ (2,265) (4,268) (1,854) (244) --
Depreciation and amortization................... 9,449 9,286 9,573 4,734 5,251
Capital expenditures............................ 6,932 8,028 8,413 3,481 4,416
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
SOMOMECA INDUSTRIES, ACQUIRED COMPANY 1996 1997
<S> <C> <C> <C> <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
Cash flows from operating activities.............. (3,498) 8,627
Cash flows from investing activities.............. (8,225) (4,623)
Cash flows from financing activities.............. 11,718 (4,356)
Depreciation and amortization..................... 7,568 6,058
Capital expenditures.............................. 9,638 5,097
</TABLE>
11
<PAGE> 15
- ------------------------------
(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. As all
companies may not calculate EBITDA in the same manner, these amounts may not
be comparable to other companies.
(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 July
4, 1998 of $252,600 minus cash of $29,668. EBITDA, as used in this
calculation, represents EBITDA for the year ended December 31, 1997.
(4) The financial data presented here is derived from the financial statements
of Moll as Moll was the accounting acquiror in the Merger. At July 4, 1998,
there were no differences between the financial statements of Moll
Industries, Inc. (the Registrant) and Anchor Holdings, Inc.
(5) The consolidated financial statements of Anchor Holdings (acquired company)
do not differ significantly from those of Anchor. See Note 16 to the
historical consolidated financial statements of Anchor Holdings.
12
<PAGE> 16
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 July 4, 1998, the Company's
total indebtedness was $252.6 million, and the Company had, subject to certain
conditions, at July 4, 1998 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. As of July 4, 1998, the Company's annual debt service was $11.8 million in
respect of the Senior Notes (11 3/4%) and $13.7 million in respect of the Notes
(10 1/2%). The total amount of the Company's Senior Debt outstanding as of July
4, 1998 consisted of $100 million of the Senior Notes and $22.6 million of
equipment leases and other debt.
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
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<PAGE> 17
Financial Condition and Results of Operations--Liquidity and Capital Resources,"
"Description of Certain Indebtedness" and "Description of Notes."
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 July 4, 1998, the Company had
outstanding $122.6 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 July 4,
1998, the subsidiaries of the Company had $41.2 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 relation-
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ships 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 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 year and a half 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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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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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. The Company does not maintain any key person life insurance. 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, and does not currently expect, 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.
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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 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
Historically, certain computerized systems have had two digits rather than
four digits to define the applicable year, which could result in recognizing a
date using "00" as the year 1900 rather than the year 2000. This could result in
major failures or miscalculations, and is generally referred to as the "Year
2000 issue." The Company recognizes that the impact of the Year 2000 issue
extends beyond traditional computer hardware and software to automated plant
systems and instrumentation, as well as to third parties. The Year 2000 issue is
being addressed within the Company by its individual business units, and
progress is reported periodically to management.
The Company has committed resources to conduct risk assessments and to take
corrective action, where required, within each of the following areas:
information technology, plant systems and external parties. Information
technology includes telecommunications, as well as traditional computer software
and hardware in the mainframe, midrange and desktop environments. Plant systems
include all automation and embedded chips used in plant operations. External
parties include any third party with which the Company does business.
In the information technology area, inventory and assessment audits in the
mainframe and midrange environments were completed in third quarter 1998 with
corrective action scheduled for completion by the fourth quarter 1998, except
for business application software which is expected to be completed by the
second quarter 1999. Inventory and assessment audits for telecommunications were
completed in third quarter 1998 with corrective action expected to be completed
by the second quarter 1999. Finally, inventory and assessment audits in the
desktop environment were completed in third quarter 1998, with corrective action
expected to be completed by the third quarter 1999. The companies located in
Europe will begin installing systems in the fourth quarter 1998 that will be
Year 2000 ready.
In the plant systems area, 75% of the Company's business units have
completed their inventory and assessment audits; the remaining units are
expected to complete this work by the fourth quarter 1998. The Company is
relying on vendor testing and certification with validation through limited
internal testing and/or industry test results. Downtime for normally scheduled
plant maintenance will be used to conduct testing, with corrective action
expected to be completed by the second quarter 1999.
With respect to external parties, 65% of the Company's business units have
completed their inventory audit of critical external parties. The remaining
business units are expected to complete this work by the fourth quarter 1998.
Risk assessment is expected to be complete by the fourth quarter 1998, and
monitoring of risk in this area will continue into 1999, as many external
parties will not have completed their work.
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The total cost of Year 2000 activities is not expected to be material to
the Company's operations, liquidity or capital resources. Costs are being
managed within each business unit. The total cost for the Company's Year 2000
work is estimated to be $2 million. 1997 costs were $500,000, and 1998 costs
through June 1998 were $300,000. Costs exclude expenditures for replacement
systems, which were previously scheduled.
There is still uncertainty around the scope of the Year 2000 issue. At this
time the Company cannot quantify the potential impact of these failures. There
can be no assurance that there will not be a delay in, or increased costs
associated with, the Company's efforts to address the Year 2000 issue, and the
Company's inability to implement the necessary changes could have an adverse
effect on the Company. The Company's Year 2000 program and contingency plans are
being developed to address issues within the Company's control. The program
minimizes but does not eliminate the issues of external parties.
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.
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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, net income and EBITDA of $414.6 million,
$.7 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. The savings consist of $1.7 million in payroll costs gained through
the elimination of duplicate expenses and excessive resources and $1.1 million
in benefit costs gained through a revision of the retirement benefits. The
savings were calculated based on the salaries of the positions eliminated and an
actuarial estimation of the savings associated with the change in the retirement
plan.
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.
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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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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.
[MOLL CORPORATION FLOW 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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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 and a $20.0 million sublimit for the making of
foreign currency loans. 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" which is not work-in-process inventory and (c) the
lesser of $5,000,000 and 25% of "eligible inventory" which is work-in-process
inventory (as such terms are defined in the Revolving Credit Facility), where
such inventory is 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.
Guarantees. Anchor Holdings has guaranteed the Company's obligations under
the Revolving Credit Facility. Additionally, in the event that any person
becomes a Designated Subsidiary (defined in the Revolving Credit Facility as, at
any time, any direct or indirect subsidiary of the Company, having at such time
any outstanding guarantee obligations in respect to any Funded Indebtedness (as
defined in the Revolving Credit Facility) of the Company other than the
indebtedness arising under the Senior Notes Indenture and the Senior Notes) of
the Company, the Company shall, cause such person to execute a Joinder Agreement
(as defined in the Revolving Credit Facility) by which such person shall be
deemed to be a party to the Revolving Credit Facility, and shall have all of the
obligations of a Guarantor (as defined in the Revolving Credit Facility),
provided, however, if such Designated Subsidiary is a foreign subsidiary of the
Company, such Joinder Agreement shall provide that the obligations of such
person under the Revolving Credit Facility shall be limited to the extent
necessary to cause such obligations to be in compliance with the laws of such
Person's jurisdiction of incorporation.
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.
23
<PAGE> 27
Covenants. The Revolving Credit Facility contains covenants customary for
working capital financings, including, without limitation: (i) restrictions on
capital expenditures, incurrence of additional indebtedness, dividends and
redemptions; and (ii) restrictions on mergers, acquisitions and sales of assets.
Additionally, the Revolving Credit Facility contains the following three
financial covenants:
(a) the Interest Coverage Ratio (EBITDA to cash interest expense), as
of the last day of each fiscal quarter of the Consolidated Parties (being
Anchor Holdings and its subsidiaries) calculated on a twelve month rolling
basis, shall be greater than or equal to (i) for the period from June 26,
1998 to and including the next to last day of the fiscal quarter of the
Company ending in December, 2000, 2.00 to 1.00, (ii) for the period from
the last day of the fiscal quarter of the Company ending in December, 2000
to and including the next to last day of the fiscal quarter of the Company
ending in December, 2001, 2.15 to 1.00, and (iii) for the period from the
last day of the fiscal quarter of the Company ending in December, 2001 and
at all times thereafter, 2.50 to 1.00;
(b) the Leverage Ratio (funded indebtedness net of cash and cash
equivalents to EBITDA), as of the last day of each fiscal quarter of the
Consolidated Parties, shall be less than or equal to (i) for the period
from June 26, 1998 to and including the next to last day of the fiscal
quarter of the Company ending in December, 1998, 4.75 to 1.00, (ii) for the
period from the last day of the fiscal quarter of the Company ending in
December, 1998 to and including the next to last day of the fiscal quarter
of the Company ending in December, 2000, 4.50 to 1.00, and (iii) for the
period from the last day of the fiscal quarter of the Company ending in
December, 2000 and at all times thereafter, 4.00 to 1.00; and
(c) at all times Consolidated Net Worth (Deficit) (shareholders'
equity or net worth) shall be greater than or equal to the sum of
($6,000,000), increased on a cumulative basis by an amount equal to (i) as
of the end of each fiscal quarter of the Company, commencing with the
fiscal quarter of the Company ending in September, 1998, 50% of
Consolidated Net Income (as defined in the Revolving Credit Facility) (to
the extent positive) for the fiscal quarter then ended and (ii) as of the
date of any Equity Issuance (as defined in the Revolving Credit Facility),
100% of the Net Proceeds (as defined in the Senior Note Indenture and the
Indenture) of any Equity Issuance.
Events of Default. The Revolving Credit Facility contains events of
default customary for working capital facilities, 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.
24
<PAGE> 28
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
$91.2 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 (payable in installments
through 2005, average interest rate of 8.25%).......... $ 84,698,000
Refinance Anchor acquisition debt (payable on April 15,
2002, interest rate of 8.3% until September 11, 1998
and 12% thereafter).................................... 6,453,000
Acquisition of Gemini Plastic............................. 10,186,000
Estimated fees and expenses............................... 7,550,000
Excess cash............................................... 21,113,000
------------
$130,000,000
============
</TABLE>
25
<PAGE> 29
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the actual cash and cash equivalents and
capitalization of Anchor Holdings at July 4, 1998. This table should be read in
conjunction with the historical consolidated financial statements of each of
Anchor Holdings (the Registrant), Moll and Anchor Holdings (the acquired
company), 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 JULY 4, 1998(1)
------------------
<S> <C>
Cash........................................................ $ 29,668
========
Total debt (including current maturities):
Revolving credit facility(2).............................. $ --
11 3/4% Senior Notes...................................... 100,000
10 1/2% Senior Subordinated Notes......................... 130,000
Other Somomeca long-term obligations...................... 12,437
Mortgage payable.......................................... 2,854
Payables to former owners................................. 1,500
Other debt................................................ 5,809
--------
Total long-term debt.............................. 252,600
--------
Stockholders' equity........................................ 1,932
--------
Total capitalization.............................. $254,532
========
</TABLE>
- ------------------------------
(1) The July 4, 1998 amounts do not reflect the effects of the Holdings Notes
Offering, except for the $2.0 million capital contribution from Holdings.
(2) Subject to certain conditions, at July 4, 1998 approximately $48.8 million
of capacity was available for borrowing under the Revolving Credit Facility.
See "Description of Certain Indebtedness--Revolving Credit Facility."
26
<PAGE> 30
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 Moll (Anchor Holdings,
Inc and its subsidiary Moll Industries, Inc -- the Registrant) and Anchor
Holdings (the acquired company) 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 Moll and Anchor
Holdings 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 selected
unaudited interim balance sheet data and the selected unaudited statements of
operations and other data for the twenty-six weeks 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 Moll and Anchor Holdings, 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 TWENTY-SIX WEEKS
DECEMBER 31, 1997 1998
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales................................................... $414,630 $199,185
Gross profit................................................ 60,048 28,691
Selling, general and administrative expenses................ 29,390 15,064
Operating income............................................ 30,458 13,527
Interest expense, net....................................... 27,006 14,009
Income (loss) before taxes and extraordinary item........... 4,321 (1,227)
Income (loss) before extraordinary item..................... 727 (1,041)
OTHER DATA:
EBITDA(1)................................................... $ 54,807 $ 23,269
Cash flows from operating activities........................ 12,956 7,037
Cash flows from investing activities........................ (29,764) (8,532)
Cash flows from financing activities........................ 18,209 772
Depreciation and amortization............................... 23,480 10,487
Capital expenditures........................................ 15,559 7,605
Cash interest expense, net(2)............................... 25,932 13,336
Ratio of EBITDA to cash interest expense, net............... 2.1x NA
Ratio of net debt to EBITDA(3).............................. 4.1x NA
</TABLE>
27
<PAGE> 31
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC., THE REGISTRANT(4)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, TWENTY-SIX WEEKS
------------------------------------------------- ------------------
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 $53,755 $123,169
Gross profit................. 9,685 15,218 16,966 16,502 19,861 11,888 21,073
Selling, general and
administrative expenses.... 5,602 6,804 8,301 7,190 10,758 4,177 9,587
Operating income............. 4,083 8,414 9,019 8,574 8,186 6,869 10,288
Other (income) expense....... -- -- 120 50 (299) 91 538
Interest expense, net........ 1,613 1,941 2,414 2,518 3,405 1,423 4,979
Income before taxes and
extraordinary item......... 2,470 6,473 6,485 6,037 4,645 4,956 4,532
Provision for income taxes... -- -- -- -- 83 -- 744
Extraordinary item(5)........ -- -- -- -- -- -- (1,971)
Net income................... 2,470 6,473 6,485 6,037 4,563 4,956 1,817
PRO FORMA INFORMATION:
Provision for income taxes... $ 988 $ 2,589 $ 2,594 $ 2,415 $ 2,531 $ 1,982 $ 1,300
Income before extraordinary
item....................... 1,482 3,884 3,891 3,622 2,114 2,974 2,444
OTHER DATA:
EBITDA(1).................... $ 6,537 $11,932 $13,317 $ 12,703 $ 13,450 $ 8,736 $ 14,596
Cash flows from operating
activities................. 2,062 11,110 9,709 10,802 5,506 1,472 2,725
Cash flows from investing
activities................. (3,749) (7,507) (2,553) (11,592) (14,215) (1,347) (34,574)
Cash flows from financing
activities................. 1,686 (3,457) (6,972) 1,336 9,595 772 59,512
Depreciation and
amortization............... 2,454 3,518 4,418 4,148 5,400 2,357 5,085
Capital expenditures......... 747 2,766 2,776 1,387 6,562 1,447 6,983
Ratio of earnings to fixed
charges(6)................. 2.3x 3.8x 3.3x 2.9x 2.1x 3.7x 1.8x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------- AT JULY 4,
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 $339,455
Long-term debt obligations... 13,777 19,739 30,466 33,640 47,932 252,600
</TABLE>
28
<PAGE> 32
ANCHOR HOLDINGS, INC., ACQUIRED COMPANY(7)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, TWENTY-SIX WEEKS
---------------------------------------------------- -----------------
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 $84,745 $75,810
Gross profit............... 20,778 18,208 24,338 27,637 25,187 13,424 8,178
Selling, general and
administrative........... 9,096 7,634 9,409 11,358 10,979 5,490 5,946
Amortization............... 577 1,712 1,662 1,530 1,698 665 729
Income from operations..... 11,105 8,862 13,267 14,749 12,510 7,269 1,503
Other (income) expense..... (110) (739) 974 408 (287) 87 102
Interest expense, net...... 5,385 5,984 8,616 8,124 11,165 4,982 6,026
Income (loss) before taxes
and extraordinary item... 5,830 3,617 3,677 6,217 1,632 2,200 (4,625)
Provision (benefit) for
income taxes............. 1,606 1,507 1,239 2,591 794 800 (1,392)
Extraordinary item(5)...... -- (334) -- -- (1,210) (1,210) --
Net income (loss).......... 4,224 1,776 2,438 3,626 (372) 190 (3,233)
OTHER DATA:
EBITDA(1).................. $ 17,881 $ 18,439 $ 21,742 $ 23,627 $ 22,370 $11,916 $ 6,652
Cash flows from operating
activities............... 6,875 8,684 8,822 13,076 16,037 5,877 1,365
Cash flows from investing
activities............... (33,039) (6,711) (6,453) (8,014) (8,847) (3,481) (7,185)
Cash flows from financing
activities............... 26,844 (2,708) (2,265) (4,268) (1,854) (244) --
Depreciation and
amortization............. 6,666 8,838 9,449 9,286 9,573 4,734 5,251
Capital expenditures....... 6,729 5,724 6,932 8,028 8,413 3,481 4,416
Ratio of earnings to fixed
charges(6)............... 2.1x 1.6x 1.4x 1.7x 1.1x 1.4x 0.2x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................... $79,227 $115,065 $116,529 $115,263 $120,839
Long-term debt obligations..... 50,444 80,387 78,133 74,468 101,939
</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. As all
companies may not calculate EBITDA in the same manner, these amounts may not
be comparable to other companies.
(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 July
4, 1998 of $252,600 minus cash of $29,668. EBITDA, as used in this
calculation, represents EBITDA for the year ended December 31, 1997.
(4) The financial data presented here is derived from the financial statements
of Moll as Moll was the accounting acquiror in the Merger. At July 4, 1998,
there were no differences between the financial statements of Moll
Industries, Inc. (the Registrant), and Anchor Holdings, Inc.
(5) With respect to Moll, amount represents loss on extinguishment of debt. With
respect to Anchor Holdings in 1997, amount represents loss on extinguishment
of debt net of tax.
29
<PAGE> 33
(6) 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).
(7) The consolidated financial statements of Anchor Holdings (acquired company)
do not differ significantly from those of Anchor. See Note 16 to the
historical consolidated financial statements of Anchor Holdings.
30
<PAGE> 34
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, net income and EBITDA of $414.6 million,
$.7 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. However, such contracts do
not contain any minimum purchase requirements on the part of the customer.
Almost all such contracts can be terminated by the parties thereto by mutual
agreement and can also be terminated by either party giving notice of
termination upon certain occurrences, including, without limitation,
disagreement on quality, quantity and pricing issues, insolvency or dissolution
of any party thereto and upon any material breach of such contracts by any party
thereto. 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
31
<PAGE> 35
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."
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
Colgate-Palmolive 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. The savings consist of $1.7 million in
payroll costs gained through the elimination of duplicate expenses and excessive
resources and $1.1 million in benefit costs gained through a revision of the
retirement benefits. The savings were calculated based on the salaries of the
positions eliminated and an actuarial estimation of the savings associated with
the change in the retirement plan.
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.
32
<PAGE> 36
RESULTS OF OPERATIONS
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC., THE REGISTRANT(1)
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 twenty-six weeks of 1997 and 1998.
<TABLE>
<CAPTION>
YEAR ENDED TWENTY-SIX WEEKS
----------------------- ----------------
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 22.1 17.1
Selling, general and administrative expenses....... 9.1 8.0 9.2 8.5 8.1
Tooling income, net................................ 1.9 0.8 1.6 0.7 0.3
Management fee..................................... 1.5 1.6 1.4 1.6 1.0
Loss incurred on closure of facility............... -- -- 1.0 -- --
Operating income................................... 9.9 9.6 7.0 12.7 8.3
Other (income) expense............................. 0.1 -- (0.3) 0.2 0.4
Interest expense, net.............................. 2.7 2.8 2.9 2.6 4.0
Income before taxes and extraordinary items........ 7.1 6.7 4.0 9.2 3.7
Provision for income taxes......................... -- -- 0.1 -- 0.6
Extraordinary item................................. -- -- -- -- 1.6
Net income......................................... 7.1 6.7 3.9 9.2 1.5
OTHER DATA:
EBITDA(2).......................................... 14.7% 14.2% 11.5% 16.3% 11.9%
Cash flows from operating activities............... 10.6 12.1 4.7 2.7 2.2
Cash flows from investing activities............... (2.8) (13.0) (12.2) (2.5) (28.1)
Cash flows from financing activities............... (7.7) 1.5 8.2 1.4 48.3
Depreciation and amortization...................... 4.9 4.6 4.6 4.4 4.1
Capital expenditures............................... 3.1 1.6 5.6 2.7 5.7
</TABLE>
- ------------------------------
(1) The financial data presented here is derived from the financial statements
of Moll as Moll was the accounting acquiror in the Merger. At July 4, 1998,
there were no differences between the financial statements of Moll
Industries, Inc. and Anchor Holdings, Inc.
(2) 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. As all companies may not calculate EBITDA in the
same manner, these amounts may not be comparable to other companies.
26 Weeks Ended July 4, 1998 Compared to 26 Weeks Ended June 30, 1997
Net Sales. Net sales for the twenty-six weeks ended July 4, 1998 increased
$69.4 million, or 129.1%, to $123.2 million from $53.8 million for the
twenty-six week period ended June 30, 1997, due primarily to the Somomeca
acquisition in January 1998 which contributed net sales of $43.4 million (80.7%
of net sales of the comparable period in 1997) and the Hanning acquisition in
August 1997 which contributed net sales of $23.8 million (44.2% of net sales of
the comparable period in 1997). The closure of the El Paso, Texas facility in
September 1997 decreased sales in the first half of 1998 by $3.2 million.
33
<PAGE> 37
Gross Profit. Gross profit increased $9.2 million, or 77.3%, in the first
half of 1998 to $21.1 million from $11.9 million in the first half of 1997, due
primarily to the Somomeca acquisition which contributed gross profit of $6.5
million (54.6% of gross profit of the comparable period in 1997) and the Hanning
acquisition which contributed gross profit of $1.9 million (16.0% of gross
profit of the comparable period in 1997). Increased utilization of plant
capacity caused a combined increase from remaining facilities of $0.8 million.
Gross profit as a percentage of net sales decreased 5.0% from 22.1% for the
twenty-six week period ended June 30, 1997 to 17.1% for the twenty-six weeks
ended July 4, 1998, primarily as a result of lower margins realized at the
acquired companies than the Company had historically realized.
Selling, General and Administrative Expenses. SG&A expenses increased $5.4
million, or 128.6%, in the first half of 1998 to $9.6 million from $4.2 million
for the first half of 1997, primarily due to the Somomeca ($2.4 million) and
Hanning ($2.2 million) acquisitions mentioned previously. Increases totaling
$0.2 million were incurred for personnel, travel and computer system support in
the period ended July 4, 1998 over the period ended June 30, 1997.
Tooling income, net. The Company acts as an agent in facilitating the
building of tools for its customers. Historically, the net earnings from such
service have been recognized as a net reduction in operating expenses. Following
consummation of the Transactions, the Company will build a majority of the tools
for its customers itself, rather than act as an agent in arranging their
construction; accordingly, it will begin recognizing sales and cost of sales
related to such activities. If the Company had classified these activities as
such, sales would be increased by $1.3 million, and cost of sales would be
increased by $1.0 million for the twenty-six weeks ended July 4, 1998.
Management Fees. Management fees increased $0.4 million, or 42.3%, to $1.2
million in the first half of 1998 from $0.8 million in the first half of 1997,
primarily due to the increase in net sales. Historically, the Company paid
management fees as a fixed percentage of net sales. Commencing in the third
quarter of 1998 management fees will be $200,000 per year.
Operating Income. Operating income increased $3.4 million, or 49.8%, in
the first half of 1998 to $10.3 million from $6.9 million in the corresponding
period of 1997, due primarily to the acquisitions mentioned above.
Interest Expense. Interest expense increased $3.6 million, or 249.9%, in
the first half of 1998 to $5.0 million from $1.4 million in the same period for
1997, primarily due to the increase in debt acquired in connection with the
Somomeca and Hanning acquisitions mentioned above.
Provision for Income Taxes. Provision for income taxes in 1998 represents
foreign income taxes recorded in connection with the new corporate subsidiaries
in France, Portugal, Germany and the United Kingdom. Prior to the acquisition of
foreign subsidiaries no provision for income taxes was recorded on the
Consolidated Financial Statements as the Company's partnership tax status
allowed for the earnings of the Company to be taxed on the tax returns of the
partners.
Extraordinary Loss. The extraordinary loss represents the write-off of
unamortized fees incurred in connection with debt which was repaid during the
period.
Net Income. Net income decreased $3.1 million, or 66.6%, to $1.8 million
for the first half of 1998 from $4.9 million for the first half of 1997 as a
result of the items listed above.
EBITDA. EBITDA increased by $5.8 million, or 67%, to $14.5 million for the
first half of 1998 from $8.7 million for the first half of 1997 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
which contributed net sales of $17.4 million (19.4% of net sales in fiscal
1996,) and Hanning results since August 7, 1997 which contributed net sales of
$19.8 million (22.1% of net sales in fiscal 1996.) Such increase was 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.
34
<PAGE> 38
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
which contributed gross profit of $4.1 million (24.8% of gross profit in fiscal
1996.) Such increase was partially offset by decreased margin of $470,000 at the
El Paso facility and 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.
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.
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<PAGE> 39
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.
ANCHOR HOLDINGS, INC., ACQUIRED COMPANY
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 twenty-six weeks of 1997 and 1998.
<TABLE>
<CAPTION>
YEAR ENDED TWENTY-SIX WEEKS
----------------------- -----------------
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 15.8 10.8
Selling, general and administrative............... 6.3 7.2 6.8 6.4 7.8
Amortization...................................... 1.1 1.0 1.1 0.8 1.0
Operating income.................................. 8.9 9.4 7.8 8.6 2.0
Other (income) expense............................ 0.7 0.3 (0.2) 0.1 0.1
Interest expense, net............................. 5.8 5.2 6.9 5.9 8.0
Income (loss) before taxes and extraordinary
items........................................... 2.5 3.9 1.0 2.6 (6.1)
Provision (benefit) for income taxes.............. 0.8 1.7 0.5 1.0 (1.8)
Extraordinary item................................ -- -- -- 1.4 --
Net income (loss)................................. 1.6 2.3 (0.2) 0.2 (4.3)
OTHER DATA:
EBITDA(1)......................................... 14.6% 15.1% 13.9% 14.1 8.8%
Cash flows from operating activities.............. 5.9 8.3 10.0 6.9 1.8
Cash flows from investing activities.............. (4.3) (5.1) (5.5) (4.1) (9.5)
Cash flows from financing activities.............. (1.5) (2.7) (1.2) (0.3) --
Depreciation and amortization..................... 6.3 5.9 5.9 5.6 6.9
Capital expenditures.............................. 4.6 5.1 5.2 4.1 5.8
</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. As all companies may not
calculate EBITDA in the same manner, these amounts may not be comparable to
other companies.
26 Weeks Ended July 4, 1998 ("Interim 98") Compared to 26 Weeks Ended June 28,
1997
("Interim 97")
Net Sales. Net sales decreased by $8.9 million, or 10.5%, to $75.8 million
for Interim 98 from $84.7 million for Interim 97, mainly because of lower
toothbrush sales in the amount of $8.5 million to Colgate-Palmolive as a result
of in-house manufacturing by Colgate-Palmolive, partially offset by increased
sales to Anchor's Cosmetics Division customers. The transition to in-house
manufacturing by Colgate-Palmolive
36
<PAGE> 40
began in the third quarter of 1997; accordingly, future periods are not expected
to be further impacted by such change.
Gross Profit. Gross Profit decreased by $5.2 million, or 39.1%, to $8.2
million for Interim 98 from $13.4 million for Interim 97, due to lower sales to
Colgate-Palmolive.
Selling, General and Administrative. SG&A expenses increased by $.5
million, or 9.1%, to $5.9 million for Interim 98 from $5.5 million for Interim
97, primarily due to selling expense associated with increased sales to Anchor's
Cosmetics Division customers and to salary and benefit increases for 1998.
Amortization. Goodwill amortization remained flat at $.7 million.
Operating Income. Operating income decreased by $5.8 million, or 79.3%, to
$1.5 million for Interim 98 from $7.3 million for Interim 97 for the reasons
listed above.
Other Expense. Other expense remained flat at $.1 million.
Net Interest Expense. Net interest expense increased by $1.0 million, or
20.0%, to $6.0 million for Interim 98 from $5.0 million for Interim 97 due to
the issuance of the Senior Notes in April 1997.
Income Taxes. Income taxes decreased by $2.2 million, or 274.0%, to $(1.4)
million for Interim 98 from $.8 million for Interim 97 as a result of decreased
operating income.
Extraordinary Item. Extraordinary item decreased by $1.2 million, or
100.0%, from $1.2 million for Interim 97 due to the writeoff of $.4 million in
bank fees, and a $.8 million prepayment penalty associated with the retirement
of subordinated debt, all of which are net of tax.
Net Income. Net income decreased $3.4 million, to $(3.2) million for
Interim 98 from $.2 million for Interim 97 as a result of the above factors.
EBITDA. EBITDA decreased $5.2 million, or 44.2%, to $6.7 million for the
first half of 1998 from $11.9 million for the first half of 1997 as a result of
the above factors.
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. The increase in gross sales for this period
was partially reduced by a drop of $9.0 million 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.
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<PAGE> 41
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.
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 as a result of general market
conditions.
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.
38
<PAGE> 42
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.
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.
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."
39
<PAGE> 43
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.
As a result of the Transactions (excluding the Holding Notes Offering), the
Company is expected to incur an increase in cash paid for interest expense of
$6.5 million per year. Additionally, the Company expects to incur additional
non-cash expenses for depreciation and amortization related to the Transactions
totaling $2.6 million per year.
YEAR 2000
Historically, certain computerized systems have had two digits rather than
four digits to define the applicable year, which could result in recognizing a
date using "00" as the year 1900 rather than the year 2000. This could result in
major failures or miscalculations, and is generally referred to as the "Year
2000 issue." The Company recognizes that the impact of the Year 2000 issue
extends beyond traditional computer hardware and software to automated plant
systems and instrumentation, as well as to third parties. The Year 2000 issue is
being addressed within the Company by its individual business units, and
progress is reported periodically to management.
The Company has committed resources to conduct risk assessments and to take
corrective action, where required, within each of the following areas:
information technology, plant systems and external parties. Information
technology includes telecommunications, as well as traditional computer software
and hardware in the mainframe, midrange and desktop environments. Plant systems
include all automation and embedded chips used in plant operations. External
parties include any third party with which the Company does business.
In the information technology area, inventory and assessment audits in the
mainframe and midrange environment were completed in third quarter 1998 with
corrective action scheduled for completion by the fourth quarter 1998, except
for business application software which is expected to be completed by the
second quarter 1999. Inventory and assessment audits for telecommunications were
completed in third quarter 1998 with corrective action expected to be completed
by the second quarter 1999. Finally, inventory and assessment audits in the
desktop environment were completed in third quarter 1998, with corrective action
expected to be completed by the third quarter 1999. The companies located in
Europe will begin installing systems in the fourth quarter 1998 that will be
Year 2000 ready.
In the plant systems area, 75% of the Company's business units have
completed their inventory and assessment audits; the remaining units are
expected to complete this work by the fourth quarter 1998. The Company is
relying on vendor testing and certification with validation through limited
internal testing and/or industry test results. Downtime for normally scheduled
plant maintenance will be used to conduct testing, with corrective action
expected to be completed by the second quarter 1999.
With respect to external parties, 65% of the Company's business units have
completed their inventory audit of critical external parties. The remaining
business units are expected to complete this work by the fourth quarter 1998.
Risk assessment is expected to be complete by the fourth quarter 1998, and
monitoring of risk in this area will continue into 1999, as many external
parties will not have completed their work.
The total cost of Year 2000 activities is not expected to be material to
the Company's operations, liquidity or capital resources. Costs are being
managed within each business unit. The total cost for the Company's Year 2000
work is estimated to be $2 million. 1997 costs were $500,000, and 1998 costs
through June 1998 were $300,000. Costs exclude expenditures for replacement
systems, which were previously scheduled.
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<PAGE> 44
There is still uncertainty around the scope of the Year 2000 issue. At this
time the Company cannot quantify the potential impact of these failures. There
can be no assurance that there will not be a delay in, or increased costs
associated with, the Company's efforts to address the Year 2000 issue, and the
Company's inability to implement the necessary changes could have an adverse
effect on the Company. The Company's Year 2000 program and contingency plans are
being developed to address issues within the Company's control. The program
minimizes but does not eliminate the issues of external parties. 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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<PAGE> 45
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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<PAGE> 46
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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<PAGE> 47
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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<PAGE> 48
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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<PAGE> 49
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> 50
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. 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> 51
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> 52
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, net income and EBITDA of $414.6 million, $.7 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. The savings consist of $1.7 million in
payroll costs gained through the elimination of duplicate expenses and excessive
resources and $1.1 million in benefit costs gained through a revision of the
retirement benefits. The savings were calculated based on the salaries of the
positions eliminated and an actuarial estimation of the savings associated with
the change in the retirement plan.
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<PAGE> 53
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> 54
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. The savings consist of $1.7 million in payroll costs gained through
the elimination of duplicate expenses and excessive resources and $1.1 million
in benefit costs gained through a revision of the retirement benefits. The
savings were calculated based on the salaries of the positions eliminated and an
actuarial estimation of the savings associated with the change in the retirement
plan. 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, manufactur-
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<PAGE> 55
ing 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.
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
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<PAGE> 56
division of Teledyne Industries, Inc. Toothbrushes accounted for approximately
13.4% and 11.2% of proforma consolidated sales in 1996 and 1997, respectively.
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. The Company's relationship with L'Oreal is governed by a letter
agreement which will expire on December 31, 2000. Such agreement does not
contain any minimum purchase requirements on the part of L'Oreal. Such agreement
provides that if long term quality and reliability is violated, such agreement
will become null and void.
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. The
Company's relationship with Whirlpool is governed by a written contract.
However, such contract does not contain any minimum purchase requirements on the
part of Whirlpool. The initial term of such contract expires on December 31,
2000, and, thereafter, such contract will be automatically renewed for one year
terms unless terminated in the manner provided therein. Such contract can be
terminated (i) by the parties by mutual agreement at any time; (ii) by either
party giving the other at least six months notice of termination upon (a) the
expiration of the initial term or upon the expiration of any calendar year
subsequent to the initial term and (b) the parties failing to agree to certain
price and quality specifications, and (iii) each party has the right to
unilaterally terminate such contract for cause, which includes, without
limitation, substantial default, dissolution of either party and insolvency of
either party.
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
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<PAGE> 57
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.
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.
CUSTOMER RELATIONSHIPS
The Company has built and maintained solid and long-term relationships with
its customers. In certain cases, such ongoing relationships are governed by
long-term purchase and sale contracts. In 1997, approximately 45% of the
Company's pro forma net sales of molded products was covered by such contracts.
However, such contracts do not contain any minimum purchase requirements on the
part of the customer.
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<PAGE> 58
Almost all such contracts can be terminated by the parties thereto by mutual
agreement and can also be terminated by either party giving notice of
termination upon certain occurrences, including, without limitation,
disagreement on quality, quantity and pricing issues, insolvency or dissolution
of any party thereto and upon any material breach of such contracts by any party
thereto.
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.
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
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<PAGE> 59
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.
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. The Company employs six sales agents and uses two
independent sales representatives to service its customers. 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.
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<PAGE> 60
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."
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, and does not currently expect, 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.
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PROPERTIES
As of July 4, 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
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> 62
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.............................. 52 Chief Financial Officer
Michael N. Red............................... 51 Senior Vice President, Marketing
T. Michael Bauer............................. 48 Executive Vice President, Eastern Operations
and U.K.
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
in 1998, 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 from 1988 to 1995 with Closure Systems
International as Vice President Global Sales and two years from 1996 to 1997
with Soft Alloy Extrusion Division, Tifton, Georgia, as Vice President of Sales
and Marketing.
T. Michael Bauer. Prior to becoming Executive Vice President, Eastern
Operations and U.K. of the Company in 1998, 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 from
1985 to 1988 with Michigan Plastics Company as Vice President of Manufacturing,
one year from 1984 to 1985 with Grote Manufacturing Company as Manager of
Manufacturing Engineering Services and ten years from 1974 to 1984 with Kusan
Manufacturing Company.
Geoffrey A. de Rohan. Prior to becoming Executive Vice President,
Cosmetics of the Company in 1998, 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 in 1998, Mr. Parkey was a Director and Executive Vice President of
Anchor and General Manager of the Brush Division of Anchor 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.
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<PAGE> 63
Mr. de Boissieu served as Managing Director and General Manager US Filter Water
Treatment France from 1994 to 1996, 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 from 1985 to 1994.
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
with Alcoa Closure Systems International Europe from 1995 to 1997 where he was
finance and procurement manager, with Treasure Craft from 1994 to 1995 as
controller and with Capella Com-Data from 1993 to 1994 as finance manager/vice
managing director.
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, $9,268.
(4) Amounts represent (i) dividends on 28,400 shares of restricted stock of
Anchor Holdings that were purchased pursuant to an option by Mr. Parkey and
(ii) dividends on 40,000 shares of restricted stock of Anchor Holdings that
were purchased pursuant to an option by Mr. Olmstead.
(5) Consist of insurance premiums with respect to term life insurance.
(6) Mr. Olmstead retired from the Company in connection with the acquisition of
Holdings in March 1998 by Anchor Acquisition Co.
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<PAGE> 64
AGGREGATED OPTIONS EXERCISED IN FISCAL YEAR 1997
AND 1997 FISCAL YEAR OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 1997 YEAR END AT 1997 YEAR END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) 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, 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),
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<PAGE> 65
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.
62
<PAGE> 66
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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<PAGE> 67
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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<PAGE> 68
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 is a summary
of the material provisions of the Indenture. 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 July 4, 1998, the Notes were subordinated
to $122.6 million of Senior Debt and effectively subordinated to $41.2 million
of liabilities of the Company's subsidiaries (other than Senior Debt). Subject
to certain conditions at July 4, 1998, approximately $48.8 million of capacity
was available for borrowing under the Revolving Credit Facility. However, after
giving effect to the most restrictive covenants contained in the Company's loan
documents, as of July 4, 1998, the maximum amount of Senior Debt that could be
incurred by the Company in addition to $122.6 million of Senior Debt outstanding
on such date was approximately $24 million.
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
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<PAGE> 69
maintained for such purpose within the City and State of New York or, at the
option of the Company, 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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<PAGE> 70
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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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 and a $20.0 million sublimit for the making of
foreign currency loans. 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" which is not work-in-process inventory and (c) the
lesser of $5,000,000 and 25% of "eligible inventory" which is work-in-process
inventory (as such terms are defined in the Revolving Credit Facility), where
such inventory is 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.
Guarantees. Anchor Holdings has guaranteed the Company's obligations under
the Revolving Credit Facility. Additionally, in the event that any person
becomes Designated Subsidiary (defined in the Revolving Credit Facility as, at
any time, any direct or indirect subsidiary of the Company having at such time
any outstanding guarantee obligations in respect to any Funded Indebtedness (as
defined in the Revolving Credit Facility) of the Company other than the
indebtedness arising under the Senior Notes Indenture and the Senior Notes) of
the Company, the Company shall cause such person to execute a Joinder Agreement
(as
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defined in the Revolving Credit Facility) by which such person shall be deemed
to be a party to the Revolving Credit Facility, and shall have all of the
obligations of a Guarantor (as defined in the Revolving Credit Facility),
provided, however, if such Designated Subsidiary is a foreign subsidiary of the
Company, such Joinder Agreement shall provide that the obligations of such
person under the Revolving Credit Facility shall be limited to the extent
necessary to cause such obligations to be in compliance with the laws of such
person's jurisdiction of incorporation.
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) restrictions on
capital expenditures, incurrence of additional indebtedness, dividends and
redemptions; and (ii) restrictions on mergers, acquisitions and sales of assets.
Additionally, the Revolving Credit Facility contains the following three
financial covenants:
(a) the Interest Coverage Ratio (EBITDA to cash interest expense), as
of the last day of each fiscal quarter of the Consolidated Parties (being
Anchor Holdings and its subsidiaries) calculated on a twelve month rolling
basis, shall be greater than or equal to (i) for the period from June 26,
1998 to and including the next to last day of the fiscal quarter of the
Company ending in December, 2000, 2.00 to 1.00, (ii) for the period from
the last day of the fiscal quarter of the Company ending in December, 2000
to and including the next to last day of the fiscal quarter of the Company
ending in December, 2001, 2.15 to 1.00, and (iii) for the period from the
last day of the fiscal quarter of the Company ending in December, 2001 and
at all times thereafter, 2.50 to 1.00;
(b) the Leverage Ratio (funded indebtedness net of cash and cash
equivalents to EBITDA), as of the last day of each fiscal quarter of the
Consolidated Parties, shall be less than or equal to (i) for the period
from June 26, 1998 to and including the next to last day of the fiscal
quarter of the Company ending in December, 1998, 4.75 to 1.00, (ii) for the
period from the last day of the fiscal quarter of the Company ending in
December, 1998 to and including the next to last day of the fiscal quarter
of the Company ending in December, 2000, 4.50 to 1.00, and (iii) for the
period from the last day of the fiscal quarter of the Company ending in
December, 2000 and at all times thereafter, 4.00 to 1.00; and
(c) at all times Consolidated Net Worth (Deficit) (shareholders'
equity or net worth) shall be greater than or equal to the sum of
($6,000,000), increased on a cumulative basis by an amount equal to (i) as
of the end of each fiscal quarter of the Company, commencing with the
fiscal quarter of the Company ending in September, 1998, 50% of
Consolidated Net Income (as defined in the Revolving Credit Facility) (to
the extent positive) for the fiscal quarter then ended and (ii) as of the
date of any Equity Issuance (as defined in the Revolving Credit Facility),
100% of the Net Proceeds (as defined in the Senior Note Indenture and the
Indenture) of any Equity Issuance.
Events of Default. The Revolving Credit Facility contains events of
default customary for working capital facilities, including, without limitation:
(i) non payment of principal, interest, fees or other amounts, (ii) violation of
covenants, and (iii) inaccuracy of representations and warranties.
95
<PAGE> 99
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.
96
<PAGE> 100
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.
97
<PAGE> 101
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.
98
<PAGE> 102
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.
99
<PAGE> 103
INDEX TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Basis of Presentation....................................... P-2
Unaudited Pro Forma Consolidated Statement of Income for the
Year Ended December 31, 1997.............................. P-3
Unaudited Pro Forma Consolidated Statement of Income for the
Twenty-six Weeks Ended July 4, 1998....................... P-4
Notes to Unaudited Pro Forma Consolidated Financial
Statements................................................ P-5
</TABLE>
P-1
<PAGE> 104
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:
X the August 1997 purchase acquisition of the Hanning companies ("Hanning")
by Moll,
X the January 1998 purchase acquisition of Somomeca Industries ("Somomeca")
by Moll,
X the June 1998 distribution of Moll's investment in Reliance Products,
L.P. ("Reliance"), to certain of Moll's limited partners, and
X the June 1998 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 except for the $2 million
capital contribution.
The unaudited pro forma consolidated statement of income of the Company for
the year ended December 31, 1997 and for the twenty-six weeks ended July 4, 1998
gives effect to these transactions as if they had occurred on January 1, 1997.
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> 105
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------------------------------
MOLL ANCHOR(A) GEMINI(B) SOMOMECA(D) HANNING(E)
-------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $116,947 $161,161 $20,980 $88,502 $29,640
Cost of sales.......................... 97,086 135,974 16,237 77,943 28,342
-------- -------- ------- ------- -------
Gross profit.......................... 19,861 25,187 4,743 10,559 1,298
Selling, general and administrative
expenses.............................. 10,758 12,497 3,580 5,469 2,597
Management fee to related parties...... 1,653 180 -- -- 127
Tooling income, net.................... (1,912) -- -- -- (1,114)
Loss on closure of facility............ 1,176 -- -- -- --
-------- -------- ------- ------- -------
Operating income (loss)................ 8,186 12,510 1,163 5,090 (312)
Interest expense....................... 3,431 11,165 221 2,654 291
Interest income........................ (25) -- (11) (263) (62)
Other (income) expense................. (299) (287) 11 320 (294)
Minority interest in income (loss) of
subsidiary............................ 435 -- -- (95) --
-------- -------- ------- ------- -------
Income (loss) before taxes and
extraordinary item.................... 4,644 1,632 942 2,474 (247)
Income tax expense..................... 82 794 372 1,036 383
-------- -------- ------- ------- -------
Income (loss) before extraordinary
item.................................. $ 4,562 $ 838 $ 570 $ 1,438 $ (630)
======== ======== ======= ======= =======
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------ PRO FORMA
RELIANCE(C) MOLL INDUSTRIES, INC.
-------------- ---------------------
<S> <C> <C> <C> <C>
Net sales.............................. $(17,383) $(4,116) (f) $414,630
18,899 (l)
Cost of sales.......................... (13,293) 15,976 (l) 354,582
808 (m)
(547) (j)
(4,193) (f)
249 (n)
-------- ------------- ---------------------
Gross profit.......................... (4,090) 60,048
Selling, general and administrative
expenses.............................. (2,278) 655 (o) 29,390
(2,429) (h)
(1,103) (i)
(356) (f)
Management fee to related parties...... (261) (1,499) (k) 200
Tooling income, net.................... -- 2,923 (l) --
103 (f)
Loss on closure of facility............ -- (1,176) (g) --
-------- ------- --- --------
Operating income (loss)................ (1,551) 30,458
Interest expense....................... (510) 5,254 (q) 27,367
4,861 (r)
Interest income........................ -- (361)
Other (income) expense................. (149) (172) (f) (870)
Minority interest in income (loss) of
subsidiary............................ -- (340) (p) --
-------- --------
Income (loss) before taxes and
extraordinary item.................... (892) 4,322
Income tax expense..................... -- 928 (s) 3,595
-------- --------
Income (loss) before extraordinary
item.................................. $ (892) $ 727
======== ========
</TABLE>
P-3
<PAGE> 106
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE TWENTY-SIX WEEKS ENDED JULY 4, 1998
(IN THOUSANDS)
<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........................... $123,169 $75,810 $10,023 $(11,165) $ 1,348 (l) $199,185
Cost of sales....................... 102,096 67,632 8,307 (8,437) (274) (j) 170,494
210 (m)
960 (l)
-------- ------- ------- -------- --------
Gross profit.................... 21,073 8,178 1,716 (2,728) 28,691
Selling, general and administrative
expenses.......................... 9,975 6,675 1,695 (1,737) 224 (o) 15,064
(1,216) (h)
(552) (i)
Management fee to related parties... 1,198 -- -- (168) (930) (k) 100
Tooling income, net................. (388) -- -- -- 388 (l) --
-------- ------- ------- -------- --------
Operating income.................... 10,288 1,503 21 (823) 13,527
Interest expense.................... 4,979 6,026 125 (167) 874 (q)
2,178 (r) 14,015
Interest income..................... -- -- (6) -- (6)
Other (income) expense.............. 538 102 -- 105 745
Minority interest in income (loss)
of subsidiary..................... 239 -- -- -- (239) (p) --
-------- ------- ------- -------- --------
Income (loss) before taxes and
extraordinary item................ 4,532 (4,625) (98) (761) (1,227)
Income tax expense (benefit)........ 744 (1,392) 11 -- 451 (s) (186)
-------- ------- ------- -------- --------
Income (loss) before extraordinary
item.............................. $ 3,788 $(3,233) $ (109) $ (761) $ (1,041)
======== ======= ======= ======== ========
</TABLE>
P-4
<PAGE> 107
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------
<TABLE>
<S> <C>
Pro Forma Adjustments
(a) Adjustment to include the Anchor Holdings historical
operating activity for the respective periods in the
unaudited pro forma financial statements.
(b) Adjustment to include the Gemini historical operating
activity for the respective periods in the unaudited pro
forma financial statements.
(c) Adjustment to eliminate the Reliance historical operating
activity as reflected in its financial statements 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 operating results of the El Paso
facility, as it was closed in September 1997. The operating
results eliminated were obtained from the El Paso division
financial statements exclusive of the impact of corporate
allocations.
(g) 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. These costs were based on
the contractual commitments of the Company and actual losses
incurred on equipment and inventory due to the closure.
(h) 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.
(i) 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.
(j) Adjustment to eliminate the rent expense associated with the
building which houses the Gemini operation as the Company
purchased the building.
(k) Adjustment to reflect the future management fee of $200,000
per year.
(l) Adjustment to conform accounting policies regarding the
classification of revenues and expenses for tooling built
for and sold to consumers. Moll has historically recorded
the net amount it has received for arranging the production
of tooling for its customers as an offset against operating
expenses. For future reporting purposes, the Company plans
to reflect the gross revenues as a component of net sales
and expenses as cost of sales.
(m) 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 of $6,300,000 which is being depreciated over
seven to ten years, and (ii) the purchase of the Gemini
building for $3,500,000 which is being depreciated over 30
years.
(n) 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.
(o) Adjustment to record amortization of additional goodwill
generated in the acquisitions of Somomeca, AMM Holdings and
Gemini. Goodwill amortization following the transaction will
approximate $1,803,000 per year. Related to previous
transactions, Anchor's and Somomeca's historical financial
statements include $1,148,000 of goodwill amortization. The
registrant evaluates the impairment of goodwill based on the
cash flows of the entity which generated the asset. The
goodwill is being amortized over 20 years. The Registrant
determined 20 years was the appropriate useful life related
to these transactions due to the mature, long-term nature of
the industry, and the benefits of an international company
in the industry.
</TABLE>
P-5
<PAGE> 108
<TABLE>
<S> <C>
(p) 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.
(q) Adjustment to record interest expense incurred on the
increase in debt resulting from the acquisitions of Hanning,
Somomeca, AMM Holdings and Gemini. The Registrant incurred
$42 million of debt in these transactions at an assumed
interest rate of 9.5%. Additionally, it assumed debt of
Anchor totaling $100 million which Anchor refinanced in
April 1997. This adjustment includes approximately $1.2
million of additional interest expense which is not included
in Anchor's historical financial statements to reflect this
refinancing.
(r) Adjustment to reflect interest on the net additional debt
incurred in connection with the Offering (approximately $30
million) and to reflect the difference in interest rates
between the current debt instruments (approximately 8.5%)
and the Notes sold pursuant to the Offering.
(s) 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>
Note: The unaudited pro forma consolidated statements of income for the year
ended December 31, 1997 and the twenty-six weeks ended July 4, 1998, do
not include the extraordinary losses of $1,210,000 and $1,971,000,
respectively, related to the extinguishment of debt.
P-6
<PAGE> 109
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.,
THE REGISTRANT
Consolidated Balance Sheet as of July 4, 1998
(unaudited)............................................ F-2
Consolidated Statements of Income for the Twenty-six Weeks
Ended June 30, 1997 and July 4, 1998 (unaudited)....... F-3
Consolidated Statements of Comprehensive Income for the
Twenty-six Weeks Ended June 30, 1997 and July 4, 1998
(unaudited)............................................ F-4
Consolidated Statements of Cash Flows for the Twenty-six
Weeks Ended June 30, 1997 and July 4, 1998
(unaudited)............................................ F-5
Notes to Consolidated Financial Statements................ F-7
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES,
THE REGISTRANT
Report of Independent Public Accountants.................. F-11
Consolidated Balance Sheets as of December 31, 1996 and
1997................................................... F-12
Consolidated Statements of Income for the Three Years
Ended December 31, 1997................................ F-13
Consolidated Statements of Comprehensive Income for the
Three Years Ended December 31, 1997.................... F-14
Consolidated Statements of Partners' Capital for the Three
Years Ended December 31, 1997.......................... F-15
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1997................................ F-16
Notes to Consolidated Financial Statements................ F-18
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES, ACQUIRED COMPANY
Report of Independent Accountants......................... F-30
Consolidated Balance Sheets as of December 31, 1996 and
1997................................................... F-31
Consolidated Statements of Operations for the Three Years
Ended December 31, 1997, and the Twenty-six Weeks Ended
June 28, 1997 and June 26, 1998........................ F-32
Consolidated Statements of Comprehensive Income for the
Three Years Ended December 31, 1997 and the Twenty-six
Weeks Ended June 28, 1997 and June 26, 1998............ F-33
Consolidated Statements of Stockholders' Equity (Deficit)
for the Three Years Ended December 31, 1997............ F-34
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1997 and the Twenty-six Weeks Ended
June 28, 1997 and June 26, 1998........................ F-35
Notes to Consolidated Financial Statements................ F-36
SOMOMECA INDUSTRIES AND SUBSIDIARIES, ACQUIRED COMPANY
Report of Independent Public Accountants.................. F-51
Consolidated Balance Sheets as of August 31, 1996 and 1997
and as of December 31, 1997............................ F-52
Consolidated Statements of Operations for the Three Years
Ended August 31, 1997 and the Four Month Period Ended
December 31, 1997...................................... F-53
Consolidated Statements of Stockholders' Equity for the
Three Years Ended August 31, 1997 and the Four Month
Period Ended December 31, 1997......................... F-54
Consolidated Statements of Cash Flows for the Three Years
Ended August 31, 1997 and the Four Month Period Ended
December 31, 1997...................................... F-55
Notes to Consolidated Financial Statements................ F-56
THE HANNING COMPANIES, ACQUIRED COMPANY
Report of Independent Public Accountants.................. F-66
Combined Balance Sheets as of December 31, 1995 and
1996................................................... F-67
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-68
Combined Statements of Equity (Deficit) for the Years
Ended December 31, 1995 and 1996....................... F-69
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-70
Notes to Financial Statements............................. F-71
</TABLE>
F-1
<PAGE> 110
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JULY 4,
1998
-------
(DOLLARS IN
THOUSANDS
AND UNAUDITED)
<S> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 29,668
Accounts receivable, net of reserves for doubtful accounts
of $2,037.............................................. 75,117
Inventories, net.......................................... 53,922
Deposits on tooling....................................... 4,551
Other current assets...................................... 4,257
--------
Total current assets.............................. 167,515
PROPERTY, PLANT AND EQUIPMENT, NET.......................... 118,933
RECEIVABLE FROM AFFILIATES.................................. 390
GOODWILL, NET............................................... 36,411
OTHER INTANGIBLE AND NON-CURRENT ASSETS, NET................ 16,206
--------
Total assets...................................... $339,455
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks drawn in excess of cash on deposit................. $ 1,005
Customer deposits on tooling.............................. 4,669
Current portion of other long-term obligations............ 7,575
Accounts payable.......................................... 36,762
Accrued liabilities....................................... 27,774
--------
Total current liabilities......................... 77,785
--------
NOTES PAYABLE............................................... 230,000
--------
OTHER LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION......... 15,025
--------
DEFERRED INCOME TAXES....................................... 6,972
--------
OTHER NON-CURRENT LIABILITIES............................... 7,741
--------
COMMITMENTS AND CONTINGENCIES............................... --
--------
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value, 2,000 shares authorized,
1,551 shares issued and outstanding)................... 15
Additional contributed capital............................ 2,372
Treasury stock at cost.................................... (10)
Retained earnings......................................... --
Accumulated other comprehensive income.................... (445)
--------
Total stockholders' equity........................ 1,932
--------
Total liabilities and stockholders' equity... $339,455
========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
F-2
<PAGE> 111
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
------------------------
JUNE 30, JULY 4,
1997 1998
---------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS
AND UNAUDITED)
<S> <C> <C>
NET SALES................................................... $ 53,755 $123,169
COST OF GOODS SOLD.......................................... 41,867 102,096
-------- --------
Gross profit.............................................. 11,888 21,073
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 4,177 9,587
MANAGEMENT AND CONSULTING FEE TO RELATED PARTIES............ 842 1,198
-------- --------
Operating income.......................................... 6,869 10,288
-------- --------
OTHER EXPENSES:
Interest expense, net..................................... 1,423 4,979
Minority interest in subsidiary income.................... 399 239
Other, net................................................ 91 538
-------- --------
1,913 5,756
-------- --------
Income before income taxes and extraordinary item......... 4,956 4,532
PROVISION FOR INCOME TAXES.................................. -- 744
-------- --------
Income before extraordinary item.......................... 4,956 3,788
EXTRAORDINARY ITEM--LOSS ON EARLY EXTINGUISHMENT OF DEBT.... -- (1,971)
-------- --------
Net income................................................ $ 4,956 $ 1,817
======== ========
EARNINGS PER SHARE BEFORE EXTRAORDINARY ITEM................ $ 3.20 $ 2.44
======== ========
EARNINGS PER SHARE.......................................... $ 3.20 $ 1.17
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.................. 1,551 1,551
======== ========
PRO FORMA INFORMATION:
Provision for income taxes................................ $ 1,982 $ 1,300
======== ========
Net income................................................ $ 2,974 $ 1,261
======== ========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
F-3
<PAGE> 112
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
-----------------------------
JUNE 30, JULY 4,
1997 1998
---------- ---------
(IN THOUSANDS AND UNAUDITED)
<S> <C> <C>
NET INCOME.................................................. $4,956 $1,817
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment................... (68) (120)
------ ------
COMPREHENSIVE INCOME........................................ $4,888 $1,697
====== ======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
F-4
<PAGE> 113
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
-----------------------------
JUNE 30, JULY 4,
1997 1998
----------- ------------
(IN THOUSANDS AND UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 4,956 $ 1,817
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 2,357 5,086
Loss on early extinguishment of debt................... -- 1,971
Gain on disposal of fixed assets....................... (69) (134)
Deferred income taxes.................................. -- 199
Minority interest in subsidiary income................. 399 239
Changes in assets and liabilities, net of assets
purchased and liabilities assumed:
Accounts receivable.................................. (8,475) (5,073)
Receivable from affiliates........................... -- 74
Inventories.......................................... (579) (591)
Other current assets................................. (299) (964)
Deposits on tooling.................................. 367 2,773
Other assets......................................... 249 (1,300)
Accounts payable..................................... 1,552 (1,507)
Accrued liabilities.................................. 978 1,842
Customer deposits on tooling......................... (83) (2,856)
Checks drawn in excess of cash on deposit............ 119 1,149
------- --------
Total adjustments................................. (3,484) 908
------- --------
Net cash provided by operating activities............ 1,472 2,725
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (1,447) (6,983)
Proceeds on disposal of fixed assets...................... 100 553
Purchase of Somomeca...................................... -- (11,737)
Purchase of Anchor........................................ -- (6,453)
Purchase of Gemini........................................ -- (9,954)
------- --------
Net cash used in investing activities................ (1,347) (34,574)
------- --------
</TABLE>
(continued)
F-5
<PAGE> 114
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
-----------------------------
JUNE 30, JULY 4,
1997 1998
----------- ------------
(IN THOUSANDS AND UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) revolving loan facility... $ 3,954 $ (10,594)
Proceeds from issuance of long-term obligations........... 1,232 187,218
Principal payments on long-term obligations............... (2,579) (106,157)
Financing costs........................................... -- (7,517)
Capital contribution from parent.......................... -- 2,000
Distributions............................................. (1,831) (4,795)
Distributions to minority partners of Reliance............ (4) (643)
------- ---------
Net cash provided by financing activities.............. 772 59,512
------- ---------
EFFECT OF EXCHANGE RATE CHANGES IN CASH..................... (13) 276
------- ---------
NET CHANGE IN CASH.......................................... 884 27,939
BALANCE AT BEGINNING OF PERIOD.............................. 878 1,729
------- ---------
BALANCE AT END OF PERIOD.................................... $ 1,762 $ 29,668
======= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 1,696 $ 4,674
======= =========
Cash paid for taxes....................................... $ -- $ 167
======= =========
</TABLE>
NON-CASH TRANSACTIONS:
In June 1997, the Company terminated a capital lease that resulted in a
reduction of debt by $2,503 and a reduction in fixed assets by $1,205.
In June 1998, the Company distributed its investment in Reliance L.P. of
$3,135 to its partners. Reliance had a cash balance of $543 at the time of the
distribution.
See accompanying notes to consolidated financial statements (unaudited).
F-6
<PAGE> 115
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS AND UNAUDITED)
Anchor Holdings, Inc. ("Holdings") was incorporated March 9, 1990, under
the laws of the State of Delaware. Holdings is the wholly-owned subsidiary of
AMM Holdings, Inc. ("AMM Holdings", formerly known as Anchor Acquisition Co.),
which is not consolidated herein. Holdings owns Moll Industries, Inc. (the
"Company", formerly known as Anchor Advanced Products, Inc.) through which,
including its subsidiaries, it designs and manufactures custom molded products
and assembled plastic components for a broad variety of customers 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, automobile and
medical devices. The Company's manufacturing facilities are located primarily in
the United States, France, Germany, Mexico and the United Kingdom.
1. MERGER WITH MOLL PLASTICRAFTERS LIMITED PARTNERSHIP
Effective June 26, 1998, the owners of Moll PlastiCrafters Limited
Partnership ("Moll") contributed their interest in Moll to AMM Holdings in
exchange for common shares of AMM Holdings. AMM Holdings contributed these
interests in Moll to Holdings and ultimately to Anchor Advanced Products, Inc.
("Anchor"). Moll was merged into Anchor (the "Merger") at which time the name of
Anchor was changed to Moll Industries, Inc. As the owners 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; therefore, the consolidated
financial statements presented for all periods herein are those of Moll, and
exclude those of Anchor prior to June 26, 1998. Moll utilized purchase
accounting to account for the Merger; accordingly, the assets and liabilities
acquired in the Merger, which primarily relate to Anchor, were adjusted to their
estimated fair values which are as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 42,966
Property, plant and equipment............................... 56,122
Goodwill.................................................... 19,566
Other assets................................................ 9,563
Current liabilities......................................... (12,914)
Notes payable............................................... (100,000)
Other non-current liabilities............................... (15,303)
</TABLE>
An evaluation of the assets acquired and liabilities assumed is in process.
Upon completion of the evaluation, net additions or restrictions, if any, in the
fair values currently assigned will result in a corresponding change in
goodwill.
2. BASIS OF PRESENTATION
The interim consolidated financial statements include the accounts of Moll,
as it is the accounting acquiror in the Merger discussed in Note 1, and its
subsidiaries. All significant results of operations of companies acquired
utilizing the purchase method of accounting have been included in the
consolidated financial statements since the effective date of the acquisition
(the Hanning Companies--August 8, 1997, Somomeca Industries, Inc.--January 8,
1998, Anchor--June 26, 1998 and Gemini Plastic Services, Inc.--June 26, 1998).
The results of Reliance Products have been excluded from these consolidated
financial statements since June 26, 1998 (see Note 4). All significant
intercompany balances have been eliminated in consolidation. The interim
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 interim 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 interim consolidated financial
statements and notes thereto are read in conjunction with the
F-7
<PAGE> 116
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
In connection with the Merger, Moll changed its financial reporting period
from one based on calendar month ends to four thirteen week periods. As a
result, Moll changed its second quarter period end from June 30 to July 4.
Earnings per share for all periods presented have been computed on a basis
assuming the number of common shares outstanding subsequent to the Merger were
outstanding for all periods presented. There are no potentially dilutive
securities currently outstanding.
RECENT ACCOUNTING PRONOUNCEMENTS
During June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement requires that derivatives and hedges be
valued at their fair value and establishes standards for the recognition of
changes in fair value. The Statement is effective for periods beginning after
June 15, 1999. The Company is evaluating SFAS No. 133 to determine the impact,
if any, on its reporting and disclosure requirements.
3. ACQUISITIONS
Effective June 26, 1998, the Company acquired the stock of Gemini Plastic
Services, Inc. ("Gemini") for cash of $10,186. The acquisition has been
accounted for using the purchase method with the purchase price allocated based
on the estimated fair values of the assets purchased and liabilities assumed, as
follows:
<TABLE>
<S> <C>
Current assets............................................. $ 4,534
Property, plant and equipment.............................. 4,571
Goodwill................................................... 6,527
Other assets............................................... 23
Current liabilities........................................ (2,818)
Non-current liabilities.................................... (2,651)
-------
$10,186
=======
</TABLE>
Effective January 8, 1998, the Company acquired Somomeca Industries, Inc.
("Somomeca"). In April 1998, the Company entered into an agreement with the
former owners of Somomeca under which the former owners will receive additional
consideration of 9,000 French Francs ($1,488 at July 4, 1998 exchange rates) in
lieu of consideration for the operating results of Somomeca for the twelve
months ended August 31, 1998 as required per the purchase agreement. The
additional consideration will be paid in three equal installments on August 31,
1998 and January 31, 1999 and 2000. The additional consideration has been
reflected as goodwill in the accompanying July 4, 1998 consolidated balance
sheet. Total cash consideration, including the additional consideration and
expenses was $15,988.
Effective August 8, 1997, the Company acquired the Hanning Companies, a
group of companies which had previously been under common control for total cash
consideration, including expenses, of $10,482.
An evaluation of the assets acquired and liabilities assumed is in process.
Upon completion of the evaluation, net additions or reductions, if any, in the
fair values currently assigned will result in a corresponding change in
goodwill.
4. DISTRIBUTION OF INTEREST IN RELIANCE PRODUCTS, L.P.
Effective immediately prior to the Merger discussed in Note 1, Moll
distributed its interest in Reliance Products, L.P. to its owners. The total
amount of such distribution was $3,135.
F-8
<PAGE> 117
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. NOTES PAYABLE
On June 26, 1998, the Company issued $130,000 of 10 1/2% Senior
Subordinated Notes due in 2008. These notes are unsecured and subordinate to
substantially all of the Company's indebtedness. The proceeds of these notes
were used primarily to repay existing indebtedness, acquire Gemini and fund
other corporate purposes.
In conjunction with the Merger, the Company assumed $100,000 of 11 3/4%
Senior Notes due 2004 originally issued by Anchor. These notes are unsecured but
are guaranteed by Holdings and the foreign subsidiaries of the Company.
6. TAXES
Effective June 26, 1998, the Company became a taxable entity. Prior to June
26, 1998, the Company was a partnership; accordingly, the earnings of the
Company, including the earnings of foreign subsidiaries attributable to the
Company for United States tax purposes, were included in the tax returns of the
partners. Therefore, the consolidated financial statements contain no provision
for federal or state income taxes related to those earnings.
Certain of the Company's foreign subsidiaries and, subsequent to June 26,
1998, the Company are taxable entities. The Company has accounted for income
taxes for taxable entities 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.
7. SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARIES
The Company's foreign subsidiaries, Moll PlastiCrafters GmbH, Moll
Industries UK, Limited and Moll France SARL, are each wholly-owned subsidiaries
of the Company. Each of these entities has fully and unconditionally guaranteed
the otherwise unsecured $100,000 of 11 3/4% Senior Notes due 2004 issued by
Anchor and assumed by the Company in the Merger. As such, these entities are
subject to the reporting requirements under Section 13 or 15(d) of the
Securities Exchange Act of 1934. Combined financial information relating to
these entities since the date of their acquisition is presented herein in
accordance with Staff Accounting Bulletin No. 53 as an addition to the notes of
the consolidated financial statements of the Company. Summarized combined
financial information for the Company's foreign subsidiaries is as follows:
<TABLE>
<CAPTION>
TWENTY-SIX
WEEKS
ENDED
JULY 4, 1998
------------
<S> <C>
Statement of Income Data:
Net sales................................................. $62,486
Gross margin.............................................. 8,370
Income from operations.................................... 4,279
Net income (loss)......................................... (418)
</TABLE>
<TABLE>
<CAPTION>
JULY 4, 1998
------------
<S> <C>
Balance Sheet Data:
Current assets............................................ $63,531
Total assets.............................................. 103,961
Current liabilities....................................... 42,886
Total liabilities......................................... 104,762
Deficit................................................... (801)
</TABLE>
F-9
<PAGE> 118
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The financial information of Anchor Holdings is identical to that of the
Company. Therefore, summarized financial information of the Company is not
required.
8. OTHER COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income, which requires the reporting of
comprehensive income in addition to net income. Comprehensive income is a more
inclusive financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net income.
Information with respect to the accumulated other comprehensive income
balance is as follows:
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS
ENDED
-------------------
JUNE 30, JULY 4,
1997 1998
-------- -------
<S> <C> <C>
Beginning balance.......................................... $ -- $ 2
Current period change in foreign currency translation...... (68) (120)
Accumulated foreign currency translation associated with
distributed interest..................................... -- 194
Deferred compensation assumed in Merger.................... -- (521)
---- -----
$(68) $(445)
==== =====
</TABLE>
9. PRO FORMA FINANCIAL INFORMATION
The historical statement of operations data for Anchor for the periods
prior to the Merger is as follows:
<TABLE>
<CAPTION>
TWENTY-SIX TWENTY-SIX
WEEKS ENDED WEEKS ENDED
JUNE 28, 1997 JULY 4, 1998
------------- ------------
<S> <C> <C>
Net sales.......................................... $84,745 $75,810
Gross margin....................................... 13,424 8,178
Income from operations............................. 7,269 1,503
Net income (loss).................................. 190 (3,233)
</TABLE>
The following unaudited pro forma statement of operations data gives effect
to the Merger and the acquisition of Gemini as if they had occurred at the
beginning of the period.
<TABLE>
<CAPTION>
TWENTY-SIX
WEEKS ENDED
JULY 4, 1998
------------
<S> <C>
Net sales................................................... $199,185
Operating income............................................ 13,527
Income (loss) before taxes and extraordinary item........... (1,227)
</TABLE>
F-10
<PAGE> 119
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.
As explained in Note 16 to the consolidated financial statements, the
Company has given retroactive effect to the change in accounting for other
comprehensive income.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
March 19, 1998 (except with respect to the information in Notes 15 and 17,
as to which the date is June 26, 1998).
F-11
<PAGE> 120
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 877,893 $ 1,729,061
Accounts receivable, net of reserves for doubtful accounts
of $561,000 and $579,000, respectively................. 8,787,703 22,483,782
Inventories, net.......................................... 10,541,739 15,579,655
Deposits on tooling....................................... 2,720,730 6,877,297
Equipment held for sale................................... -- 416,700
Other current assets...................................... 565,363 392,357
------------ ------------
Total current assets.............................. 23,493,428 47,478,852
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land...................................................... 377,242 1,624,443
Buildings................................................. 7,293,782 9,512,209
Machinery and equipment................................... 34,265,843 37,732,863
Less: accumulated depreciation............................ (12,950,756) (13,451,227)
------------ ------------
Property, plant and equipment, net..................... 28,986,111 35,418,288
------------ ------------
RECEIVABLE FROM AFFILIATES.................................. 390,000 464,451
------------ ------------
INTANGIBLE AND OTHER ASSETS, NET............................ 1,031,256 3,562,964
------------ ------------
Total assets...................................... $ 53,900,795 $ 86,924,555
============ ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Checks drawn in excess of cash on deposit................. $ 644,864 $ 143,272
Customer deposits on tooling.............................. 3,141,118 7,411,548
Current portion of long-term obligations.................. 6,026,626 5,059,450
Accounts payable.......................................... 4,231,673 16,587,519
Accrued liabilities....................................... 3,976,622 5,505,943
------------ ------------
Total current liabilities......................... 18,020,903 34,707,732
------------ ------------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION............... 27,614,197 42,872,953
------------ ------------
DEFERRED INCOME TAXES....................................... -- 10,377
------------ ------------
DEFERRED GAIN............................................... -- 1,157,358
------------ ------------
COMMITMENTS AND CONTINGENCIES............................... -- --
MINORITY INTEREST........................................... 1,849,755 2,212,675
------------ ------------
PARTNERS' CAPITAL:
General partner........................................... 1,026,260 648,116
Limited partners.......................................... 5,389,680 5,312,848
Accumulated other comprehensive income.................... -- 2,496
------------ ------------
Total partners' capital........................... 6,415,940 5,963,460
------------ ------------
Total liabilities and partners' capital........... $ 53,900,795 $ 86,924,555
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-12
<PAGE> 121
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
NET SALES................................................... $90,875,746 $89,463,883 $116,947,000
COST OF SALES............................................... 73,909,450 72,961,380 97,086,199
----------- ----------- ------------
Gross profit.............................................. 16,966,296 16,502,503 19,860,801
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 8,300,503 7,189,649 10,757,773
TOOLING INCOME, NET......................................... (1,716,091) (706,947) (1,911,871)
MANAGEMENT AND CONSULTING FEE TO RELATED PARTIES............ 1,363,135 1,446,143 1,652,933
LOSS INCURRED ON CLOSURE OF FACILITY........................ -- -- 1,176,172
----------- ----------- ------------
Operating income.......................................... 9,018,749 8,573,658 8,185,794
INTEREST EXPENSE, NET....................................... 2,413,607 2,518,005 3,405,386
OTHER (INCOME) EXPENSE...................................... 119,727 50,307 (299,338)
MINORITY INTEREST IN INCOME (LOSS) OF SUBSIDIARY............ -- (31,224) 434,555
----------- ----------- ------------
INCOME BEFORE TAXES......................................... 6,485,415 6,036,570 4,645,191
----------- ----------- ------------
PROVISION FOR INCOME TAXES
Current................................................... -- -- 72,279
Deferred.................................................. -- -- 10,343
----------- ----------- ------------
-- -- 82,622
----------- ----------- ------------
NET INCOME.................................................. $ 6,485,415 $ 6,036,570 $ 4,562,569
=========== =========== ============
PRO FORMA INFORMATION (UNAUDITED)
Provision for income taxes................................ $ 2,594,000 $ 2,415,000 $ 2,531,000
=========== =========== ============
Net income................................................ $ 3,891,415 $ 3,621,570 $ 2,114,191
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
<PAGE> 122
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
NET INCOME............................................. $6,485,415 $6,036,570 $4,562,569
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment.............. -- -- 2,496
---------- ---------- ----------
COMPREHENSIVE INCOME................................... $6,485,415 $6,036,570 $4,565,065
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-14
<PAGE> 123
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
ACCUMULATED
OTHER COMPREHENSIVE
GENERAL PARTNER LIMITED PARTNERS INCOME TOTAL
--------------- ---------------- ------------------- ------------
<S> <C> <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........... -- -- 2,496 2,496
----------- ------------ ------- ------------
BALANCE, DECEMBER 31, 1997......... $ 648,116 $ 5,312,848 $ 2,496 $ 5,963,460
=========== ============ ======= ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-15
<PAGE> 124
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 6,485,415 $ 6,036,570 $ 4,562,569
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 4,417,590 4,148,148 5,399,573
Write-off of investment in affiliate.................... 300,000 -- --
(Gain) loss on disposal of fixed assets................. 119,727 50,307 (35,661)
Accrued loss on closure of facility..................... -- -- 1,060,604
Deferred income taxes................................... -- -- 10,343
Minority interest in subsidiary income (loss)........... -- (31,224) 434,555
Changes in assets and liabilities, net of assets
purchased:
Accounts receivable................................... (1,318,658) 3,300,726 (8,347,044)
Receivable from affiliates............................ (390,000) -- (74,451)
Inventories........................................... (350,539) 672,096 527,008
Other current assets.................................. (781,941) 938,771 181,065
Deposits on tooling................................... (3,245,354) 3,830,300 1,095,033
Other assets.......................................... -- (251,035) (359,124)
Accounts payable...................................... (924,669) (2,559,947) 3,805,343
Accrued liabilities................................... 1,535,307 (1,268,403) 84,746
Customer deposits on tooling.......................... 3,894,672 (4,066,305) (2,337,203)
Checks drawn in excess of cash on deposit............. (32,370) 2,261 (501,592)
------------ ------------ ------------
Total adjustments.................................. 3,223,765 4,765,695 (943,195)
------------ ------------ ------------
Net cash provided by (used in) operating activities... 9,709,180 10,802,265 5,505,764
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (2,775,589) (1,387,297) (6,561,692)
Proceeds on disposal of fixed assets...................... 222,947 57,765 267,530
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)
------------ ------------ ------------
Net cash used in investing activities................. (2,552,642) (11,591,895) (14,215,338)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) revolving loan facility... $ (1,388,269) $ 200,375 $ 10,170,694
Proceeds from issuance of long-term obligations........... 14,267,877 9,597,130 12,513,382
Principal payments on long-term obligations............... (3,540,330) (7,581,902) (7,168,396)
Distributions............................................. (16,311,462) (2,509,134) (5,017,545)
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
------------ ------------ ------------
EFFECT OF EXCHANGE RATE CHANGES IN CASH..................... -- -- (33,928)
------------ ------------ ------------
NET CHANGE IN CASH.......................................... 184,354 546,786 851,168
------------ ------------ ------------
</TABLE>
(Continued)
F-16
<PAGE> 125
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD.............................. 146,753 331,107 877,893
------------ ------------ ------------
BALANCE AT END OF PERIOD.................................... $ 331,107 $ 877,893 $ 1,729,061
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 2,225,115 $ 2,822,910 $ 3,414,407
============ ============ ============
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.
(Continued)
F-17
<PAGE> 126
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 (see Note 17).
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-18
<PAGE> 127
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.
The accompanying consolidated financial statements reflect provisions for
income taxes on a pro forma basis as if the Partnership were liable for income
taxes as a corporate entity throughout the periods presented.
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;
F-19
<PAGE> 128
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
however, the amount of distributions is subject to limitations under certain of
the Partnerships' debt agreements (See Note 6).
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.
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-20
<PAGE> 129
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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-21
<PAGE> 130
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 17 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-22
<PAGE> 131
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-23
<PAGE> 132
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-24
<PAGE> 133
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-25
<PAGE> 134
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
primarily for lease payments and losses on equipment and inventory related to
the closure. These losses are expected to be realized within twelve months of
the closure and were determined based on the terms of contracts to which the
Partnership is a party. 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
Customers which represented in excess of 10% of sales were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Customer A............................................ 46% 50% 35%
Customer B............................................ N/A N/A 10%
</TABLE>
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
=========== =========== ============
</TABLE>
F-26
<PAGE> 135
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
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
=========== =========== ============
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 17 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.
F-27
<PAGE> 136
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARIES
The Partnership's foreign subsidiaries, Moll Industries Germany GmbH and
Moll Industries UK, Limited (formerly companies in the Hanning Companies), are
each wholly-owned subsidiaries of the Partnership. Each of these entities has
fully and unconditionally guaranteed the otherwise unsecured $100,000,000 of
11 3/4% Senior Notes due 2004 issued by Anchor Advanced Products, Inc.
("Anchor") and assumed by the Partnership (See Note 17). As such, these entities
are subject to the reporting requirements under Section 13 or 15(d) of the
Securities Act of 1934. Combined financial information relating to these
entities since the date of their acquisition is presented herein in accordance
with Staff Accounting Bulletin No. 53 as an addition to the notes to the
consolidated financial statements of the Partnership. Summarized combined
financial information for the Partnership's foreign subsidiaries is as follows:
Statement of Income Data:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Net sales................................................... $11,979,000
Gross margin................................................ (740,000)
Income (loss) from operations............................... (1,671,000)
Net loss.................................................... (1,607,000)
</TABLE>
Balance Sheet Data:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Current assets.............................................. $ 9,528,000
Total assets................................................ 17,591,000
Current liabilities......................................... 19,054,000
Total liabilities........................................... 19,089,000
Partners' deficit........................................... (1,498,000)
</TABLE>
16. OTHER COMPREHENSIVE INCOME
The Partnership has adopted Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income, which requires the reporting of
comprehensive income in addition to net income. Comprehensive income is a more
inclusive financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net income.
Information with respect to the accumulated other comprehensive income
balance is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Beginning balance........................................... $ -- $ -- $ --
Current period change in foreign currency translation....... 2,496
------ ------ ------
$ -- $ -- $2,496
====== ====== ======
</TABLE>
F-28
<PAGE> 137
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. SUBSEQUENT EVENT AND PRO FORMA INFORMATION
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 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 of 10.5%
Senior Subordinated Notes due 2008,
(iv) the acquisition of Gemini Plastic Services, Inc. for cash of
$10,186,000, 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 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 $ 4,322,000
------------ ------------
</TABLE>
F-29
<PAGE> 138
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-30
<PAGE> 139
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 1,578 $ 6,914
Accounts receivable, less allowance for doubtful accounts,
allowances, and returns of $998 in 1996 and $900 in
1997................................................... 21,400 15,574
Inventories............................................... 20,411 23,292
Prepaid expenses and other assets......................... 198 195
Refundable federal income taxes........................... 448 1,232
Deferred income taxes..................................... 2,023 2,080
-------- --------
Total current assets.............................. 46,058 49,287
Property, plant, and equipment, net......................... 52,723 53,202
Goodwill, net............................................... 10,395 9,569
Other assets, net........................................... 6,087 8,781
-------- --------
$115,263 $120,839
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term liabilities............... $ 6,000 $ 832
Current maturities of obligations under capital leases.... 480 382
Accounts payable.......................................... 6,120 6,119
Other accrued expenses and current liabilities............ 5,995 8,059
-------- --------
Total current liabilities......................... 18,595 15,392
Long-term debt, less current maturities..................... 44,702 100,000
Related party long-term debt................................ 21,000 --
Accrued pension liability................................... 4,957 6,019
Deferred income taxes....................................... 2,906 1,542
Other long-term liabilities................................. 2,286 725
-------- --------
Total liabilities................................. 94,446 123,678
-------- --------
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
Additional paid-in capital................................ 10,240 --
Retained earnings (deficit)............................... 11,145 (2,323)
Additional pension liability, net of tax of $348 in 1996
and $319 in 1997....................................... (568) (521)
Treasury stock at cost.................................... (10) (10)
-------- --------
Total stockholders' equity (deficit).............. 20,817 (2,839)
-------- --------
$115,263 $120,839
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-31
<PAGE> 140
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, TWENTY-SIX WEEKS ENDED
-------------------------------- JUNE 28, JUNE 26,
1995 1996 1997 1997 1998
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales......................... $149,366 $156,858 $161,161 $84,745 $75,810
Cost of goods sold................ 125,028 129,221 135,974 71,321 67,632
-------- -------- -------- ------- -------
Gross profit...................... 24,338 27,637 25,187 13,424 8,178
Amortization expense.............. 1,662 1,530 1,698 665 729
Selling, general and
administrative expense.......... 9,409 11,358 10,979 5,490 5,946
-------- -------- -------- ------- -------
Operating income.................. 13,267 14,749 12,510 7,269 1,503
-------- -------- -------- ------- -------
Other income (expense):
Gain (loss) on disposal of fixed
assets....................... 23 (123) (62) (49) (45)
Interest expense, net........... (5,463) (4,931) (10,098) (4,982) (6,026)
Interest expense, related
party........................ (3,153) (3,193) (1,067) --
Other, net...................... (997) (285) 349 (38) (57)
-------- -------- -------- ------- -------
Total other expense,
net................... (9,590) (8,532) (10,878) (5,069) (6,128)
-------- -------- -------- ------- -------
Income (loss) before income taxes
and extraordinary item.......... 3,677 6,217 1,632 2,200 (4,625)
Provision (benefit) for income
taxes........................... 1,239 2,591 794 800 (1,392)
-------- -------- -------- ------- -------
Income (loss) before extraordinary
item............................ 2,438 3,626 838 1,400 (3,233)
Extraordinary item--loss on early
extinguishment of debt, net of
tax benefit of $742............. -- -- (1,210) (1,210) --
-------- -------- -------- ------- -------
Net income (loss)............ $ 2,438 $ 3,626 $ (372) $ 190 $(3,233)
======== ======== ======== ======= =======
Earnings per share:
Basic Income (loss) before
extraordinary item........... $ 2.39 $ 3.56 $ 0.59 $ 1.09 $ (2.08)
Extraordinary item........... 0.00 0.00 (0.85) (.94) --
-------- -------- -------- ------- -------
Income (loss)................ $ 2.39 $ 3.56 $ (0.26) $ .15 $ (2.08)
======== ======== ======== ======= =======
Weighted average common
shares outstanding......... 1,018 1,018 1,418 1,280 1,551
======== ======== ======== ======= =======
Diluted Income (loss) before
extraordinary item........... $ 1.87 $ 2.65 $ 0.59 $ 1.09 $ (2.08)
Extraordinary item........... 0.00 0.00 (0.85) (.94) --
-------- -------- -------- ------- -------
Income (loss)................ $ 1.87 $ 2.65 $ (0.26) $ .15 $ (2.08)
======== ======== ======== ======= =======
Weighted average common shares
and assumed conversions
outstanding.................. 1,306 1,370 1,418 1,280 1,551
======== ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-32
<PAGE> 141
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWENTY-SIX
WEEKS ENDED
YEAR ENDED DECEMBER 31, --------------------
------------------------- JUNE 28, JUNE 26,
1995 1996 1997 1997 1998
------ ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
NET INCOME (LOSS)........................ $2,438 $3,626 $(372) $190 $(3,233)
OTHER COMPREHENSIVE INCOME:
Additional Pension Liability........... (96) (72) 47 -- --
------ ------ ----- ---- -------
COMPREHENSIVE INCOME (LOSS).............. $2,342 $3,550 $(325) $190 $(3,233)
====== ====== ===== ==== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-33
<PAGE> 142
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-34
<PAGE> 143
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDING
YEARS ENDED DECEMBER 31, -------------------------
------------------------------ JUNE 28, JUNE 26,
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) $ 190 $(3,233)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Deferred income taxes................. 60 296 (1,421) 358 53
Depreciation and amortization......... 9,768 9,605 9,891 4,734 5,254
Provision for doubtful accounts....... 356 20 (98) 92 96
Provision for inventory
obsolescence........................ 450 (266) 287 125 28
(Gain) loss from disposal of fixed
assets.............................. (23) 123 62 49 62
Write off of debt issue costs -- -- 701 701 --
Changes in assets and liabilities:
Accounts receivable................. (1,361) 337 5,924 1,017 1,358
Inventories......................... (3,909) 794 (3,169) (446) 883
Prepaid and other assets............ (1,634) (1,798) 3 1,306 283
Refundable federal income taxes..... 154 (32) (784) (654) (918)
Accounts payable, accrued expense
and other liabilities............ 2,523 371 5,013 (1,595) (2,501)
-------- -------- -------- -------- -------
Net cash provided by (used in)
operating activities........... 8,822 13,076 16,037 5,877 1,365
-------- -------- -------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and
equipment............................. (6,932) (8,028) (8,413) (3,481) (4,416)
Proceeds from sale of fixed assets....... 479 14 -- -- --
Purchase of other long-term assets....... -- -- (434) -- --
Payments made for Parent Company......... -- -- -- -- (2,769)
-------- -------- -------- -------- -------
Net cash used in investing
activities..................... (6,453) (8,014) (8,847) (3,481) (7,185)
-------- -------- -------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt............. 9,886 8,647 101,529 101,529 --
Principal payments on long-term debt..... (12,569) (12,435) (73,231) (73,231) (101)
Principal payments on capital lease
obligations........................... (588) (480) (623) (265) (154)
Exercise of options and warrants......... -- -- 5,066 5,066 --
Payments of dividends.................... -- -- (29,504) (29,504) --
Proceeds (payments) from other long-term
liabilities........................... 1,016 -- (939) -- (32)
Shares acquired in treasury.............. (10) -- -- -- --
Payment of bond issue costs.............. -- -- (4,152) (3,839) --
Checks written in excess of bank
balances.............................. -- -- -- -- 287
Payments on other liabilities............ -- -- -- -- --
-------- -------- -------- -------- -------
Net cash (used in) provided by
financing activities........... (2,265) (4,268) (1,854) (244) --
NET INCREASE (DECREASE) IN CASH............ 104 794 5,336 2,152 (5,820)
CASH AT BEGINNING OF PERIOD................ 680 784 1,578 1,578 6,914
-------- -------- -------- -------- -------
CASH AT END OF PERIOD...................... $ 784 $ 1,578 $ 6,914 $ 3,730 $ 1,094
======== ======== ======== ======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (refund received)...... $ 1,243 $ 1,945 $ 661 $ 609 $ (968)
Interest paid............................ $ 8,172 $ 7,799 $ 9,701 $ 4,751 $ 5,944
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-35
<PAGE> 144
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-36
<PAGE> 145
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-37
<PAGE> 146
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.
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.
During June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement required that derivatives and hedges be
valued at their fair value and established standards for the recognition of
changes in fair value. The Statement is effective for periods beginning after
June 15, 1999. The Company is evaluating SFAS No. 133 to determine the impact,
if any, on its reporting and disclosure requirements.
2. INVENTORIES
Inventories at December 31, 1996 and 1997 consist of:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Raw materials................................ $ 9,508 $12,026
Work in process.............................. 6,254 6,306
Finished goods............................... 5,954 6,553
------- -------
21,716 24,885
Less valuation allowances.................... (1,305) (1,593)
------- -------
$20,411 $23,292
======= =======
</TABLE>
F-38
<PAGE> 147
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-39
<PAGE> 148
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-40
<PAGE> 149
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-41
<PAGE> 150
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-42
<PAGE> 151
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-43
<PAGE> 152
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-44
<PAGE> 153
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-45
<PAGE> 154
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-46
<PAGE> 155
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-47
<PAGE> 156
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-48
<PAGE> 157
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>
TWENTY-SIX
WEEKS ENDED
YEAR ENDED DECEMBER 31, -------------------------
------------------------- JUNE 28, JUNE 26,
1995 1996 1997 1997 1998
------ ------ ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator:
Net income (loss) before
extraordinary item............ $2,438 $3,626 $ 838 $ 1,400 $(3,233)
Extraordinary item............... -- -- (1,210) (1,210) --
------ ------ ------- ------- -------
Numerator for basic and diluted
earnings per share............... $2,438 $3,626 $ (372) $ 190 $(3,233)
====== ====== ======= ======= =======
Denominator:
Denominator for basic earnings
per share-- weighted-average
shares........................ 1,018 1,018 1,418 1,551 1,551
Potentially dilutive common
shares........................ 288 352 -- -- --
------ ------ ------- ------- -------
Denominator for diluted earnings
per share--adjusted
weighted-average shares and
dilutive shares.................. 1,306 1,370 1,418 1,551 1,551
====== ====== ======= ======= =======
BASIC
Income before extraordinary
item.......................... $ 2.39 $ 3.56 $ 0.59 $ 0.90 $ (2.08)
Extraordinary item............... -- -- (0.85) (0.78) --
------ ------ ------- ------- -------
Net income....................... $ 2.39 $ 3.56 $ (0.26) $ 0.12 $ (2.08)
====== ====== ======= ======= =======
DILUTED
Income before extraordinary
item.......................... $ 1.87 $ 2.65 $ 0.59 $ 0.90 $ (2.08)
Extraordinary item............... -- -- (0.85) (0.78) --
------ ------ ------- ------- -------
Net income....................... $ 1.87 $ 2.65 $ (0.26) $ 0.12 $ (2.08)
====== ====== ======= ======= =======
</TABLE>
18. OTHER COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income, which requires the reporting of
comprehensive income in addition to net income. Comprehensive income is a more
inclusive financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net income.
Information with respect to the accumulated other comprehensive income
balance is as follows:
<TABLE>
<CAPTION>
TWENTY-SIX
WEEKS ENDED
YEAR ENDED DECEMBER 31, --------------------------
----------------------- JUNE 28, JUNE 26,
1995 1996 1997 1997 1998
----- ----- ----- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Beginning balance......................... $(400) $(496) $(568) $(568) $(521)
Current period change in additional
pension liability....................... (96) (72) 47 -- --
----- ----- ----- ----- -----
$(496) $(568) $(521) $(568) $(521)
===== ===== ===== ===== =====
</TABLE>
F-49
<PAGE> 158
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
19. INTERIM BASIS OF PRESENTATION (UNAUDITED)
The quarterly condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. Anchor Acquisition
Co. (see Note 20) 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.
20. 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. Additionally, the Company paid $2,769 on behalf
of Anchor Acquisition Co. to the holders of the Senior Notes for their consent
to the transaction and to other parties for expenses in regards to the
transaction.
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-50
<PAGE> 159
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-51
<PAGE> 160
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-52
<PAGE> 161
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-53
<PAGE> 162
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-54
<PAGE> 163
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-55
<PAGE> 164
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-56
<PAGE> 165
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-57
<PAGE> 166
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-58
<PAGE> 167
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-59
<PAGE> 168
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-60
<PAGE> 169
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-61
<PAGE> 170
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-62
<PAGE> 171
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-63
<PAGE> 172
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-64
<PAGE> 173
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-65
<PAGE> 174
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-66
<PAGE> 175
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-67
<PAGE> 176
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-68
<PAGE> 177
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-69
<PAGE> 178
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-70
<PAGE> 179
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
Moll Industries Paderborn Beteilingungs-GmbH................ Corporation Germany
Moll Industries Paderborn 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-71
<PAGE> 180
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-72
<PAGE> 181
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-73
<PAGE> 182
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-74
<PAGE> 183
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-75
<PAGE> 184
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-76
<PAGE> 185
- ------------------------------------------------------
- ------------------------------------------------------
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................................. 13
The Company.................................. 20
The Transactions............................. 22
Use of Proceeds.............................. 25
Capitalization............................... 26
Selected Unaudited Pro Forma and Historical
Consolidated Financial Data................ 27
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 31
The Exchange Offer........................... 42
Business..................................... 49
Management................................... 59
Certain Beneficial Owners.................... 63
Certain Relationships and Related
Transactions............................... 64
Description of Notes......................... 65
Description of Certain Indebtedness.......... 93
Certain Federal Income Tax Considerations.... 96
Plan of Distribution......................... 98
Legal Matters................................ 98
Experts...................................... 98
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> 186
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,
II-1
<PAGE> 187
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
II-2
<PAGE> 188
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.)*
3.2 By-Laws of Moll Industries, Inc.*
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*
4.4 Amended and Restated Credit Agreement dated as of June 26,
1998 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*
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 Moll
S.P.R.L.
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*
</TABLE>
II-3
<PAGE> 189
<TABLE>
<S> <C>
4.15 Security Agreement dated as of June 26, 1998 by and among Moll Industries, Inc., the subsidiary guarantors
from time party thereto, Moll Industries, LLC, Moll Plastics LLC and NationsBank, N.A., as agent for the
lenders from time to time party thereto
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.*
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*
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*
10.5 Form of Employment Agreement*
10.6 Form of Supplemental Executive Retirement Benefit Agreement and Side Letter*
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>
- ------------------------------
* Previously filed.
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.
(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
II-4
<PAGE> 190
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> 191
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Tennessee, on
November 2, 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 Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GEORGE T. VOTIS Chairman and Chief November 2, 1998
- ----------------------------------------------------- Executive Officer
George T. Votis
* President and Director November 2, 1998
- -----------------------------------------------------
Charles B. Schiele
/s/ PHYLLIS C. BEST Chief Financial Officer November 2, 1998
- -----------------------------------------------------
Phyllis C. Best
*By: /s/ PHYLLIS C. BEST Attorney-in-Fact November 2, 1998
------------------------------------------------
Phyllis C. Best
</TABLE>
II-6
<PAGE> 192
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.)*
3.2 By-Laws of Moll Industries, Inc.*
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*
4.4 Amended and Restated Credit Agreement dated as of June 26,
1998 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*
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 Moll
S.P.R.L.
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*
4.15 Security Agreement dated as of June 26, 1998 by and among
Moll Industries, Inc., the subsidiary guarantors from time
party thereto, Moll Industries, LLC, Moll Plastics LLC and
NationsBank, N.A., as agent for the lenders from time to
time party thereto
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.*
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*
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*
10.5 Form of Employment Agreement*
10.6 Form of Supplemental Executive Retirement Benefit Agreement
and Side Letter*
10.7 Letter Agreement dated March 19, 1998 between Thomas H. Lee
Company and Anchor Acquisition Co.*
</TABLE>
<PAGE> 193
<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>
- ------------------------------
* Previously filed.
<PAGE> 1
EXHIBIT 4.4
AMENDED AND RESTATED
CREDIT AGREEMENT
among
MOLL INDUSTRIES, INC.,
as Borrower,
and
THE GUARANTORS FROM TIME TO TIME PARTIES HERETO,
THE LENDERS FROM TIME TO TIME PARTIES HERETO,
and
NATIONSBANK, N.A.,
as Agent
DATED AS OF JUNE 26, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SECTION 1 DEFINITIONS AND ACCOUNTING TERMS...................................1
1.1 Definitions......................................................1
1.2 Computation of Time Periods and Other Definitional Provisions...29
1.3 Accounting Terms................................................29
SECTION 2 CREDIT FACILITIES.................................................30
2.1 Revolving Loans.................................................30
2.2 Letter of Credit Subfacility....................................31
2.3 Foreign Currency Loan Subfacility...............................36
2.4 Continuations and Conversions...................................37
2.6 General.........................................................38
SECTION 3 GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT......39
3.1 Interest........................................................39
3.2 Place and Manner of Payments....................................39
3.3 Prepayments.....................................................41
3.5 Fees............................................................42
3.6 Payment in full at Maturity.....................................43
3.7 Computations of Interest and Fees...............................43
3.8 Pro Rata Treatment..............................................44
3.9 Allocation of Payments After Event of Default...................45
3.10 Sharing of Payments............................................46
3.11 Capital Adequacy...............................................47
3.12 Inability To Determine Interest Rate; Unavailability of Funds..47
3.14 Requirements of Law............................................49
3.15 Taxes..........................................................50
3.16 Indemnity......................................................52
3.17 European Monetary Union........................................53
SECTION 4 GUARANTY..........................................................54
4.1 Guaranty of Payment.............................................54
4.2 Obligations Unconditional.......................................54
4.3 Modifications...................................................55
4.4 Waiver of Rights................................................55
4.5 Reinstatement...................................................56
4.6 Remedies........................................................56
4.7 Limitation of Guaranty..........................................56
4.8 Rights of Contribution..........................................57
SECTION 5 CONDITIONS PRECEDENT..............................................57
5.1 Closing Conditions..............................................57
5.2 Conditions to All Extensions of Credit..........................61
SECTION 6....................................................................62
REPRESENTATIONS AND WARRANTIES...............................................62
6.1 Financial Condition.............................................62
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
6.2 No Material Change..............................................64
6.3 Organization and Good Standing..................................64
6.4 Due Authorization...............................................64
6.5 No Conflicts....................................................65
6.6 Consents........................................................65
6.7 Enforceable Obligations.........................................65
6.8 No Default......................................................65
6.9 Ownership.......................................................65
6.10 Indebtedness...................................................66
6.11 Litigation.....................................................66
6.12 Taxes..........................................................66
6.13 Compliance with Law............................................66
6.14 ERISA..........................................................66
6.15 Subsidiaries...................................................67
6.16 Use of Proceeds; Margin Stock..................................68
6.17 Government Regulation..........................................68
6.18 Environmental Matters..........................................68
6.19 Intellectual Property..........................................69
6.20 Solvency.......................................................70
6.21 Investments....................................................70
6.22 Location of Collateral.........................................70
6.23 Disclosure.....................................................70
6.24 Licenses, etc..................................................70
6.25 No Burdensome Restrictions.....................................70
6.26 Labor Matters..................................................71
6.27 Nature of Business.............................................71
SECTION 7 AFFIRMATIVE COVENANTS.............................................71
7.1 Information Covenants...........................................71
7.2 Preservation of Existence and Franchises........................74
7.3 Books and Records...............................................74
7.4 Compliance with Law.............................................74
7.5 Payment of Taxes and Other Indebtedness.........................74
7.6 Insurance.......................................................75
7.7 Maintenance of property.........................................75
7.8 Performance of Obligations......................................75
7.9 Collateral......................................................75
7.10 Use of Proceeds................................................76
7.11 Audits/Inspections.............................................76
7.12 Financial Covenants............................................77
7.13 Additional Credit Parties; Additional Collateral...............78
SECTION 8....................................................................78
NEGATIVE COVENANTS...........................................................78
8.1 Indebtedness....................................................78
8.2 Liens...........................................................80
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
8.3 Nature of Business..............................................80
8.4 Consolidation and Merger........................................80
8.5 Asset Dispositions..............................................81
8.6 Investments.....................................................81
8.7 Restricted Payments.............................................81
8.8 Transactions with Affiliates....................................82
8.9 Restrictions on the Parent; Ownership of Subsidiaries...........82
8.10 Fiscal Year; Organizational Documents..........................83
8.11 Prepayment or Modification of Indebtedness.....................83
8.12 Limitations....................................................83
8.13 Sale Leasebacks................................................84
8.14 Capital Expenditures...........................................84
8.15 No Further Negative Pledges....................................84
8.16 Operating Lease Obligations....................................85
8.17 Mexican Operations.............................................85
SECTION 9 EVENTS OF DEFAULT.................................................85
9.1 Events of Default...............................................85
9.2 Acceleration; Remedies..........................................87
SECTION 10 AGENCY PROVISIONS................................................88
10.1 Appointment....................................................88
10.2 Delegation of Duties...........................................89
10.3 Exculpatory Provisions.........................................89
10.4 Reliance on Communications.....................................90
10.5 Notice of Default..............................................90
10.6 Non-Reliance on Agent and Other Lenders........................90
10.7 Indemnification................................................91
10.8 Agent in Its Individual Capacity...............................91
10.9 Successor Agent................................................91
SECTION 11 MISCELLANEOUS....................................................92
11.1 Notices........................................................92
11.2 Right of Set-Off...............................................92
11.3 Benefit of Agreement...........................................93
11.4 No Waiver; Remedies Cumulative.................................95
11.5 Payment of Expenses; Indemnification...........................95
11.6 Amendments, Waivers and Consents...............................96
11.7 Counterparts...................................................97
11.8 Pleadings......................................................97
11.9 Defaulting Lender..............................................98
11.10 Survival of Indemnification and Representations and
Warranties....................................................98
11.11 Governing Law; Venue..........................................98
11.12 Waiver of Jury Trial..........................................99
11.13 Time..........................................................99
11.14 Severability..................................................99
11.15 Entirety......................................................99
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
11.16 Binding Effect; Termination of this Credit Agreement..........99
11.17 Confidentiality..............................................100
11.18 Judgment Currency............................................100
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule 1.1A Commitment Percentages
Schedule 1.1B Existing Letters of Credit
Schedule 1.1C Calculation of MLA Cost
Schedule 1.1D Existing Investments
Schedule 1.1E-1 Existing Liens (excluding Gemini)
Schedule 1.1E-2 Existing Liens (Gemini)
Schedule 5.1(d)(i) Form of Opinion of Choate, Hall & Stewart
Schedule 5.1(d)(ii) Form of Opinion of Skadden, Arps, Slate, Meagher &
Flom LLP (U.S.) Schedule 5.1(d)(iii) Form of Opinion
of Skadden, Arps, Slate, Meagher & Flom LLP (France)
Schedule 5.1(d)(iv) Form of Opinion of Gunster,
Yoakley, Valdes-Fauli & Stewart, P.A. Schedule 6.5
Conflicts with Other Agreements
Schedule 6.6 Consents, Approvals and Authorizations
Schedule 6.10-1 Existing Indebtedness (excluding Gemini)
Schedule 6.10-2 Existing Indebtedness (Gemini)
Schedule 6.11 Litigation
Schedule 6.12 Taxes
Schedule 6.15 Existing Subsidiaries
Schedule 6.18 Environmental Matters
Schedule 6.22(a) Personal Property Locations
Schedule 6.22(b) Chief Executive Offices
Schedule 6.26 Labor Matters
Schedule 7.6 Existing Insurance Coverage
Schedule 11.1 Addresses for Notice
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit 1.1A Form of Notice of Borrowing
Exhibit 1.1B Form of Security Agreement
Exhibit 2.1(d) Form of Revolving Note
Exhibit 2.3(d) Form of Foreign Currency Note
Exhibit 2.4 Form of Notice of Continuation/Conversion
Exhibit 7.1(c) Form of Officer's Certificate
Exhibit 7.1(d) Form of Borrowing Base Report
Exhibit 7.13 Form of Joinder Agreement
Exhibit 11.3 Form of Assignment Agreement
</TABLE>
<PAGE> 7
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 26, 1998
(as amended, modified, restated or supplemented from time to time, the "Credit
Agreement"), amends and restates that certain Credit Agreement dated as of April
2, 1997 by and between Anchor Advanced Products, Inc. and NationsBank, N.A., as
agent and as sole lender, and is by and among MOLL INDUSTRIES, INC. (f/k/a
Anchor Advanced Products, Inc.), a Delaware corporation (the "Borrower"), the
Guarantors (as defined herein), the Lenders (as defined herein) and NATIONSBANK,
N.A., as Agent for the Lenders (in such capacity, the "Agent").
RECITALS
WHEREAS, the Borrower has requested that the Lenders provide a
$50,000,000 revolving credit facility with a sublimit of $10,000,000 for letters
of credit to the Borrower; and
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
1.1 DEFINITIONS.
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms herein shall
include in the singular number the plural and in the plural the singular:
"Acquired Debt" means, with respect to any 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.
"Acquisition", by any Person, means the acquisition by such
Person of the Capital Stock or all or substantially all of the Property
of another Person, whether or not involving a merger or consolidation
with such Person.
-7-
<PAGE> 8
"Adjusted Base Rate" means the Base Rate plus the Applicable
Percentage.
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus the
Applicable Percentage.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to
all directors and officers of such Person), controlled by or under
direct or indirect common control with such Person. A Person shall be
deemed to control a corporation if such Person possesses, directly or
indirectly, the power (i) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such corporation
or (ii) to direct or cause direction of the management and policies of
such corporation, whether through the ownership of voting securities,
by contract or otherwise.
"Agency Services Address" means NationsBank, N.A.,
NC-001-15-04, Independence Center, 15th Floor, 101 North Tryon Street,
Charlotte 28255, Attn: Agency Services, or such other address as may be
identified by written notice from the Agent to the Borrower.
"Agent" shall have the meaning assigned to such term in the
heading hereof, together with any successors or assigns.
"Agent's Fee Letter" means that certain letter agreement,
dated as of the Closing Date, between the Agent and the Borrower, as
amended, modified, restated or supplemented from time to time.
"Anchor" means Anchor Advanced Products, Inc., a Delaware
corporation.
"Applicable Percentage" means for the Loans, Standby Letter of
Credit Fee and Commitment Fees, the appropriate applicable percentages
corresponding to the Leverage Ratio in effect as of the most recent
Calculation Date as shown below:
<TABLE>
<CAPTION>
===============================================================================================================================
Applicable Applicable Applicable Applicable
Percentage For Percentage For Percentage For Percentage For Applicable
Pricing Leverage Eurodollar Base Rate Standby Letter of Trade Letter of Percentage For
Level Ratio Loans Loans Credit Fee Credit Fee Commitment Fees
- ------------- ------------------- -------------- -------------- ------------------ --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
I > or = 4.25 to 1.00 2.25% 1.25% 2.25% 1.125% 0.50%
- ------------- ------------------- -------------- -------------- ------------------ --------------- ----------------
II <4.25 to 1.00 but 2.00% 1.00% 2.00% 1.00% 0.425%
> or = 3.50 to 1.00
- ------------- ------------------- -------------- -------------- ------------------ --------------- ----------------
</TABLE>
-8-
<PAGE> 9
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
III <3.50 to 1.00 but 1.75% 0.75% 1.75% 0.875% 0.375%
> or = 3.00 to 1.00
- ------------- ------------------- -------------- -------------- ------------------ --------------- ----------------
IV < 3.00 to 1.00 1.50% 0.50% 1.50% 0.75% 0.375%
===============================================================================================================================
</TABLE>
The Applicable Percentages shall be determined and adjusted quarterly
on the date (each a "Calculation Date") five Business Days after the
date by which the Borrower is required to provide the officer's
certificate in accordance with the provisions of Section 7.1(c);
provided, however, that (i) the initial Applicable Percentages shall be
based on Pricing Level II until the Calculation Date for the fiscal
quarter of the Consolidated Parties ending on September 30, 1998, on
and after which time the Applicable Percentages shall be determined by
the Leverage Ratio as of the fiscal quarter end immediately preceding
the applicable Calculation Date; and (ii) if the Borrower fails to
provide the officer's certificate to the Agency Services Address as
required by Section 7.1(c) on or before the most recent Calculation
Date, the Applicable Percentages from such Calculation Date shall be
based on Pricing Level I until such time as an appropriate officer's
certificate is provided, whereupon the Pricing Level shall be
determined by the Leverage Ratio as of the fiscal quarter end
immediately preceding the applicable Calculation Date. Except as set
forth above, each Applicable Percentage shall be effective from one
Calculation Date until the next Calculation Date. Any adjustment in the
Applicable Percentages shall be applicable to all existing Loans and
Letters of Credit as well as any new Loans made or Letters of Credit
issued.
"Application Period" shall have the meaning assigned to such
term in Section 8.5.
"Asset Disposition" means the disposition of any or all of the
assets (including without limitation the Capital Stock of a Subsidiary)
of any Consolidated Party whether by sale, lease, transfer or
otherwise. The term "Asset Disposition" shall include any "Asset Sale"
under and as defined in the Senior Note Indenture or the Subordinated
Note Indenture.
"Asset Disposition Prepayment Event" means, with respect to
any Asset Disposition other than an Excluded Asset Disposition, the
failure of the Borrower to apply (or cause to be applied) the Net Cash
Proceeds of such Asset Disposition to Eligible Reinvestments during the
Application Period for such Asset Disposition.
"Available Foreign Currency" means (i) Pounds Sterling, French
Francs and Deutsche Marks and (ii) to the extent available to all of
the Lenders (as reasonably determined from time to time by the Agent),
Pesos and Escudos.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
-9-
<PAGE> 10
"Bankruptcy Event" means, with respect to any Person, the
occurrence of any of the following with respect to such Person: (i) a
court or governmental agency having jurisdiction shall enter a decree
or order for relief in respect of such Person in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such Person
or for any substantial part of its property or ordering the winding up
or liquidation of its affairs; or (ii) there shall be commenced against
such Person an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or any
case, proceeding or other action for the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its property or
for the winding up or liquidation of its affairs, and such involuntary
case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded for a period of sixty (60)
consecutive days; or (iii) such Person shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in
an involuntary case under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its property or make any general assignment for the
benefit of creditors; or (iv) such Person shall be unable to, or shall
admit in writing its inability to, pay its debts generally as they
become due.
"Base Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
equal to the greater of (a) the Federal Funds Rate in effect on such
day plus 1/2 of 1% or (b) the Prime Rate in effect on such day. If for
any reason the Agent shall have determined (which determination shall
be conclusive absent manifest error) that it is unable after due
inquiry to ascertain the Federal Funds Rate for any reason, including
the inability or failure of the Agent to obtain sufficient quotations
in accordance with the terms hereof, the Base Rate shall be determined
without regard to clause (a) of the first sentence of this definition
until the circumstances giving rise to such inability no longer exist.
Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Rate shall be effective on the effective date of such
change in the Prime Rate or the Federal Funds Rate, respectively.
"Base Rate Loan" means any Revolving Loan bearing interest at
a rate determined by reference to the Base Rate.
"Borrower" means the Person identified as such in the heading
hereof, together with any permitted successors and assigns.
"Borrowing Base" means, as of any day, the sum of (i) 85% of
Eligible Receivables, (ii) 50% of Eligible Inventory which is not
work-in-process inventory and (iii) the lesser of (A) $5,000,000 and
(B) 25% of Eligible Inventory which is work-in-process inventory, in
each case as set forth in the most recent Borrowing Base Certificate
delivered to the Agent and the Lenders in accordance with the terms of
Section 7.1(d);
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provided, however, that subject to the further requirements of clause
(vi) of the definition of "Eligible Receivables" set forth in this
Section 1.1, Receivables owing by an account debtor located outside of
the United States shall not at any time constitute more than 20% of the
Borrowing Base.
"Business Day" means any day other than a Saturday, a Sunday,
a legal holiday or a day on which banking institutions are authorized
or required by law or other governmental action to close in Charlotte,
North Carolina or New York, New York; provided that (i) when used in
connection with Eurodollar Loans, such day is also a day on which
dealings between banks are carried on in U.S. dollar deposits in the
London interbank market and (ii) when used in connection with a Foreign
Currency Loan, such day shall also be a day on which dealings in the
applicable Available Foreign Currency are being carried on between
banks in the interbank eurocurrency market with respect to such
Available Foreign Currency.
"Calculation Date" has the meaning set forth in the definition
of Applicable Percentage.
"Capital Expenditures" means all expenditures of the
Consolidated Parties which, in accordance with GAAP, would be
classified as capital expenditures.
"Capital Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"Capital Lease Obligations" means, with respect to any Person
as of any date, 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 of such Person as of such date in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
capital stock, (ii) in the case of an association or business entity,
any and all shares, interests, participations, rights or other
equivalents (however designated) of capital stock, (iii) in the case of
a partnership, partnership interests (whether general or limited), (iv)
in the case of a limited liability company, membership interests and
(v) 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 (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (b) U.S. dollar denominated time deposits and certificates
of deposit of (i) any Lender, (ii) any domestic commercial bank of
recognized standing having capital and
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surplus in excess of $500,000,000 or (iii) any bank whose short-term
commercial paper rating from S&P is at least A-1 or the equivalent
thereof or from Moody's is at least P-1 or the equivalent thereof (any
such bank being an "Approved Bank"), in each case with maturities of
not more than one year from the date of acquisition, (c) commercial
paper and variable or fixed rate notes issued by any Approved Bank (or
by the parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-1 (or the equivalent
thereof) or better by S&P or P-1 (or the equivalent thereof) or better
by Moody's and maturing within one year of the date of acquisition, (d)
repurchase agreements with a bank or trust company (including any of
the Lenders) or recognized securities dealer having capital and surplus
in excess of $500,000,000 for direct obligations issued by or fully
guaranteed by the United States of America in which the applicable
Credit Party shall have a perfected first priority security interest
(subject to no other Liens) and having, on the date of purchase
thereof, a fair market value of at least 100% of the amount of the
repurchase obligations and (e) Investments, classified in accordance
with GAAP as current assets, in money market investment programs
registered under the Investment Company Act of 1940, as amended, which
are administered by reputable financial institutions having capital of
at least $500,000,000 and the portfolios of which are limited to
Investments of the character described in the foregoing subdivisions
(a) through (d).
"Cash Taxes" means, with respect to any Person for any period,
the aggregate of all taxes of such Person, as determined in accordance
with GAAP, to the extent the same are paid in cash during such period.
"Change of Control" means the occurrence of any of the
following:
(i) the failure of Holdings to own all of the Capital
Stock of the Parent;
(ii) the failure of the Parent to own all of the
Capital Stock of the Borrower;
(iii) (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 Borrower, the Parent, 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
Borrower, the Parent or Holdings than is at the time
"beneficially owned" (as defined above) by the Principals;
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<PAGE> 13
(iv) the first day on which a majority of the members
of the Borrower's, the Parent's or Holding's board of
directors are not Continuing Directors; or
(v) 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 Holdings and its
Subsidiaries taken as a whole 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 any Capital Stock in a
Person that was formed for the purpose of acquiring voting stock of
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
Person that has been so transferred.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to
time. References to sections of the Code shall be construed also to
refer to any successor sections.
"Collateral" means all collateral referred to in and covered
by the Collateral Documents.
"Collateral Documents" means the the Security Agreement and
such other documents executed and delivered in connection with the
attachment and perfection of the Lenders' security interests in the
Collateral, including without limitation, UCC financing statements and
trademark filings.
"Commitment" means, with respect to each Lender, the
commitment of such Lender in an aggregate principal amount at any time
outstanding of up to such Lender's Commitment Percentage of the
Revolving Committed Amount, (i) to make Revolving Loans in accordance
with the provisions of Section 2.1(a), (ii) to make Foreign Currency
Loans in accordance with the provisions of Section 2.3(a) and (iii) to
purchase Participation Interests in Letters of Credit in accordance
with the provisions of Section 2.2(c).
"Commitment Fees" means the fees payable to the Lenders
pursuant to Section 3.5(a).
"Commitment Percentage" means, for each Lender, the percentage
identified as its Commitment Percentage on Schedule 1.1A, as such
percentage may be modified in connection with any assignment made in
accordance with the provisions of Section 11.3.
"Consolidated EBITDA" means, for any period, with respect to
the Consolidated
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<PAGE> 14
Parties on a consolidated basis, the sum of (i) Consolidated Net Income
for such period (excluding the effect of (a) any extraordinary or other
non-recurring gains or losses outside of the ordinary course of
business and (b) any non-recurring charges, non-cash charges or
documented cash charges, in each case deducted in determining
Consolidated Net Income for such period and related to the issuance of
the Senior Notes or the Subordinated Notes) plus (ii) an amount which,
in the determination of Consolidated Net Income for such period, has
been deducted for (A) Interest Expense, (B) total Federal, state,
foreign or other income taxes and (C) depreciation and amortization
expense and any other non-cash charges deducted in determining
Consolidated Net Income for such period, all as determined in
accordance with GAAP.
"Consolidated Net Income" means, for any period, the net
income after taxes for such period of the Consolidated Parties on a
consolidated basis, as determined in accordance with GAAP.
"Consolidated Parties" means the Parent and its Subsidiaries,
and "Consolidated Party" means any one of them.
"Consolidated Net Worth" means, at any time, shareholders'
equity or net worth of the Consolidated Parties on a consolidated
basis, as determined in accordance with GAAP.
"Consolidated Total Assets" means, at any time, total assets
of the Consolidated Parties on a consolidated basis at such time, as
determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination,
any member of the board of directors of Holdings who (i) was a member
of such board of directors on the Closing Date after giving effect to
the Transaction 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 at any time 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 at such time.
"Credit Documents" means this Credit Agreement, the Notes, any
Joinder Agreement, the Collateral Documents, the LOC Documents and all
other related agreements and documents issued or delivered hereunder or
thereunder or pursuant hereto or thereto.
"Credit Parties" means the Borrower and the Guarantors, and
"Credit Party" means any one of them.
"Credit Party Obligations" means, without duplication, (a) all
of the obligations of the Credit Parties to the Lenders (including the
Issuing Lender) and the Agent, whenever
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<PAGE> 15
arising, under this Credit Agreement, the Notes, the Collateral
Documents or any of the other Credit Documents to which the Borrower or
any other Credit Party is a party and (b) all Hedging Obligations owing
from a Credit Party to any Lender, or any Affiliate of a Lender.
"Credit Suisse First Boston Facility" means the credit
facility in favor of Moll pursuant to that certain Credit Agreement
dated as of January 8, 1998, as amended from time to time thereafter,
by and among Moll, certain Subsidiaries of Moll, the lenders party
thereto and Credit Suisse First Boston, as collateral agent,
administrative agent and issuing bank.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that (a)
has failed to make a Loan or purchase a Participation Interest required
pursuant to the term of this Credit Agreement within one Business Day
of when due, (b) other than as set forth in (a) above, has failed to
pay to the Agent or any Lender an amount owed by such Lender pursuant
to the terms of this Credit Agreement within one Business Day of when
due, unless such amount is subject to a good faith dispute or (c) has
been deemed insolvent or has become subject to a bankruptcy or
insolvency proceeding or with respect to which (or with respect to any
of assets of which) a receiver, trustee or similar official has been
appointed.
"Designated Subsidiary" means, at any time, any direct or
indirect Subsidiary of the Borrower having at such time any outstanding
Guaranty Obligations in respect of any Funded Indebtedness of the
Borrower other than the Indebtedness arising under the Senior Note
Indenture and the Senior Notes.
"Determination Date" means each of:
(a) the date three Business Days prior to the date
that any Foreign Currency Loan is made;
(b) the date three Business Days prior to the date
that any Foreign Currency Loan is continued from the current
Interest Period for such Foreign Currency Loan into a
subsequent Interest Period;
(c) the last Business Day of each March, June,
September and December; and
(d) the date of any reduction of the Revolving
Committed Amount pursuant to the terms of Section 3.5.
"Deutsche Marks" means the lawful currency of the Federal
Republic of Germany.
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"Dollar Amount" means (a) with respect to Dollars or an amount
denominated in Dollars, such amount and (b) with respect to an amount
of any Available Foreign Currency or an amount denominated in such
Available Foreign Currency, the Dollar Equivalent of such amount on the
applicable date contemplated in this Credit Agreement.
"Dollar Equivalent" means, on any date, with respect to an
amount denominated in an Available Foreign Currency, the amount of
Dollars into which the Agent could, in accordance with its practice
from time to time in the interbank foreign exchange market, convert
such amount of Available Foreign Currency at its spot rate of exchange
applicable to the relevant transaction at or about 11:00 a.m., London,
England time, on such date.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Domestic Credit Party" means any Credit Party which is
incorporated or organized under the laws of any State of the United
States or the District of Columbia.
"Domestic Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which is incorporated or organized under the
laws of any State of the United States or the District of Columbia.
"Eligible Assets" means another business or any substantial
part of another business or other long-term assets, in each case, in,
or used or useful in, the same or a similar line of business as the
Consolidated Parties were engaged in on the Closing Date or any
reasonable extensions or expansions thereof.
"Eligible Inventory" means, as of any date of determination
and without duplication, the lower of the aggregate book value (based
on a FIFO or a moving average cost valuation, consistently applied) or
fair market value of all raw materials, work-in-process and finished
goods inventory owned by the Borrower or any of its Domestic
Subsidiaries other than Moll Industries, LLC and Moll Plastics, LLC
less appropriate reserves determined in accordance with GAAP but
excluding in any event (i) inventory which is (a) not subject to a
perfected, first priority Lien in favor for the Agent to secure the
Credit Party Obligations or (b) subject to any other Lien that is not a
Permitted Lien, (ii) inventory which is not in good condition or fails
to meet standards for sale or use imposed by governmental agencies,
departments or divisions having regulatory authority over such goods,
(iii) inventory which is not useable or salable at prices approximating
their cost in the ordinary course of the business (including without
duplication the amount of any reserves for obsolescence, unsalability
or decline in value), (iv) inventory located outside of the United
States other than (subject to the requirements of Section 7.9(b))
inventory of the Borrower located for less than 90 days at a
manufacturing facility operated by the Borrower or the Mexican
Subsidiary in Mexico, (v) at any time after August 31, 1998, inventory
located at a leased location with respect to which the Agent
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<PAGE> 17
shall not have received a landlord's waiver satisfactory to the Agent
and (vi) inventory which is leased or on consignment.
"Eligible Receivables" means, as of any date of determination
and without duplication, the aggregate book value of all accounts
receivable, receivables, and obligations for payment created or arising
from the sale of inventory or the rendering of services in the ordinary
course of business (collectively, the "Receivables"), owned by or owing
to the Borrower or any of its Domestic Subsidiaries other than Moll
Industries, LLC and Moll Plastics, LLC, net of allowances and reserves
for doubtful or uncollectible accounts and sales adjustments consistent
with such Person's internal policies and in any event in accordance
with GAAP, but excluding in any event (i) any Receivable which is (a)
not subject to a perfected, first priority Lien in favor for the Agent
to secure the Credit Party Obligations or (b) subject to any other Lien
that is not a Permitted Lien, (ii) Receivables which are more than 90
days past due (net of reserves for bad debts in connection with any
such Receivables), (iii) any Receivable not otherwise excluded by
clause (ii) above if more than 50% of the total Receivables owing from
the applicable account debtor are then excluded by such clause (ii),
(iv) Receivables evidenced by notes, chattel paper or other
instruments, unless such notes, chattel paper or instruments have been
delivered to and are in the possession of the Agent, (v) Receivables
owing by an account debtor which is not solvent or is subject to any
bankruptcy or insolvency proceeding of any kind, (vi) Receivables owing
by an account debtor located outside of the United States unless (a)
such account debtor is, or is a Foreign Subsidiary of, a Person which
is incorporated or organized under the laws of any State of the United
States or the District of Columbia or (b) payment for the goods shipped
is secured by an irrevocable letter of credit in a form and from an
institution acceptable to the Agent, (vii) Receivables which are
contingent or subject to offset, deduction, counterclaim, dispute or
other defense to payment (including without limitation pursuant to any
netting arrangement with an account debtor that is also a creditor of
any Consolidated Party, in each case to the extent of such offset,
deduction, counterclaim, dispute or other defense, (viii) Receivables
for which any direct or indirect Subsidiary or any Affiliate of the
Borrower is the account debtor and (ix) Receivables in excess of
$250,000 in aggregate amount representing a sale to the government of
the United States of America or any subdivision thereof unless the
Federal Assignment of Claims Act has been complied with to the
satisfaction of the Agent with respect to the granting of a security
interest in such Receivable, with or other similar applicable law.
"Eligible Reinvestment" means (i) an acquisition (whether or
not constituting a capital expenditure, but not constituting an
Acquisition) of Eligible Assets and (ii) a Permitted Acquisition. The
term "Eligible Reinvestment" shall not include any item which is not a
permitted application of proceeds of an "Asset Sale" under the
documentation for the Senior Note Indenture and the Subordinated Note
Indenture.
"Environmental Claim" means any written notice, written
demand, written allegation, action, suit, injunction, judgment, order,
consent decree, penalty, fine, lien, proceeding, or written claim
(whether administrative, judicial, or private in nature) arising
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(a) pursuant to, or in connection with, an actual or alleged violation
of, any Environmental Law, (b) in connection with any Hazardous
Material, (c) from any assessment, abatement, removal, remedial,
corrective, or other response action in connection with an
Environmental Law or other order of a Governmental Authority or (d)
from any actual or alleged damage, injury, threat, or harm to human
health or safety, natural resources, or the environment.
"Environmental Laws" means any and all valid and applicable
Federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, licenses or
other governmental restrictions protecting the environment or relating
to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or toxic or hazardous substances
or wastes into the environment including, without limitation, ambient
air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants,
chemicals, or toxic or hazardous substances or wastes.
"Equity Issuance" means any issuance by any Consolidated Party
to any Person other than a Credit Party, a Principal or a Related Party
of a Principal of (a) shares of its Capital Stock, (b) any shares of
its Capital Stock pursuant to the exercise of options or warrants or
(c) any shares of its Capital Stock pursuant to the conversion of any
debt securities to equity.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity which is under common
control with any Consolidated Party within the meaning of Section
4001(a)(14) of ERISA, or is a member of a group which includes any
Consolidated Party and which is treated as a single employer under
Sections 414(b) or (c) of the Code.
"ERISA Event" means (i) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of
operations (within the meaning of Section 4062(e) of ERISA); (ii) the
withdrawal by any Consolidated Party from a Multiple Employer Plan
during a plan year in which it was a substantial employer (as such term
is defined in Section 4001(a)(2) of ERISA), or the termination of a
Multiple Employer Plan; (iii) the distribution of a notice of intent to
terminate or the actual termination of a Plan pursuant to Section
4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to
terminate or the actual termination of a Plan by the PBGC under Section
4042 of ERISA; (v) any event or condition which could reasonably be
expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
Plan; (vi) the complete or partial withdrawal of any Consolidated Party
from a Multiemployer Plan; (vii) the conditions for imposition of a
lien under Section
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302(f) of ERISA exist with respect to any Plan; or (vii) the adoption
of an amendment to any Plan requiring the provision of security to such
Plan pursuant to Section 307 of ERISA.
"Escudos" means the lawful currency of the Portugal.
"Eurodollar Loan" means a Loan bearing interest based at a
rate determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate = Interbank Offered Rate
---------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that
percentage (expressed as a decimal) which is in effect from time to
time under Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as such regulation may be amended
from time to time or any successor regulation, as the maximum reserve
requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to
Eurocurrency liabilities as that term is defined in Regulation D (or
against any other category of liabilities that includes deposits by
reference to which the interest rate of Eurodollar Loans is
determined), whether or not Lender has any Eurocurrency liabilities
subject to such reserve requirement at that time. Eurodollar Loans
shall be deemed to constitute Eurocurrency liabilities and as such
shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available from
time to time to a Lender. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default" has the meaning specified in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Excluded Asset Disposition" means (i) any Asset Disposition
consisting of a sale, transfer or other disposition of inventory by a
Consolidated Party in the ordinary course of such Person's business,
(ii) any Asset Disposition by any Consolidated Party to any Credit
Party other than the Parent if (a) the Credit Parties shall cause to be
executed and delivered such documents, instruments and certificates as
the Agent may request so as to cause the Credit Parties to be in
compliance with the terms of Section 7.9 after giving effect to such
Asset Disposition and (b) after giving effect such Asset Disposition,
no Default or Event of Default exists, (iii) any Asset Disposition by
any Consolidated Party which is not a Credit Party to any other
Consolidated Party which is not a Credit
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<PAGE> 20
Party if after giving effect such Asset Disposition, no Default or
Event of Default exists, (iv) in addition to Asset Dispositions of the
types referred in clauses (i), (ii) and (iii), other Asset Dispositions
provided that the Net Cash Proceeds of all such other Asset
Dispositions by all of the Consolidated Parties during any fiscal year
of the Borrower does not exceed $500,000 and (v) in addition to Asset
Dispositions of the types referred in clauses (i), (ii), (iii) and
(iv), other Asset Dispositions provided that the Net Cash Proceeds of
all such other Asset Dispositions by all of the Consolidated Parties
after the Closing Date does not exceed 10% of Consolidated Total
Assets.
"Executive Officer" of any Person means any of the chief
executive officer, chief operating officer, president, executive vice
president, chief financial officer or treasurer or such Person.
"Exempt Affiliate Transactions" means (a) fees and
compensation paid to and indemnity provided on behalf of directors,
officers or employees of any Consolidated Party in the ordinary course
of business, (b) any employment agreement that is in effect on the
Closing Date and any such agreement entered into by any Consolidated
Party after the Closing Date in the ordinary course of business of such
Consolidated Party, (c) payments by the Consolidated Parties to Galt
Industries, Inc. of (i) management fees of up to $200,000 annually and
(ii) reasonable expenses from time to time of Galt Industries, Inc.,
(d) the lease of real property in Paderborn, Germany between Hanning
Kunstoffe GmbH & Co. and G & R Grundverwaltung GmbH, (e) transactions
between or among any Credit Parties (including without limitation
advances of working capital and transfers of cash and assets to any
Credit Party) and (f) transactions between or among any Consolidated
Parties which are not Credit Parties.
"Existing Anchor Credit Agreement" means that certain Credit
Agreement dated as of April 2, 1997 by and among Anchor Advanced
Products, Inc., Anchor Holdings, Inc. and NationsBank, as sole lender
and as agent, as amended, modified, restated or supplemented from time
to time
"Existing Letters of Credit" means the letters of credit
described by date of issuance, letter of credit number, undrawn amount,
name of beneficiary and date of expiry on Schedule 1.1B.
"Extension of Credit" means, as to any Lender, the making of a
Loan or the purchase of a Participation Interest by such Lender.
"Federal Funds Rate" means, for any day, the rate of interest
per annum (rounded upwards, if necessary, to the nearest whole multiple
of 1/100 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding
such day, provided that (A) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day and (B) if
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no such rate is so published on such next preceding Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to the
Agent on such day on such transactions as determined by the Agent.
"Foreign Currency Committed Amount" shall have the meaning
assigned to such term in Section 2.3(a).
"Foreign Currency Equivalent" means, on any date, with respect
to an amount denominated in Dollars, the amount of any applicable
Available Foreign Currency into which the Agent could, in accordance
with its practice from time to time in the interbank foreign exchange
market, convert such amount of Dollars at its spot rate of exchange
applicable to the relevant transaction at or about 11:00 a.m., London,
England time, on such date.
"Foreign Currency Loans" shall have the meaning assigned to
such term in Section 2.3(a).
"Foreign Currency Note" means a promissory note of the
Borrower in favor of a Lender delivered pursuant to Section 2.3(d) and
evidencing the Foreign Currency Loans of such Lender, as such
promissory note may be amended, modified, restated or replaced from
time to time.
"Foreign Subsidiary", of any Person, means any Subsidiary of
such Person which is not a Domestic Subsidiary of such Person.
"French Francs" means the lawful currency of the Republic of
France.
"Funded Indebtedness" means, with respect to any Person,
without duplication, (a) all Indebtedness of such Person other than
Indebtedness of the types referred to in clause (e), (f), (g), (i) and
(n) of the definition of "Indebtedness" set forth in this Section 1.1,
(b) all Funded Indebtedness of others of the type referred to in clause
(a) above secured by (or for which the holder of such Funded
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on, or payable out of the proceeds of production
from, Property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (c) all Guaranty
Obligations of such Person with respect to Funded Indebtedness of the
type referred to in clause (a) above of another Person and (d) Funded
Indebtedness of the type referred to in clause (a) above of any
partnership or unincorporated joint venture in which such Person is
legally obligated or has a reasonable expectation of being liable with
respect thereto.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to Section 1.3.
"Gemini" means Gemini Plastic Services, Inc., a Florida
corporation.
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"Governmental Authority" means any Federal, state, local,
provincial or foreign court or governmental agency, authority,
instrumentality or regulatory body.
"Guarantor" means a collective reference to the Parent and
each Subsidiary Guarantor.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations of such Person (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to
guarantee any Indebtedness of any other Person in any manner, whether
direct or indirect, and including without limitation any obligation,
whether or not contingent, (i) to purchase any such Indebtedness or any
property constituting security therefor, (ii) to advance or provide
funds or other support for the payment or purchase of any such
Indebtedness or to maintain working capital, solvency or other balance
sheet condition of such other Person (including without limitation keep
well agreements, maintenance agreements, comfort letters or similar
agreements or arrangements) for the benefit of any holder of
Indebtedness of such other Person, (iii) to lease or purchase property,
securities or services primarily for the purpose of assuring the holder
of such Indebtedness, or (iv) to otherwise assure or hold harmless the
holder of such Indebtedness against loss in respect thereof. The amount
of any Guaranty Obligation hereunder shall (subject to any limitations
set forth therein) be deemed to be an amount equal to the outstanding
principal amount (or maximum principal amount, if larger) of the
Indebtedness in respect of which such Guaranty Obligation is made.
"Hazardous Materials" means any substance, material or waste
regulated in or under any Environmental Laws.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person entered into in the ordinary course of
business under interest rate swap agreements, interest rate cap
agreements, interest rate collar agreements and foreign currency
exchange agreement and other similar financial agreements or
arrangements designed to protect such Person against, or manage the
exposure of such Person to, fluctuations in interest rates and entered
into in order to manage existing or anticipated interest rate or
exchange rate risks and not for speculative purposes.
"Holdings" means AMM Holdings, Inc., a Delaware corporation.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money, (b) all obligations
of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made, (c)
all obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person
(other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of
business), (d) all obligations of such Person issued or assumed as the
deferred purchase price of property or services purchased by such
Person (other than
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trade debt incurred in the ordinary course of business and due within
six months of the incurrence thereof) which would appear as liabilities
on a balance sheet of such Person, (e) all obligations of such Person
under take-or-pay or similar arrangements or under commodities
agreements, (f) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of the
proceeds of production from, property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed, (g)
all Guaranty Obligations of such Person with respect to Indebtedness of
another Person, (h) the principal portion of all obligations of such
Person under Capital Leases, (i) all obligations of such Person under
Hedging Agreements, (j) the maximum amount of all standby letters of
credit issued or bankers' acceptances facilities created for the
account of such Person and, without duplication, all drafts drawn
thereunder (to the extent unreimbursed), (k) all preferred Capital
Stock issued by such Person and required by the terms thereof to be
redeemed, or for which mandatory sinking fund payments are due, on or
before the Maturity Date, (l) the principal portion of all obligations
of such Person under Synthetic Leases and (n) the Indebtedness of any
partnership or unincorporated joint venture in which such Person is a
general partner or a joint venturer. The term "Indebtedness" shall not
include trade payables or accrued expenses, in either case arising in
the ordinary course of business.
"Initial Public Offering" means a public offering of common
equity of the Parent (or in the case of a merger or consolidation
between the Parent and the Borrower in connection with such public
offering, then of the continuing or surviving corporation of such
merger or consolidation).
"Interbank Offered Rate" means, for the Interest Period for
each Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
(rounded upwards, if necessary, to the nearest whole multiple of 1/100
of 1%) equal to (i) the rate of interest, determined by the Agent on
the basis of the offered rates for deposits in dollars for a period of
time corresponding to such Interest Period (and commencing on the first
day of such Interest Period), appearing on Telerate Page 3750 (or, if,
for any reason, Telerate Page 3750 is not available, the Reuters Screen
LIBO Page) as of approximately 11:00 a.m. (London time) two (2)
Business Days before the first day of such Interest Period and (ii)
with respect to any Foreign Currency Loan, for the Interest Period
applicable thereto, the sum of (a) the per annum rate of interest
determined by the Agent on the basis of the offered rates for deposits
in the relevant Available Foreign Currency (for a period of time
corresponding to such Interest Period and commencing on the first day
of such Interest Period) which appear on Telerate Page 3750 (or any
successor or equivalent page) as of 11:00 a.m. (London time) two
Business Days before the first day of such Interest Period (provided
that if at least two such offered rates appear on Telerate Page 3750
(or any successor or equivalent page), the rate in respect of such
Interest Period will be the arithmetic mean of such offered rates) plus
(b) in the case of any Foreign Currency Loan denominated in Pounds
Sterling, the applicable MLA Cost. If for any reason the foregoing
rates are unavailable from the Telerate service, then the Interbank
Offered Rate shall be a market rate for the applicable Loan for
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the applicable Interest Period as determined by the Agent plus, in the
case of any Foreign Currency Loan denominated in Pounds Sterling, the
applicable MLA Cost.
"Interest Expense" means, for any period, with respect to the
Consolidated Parties on a consolidated basis, all net interest expense,
including the interest component under Capital Leases, as determined in
accordance with GAAP.
"Interest Coverage Ratio" means, with respect to the
Consolidated Parties on a consolidated basis for the twelve month
period ending on the last day of any fiscal quarter of the Consolidated
Parties, the ratio of (a) Consolidated EBITDA for such period to (b)
cash Interest Expense for such period.
"Interest Payment Date" means (a) as to Base Rate Loans, the
last Business Day of each fiscal quarter of the Borrower and the
Maturity Date and (b) as to Eurodollar Loans, the last day of each
applicable Interest Period and the Maturity Date and, in addition where
the applicable Interest Period for a Eurodollar Loan is greater than
three months, then also the date three months from the beginning of the
Interest Period and each three months thereafter.
"Interest Period" means, as to Eurodollar Loans, a period of
one, two, three or six months' duration, as the Borrower may elect,
commencing, in each case, on the date of the borrowing (including
continuations and conversions thereof); provided, however, (a) if any
Interest Period would end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
(except that where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day),
(b) no Interest Period shall extend beyond the Maturity Date and (c)
where an Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month in which the
Interest Period is to end, such Interest Period shall end on the last
Business Day of such calendar month.
"Interim Foreign Currency Rate" means, for any day, with
respect to any Foreign Currency Loan, a rate per annum equal to the sum
of (i) the average rate at which overnight deposits in the applicable
Available Foreign Currency and approximately equal in principal amount
to the applicable Foreign Currency Loan are obtainable by the Agent on
such day in the interbank market, adjusted to reflect any direct or
indirect costs of obtaining such deposits plus (ii) in the case of any
Foreign Currency Loan denominated in Pounds Sterling, the applicable
MLA Cost. The Interim Foreign Currency Rate shall be determined for
each day by the Agent and such determination shall be conclusive absent
manifest error.
"Investment" in any Person means (a) the acquisition (whether
for cash, property, services, assumption of Indebtedness, securities or
otherwise) of assets, shares of Capital Stock, bonds, notes,
debentures, partnership, joint ventures or other ownership interests or
other securities of such other Person or (b) any deposit with, or
advance, loan or other extension of credit to, such Person (other than
deposits made in connection with the
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purchase of equipment or other assets in the ordinary course of
business) or (c) any other capital contribution to or investment in
such Person, including, without limitation, any Guaranty Obligation
(including any support for a letter of credit issued on behalf of such
Person) incurred for the benefit of such Person, but excluding any
Restricted Payment to such Person.
"Issuing Lender" means NationsBank.
"Issuing Lender Fees" has the meaning set forth in Section
3.5(b)(iii).
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Exhibit 7.13, executed and delivered by a new Subsidiary
Guarantor in accordance with the provisions of Section 7.13.
"Lender" means any of the Persons identified as a "Lender" on
the signature pages hereto, and any Person which may become a Lender by
way of assignment in accordance with the terms hereof, together with
their successors and permitted assigns.
"Letter of Credit" means (i) a Letter of Credit issued for the
account of the Borrower or one of its Subsidiaries by the Issuing
Lender pursuant to Section 2.2 and (ii) any Existing Letter of Credit,
as such Letter of Credit or Existing Letter of Credit may be amended,
modified, extended, renewed or replaced.
"Leverage Ratio" means, with respect to the Consolidated
Parties on a consolidated basis for the twelve month period ending on
the last day of any fiscal quarter of the Borrower, the ratio of (a)
Funded Indebtedness (net of cash and Cash Equivalents) of the
Consolidated Parties on a consolidated basis on the last day of such
period to (b) Consolidated EBITDA for such period.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind, including,
without limitation, any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any financing or
similar statement or notice filed under the Uniform Commercial Code as
adopted and in effect in the relevant jurisdiction or other similar
recording or notice statute, and any lease in the nature thereof.
"Loan" or "Loans" means the Revolving Loans (or a portion of
any Revolving Loan bearing interest at the Adjusted Base Rate or the
Adjusted Eurodollar Rate and referred to as a Base Rate Loan or a
Eurodollar Loan) and/or the Foreign Currency Loans (or any Foreign
Currency Loan referred to as a Eurodollar Loan), individually or
collectively, as appropriate.
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any
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<PAGE> 26
application therefor, and any agreements, instruments, guarantees or
other documents (whether general in application or applicable only to
such Letter of Credit) governing or providing for (a) the rights and
obligations of the parties concerned or at risk or (b) any collateral
security for such obligations.
"LOC Obligations" means, at any time, the sum of (a) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (b) the aggregate amount of all drawings
under Letters of Credit honored by the Issuing Lender but not
theretofore reimbursed.
"Mandatory Borrowing" has the meaning set forth in Section
2.2(e).
"Material Adverse Effect" means a material adverse effect on
(a) the operations, financial condition, business or prospects of the
Consolidated Parties taken as a whole, (b) the ability of the Credit
Parties taken as a whole to perform their obligations under this Credit
Agreement or any of the other Credit Documents, or (c) the validity or
enforceability of this Credit Agreement, any of the other Credit
Documents, or the rights and remedies of the Lenders hereunder or
thereunder taken as a whole.
"Material Foreign Subsidiary" means, at any time, any direct
Foreign Subsidiary of the Borrower or any of its Domestic Subsidiaries
having (i) 5% or more of Consolidated Total Assets at such time or (ii)
5% or more of Consolidated EBITDA for the most recently ended four
fiscal quarters.
"Maturity Date" means June 30, 2003.
"Mexican Subsidiary" means Cepillos de Matamoros, a direct
Subsidiary of the Parent organized and existing under the laws of
Mexico.
"MLA Cost" means an addition to the interest rate on any
Foreign Currency Loan denominated in Pounds Sterling made by any Lender
to compensate such Lender for the cost imputed to such Lender resulting
from the imposition from time to time under or pursuant to the Bank of
England Act 1998 (the "Act") and/or by the Bank of England and/or the
Financial Services Authority (the "FSA") (or other United Kingdom
governmental authorities or agencies) of a requirement to place
non-interest-bearing cash ratio deposits or Special Deposits (whether
interest bearing or not) with the Bank of England and/or pay fees to
the FSA calculated by reference to liabilities used to fund the Foreign
Currency Loan denominated in Pounds Sterling, expressed as a rate per
annum and as determined in accordance with Schedule 1.1C.
"Moll" means Moll PlastiCrafters Limited Partnership, a
Delaware limited partnership.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of
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the business of such company in the business of rating securities.
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which any Consolidated
Party and at least one employer other than the Consolidated Parties are
contributing sponsors.
"NationsBank" means NationsBank, N. A. and its successors.
"Net Cash Proceeds" means the aggregate cash proceeds
(including, without limitation, cash payments on non-cash consideration
and any cash received upon the sale or other disposition of any
non-cash consideration) received by any Consolidated Party in respect
of any Asset Disposition, net of (a) direct costs (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions), (b) taxes paid or payable as a result thereof and (c) any
reserve for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP; it being understood that
"Net Cash Proceeds" shall include, without limitation, any cash
received upon the sale or other disposition of any non-cash
consideration received by a Consolidated Party in any Asset
Disposition. In addition, the "Net Cash Proceeds" of any Asset
Disposition shall include any other amounts defined as "Net Proceeds"
of such transaction under the Senior Note Indenture and the
Subordinated Note Indenture.
"Non-Excluded Taxes" has the meaning set forth in Section
3.15.
"Note" means any Revolving Note or any Foreign Currency Note,
as the context may require.
"Notice of Borrowing" means a request by the Borrower for a
Loan in the form of Exhibit 1.1A.
"Notice of Continuation/Conversion" means a request by the
Borrower to continue an existing Eurodollar Loan to a new Interest
Period or to convert a Eurodollar Loan to a Base Rate Loan or a Base
Rate Loan to a Eurodollar Loan, in the form of Exhibit 2.4.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"Parent" means Anchor Holdings, Inc., a Delaware corporation,
together with any permitted successors and assigns.
"Participation Interest" means a purchase by a Lender of a
participation in Letters
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of Credit or LOC Obligations as provided in Section 2.2 or in any Loans
as provided in Section 3.10.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereto.
"Permitted Acquisition" means (i) the acquisition by the
Borrower of all of the Capital Stock of Gemini pursuant to the Purchase
Agreement or (ii) any other Acquisition by the Borrower or any
Subsidiary of the Borrower for consideration no greater than the fair
market value of the Capital Stock or Property acquired, provided that
(A) the Capital Stock or Property acquired in such Acquisition
constitute Eligible Assets, (B) the Agent shall have received all items
in respect of the Capital Stock or Property acquired in such
Acquisition (and/or the seller thereof) required to be delivered by the
terms of Section 7.9 and/or Section 7.13, (C) in the case of an
Acquisition of the Capital Stock of another Person, the board of
directors (or other comparable governing body) of such other Person
shall have duly approved such Acquisition, (D) the Borrower shall have
delivered to the Agent evidence satisfactory to the Agent that (1) upon
giving effect to such Acquisition on a Pro Forma Basis, the Credit
Parties shall be in compliance with all of the covenants set forth in
Sections 7.12 and (2) the Person or Property acquired in such
Acquisition shall have positive net income (excluding the effect of
extraordinary or other non-recurring gains or losses outside of the
ordinary course of business) before interest expense, income taxes,
depreciation and amortization (as determined in accordance with GAAP)
for the 12 calendar month period immediately preceding such
Acquisition, (E) after giving effect to such Acquisition, there shall
be at least $25,000,000 of availability existing under the Revolving
Committed Amount and the Borrowing Base, (F) the aggregate
consideration (including cash and non-cash consideration and any
assumption of liabilities (other than current working capital
liabilities not constituting Indebtedness), but excluding consideration
consisting of any Capital Stock of the Borrower) for such Acquisition
shall not exceed $50,000,000 and (G) the aggregate consideration
(including cash and non-cash consideration and any assumption of
liabilities (other than current working capital liabilities not
constituting Indebtedness), but excluding consideration consisting of
any Capital Stock of the Borrower) for all such Acquisitions occurring
after the Closing Date shall not exceed $75,000,000.
"Permitted Investments" means Investments which are (a) cash
or Cash Equivalents, (b) accounts receivable created, acquired or made
in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms or otherwise in the prudent
judgment of a Consolidated Party, (c) inventory, raw materials and
general intangibles (to the extent such general intangible is not a
Capital Expenditure) acquired in the ordinary course of business, (d)
Investments existing as of the Closing Date and set forth in Schedule
1.1D, (e) additional Investments in any Credit Party other than the
Parent, (f) subject to the terms of Section 7.13 and Section 8.9, (i)
additional Investments in Anchor Advanced Products Foreign Sales Corp.,
(ii) additional Investments in any Subsidiary of the Borrower to
finance the working capital and general corporate needs of such Person
and (iii) additional Investments in any Subsidiary of the
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Borrower to finance a Permitted Acquisition by such Person, provided
that (A) the aggregate amount of all Investments in Anchor Advanced
Products Foreign Sales Corp. pursuant to subclause (ii) shall not
exceed $2,000,000 at any time outstanding (excluding any such
Investments referred to in subsection (d) above) and (B) the aggregate
amount of all Investments pursuant to this subclauses (i) and (ii)
shall not exceed $10,000,000 at any time outstanding (excluding any
such Investments referred to in subsection (d) above), (g) Guaranty
Obligations and Hedging Obligations permitted by Section 8.1, (h) loans
to directors, officers, employees, agents, customers or suppliers in
the ordinary course of business for reasonable business expenses, not
to exceed in the aggregate $250,000 at any one time (excluding any such
Investments referred to in subsection (d) above), (i) Investments in
dealers and customers received in connection with any bankruptcy or
reorganization of such dealer or customer and (j) Permitted
Acquisitions.
"Permitted Liens" means:
(i) Liens in favor of the Agent on behalf of the
Lenders;
(ii) Liens (other than Liens created or imposed under
ERISA) for taxes, assessments or governmental charges or
levies not yet due or Liens for taxes being contested in good
faith by appropriate proceedings for which adequate reserves
determined in accordance with GAAP have been established (and
as to which the property subject to any such Lien is not yet
subject to foreclosure, sale or loss on account thereof);
(iii) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and suppliers
and other Liens imposed by law or pursuant to customary
reservations or retentions of title arising in the ordinary
course of business, provided that such Liens (A) secure only
amounts not yet due and payable or, if due and payable, are
unfiled and no other action has been taken to enforce the
same, (B) have been in existence for less than 90 days or (C)
are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP
have been established (and as to which the property subject to
any such Lien is not yet subject to foreclosure, sale or loss
on account thereof);
(iv) Liens (other than Liens created or imposed under
ERISA) incurred or deposits made by any Consolidated Party in
the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory
obligations, bids, leases, government contracts, performance
and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(v) Liens in connection with attachments or judgments
(including judgment or appeal bonds) provided that the
judgments secured shall, within 60
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days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall have been
discharged within 60 days after the expiration of any such
stay;
(vi) Liens on property securing purchase money
Indebtedness (including Capital Leases) to the extent
permitted under Section 8.1(c), provided that any such Lien
attaches to such property concurrently with or within 45 days
after the acquisition thereof;
(vii) Liens deemed to exist in connection with
Investments in repurchase agreements permitted under Section
8.6;
(ix) normal and customary rights of setoff upon
deposits of cash in favor of banks or other depository
institutions;
(x) customary reservations or retentions of title in
respect of inventory of any Foreign Subsidiary of the Parent
under agreements with suppliers entered into in the ordinary
course of business;
(xi) Liens on property of any Foreign Subsidiary of
the Parent securing Indebtedness to the extent permitted under
Section 8.1(f);
(xii) Liens existing as of the Closing Date and set
forth on Schedule 1.1E-1; provided that no such Lien shall at
any time be extended to or cover any Property other than the
Property subject thereto on the Closing Date (or any Property
acquired in replacement or substitution of such original
Property); and
(xiii) on and after such time as the Acquisition of
Gemini by the Borrower shall have been consummated, Liens
existing as of the Closing Date and set forth on Schedule
1.1E-2; provided that no such Lien shall at any time be
extended to or cover any Property other than the Property
subject thereto on the Closing Date (or any Property acquired
in replacement or substitution of such original Property).
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated), or any Governmental
Authority.
"Pesos" means the lawful currency of Mexico.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which any
Consolidated Party is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" within
the meaning of Section 3(5) of ERISA.
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"Pounds Sterling" means the lawful currency of the United
Kingdom.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by the Agent as its prime rate in effect at
its principal office in Charlotte, North Carolina, with each change in
the Prime Rate being effective on the date such change is publicly
announced as effective (it being understood and agreed that the Prime
Rate is a reference rate used by the Agent in determining interest
rates on certain loans and is not intended to be the lowest rate of
interest charged on any extension of credit by the Agent to any
borrower).
"Principals" means Mr. George T. Votis and Mr. Anastosios
Votis.
"Pro Forma Basis" means, for purposes of calculating (pursuant
to clause (ii)(D)(1) of the definition of "Permitted Acquisition" set
forth in this Section 1.1 and utilizing the principles set forth in the
second paragraph of Section 1.3) compliance with each of the financial
covenants set forth in Section 7.12 in respect of any proposed
Acquisition, that (i) such Acquisition shall be deemed to have occurred
as of the first day of the four fiscal-quarter period ending as of the
most recent fiscal quarter end preceding the date of such Investment
with respect to which the Agent has received the financial statements
and officer's certificate required to delivered pursuant to Section
7.1(a) or (b), as applicable, and Section 7.1(c), (ii) any Indebtedness
incurred by any Consolidated Party in order to consummate such
Acquisition (A) shall be deemed to have been incurred on the first day
of the applicable period four fiscal-quarter period and (B) if such
Indebtedness has a floating or formula rate, then the implied rate of
interest for such Indebtedness for the applicable period for purposes
of this definition shall be determined by utilizing the rate which is
or would be in effect with respect to such Indebtedness as at the
relevant date of determination and (iii) income statement items
(whether positive or negative) attributable to the Person or Property
acquired in such Acquisition shall be included to the extent relating
to the relevant period.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Purchase Agreement" means the Stock Purchase Agreement by and
among Gemini, Robert Hayberg, Carl Hunt, Monty Cochran, Phillips
Patton, Robert Dehner, Crugar Tuttle, Gregory Cronkhite, Wayne Moore
and Anchor Advanced Products, Inc., dated as of June 4, 1998, as
amended by that certain Amendment No. 1 to Purchase Agreement dated as
of June 29, 1998.
"Real Properties" means each of facilities and properties
owned, leased or operated by any Credit Party.
"Register" shall have the meaning given such term in Section
11.3(d).
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"Regulation T, U, or X" means Regulation T, U or X,
respectively, of the Board of Governors of the Federal Reserve System
as from time to time in effect and any successor to all or a portion
thereof.
"Related Parties", 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).
"Reportable Event" means a "reportable event" as defined in
Section 4043(c) of ERISA, other than those events as to which the
notice requirements or penalties for failure to provide notice have
been waived by regulation or administrative action of the PBGC.
"Required Lenders" means, at any time, Lenders (other than
Defaulting Lenders) holding in the aggregate at least 51% of (i) the
Commitments) or (ii) if the Commitments have been terminated, the
outstanding Loans and Participation Interests (including the
Participation Interests of the Issuing Lender in any Letters of Credit
and LOC Obligations).
"Requirement of Law" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation or final, non-appealable determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or
binding upon such Person or to which any of its material property is
subject.
"Restricted Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of Capital Stock of any Consolidated Party, now or hereafter
outstanding, (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect,
of any shares of any class of Capital Stock of any Consolidated Party,
now or hereafter outstanding or (iii) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other
rights to acquire shares of any class of Capital Stock of any
Consolidated Party, now or hereafter outstanding.
"Revolving Committed Amount" means FIFTY MILLION DOLLARS
($50,000,000) or such lesser amount as the Revolving Committed Amount
may be reduced pursuant to Section 3.3(b) or Section 3.4.
"Revolving Loans" shall have the meaning assigned to such term
in Section 2.1(a).
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"Revolving Note" means a promissory note the Borrower in favor
of a Lender delivered pursuant to Section 2.1(d) and evidencing the
Revolving Loans of such Lender, as such promissory note may be amended,
modified, restated or replaced from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to any Consolidated Party of any property,
whether owned by such Consolidated Party as of the Closing Date or
later acquired, which has been or is to be sold or transferred by such
Consolidated Party to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of
such property.
"Scheduled Funded Indebtedness Payments" means, as of the end
of each fiscal quarter of the Consolidated Parties, for the
Consolidated Parties on a consolidated basis, the sum of all scheduled
payments of principal on Funded Indebtedness for the applicable period
ending on such date (including the principal component of payments due
on Capital Leases during the applicable period ending on such date); it
being understood that Scheduled Funded Indebtedness Payments shall not
include voluntary prepayments or the mandatory prepayments required
pursuant to Section 3.3.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Security Agreement" means the security agreement dated as of
the Closing Date in the form of Exhibit 1.1B to be executed in favor of
the Agent by the Borrower and each of the Subisidiary Guarantors, as
amended, modified, restated or supplemented from time to time.
"Senior Note" means any one of the 11-3/4% Senior Notes due
April 1, 2004 in an aggregate original principal amount of
$100,000,000, issued by the Borrower, as such Senior Notes may be
restated, extended, renewed, amended or otherwise modified and in
effect from time to time.
"Senior Note Indenture" means that certain Indenture
Agreement, dated as of April 2, 1997, by and among the Borrower and
Fleet National Bank, as trustee, as the same may be restated, extended,
renewed, amended or otherwise modified and in effect from time to time.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple
Employer Plan.
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"Solvent" means, with respect to any Person as of a particular
date, that on such date (a) such Person is able to pay its debts and
other liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (b) such Person does not
intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and
liabilities mature in their ordinary course, (c) such Person is not
engaged in a business or a transaction, and is not about to engage in a
business or a transaction, for which such Person's assets would
constitute unreasonably small capital after giving due consideration to
the prevailing practice in the industry in which such Person is engaged
or is to engage, (d) the fair value of the assets of such Person is
greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person and (e) the present
fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured. In computing
the amount of contingent liabilities at any time, it is intended that
such liabilities will be computed at the amount which, in light of all
the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
"Somomeca" means a collective reference to Somomeca Industries
SARL, a French limited liability company, and its Subsidiaries.
"Standby Letter of Credit Fee" shall have the meaning assigned
to such term in Section 3.5(b)(i).
"Subordinated Note" means any one of the Series A and Series B
10-1/2% Senior Subordinated Notes issued by the Borrower pursuant to
the Subordinated Note Indenture, as such Subordinated Notes may be
amended, modified, restated or supplemented and in effect from time to
time.
"Subordinated Note Indenture" means the Indenture, dated as of
the Closing Date, by and between the Borrower and and State Street Bank
and Trust Company, as trustee, as such Subordinated Note Indenture may
be amended, modified, restated or supplemented and in effect from time
to time.
"Subsidiary" means, as to any Person, (a) any corporation more
than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time, any class
or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by
such Person directly or indirectly through Subsidiaries, and (b) any
partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries has more than a 50%
equity interest at any time.
"Subsidiary Guarantor" means each Person which may hereafter
execute a Joinder Agreement, together with their successors and
permitted assigns, and "Subsidiary
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Guarantor" means any one of them.
"Synthetic Lease" means any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet
financing product where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an operating lease
in accordance with GAAP. The term "Synthetic Lease" shall not include
any lease classified as an operating lease in accordance with GAAP
which is not considered borrowed money indebtedness for tax purposes.
"Trade Letter of Credit Fee" shall have the meaning assigned
to such term in Section 3.5(b)(ii).
"Transaction" means a collective reference to (i) the merger
of Moll with and into Anchor with the surviving corporation being the
Borrower, (ii) the distribution by the Borrower of a 69% limited
partnership interest in Reliance Products Limited Partnership, a
Delaware limited partnership, to certain of the limited partners of
Moll, (iii) the entering into of the Subordinated Note Indenture and
the sale of the Subordinated Notes by the Borrower, (iv) the entering
into of this Credit Agreement and the other Credit Documents by the
Borrower and the Parent and (v) the repayment, with proceeds from the
sale of the Subordinated Notes, of (A) all of the indebtedness under
the Credit Suisse First Boston Facility existing as of the Closing
Date, (B) the $6.6 million loan used for the acquisition of Anchor by
Moll and (C) at least $13.3 million of term indebtedness of the French
Subsidiaries of Moll.
"Unused Revolving Committed Amount" means, for any period, the
amount by which (a) the then applicable aggregate Revolving Committed
Amount exceeds (b) the daily average sum for such period of the Dollar
Amount (as determined as of the most recent Determination Date) of the
aggregate outstanding principal amount of all Loans and LOC
Obligations.
1.2 COMPUTATION OF TIME PERIODS AND OTHER DEFINITIONAL PROVISIONS.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding." References in this Credit Agreement to "Articles", "Sections",
"Schedules" or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits
of or to this Credit Agreement unless otherwise specifically provided.
1.3 ACCOUNTING TERMS.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All financial statements delivered to the Lenders hereunder shall be
accompanied by a statement from the Borrower that GAAP has not changed since the
most
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recent financial statements delivered by the Credit Parties to the Lenders
or if GAAP has changed describing such changes in detail and explaining how such
changes affect the financial statements. All calculations made for the purposes
of determining compliance with this Credit Agreement shall (except as otherwise
expressly provided herein) be made by application of GAAP applied on a basis
consistent with the most recent annual or quarterly financial statements
delivered pursuant to Section 7.1 (or, prior to the delivery of the first
financial statements pursuant to Section 7.1, consistent with the December 31,
1997 financial statements of the Consolidated Parties); provided, however, if
(a) the Credit Parties shall object to determining such compliance on such basis
at the time of delivery of such financial statements due to any change in GAAP
or the rules promulgated with respect thereto or (b) the Agent or the Required
Lenders shall so object in writing within 60 days after delivery of such
financial statements (or after the Lenders have been informed of the change in
GAAP affecting such financial statements, if later), then such calculations
shall be made on a basis consistent with the most recent financial statements
delivered by the Credit Parties to the Lenders as to which no such objection
shall have been made.
Notwithstanding the above, the parties hereto acknowledge and agree that, for
purposes of all calculations made under the financial covenants set forth in
Section 7.12 (including without limitation for purposes of the definitions of
"Applicable Percentage" and "Pro Forma Basis" set forth in Section 1.1), income
statement items (whether positive or negative) attributable to any Person or
Property acquired in the Transaction (i.e., Moll, Gemini and their respective
Subsidiaries) or in any Acquisition contemplated by clause (ii)(D)(1) of the
definition of "Permitted Acquisition" set forth in Section 1.1 shall, to the
extent not otherwise included in such income statements items for the
Consolidated Parties in accordance with GAAP or in accordance with any defined
terms set forth in Section 1.1, be included to the extent relating to any period
applicable in such calculations.
SECTION 2
CREDIT FACILITIES
2.1 REVOLVING LOANS.
(a) Revolving Loan Commitment. Subject to the terms and
conditions set forth herein, each Lender severally agrees to make
revolving loans (each a "Revolving Loan" and collectively the
"Revolving Loans") to the Borrower, in Dollars, at any time and from
time to time, during the period from and including the Closing Date to
but not including the Maturity Date (or such earlier date if the
Revolving Committed Amount has been terminated as provided herein);
provided, however, that (i) the Dollar Amount (as determined as of the
most recent Determination Date) of the aggregate outstanding principal
amounts of Revolving Loans, LOC Obligations and Foreign Currency Loans
shall not exceed the lesser of (A) the Revolving Committed Amount and
(B) the Borrowing Base and (ii) with respect to each individual Lender,
such Lender's pro rata share of the Dollar Amount (as determined as of
the most recent Determination Date) of
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the aggregate outstanding principal amounts of Revolving Loans, LOC
Obligations and Foreign Currency Loans shall not exceed such Lender's
Commitment Percentage of the Revolving Committed Amount. Subject to the
terms of this Credit Agreement (including Section 3.3), the Borrower
may borrow, repay and reborrow Revolving Loans.
(b) Method of Borrowing for Revolving Loans. By no later than
11:00 a.m. (Charlotte, North Carolina time) (i) on the date of the
requested borrowing of Revolving Loans that will be Base Rate Loans or
(ii) three Business Days prior to the date of the requested borrowing
of Revolving Loans that will be Eurodollar Loans, the Borrower shall
submit a written Notice of Borrowing to the Agent setting forth (A) the
amount requested, (B) whether such Revolving Loans shall accrue
interest at the Adjusted Base Rate or the Adjusted Eurodollar Rate, (C)
with respect to Revolving Loans that will be Eurodollar Loans, the
Interest Period applicable thereto and (D) certification that the
Borrower has complied in all respects with Section 5.2. If the Borrower
shall fail to specify in any such Notice of Borrowing for a Revolving
Loan that will be a Eurodollar Loan an applicable Interest Period, then
such notice shall be deemed to be a request for an Interest Period of
one month.
(c) Funding of Revolving Loans. Upon receipt of a Notice of
Borrowing, the Agent shall promptly inform the Lenders as to the terms
thereof. Each such Lender shall make its Commitment Percentage of the
requested Revolving Loans available to the Agent by 1:00 p.m.
(Charlotte, North Carolina time), on the date specified in the
applicable Notice of Borrowing, by deposit with the Agent (or in such
other manner as the Agent may specify in writing) at the same place and
account specified in Section 3.2(b) for payments by the Borrower in the
Dollars and in funds immediately available to the Agent. The amount of
the requested Revolving Loans will be made available to the Borrower by
the Agent by 3:00 p.m. (Charlotte, North Carolina time) by crediting
the account of the Borrower on the books of such office of the Agent.
(d) Revolving Notes. The Revolving Loans made by each Lender
shall be evidenced by a duly executed promissory note of the Borrower
to each Lender in the face amount of its Commitment Percentage of the
Revolving Committed Amount in substantially the form of Exhibit 2.1(d).
2.2 LETTER OF CREDIT SUBFACILITY.
(a) Issuance. Subject to the terms and conditions hereof and
of the LOC Documents, if any, and any other terms and conditions which
the Issuing Lender may reasonably require, the Issuing Lender shall
from time to time upon request issue, in Dollars, and the Lenders shall
participate in, letters of credit (the "Letters of Credit") for the
account of the Borrower or any of its Subsidiaries, from the Closing
Date until the date five (5) days prior to the Maturity Date, in a form
reasonably acceptable to the Issuing Lender; provided, however, that
(i) the aggregate amount of LOC Obligations shall not at any time
exceed TEN MILLION DOLLARS ($10,000,000), (ii) the Dollar Amount (as
determined as of the most recent Determination Date) of the aggregate
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outstanding principal amounts of Revolving Loans, LOC Obligations and
Foreign Currency Loans shall not exceed the lesser of (A) the Revolving
Committed Amount and (B) the Borrowing Base and (iii) with respect to
each individual Lender, such Lender's pro rata share of the Dollar
Amount (as determined as of the most recent Determination Date) of the
aggregate outstanding principal amounts of Revolving Loans, LOC
Obligations and Foreign Currency Loans shall not exceed such Lender's
Commitment Percentage of the Revolving Committed Amount. The issuance
and expiry date of each Letter of Credit shall be a Business Day. No
Letter of Credit shall have an original expiry date more than one year
from the date of issuance, or as extended, shall have an expiry date
extending beyond the date five (5) days prior to the Maturity Date.
Each Letter of Credit shall be either (x) a standby letter of credit
issued to support the obligations (including pension or insurance
obligations), contingent or otherwise, of the Borrower or any of its
Subsidiaries, or (y) a commercial letter of credit in respect of the
purchase of goods or services by the Borrower or any of its
Subsidiaries in the ordinary course of business. Each Letter of Credit
shall comply with the related LOC Documents.
(b) Notice and Reports. The request for the issuance of a
Letter of Credit shall be submitted to the Issuing Lender at least
three Business Days prior to the requested date of issuance. The
Issuing Lender will, at least quarterly and more frequently upon
request, provide to the Agent for dissemination to the Lenders a
detailed report specifying the Letters of Credit which are then issued
and outstanding and any activity with respect thereto which may have
occurred since the date of the prior report, and including therein,
among other things, the account party, the beneficiary, the face
amount, and the expiry date as well as any payments or expirations
which may have occurred. The Issuing Lender will further provide to the
Agent, promptly upon request, copies of the Letters of Credit.
(c) Participations. Each Lender, upon issuance of a Letter of
Credit (or, in the case of each Existing Letter of Credit, on the
Closing Date), shall be deemed to have purchased without recourse a
risk participation from the Issuing Lender in such Letter of Credit and
the obligations arising thereunder and any collateral relating thereto,
in each case in an amount equal to its Commitment Percentage of the
obligations under such Letter of Credit, and shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as
surety, and be obligated to pay to the Issuing Lender therefor and
discharge when due, its Commitment Percentage of the obligations
arising under such Letter of Credit. Without limiting the scope and
nature of each Lender's participation in any Letter of Credit, to the
extent that the Issuing Lender has not been reimbursed as required
hereunder or under any such Letter of Credit, each such Lender shall
pay to the Issuing Lender its Commitment Percentage of such
unreimbursed drawing in same day funds on the day of notification by
the Issuing Lender of an unreimbursed drawing pursuant to the
provisions of subsection (d) hereof. The obligation of each Lender to
so reimburse the Issuing Lender shall be absolute and unconditional and
shall not be affected by the occurrence of a Default, an Event of
Default or any other occurrence or event. Any such reimbursement shall
not relieve or otherwise impair the obligation of the Borrower or any
other Credit Party to reimburse the Issuing Lender under any Letter of
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Credit, together with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Letter of Credit, the Issuing Lender will promptly notify the Borrower.
Unless the Borrower shall immediately notify the Issuing Lender of its
intent to otherwise reimburse the Issuing Lender, the Borrower shall be
deemed to have requested a Revolving Loan at the Adjusted Base Rate in
the amount of the drawing as provided in subsection (e) hereof, the
proceeds of which will be used to satisfy the reimbursement
obligations. The Borrower shall reimburse the Issuing Lender on the day
of drawing under any Letter of Credit either with the proceeds of a
Revolving Loan obtained hereunder or otherwise in same day funds as
provided herein or in the LOC Documents. If the Borrower shall fail to
reimburse the Issuing Lender as provided hereinabove, the unreimbursed
amount of such drawing shall bear interest at a per annum rate equal to
the Base Rate plus the Applicable Percentage for the Base Rate Loans
plus two percent (2%). The Borrower's reimbursement obligations
hereunder shall be absolute and unconditional under all circumstances
irrespective of (but without waiver of) any rights of set-off,
counterclaim or defense to payment the applicable account party or the
Borrower may claim or have against the Issuing Lender, the Agent, the
Lenders, the beneficiary of the Letter of Credit drawn upon or any
other Person, including without limitation, any defense based on any
failure of the applicable account party, the Borrower or any other
Credit Party to receive consideration or the legality, validity,
regularity or unenforceability of the Letter of Credit. The Issuing
Lender will promptly notify the Lenders of the amount of any
unreimbursed drawing and each Lender shall promptly pay to the Agent
for the account of the Issuing Lender, in Dollars and in immediately
available funds, the amount of such Lender's Commitment Percentage of
such unreimbursed drawing. Such payment shall be made on the day such
notice is received by such Lender from the Issuing Lender if such
notice is received at or before 2:00 p.m., otherwise such payment shall
be made at or before 12:00 Noon on the Business Day next succeeding the
day such notice is received. If such Lender does not pay such amount to
the Issuing Lender in full upon such request, such Lender shall, on
demand, pay to the Agent for the account of the Issuing Lender interest
on the unpaid amount during the period from the date the Lender
received the notice regarding the unreimbursed drawing until such
Lender pays such amount to the Issuing Lender in full at a rate per
annum equal to, if paid within two Business Days of the date of
drawing, the Federal Funds Rate and thereafter at a rate equal to the
Base Rate. Each Lender's obligation to make such payment to the Issuing
Lender, and the right of the Issuing Lender to receive the same, shall
be absolute and unconditional, shall not be affected by any
circumstance whatsoever and without regard to the termination of this
Credit Agreement or the Commitments hereunder, the existence of a
Default or Event of Default or the acceleration of the obligations
hereunder and shall be made without any offset, abatement, withholding
or reduction whatsoever. Simultaneously with the making of each such
payment by a Lender to the Issuing Lender, such Lender shall,
automatically and without any further action on the part of the Issuing
Lender or such Lender, acquire a participation in an amount equal to
such payment (excluding the portion of such payment constituting
interest owing to the Issuing Lender) in the related unreimbursed
drawing portion of the LOC Obligation and in the interest thereon and
in the related LOC
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Documents. Notwithstanding anything to the contrary contained in this
subsection (D), the Borrower shall have no obligation to reimburse the
Issuing Lender in respect of any wrongful payment made by the Issuing
Lender under a Letter of Credit solely as a result of acts or omissions
constituting gross negligence or willful misconduct by the Issuing
Lender, as determined by a court of competent jurisdiction.
(e) Repayment with Revolving Loans. On any day on which the
Borrower shall have requested, or been deemed to have requested, a
Revolving Loan borrowing to reimburse a drawing under a Letter of
Credit, the Agent shall give notice to the Lenders that a Revolving
Loan has been requested or deemed requested in connection with a
drawing under a Letter of Credit, in which case a Revolving Loan
borrowing comprised solely of Base Rate Loans (each such borrowing, a
"Mandatory Borrowing") shall be immediately made from all Lenders
(without giving effect to any termination of the Commitments pursuant
to Section 9.2) pro rata based on each Lender's respective Commitment
Percentage and the proceeds thereof shall be paid directly to the
Issuing Lender for application to the respective LOC Obligations. Each
such Lender hereby irrevocably agrees to make such Revolving Loans
immediately upon any such request or deemed request on account of each
such Mandatory Borrowing in the amount and in the manner specified in
the preceding sentence and on the same such date notwithstanding (i)
the amount of Mandatory Borrowing may not comply with the minimum
amount for borrowings of Revolving Loans otherwise required hereunder,
(ii) whether any conditions specified in Section 5 are then satisfied,
(iii) whether a Default or Event of Default then exists, (iv) failure
of any such request or deemed request for Revolving Loans to be made by
the time otherwise required hereunder, (v) the date of such Mandatory
Borrowing, or (vi) any reduction in the Revolving Committed Amount or
any termination of the Commitments. In the event that any Mandatory
Borrowing cannot for any reason be made on the date otherwise required
above (including, without limitation, as a result of the commencement
of a proceeding under the Bankruptcy Code with respect to the Borrower
or any other Credit Party), then each such Lender hereby agrees that it
shall forthwith fund (as of the date the Mandatory Borrowing would
otherwise have occurred, but adjusted for any payments received from
the Borrower on or after such date and prior to such purchase) its
Participation Interest in the outstanding LOC Obligations; provided
further, that in the event any Lender shall fail to fund its
Participation Interest on the day the Mandatory Borrowing would
otherwise have occurred, then the amount of such Lender's unfunded
Participation Interest therein shall bear interest payable to the
Issuing Lender upon demand, at the rate equal to, if paid within two
Business Days of such date, the Federal Funds Rate, and thereafter at a
rate equal to the Base Rate.
(f) Designation of Subsidiaries as Account Parties.
Notwithstanding anything to the contrary set forth in this Credit
Agreement, a Letter of Credit issued hereunder may contain a statement
to the effect that such Letter of Credit is issued for the account of a
Subsidiary of the Borrower; provided that notwithstanding such
statement, the Borrower shall be the actual account party for all
purposes of this Credit Agreement for such Letter of Credit and such
statement shall not affect the Borrower's reimbursement obligations
hereunder with respect to such Letter of Credit.
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(g) Modification and Extension. The issuance of any
supplement, modification, amendment, renewal, or extensions to any
Letter of Credit shall, for purposes hereof, be treated in all respects
the same as the issuance of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may have
the Letters of Credit be subject to The Uniform Customs and Practice
for Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (Publication No. 500 or the most
recent publication, the "UCP"), in which case the UCP may be
incorporated therein and deemed in all respects to be a part thereof.
(i) Responsibility of Issuing Lender. It is expressly
understood and agreed that the obligations of the Issuing Lender
hereunder to the Lenders are only those expressly set forth in this
Credit Agreement and that the Issuing Lender shall be entitled to
assume that the conditions precedent set forth in Section 5 have been
satisfied unless it shall have acquired actual knowledge that any such
condition precedent has not been satisfied; provided, however, that
nothing set forth in this Section 2.2 shall be deemed to prejudice the
right of any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this Section
2.2 in the event that it is determined by a court of competent
jurisdiction that the payment with respect to a Letter of Credit
constituted gross negligence or willful misconduct on the part of the
Issuing Lender.
(j) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document, this Credit
Agreement shall govern.
(k) Indemnification of Issuing Lender.
(i) In addition to its other obligations under this
Credit Agreement, the Borrower hereby agrees to protect,
indemnify, pay and save the Issuing Lender harmless from and
against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable
attorneys' fees) that the Issuing Lender may incur or be
subject to as a consequence, direct or indirect, of (A) the
issuance of any Letter of Credit or (B) the failure of the
Issuing Lender to honor a drawing under a Letter of Credit as
a result of any act or omission, whether rightful or wrongful,
of any present or future Governmental Authority (all such acts
or omissions, herein called "Government Acts").
(ii) As between the Borrower and the Issuing Lender,
the Borrower shall assume all risks of the acts, omissions or
misuse of any Letter of Credit by the beneficiary thereof. The
Issuing Lender shall not be responsible for: (A) the form,
validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the
application for and issuance of any Letter of Credit, even if
it should in fact prove to be in any or all respects invalid,
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insufficient, inaccurate, fraudulent or forged; (B) the
validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (C) errors, omissions,
interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (D) any loss or delay in the
transmission or otherwise of any document required in order to
make a drawing under a Letter of Credit or of the proceeds
thereof; and (E) any consequences arising from causes beyond
the control of the Issuing Lender, including, without
limitation, any Government Acts. None of the above shall
affect, impair, or prevent the vesting of the Issuing Lender's
rights or powers hereunder.
(iii) In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth,
any action taken or omitted by the Issuing Lender, under or in
connection with any Letter of Credit or the related
certificates, if taken or omitted in good faith, shall not put
the Issuing Lender under any resulting liability to the
Borrower or any other Credit Party. It is the intention of the
parties that this Credit Agreement shall be construed and
applied to protect and indemnify the Issuing Lender against
any and all risks involved in the issuance of the Letters of
Credit, all of which risks are hereby assumed by the Borrower,
including, without limitation, any and all risks of the acts
or omissions, whether rightful or wrongful, of any present or
future Government Acts. The Issuing Lender shall not, in any
way, be liable for any failure by the Issuing Lender or anyone
else to pay any drawing under any Letter of Credit as a result
of any Government Acts or any other cause beyond the control
of the Issuing Lender.
(iv) Nothing in this subsection (k) is intended to
limit the reimbursement obligation of the Borrower contained
in this Section 2.2. The obligations of the Borrower under
this subsection (k) shall survive the termination of this
Credit Agreement. No act or omission of any current or prior
beneficiary of a Letter of Credit shall in any way affect or
impair the rights of the Issuing Lender to enforce any right,
power or benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary
contained in this subsection (k), the Borrower shall have no
obligation to indemnify the Issuing Lender in respect of any
liability incurred by the Issuing Lender arising solely out of
the gross negligence or willful misconduct of the Issuing
Lender, as determined by a court of competent jurisdiction.
2.3 FOREIGN CURRENCY LOAN SUBFACILITY.
(a) Foreign Currency Commitment. Subject to the terms and
conditions hereof, each Lender severally agrees to make available to
the Borrower such Lender's
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Commitment Percentage of revolving credit loans in the Available
Foreign Currency requested by the Borrower ("Foreign Currency Loans")
from time to time from the date five (5) Business Days subsequent to
the Closing Date until the date five (5) Business Days prior to the
Maturity Date, or such earlier date as the Revolving Commitments shall
have been terminated as provided in this Credit Agreement for the
purposes hereinafter set forth; provided, however, that (i) the Dollar
Amount (as determined as of the most recent Determination Date) of the
aggregate amount of Foreign Currency Loans outstanding at any time
shall not exceed TWENTY MILLION DOLLARS ($20,000,000) (the "Foreign
Currency Committed Amount"); provided, further, (ii) the Dollar Amount
(as determined as of the most recent Determination Date) of the
aggregate outstanding principal amounts of Revolving Loans, LOC
Obligations and Foreign Currency Loans shall not exceed the lesser of
(A) the Revolving Committed Amount and (B) the Borrowing Base and (iii)
with respect to each individual Lender, such Lender's pro rata share of
the Dollar Amount (as determined as of the most recent Determination
Date) of the aggregate outstanding principal amounts of Revolving
Loans, LOC Obligations and Foreign Currency Loans shall not exceed such
Lender's Commitment Percentage of the Revolving Committed Amount.
(b) Method of Borrowing for Foreign Currency Loan Borrowings.
By no later than 11:00 a.m. (Charlotte, North Carolina time) three
Business Days prior to the date of the requested borrowing of a Foreign
Currency Loan, the Borrower shall submit a written Notice of Borrowing
to the Agent at each office of the Agent specified in Section 3.2(b),
setting forth (A) the applicable Available Foreign Currency of the
requested borrowing, (B) the amount requested, (C) the date of the
requested borrowing (which shall be a Business Day), (D) the Interest
Period applicable to the requested borrowing and (E) certification that
the Borrower has complied in all respects with Section 5.2. Each such
request for borrowing shall be irrevocable. If the Borrower shall fail
to specify in any such Notice of Borrowing an applicable Interest
Period, then such notice shall be deemed to be a request for an
Interest Period of one month.
(c) Funding of Foreign Currency Loans. Upon receipt of a
Notice of Borrowing, the Agent shall promptly inform the Lenders as to
the terms thereof. Each such Lender shall make arrangements to cause
its Commitment Percentage of the requested Foreign Currency Loans
available to the Agent by 1:00 p.m., local time in the place where such
deposit is required to be made, on the date specified in the applicable
Notice of Borrowing, by deposit with the Agent (or in such other manner
as the Agent may specify in writing) at the same place and account
specified in Section 3.2(b) for payments by the Borrower in the
applicable Available Foreign Currency and in funds immediately
available to the Agent. The amount of the requested Foreign Currency
Loans will be made available to the Borrower by the Agent by 3:00 p.m.,
local time in the place where such Foreign Currency Loans are to be
made by crediting the account of the Borrower on the books of such
office of the Agent; provided, however, notwithstanding the foregoing,
the proceeds of any Foreign Currency Loan may be made available by the
Agent by crediting the account of a Foreign Subsidiary of the Borrower
on the books of the applicable office of the Agent; provided further,
however that making the proceeds of
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such Foreign Currency Loan available in such manner shall not affect
the Borrower's obligations hereunder with respect to such Foreign
Currency Loan.
(d) Repayment. The principal amount of all Foreign Currency
Loans shall be due and payable in full in the applicable Available
Foreign Currency on the Maturity Date.
(e) Foreign Currency Notes. The Foreign Currency Loans made by
each Lender shall be evidenced by a duly executed promissory note of
the Borrower to each Lender in substantially the form of Schedule
2.3(d).
2.4 CONTINUATIONS AND CONVERSIONS.
Subject to the terms of Section 5.2, the Borrower shall have the
option, on any Business Day, to continue existing Eurodollar Loans for a
subsequent Interest Period, to convert Base Rate Loans into Eurodollar Loans or
to convert Eurodollar Loans into Base Rate Loans; provided, however, that (a)
each such continuation or conversion must be requested by the Borrower pursuant
to a written Notice of Continuation/Conversion, in the form of Exhibit 2.4, in
compliance with the terms set forth below, (b) Loans continued as, or Loans
converted into, Eurodollar Loans shall be subject to the terms of the definition
of "Interest Period" set forth in Section 1.1, (c) except as provided in Section
3.13, Eurodollar Loans may only be continued or converted into Base Rate Loans
on the last day of the Interest Period applicable hereto, (d) Eurodollar Loans
may not be continued nor may Base Rate Loans be converted into Eurodollar Loans
during the existence and continuation of a Default or Event of Default, (e)
Foreign Currency Loans may not be Base Rate Loans and (f) Foreign Currency Loans
in one Available Foreign Currency may not be converted into Foreign Currency
Loans in another Available Foreign Currency. Each continuation or conversion
must be requested by the Borrower no later than 11:00 a.m. (i) on the date for a
requested conversion of a Eurodollar Loan to a Base Rate Loan or (ii) three
Business Days prior to the date for a requested continuation of a Eurodollar
Loan or conversion of a Base Rate Loan to a Eurodollar Loan, in each case
pursuant to a written Notice of Continuation/Conversion submitted to the Agent
which shall set forth (A) whether the Borrower wishes to continue or convert
such Loans and (B) if the request is to continue a Eurodollar Loan or convert a
Base Rate Loan to a Eurodollar Loan, the Interest Period applicable thereto. In
the event the Borrower fails to request extension or conversion of any
Eurodollar Loan in accordance with this Section, or any such conversion or
extension is not permitted or required by this Section, then (i) in the case of
any Eurodollar Loan that is a Revolving Loan, such Loan shall be automatically
converted into a Base Rate Loan at the end of the Interest Period applicable
thereto and (ii) in the case of any Eurodollar Loan which is a Foreign Currency
Loan, such Loan shall be automatically continued as a Eurodollar Loan for an
Interest Period of one month.
2.5 MINIMUM AMOUNTS.
Each request for a borrowing, conversion or continuation shall be
subject to the requirements that (a) each Eurodollar Loan which is a Revolving
Loan shall be in a minimum
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amount of $500,000 (and integral multiples of $50,000 in excess thereof), (b)
each Base Rate Loan shall, subject to the terms of Section 2.2(e), be in a
minimum amount of the lesser of $500,000 (and integral multiples of $250,000 in
excess thereof) or the remaining amount available under the Revolving Committed
Amount, (c) each Eurodollar Loan which is a Foreign Currency Loan shall be in a
minimum amount equal to the lesser of the Foreign Currency Equivalent of
$500,000 (and integral multiples of the Foreign Currency Equivalent $100,000 in
excess thereof) or the remaining amount available under the the Foreign Currency
Committed Amount and (d) no more than 5 Eurodollar Loans shall be outstanding
hereunder at any one time. For the purposes of this Section, all Eurodollar
Loans with the same Interest Periods and in the same currency shall be
considered as one Eurodollar Loan, but Eurodollar Loans with different Interest
Periods and/or in different currencies, even if they begin on the same date,
shall be considered as separate Eurodollar Loans.
2.6 GENERAL.
Neither the Agent nor any Lender shall be responsible for the failure
or delay by any other Lender in its obligation to make Loans or purchase
Participation Interests hereunder; provided, however, that the failure of any
Lender to fulfill its obligations hereunder shall not relieve any other Lender
of its obligations hereunder. Unless the Agent shall have been notified by any
Lender prior to the time to the making of any Loan that such Lender does not
intend to make available to the Agent its portion of the Loans to be made on
such date, the Agent may assume that such Lender has made such amount available
to the Agent on the date of such Loans, and the Agent in reliance upon such
assumption, may (in its sole discretion but without any obligation to do so)
make available to the Borrower a corresponding amount. If such corresponding
amount is not in fact made available to the Agent, the Agent shall be able to
recover such corresponding amount from such Lender. If such Lender does not pay
such corresponding amount forthwith upon the Agent's demand therefor, the Agent
will promptly notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Agent. The Agent shall also be entitled to recover
from the Lender or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Agent to the Borrower to the date such
corresponding amount is recovered by the Agent at a per annum rate equal to (i)
from the Borrower at the applicable rate for such Loan pursuant to the Notice of
Borrowing and (ii) from a Lender at the Federal Funds Rate (or, in the case of a
Foreign Currency Loan, the Interim Foreign Currency Rate).
SECTION 3
GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT
3.1 INTEREST.
(a) Interest Rate. All Base Rate Loans shall accrue interest
at the Adjusted Base Rate and all Eurodollar Loans shall accrue
interest at the Adjusted Eurodollar Rate.
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(b) Default Rate of Interest. Upon the occurrence, and during
the continuance, of an Event of Default, the principal of and, to the
extent permitted by law, interest on the Loans and any other amounts
owing (but not timely paid) hereunder or under the other Credit
Documents (including without limitation fees and expenses) shall bear
interest, payable on demand, at a per annum rate equal to 2% plus the
rate which would otherwise be applicable (or if no rate is applicable,
then the Adjusted Base Rate plus two percent (2%) per annum).
(c) Interest Payments. Interest on Loans shall be due and
payable in arrears on each Interest Payment Date. If an Interest
Payment Date falls on a date which is not a Business Day, such Interest
Payment Date shall be deemed to be the next succeeding Business Day,
except that in the case of Eurodollar Loans where the next succeeding
Business Day falls in the next succeeding calendar month, then on the
next preceding Business Day.
3.2 PLACE AND MANNER OF PAYMENTS.
(a) Currency of Payments. Each payment on account of an amount
due from any Credit Party under this Credit Agreement or under any
other Credit Document shall be made by such Credit Party to the Agent
for the pro rata account of the Lenders entitled to receive such
payment as provided in this Credit Agreement in the currency in which
such amount is denominated. Without limiting the terms of the preceding
sentence, accrued interest on any Foreign Currency Loans shall be
payable in the same Available Foreign Currency as such Foreign Currency
Loans. Upon request, the Agent will give the Credit Parties a statement
showing the computation used in calculating such amount, which
statement shall be conclusive in the absence of manifest error. The
obligation of each Credit Party to make each payment on account of such
amount in the currency in which such amount is denominated shall not be
discharged or satisfied by any tender, or any recovery pursuant to any
judgment, which is expressed in or converted into any other currency,
except to the extent such tender or recovery shall result in the actual
receipt by the Agent of the full amount in the appropriate currency
payable under this Credit Agreement. Each Credit Party agrees that its
obligation to make each payment on account of such amount in the
currency in which such amount is denominated shall be enforceable as an
additional or alternative claim for recovery in such currency of the
amount (if any) by which such actual receipt shall fall short of the
full amount of such currency payable under this Credit Agreement, and
shall not be affected by judgment being obtained for such amount.
(b) Place and Manner of Payments. Except as otherwise
specifically provided in this Credit Agreement, each payment on account
of an amount due from any Credit Party under this Credit Agreement or
under any other Credit Document shall be made to the Agent in
immediately available funds, without offset, deduction, counterclaim or
withholding of any kind, prior to 3:00 p.m., local time in the place
where such payment is required to be made pursuant to this subsection
(b), on the date due at the office of the
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Agent: at (i) 101 N. Tryon Street, Independence Center, 15th Floor,
NC1-001-15-01, Charlotte, North Carolina 28255 (or such other place as
shall be designated in writing by the Agent), with respect to payments
in Dollars; (ii) NationsBank, N.A., London, for the account of
NationsBank, N.A., London (or such other place as shall be designated
in writing by the Agent), with respect to payments in Pounds Sterling;
(iii) Societe Generale, Paris, for the account of NationsBank, N.A.,
London (or such other place as shall be designated in writing by the
Agent), with respect to payments in French Francs; (iv) Deutsche Bank,
Frankfurt, for the account of NationsBank, N.A., London (or such other
place as shall be designated in writing by the Agent), with respect to
payments in Deutsche Marks; (v) such place as shall be designated in
writing by the Agent from time to time, for the account of NationsBank,
N.A., with respect to payments in Pesos; and (vi) such place as shall
be designated in writing by the Agent from time to time, for the
account of NationsBank, N.A., with respect to payments in Escudos.
Payments received after such time shall be deemed to have been received
on the next Business Day. The Borrower shall, at the time it makes any
payment under this Credit Agreement, specify to the Agent, the Loans,
LOC Obligations, fees or other amounts payable by the Borrower
hereunder to which such payment is to be applied (and in the event that
it fails to specify, or if such application would be inconsistent with
the terms hereof, the Agent shall, subject to Section 3.8, distribute
such payment to the Lenders in such manner as the Agent may deem
appropriate). The Agent will distribute on the same day of receipt,
such payments to the Lenders if any such payment is received prior to
3:00 p.m.; otherwise the Agent will distribute such payment to the
Lenders on the next succeeding Business Day. Whenever any payment
hereunder shall be stated to be due on a day which is not a Business
Day, the due date thereof shall be extended to the next succeeding
Business Day (subject to accrual of interest and fees for the period of
such extension), except that in the case of Eurodollar Loans, if the
extension would cause the payment to be made in the next following
calendar month, then such payment shall instead be made on the next
preceding Business Day.
3.3 PREPAYMENTS.
(a) Voluntary Prepayments. The Borrower shall have the right
to prepay Loans in whole or in part from time to time without premium
or penalty; provided, however, that (i) Eurodollar Loans may only be
prepaid on three Business Days' prior written notice to the Agent and
any prepayment of Eurodollar Loans will be subject to Section 3.16 and
(ii) each such partial prepayment of Loans shall be in the minimum
principal amount of $500,000 (or the Foreign Currency Equivalent
thereof) and integral multiples of $50,000 (or the Foreign Currency
Equivalent thereof) in excess thereof. Subject to the foregoing terms,
amounts prepaid under this Section 3.3(a) shall be applied as the
Borrower may elect; provided that if the Borrower fails to specify a
voluntary prepayment then such prepayment shall be applied first to
Base Rate Loans (in the case of Revolving Loans) and then to Eurodollar
Loans in direct order of Interest Period maturities. Subject to the
terms of Section 5.2, amounts prepaid under this Section 3.3(a) may be
reborrowed. All prepayments pursuant to this Section 3.3(a) shall be
subject to Section 3.16.
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(b) Mandatory Prepayments.
(i) Revolving Committed Amount. If at any time the
Dollar Amount (as determined as of the most recent
Determination Date) of the aggregate outstanding principal
amounts of Revolving Loans, LOC Obligations and Foreign
Currency Loans shall exceed the lesser of (A) the Revolving
Committed Amount and (B) the Borrowing Base, the Borrower
shall immediately prepay the Loans and cash collateralize the
LOC Obligations, in an amount sufficient to eliminate such
excess (such prepayment to be applied as set forth in clause
(iv) below). Subject to the terms of Section 5.2, amounts
prepaid under this Section 3.3(b)(i) may be reborrowed.
(ii) Foreign Currency Committed Amount. If on any
Determination Date, the Dollar Amount of the aggregate
outstanding principal amounts of Foreign Currency Loans
exceeds (as the result of fluctuations in applicable foreign
exchange rates or otherwise) the Foreign Currency Committed
Amount, the Borrower shall immediately prepay Foreign Currency
Loans in an aggregate Dollar Amount sufficient to eliminate
such excess (such prepayment to be applied as set forth in
clause (iv) below). Subject to the terms of Section 5.2,
amounts prepaid under this Section 3.3(b)(ii) may be
reborrowed.
(iii) Asset Dispositions. Immediately upon the
occurrence of any Asset Disposition Prepayment Event, the
Borrower shall immediately prepay the Loans and cash
collateralize the LOC Obligations (with a corresponding
reduction in the Revolving Committed Amount in an amount equal
to all amounts so applied) in an aggregate amount equal to the
Net Cash Proceeds of the related Asset Disposition not applied
(or caused to be applied) by the Borrower during the related
Application Period to make Eligible Reinvestments as
contemplated by the terms of Section 8.5(v) (such prepayment
to be applied as set forth in clause (iv) below).
(iv) Application of Mandatory Prepayments. All
amounts required to be paid pursuant to this Section 3.3(b)
shall be applied to outstanding Loans and (after all
outstanding Loans have been repaid) to a cash collateral
account in respect of LOC Obligations. Prepayments of Loans
shall be applied first to Base Rate Loans (in the case of
Revolving Loans) and then to Eurodollar Loans in direct order
of Interest Period maturities. All prepayments pursuant to
this Section 3.3(b) shall be subject to Section 3.16.
3.4 REDUCTIONS OF REVOLVING COMMITTED AMOUNT.
Upon at least three Business Days' notice, the Borrower shall have the
right to permanently terminate or reduce the aggregate unused amount of the
Revolving Committed Amount at any time or from time to time; provided that (i)
each partial reduction shall be in an
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aggregate amount at least equal to $500,000 and in integral multiples of $50,000
above such amount and (ii) no reduction shall be made which would reduce the
Revolving Committed Amount to an amount less than the Dollar Amount (as
determined as of the most recent Determination Date) of the aggregate
outstanding principal amounts of Revolving Loans, LOC Obligations and Foreign
Currency Loans. Any reduction in (or termination of) the Revolving Committed
Amount shall be permanent and may not be reinstated.
3.5 FEES.
(a) Commitment Fees.
In consideration of the Commitments of the Lenders hereunder,
the Borrower agrees to pay to the Agent, for the pro rata benefit of
each Lender (based on each Lender's Commitment Percentage of the
Revolving Committed Amount), a per annum fee (the "Commitment Fees")
equal to the Applicable Percentage. The accrued Commitment Fees shall
commence to accrue on the Closing Date and shall be due and payable in
arrears on the last Business Day of each fiscal quarter of the Borrower
(as well as on the Maturity Date and on any date that the Revolving
Committed Amount is reduced) for the immediately preceding fiscal
quarter (or portion thereof), beginning with the first of such dates to
occur after the Closing Date.
(b) Letter of Credit Fees.
(i) Standby Letter of Credit Issuance Fee. In
consideration of the issuance of standby Letters of Credit
hereunder, the Borrower promises to pay to the Agent for the
account of each Lender a fee (the "Standby Letter of Credit
Fee") on such Lender's Commitment Percentage of the average
daily maximum amount available to be drawn under each such
standby Letter of Credit computed at a per annum rate for each
day from the date of issuance to the date of expiration equal
to the Applicable Percentage. The Standby Letter of Credit Fee
shall be payable quarterly in arrears 15 days after the end of
each fiscal quarter of the Borrower and on the Maturity Date.
(ii) Trade Letter of Credit Drawing Fee. In
consideration of the issuance of trade Letters of Credit
hereunder, the Borrower promises to pay to the Agent for the
account of each Lender a fee (the "Trade Letter of Credit
Fee") equal to the Applicable Percentage on such Lender's
Commitment Percentage of the amount of each drawing under any
such trade Letter of Credit. The Trade Letter of Credit Fee
will be payable on each date of drawing under a trade Letter
of Credit.
(iii) Issuing Lender Fees. In addition to the Standby
Letter of Credit Fee and the Trade Letter of Credit Fee
payable pursuant to subsections (i) and (ii) above, the
Borrower shall pay to the Issuing Lender for its own account,
without sharing by the other Lenders, the customary charges
from time to time to the
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Issuing Lender for its services in connection with the
issuance, amendment, payment, transfer, administration,
cancellation and conversion of, and drawings under, such
Letters of Credit (collectively, the "Issuing Lender Fees").
(c) Administrative Fees. The Borrower agrees to pay to the
Agent, for its own account, for the account of the Issuing Lender and
for the account of NationsBanc Montgomery Securities LLC, as
applicable, the fees referred to in the Agent's Fee Letter
(collectively, the "Agent's Fees").
3.6 PAYMENT IN FULL AT MATURITY.
On the Maturity Date, the entire outstanding principal balance
of all Loans and LOC Obligations, together with accrued but unpaid
interest and all other sums owing with respect thereto, shall be due
and payable in full, unless accelerated sooner pursuant to Section 9.
3.7 COMPUTATIONS OF INTEREST AND FEES.
(a) Except for Base Rate Loans, in which case interest shall
be computed on the basis of a 365 or 366 day year, as the case may be,
all computations of interest and fees hereunder shall be made on the
basis of the actual number of days elapsed over a year of 360 days.
Interest shall accrue from and include the date of borrowing (or
continuation or conversion) but exclude the date of payment.
(b) It is the intent of the Lenders and the Credit Parties to
conform to and contract in strict compliance with applicable usury law
from time to time in effect. All agreements between the Lenders and the
Borrower are hereby limited by the provisions of this paragraph which
shall override and control all such agreements, whether now existing or
hereafter arising and whether written or oral. In no way, nor in any
event or contingency (including but not limited to prepayment or
acceleration of the maturity of any obligation), shall the interest
taken, reserved, contracted for, charged, or received under this Credit
Agreement, under the Notes or otherwise, exceed the maximum
non-usurious amount permissible under applicable law. If, from any
possible construction of any of the Credit Documents or any other
document, interest would otherwise be payable in excess of the maximum
non-usurious amount, any such construction shall be subject to the
provisions of this paragraph and such documents shall be automatically
reduced to the maximum non-usurious amount permitted under applicable
law, without the necessity of execution of any amendment or new
document. If any Lender shall ever receive anything of value which is
characterized as interest on the Loans under applicable law and which
would, apart from this provision, be in excess of the maximum lawful
amount, an amount equal to the amount which would have been excessive
interest shall, without penalty, be applied to the reduction of the
principal amount owing on the Loans and not to the payment of interest,
or refunded to the Borrower or the other payor thereof if and to the
extent such amount which would have been excessive exceeds such unpaid
principal amount of the Loans. The right to demand payment of the Loans
or any other
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indebtedness evidenced by any of the Credit Documents does not include
the right to receive any interest which has not otherwise accrued on
the date of such demand, and the Lenders do not intend to charge or
receive any unearned interest in the event of such demand. All interest
paid or agreed to be paid to the Lenders with respect to the Loans
shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full stated term
(including any renewal or extension) of the Loans so that the amount of
interest on account of such indebtedness does not exceed the maximum
non-usurious amount permitted by applicable law.
3.8 PRO RATA TREATMENT.
Except to the extent otherwise provided herein:
(a) Loans. Each Loan borrowing (including, without limitation,
each Mandatory Borrowing), each payment or prepayment of principal of
any Loan, each payment of fees (other than the Issuing Lender Fees
retained by the Issuing Lender for its own account and the
Administrative Fees retained by the Agent for its own account), each
reduction of the Revolving Committed Amount, and each conversion or
continuation of any Loan, shall (except as otherwise provided in
Section 3.3(c)) be allocated pro rata among the relevant Lenders in
accordance with the respective Commitment Percentages of such Lenders
(or, if the Commitments of such Lenders have expired or been
terminated, in accordance with the respective principal amounts of the
outstanding Loans and Participation Interests of such Lenders);
provided that, if any Lender shall have failed to pay its applicable
pro rata share of any Loan, then any amount to which such Lender would
otherwise be entitled pursuant to this subsection (a) shall instead be
payable to the Agent; provided further, that in the event any amount
paid to any Lender pursuant to this subsection (a) is rescinded or must
otherwise be returned by the Agent, each Lender shall, upon the request
of the Agent, repay to the Agent the amount so paid to such Lender,
with interest for the period commencing on the date such payment is
returned by the Agent until the date the Agent receives such repayment
at a rate per annum equal to, during the period to but excluding the
date two Business Days after such request, the Federal Funds Rate, and
thereafter, the Base Rate plus two percent (2%) per annum; and
(b) Letters of Credit. Each payment of unreimbursed drawings
in respect of LOC Obligations shall be allocated to each Lender pro
rata in accordance with its Commitment Percentage; provided that, if
any Lender shall have failed to pay its applicable pro rata share of
any drawing under any Letter of Credit, then any amount to which such
Lender would otherwise be entitled pursuant to this subsection (b)
shall instead be payable to the Issuing Lender; provided further, that
in the event any amount paid to any Lender pursuant to this subsection
(b) is rescinded or must otherwise be returned by the Issuing Lender,
each Lender shall, upon the request of the Issuing Lender, repay to the
Agent for the account of the Issuing Lender the amount so paid to such
Lender, with interest for the period commencing on the date such
payment is returned by the Issuing Lender until the date the Issuing
Lender receives such repayment at a rate per
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annum equal to, during the period to but excluding the date two
Business Days after such request, the Federal Funds Rate, and
thereafter, the Base Rate plus two percent (2%) per annum.
3.9 ALLOCATION OF PAYMENTS AFTER EVENT OF DEFAULT.
Notwithstanding any other provisions of this Credit Agreement, after
the occurrence and during the continuance of an Event of Default, all amounts
collected or received by the Agent or any Lender on account of amounts
outstanding under any of the Credit Documents or in respect of the Collateral
shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys' fees)
of the Agent in connection with enforcing the rights of the Lenders
under the Credit Documents and any protective advances made by the
Agent with respect to the Collateral under or pursuant to the terms of
the Collateral Documents;
SECOND, to payment of any fees owed to the Agent or the
Issuing Lender;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses, (including, without limitation, reasonable attorneys'
fees) of each of the Lenders in connection with enforcing its rights
under the Credit Documents;
FOURTH, to the payment of all accrued fees and interest
payable to the Lenders hereunder;
FIFTH, to the payment of the outstanding principal amount of
the Loans, to the payment or cash collateralization of the outstanding
LOC Obligations, and, in the case of any proceeds of Collateral, to the
outstanding principal portion of any Hedging Obligations, pro rata, as
set forth below;
SIXTH, to all other obligations which shall have become due
and payable under the Credit Documents and not repaid pursuant to
clauses "FIRST" through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (a) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (b) each of the Lenders shall receive an amount equal to
its pro rata share (based on the proportion that the then outstanding Loans, LOC
Obligations and Hedging Obligations held by such Lender bears to the aggregate
then outstanding Loans, LOC Obligations and Hedging Obligations held by all of
the Lenders) of amounts available to be applied pursuant to clauses "THIRD",
"FOURTH," "FIFTH," and "SIXTH" above; and (c) to the extent that any amounts
available for distribution
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pursuant to clause "FIFTH" above are attributable to the issued but undrawn
amount of an outstanding Letter of Credit, such amounts shall be held by the
Agent in a cash collateral account and applied (x) first, to reimburse the
Issuing Lender from time to time for any drawings under such Letter of Credit
and (y) then, following the expiration of such Letter of Credit, to all other
obligations of the types described in clauses "FIFTH" and "SIXTH" above in the
manner provided in this Section 3.9.
3.10 SHARING OF PAYMENTS.
The Lenders agree among themselves that, except to the extent otherwise
provided herein, in the event that any Lender shall obtain payment in respect of
any Loan, unreimbursed drawing with respect to any LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of the Bankruptcy Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, in excess of its pro rata share of such payment as provided for
in this Credit Agreement, such Lender shall promptly pay in cash or purchase
from the other Lenders a participation in such Loans, LOC Obligations, and other
obligations in such amounts, and make such other adjustments from time to time,
as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in this Credit
Agreement. The Lenders further agree among themselves that if payment to a
Lender obtained by such Lender through the exercise of a right of setoff,
banker's lien, counterclaim or other event as aforesaid shall be rescinded or
must otherwise be restored, each Lender which shall have shared the benefit of
such payment shall, by payment in cash or a repurchase of a participation
theretofore sold, return its share of that benefit (together with its share of
any accrued interest payable with respect thereto) to each Lender whose payment
shall have been rescinded or otherwise restored. The Borrower agrees that any
Lender so purchasing such a participation may, to the fullest extent permitted
by law, exercise all rights of payment, including setoff, banker's lien or
counterclaim, with respect to such participation as fully as if such Lender were
a holder of such Loan, LOC Obligation or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Credit Agreement,
if any Lender or the Agent shall fail to remit to the Agent or any other Lender
an amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this Credit Agreement on the date when such amount is due, such
payments shall be made together with interest thereon for each date from the
date such amount is due until the date such amount is paid to the Agent or such
other Lender at a rate per annum equal to the Federal Funds Rate (or, in the
case of a Foreign Currency Loan, the Interim Foreign Currency Rate). If under
any applicable bankruptcy, insolvency or other similar law, any Lender receives
a secured claim in lieu of a setoff to which this Section 3.10 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.10 to share in the benefits of any recovery on such secured claim.
3.11 CAPITAL ADEQUACY.
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If, after the date hereof, any Lender has determined in good faith that
the adoption or the becoming effective of, or any change in, or any change by
any Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender, or its parent corporation, with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Lender's (or parent corporation's)
capital or assets as a consequence of its commitments or obligations hereunder
to a level below that which such Lender, or its parent corporation, could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's (or parent corporation's) policies with respect to
capital adequacy), then, upon notice from such Lender to the Borrower, the
Borrower shall be obligated to pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction. This covenant shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
3.12 INABILITY TO DETERMINE INTEREST RATE; UNAVAILABILITY OF FUNDS.
(a) If prior to the first day of the Interest Period for any
Loan, the Agent shall have determined in good faith (which
determination shall be conclusive and binding upon the Borrower absent
bad faith) that, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Loan for such Interest Period, the Agent shall
give telecopy or telephonic notice thereof to the Borrower and the
Lenders as soon as practicable thereafter. If such notice is given (i)
in respect of any Eurodollar Loans which are Revolving Loans, (A) such
Loans requested to be made on the first day of such Interest Period
shall be made as Base Rate Loans, (B) any Loans that were to have been
converted on the first day of such Interest Period to or continued as
Eurodollar Loans shall be converted to or continued as Base Rate Loans
and (C) any outstanding Eurodollar Loans shall be converted, on the
first day of such Interest Period, to Base Rate Loans and (ii) in
respect of any Eurodollar Loans which are Foreign Currency Loans, (A)
any such Loans requested to be made on the first day of such Interest
Period shall be deemed rescinded and (B) any such Loans shall be repaid
in full by the Borrower on the first day of such Interest Period. Until
such notice has been withdrawn by the Agent, no further Eurodollar
Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Base Rate Loans to Eurodollar Loans.
(b) If prior to the first day of the Interest Period for any
Loan, the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that deposits in any
Available Foreign Currency are not available in the relevant market to
any Lender, the Agent shall give telecopy or telephonic notice thereof
to the Borrower and the Lenders as soon as practicable thereafter. If
such notice is given, (i) any Foreign Currency Loans denominated in
such Available Foreign Currency requested to be made on the first day
of such Interest Period shall be deemed rescinded and (ii) any
outstanding Foreign Currency Loans denominated in such Available
Foreign
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Currency shall be repaid in full by the Borrower on the first day of
such Interest Period. Until such notice has been withdrawn by the
Agent, no further Foreign Currency Loans denominated in such Available
Foreign Currency shall be made or continued.
3.13 ILLEGALITY.
(a) Notwithstanding any other provision herein, if (i) the
adoption of or any change in any Requirement of Law or in the
interpretation or application thereof occurring after the Closing Date
shall make it unlawful for any Lender to make or maintain any
Eurodollar Loans denominated in any currency or (ii) there shall have
occurred any change in national or international financial, political
or economic conditions (including the imposition of or any change in
exchange controls) or currency exchange rates which would make it
impracticable for any Lender to make Eurodollar Loans denominated in
any currency to the Borrower, as contemplated by this Credit Agreement,
then, by written notice to the Borrower and the Agent (which notice
shall be withdrawn whenever such circumstances no longer exist):
(A) such Lender may declare that Eurodollar Loans in
the affected currency or currencies, as the case may be, will
not thereafter (for the duration of such unlawfulness or
impracticability) be made or issued by such Lender under this
Credit Agreement, whereupon any request for a Eurodollar Loan
in the affected currency or currencies, as the case may be,
shall, as to such Lender only, (1) if such Loan is not a
Foreign Currency Loan, be deemed a request for a Base Rate
Loan, unless such declaration shall be subsequently withdrawn
and (2) if such Eurodollar Loan is a Foreign Currency Loan, be
deemed to have been withdrawn, unless such declaration shall
be subsequently withdrawn; and
(B) such Lender may require that all outstanding
Eurodollar Loans in the affected currency or currencies, as
the case may be, made by it be (1) if such Loans are not
Foreign Currency Loans, converted to Base Rate Loans, in which
event all such Eurodollar Loans shall be automatically
converted to Base Rate Loans as of the effective date of such
notice as provided in paragraph (b) below or (2) if such Loans
are Foreign Currency Loans, repaid immediately, in which event
all such Foreign Currency Loans in the affected currency or
currencies shall be required to be repaid in full by the
Borrower as of the effective date of such notice.
(b) If any such conversion of a Eurodollar Loan occurs on a
day which is not the last day of the then current Interest Period with
respect thereto, the Borrower shall pay to such Lender such amounts, if
any, as may be required pursuant to Section 3.16.
3.14 REQUIREMENTS OF LAW.
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to any Lender, or compliance by
any Lender with any request or
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directive (whether or not having the force of law) from any central bank or
other Governmental Authority, in each case made subsequent to the Closing Date
(or, if later, the date on which such Lender becomes a Lender):
(a) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit, any Eurodollar Loans
made by it or its obligation to make Eurodollar Loans, or change the
basis of taxation of payments to such Lender in respect thereof (except
for Non-Excluded Taxes covered by Section 3.15 (including Non-Excluded
Taxes imposed solely by reason of any failure of such Lender to comply
with its obligations under Section 3.15(b)) and changes in taxes
measured by or imposed upon the overall net income, or franchise tax
(imposed in lieu of such net income tax), of such Lender or its
applicable lending office, branch, or any affiliate thereof);
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(c) shall impose on such Lender any other condition (excluding
any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from such Lender,
through the Agent, in accordance herewith, the Borrower shall be obligated to
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable,
provided that, in any such case, the Borrower may elect to convert the
Eurodollar Loans made by such Lender hereunder to Base Rate Loans by giving the
Agent at least one Business Day's notice of such election, in which case the
Borrower shall promptly pay to such Lender, upon demand, without duplication,
such amounts, if any, as may be required pursuant to Section 3.16. If any Lender
becomes entitled to claim any additional amounts pursuant to this Section 3.16,
it shall provide prompt notice thereof to the Borrower, through the Agent,
certifying (x) that one of the events described in this Section 3.16 has
occurred and describing in reasonable detail the nature of such event, (y) as to
the increased cost or reduced amount resulting from such event and (z) as to the
additional amount demanded by such Lender and a reasonably detailed explanation
of the calculation thereof. Such a certificate as to any additional amounts
payable pursuant to this Section 3.16 submitted by such Lender, through the
Agent, to the Borrower shall be conclusive and binding on the parties hereto in
the absence of manifest error. This covenant shall survive the termination of
this Credit Agreement and the payment of the Loans and all other amounts payable
hereunder.
3.15 TAXES.
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(a) Except as provided below in this Section 3.15, all
payments made by the Borrower under this Credit Agreement and any Notes
shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any court, or governmental body, agency or other official,
excluding taxes measured by or imposed upon the overall net income of
any Lender or its applicable lending office, or any branch or affiliate
thereof, and all franchise taxes, branch taxes, taxes on doing business
or taxes on the overall capital or net worth of any Lender or its
applicable lending office, or any branch or affiliate thereof, in each
case imposed in lieu of net income taxes, imposed: (i) by the
jurisdiction under the laws of which such Lender, applicable lending
office, branch or affiliate is organized or is located, or in which its
principal executive office is located, or any nation within which such
jurisdiction is located or any political subdivision thereof; or (ii)
by reason of any connection between the jurisdiction imposing such tax
and such Lender, applicable lending office, branch or affiliate other
than a connection arising solely from such Lender having executed,
delivered or performed its obligations, or received payment under or
enforced, this Credit Agreement or any Notes. If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from
any amounts payable to the Agent or any Lender hereunder or under any
Notes, (A) the amounts so payable to the Agent or such Lender shall be
increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in
this Credit Agreement and any Notes, provided, however, that the
Borrower shall be entitled to deduct and withhold any Non-Excluded
Taxes and shall not be required to increase any such amounts payable to
any Lender that is not organized under the laws of the United States of
America or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this Section 3.15 whenever any
Non-Excluded Taxes are payable by the Borrower, and (B) as promptly as
possible thereafter the Borrower shall send to the Agent for its own
account or for the account of such Lender, as the case may be, a
certified copy of an original official receipt received by the
Borrower, if any, showing payment thereof. If the Borrower fails to pay
any Non-Excluded Taxes when due to the appropriate taxing authority or
fails to remit to the Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Agent and any
Lender for any incremental taxes, interest or penalties that may become
payable by the Agent or any Lender as a result of any such failure. The
agreements in this subsection shall survive the termination of this
Credit Agreement and the payment of the Loans and all other amounts
payable hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) (A) on or before the date of any payment by the
Borrower under this Credit Agreement or any Notes to such
Lender, deliver to the Borrower
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and the Agent (x) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, or successor
applicable form, as the case may be, certifying that it is
entitled to receive payments under this Credit Agreement and
any Notes without deduction or withholding of any United
States federal income taxes and (y) an Internal Revenue
Service Form W-8 or W-9, or successor applicable form, as the
case may be, certifying that it is entitled to an exemption
from United States backup withholding tax;
(B) deliver to the Borrower and the Agent two further
copies of any such form or certification on or before the date
that any such form or certification expires or becomes
obsolete and after the occurrence of any event requiring a
change in the most recent form previously delivered by it to
the Borrower; and
(C) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be
requested by the Borrower or the Agent; or
(ii) in the case of any such Lender that is not a
"bank" within the meaning of Section 881(c)(3)(A) of the
Internal Revenue Code, (A) represent to the Borrower (for the
benefit of the Borrower and the Agent) that it is not a bank
within the meaning of Section 881(c)(3)(A) of the Internal
Revenue Code, (B) agree to furnish to the Borrower, on or
before the date of any payment by the Borrower, with a copy to
the Agent, two accurate and complete original signed copies of
Internal Revenue Service Form W-8, or successor applicable
form certifying to such Lender's legal entitlement at the date
of such certificate to an exemption from U.S. withholding tax
under the provisions of Section 881(c) of the Internal Revenue
Code with respect to payments to be made under this Credit
Agreement and any Notes (and to deliver to the Borrower and
the Agent two further copies of such form on or before the
date it expires or becomes obsolete and after the occurrence
of any event requiring a change in the most recently provided
form and, if necessary, obtain any extensions of time
reasonably requested by the Borrower or the Agent for filing
and completing such forms), and (C) agree, to the extent
legally entitled to do so, upon reasonable request by the
Borrower, to provide to the Borrower (for the benefit of the
Borrower and the Agent) such other forms as may be reasonably
required in order to establish the legal entitlement of such
Lender to an exemption from withholding with respect to
payments under this Credit Agreement and any Notes.
Notwithstanding the above, if any change in treaty, law or regulation
has occurred after the date such Person becomes a Lender hereunder
which renders all such forms (including successor forms) inapplicable
or which would prevent such Lender from duly completing and delivering
any such form with respect to it and such Lender so advises the
Borrower and the Agent then such Lender shall be exempt from such
requirements. Each Person that shall become a Lender or a participant
of a Lender pursuant to Section 11.3 shall, upon the effectiveness of
the related transfer, be required to provide all of the forms,
certifications and statements required pursuant to this subsection (b);
provided that
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in the case of a participant of a Lender, the obligations of such
participant of a Lender pursuant to this subsection (b) shall be
determined as if the participant of a Lender were a Lender except that
such participant of a Lender shall furnish all such required forms,
certifications and statements to the Lender from which the related
participation shall have been purchased.
(c) Each Lender agrees to make a good faith effort to minimize
any Non-Excluded Taxes by making, funding or maintaining its Foreign
Currency Loans through another lending office located in another
jurisdiction so long as the making, funding or maintenance of such
Foreign Currency Loans through such other office does not, in the
reasonable judgment of such Lender, materially affect such Lender.
(d) Each Person that shall become a Lender or a participant of
a Lender pursuant to subsection 11.3 shall, upon the effectiveness of
the related transfer, be required to provide all of the forms,
certifications and statements required pursuant to this subsection,
provided that in the case of a participant of a Lender the obligations
of such participant of a Lender pursuant to subsection (b) shall be
determined as if the participant of a Lender were a Lender except that
such participant of a Lender shall furnish all such required forms,
certifications and statements to the Lender from which the related
participation shall have been purchased.
3.16 INDEMNITY.
The Borrower promises to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur (other
than through such Lender's gross negligence or willful misconduct) as a
consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrower has given a written
notice requesting the same in accordance with the provisions of this Credit
Agreement, (b) default by the Borrower in making any prepayment of a Eurodollar
Loan after the Borrower has given a written notice thereof in accordance with
the provisions of this Credit Agreement and (c) the making of a prepayment of
Eurodollar Loans on a day which is not the last day of an Interest Period with
respect thereto. Such indemnification may include an amount equal to (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Loans provided for herein (excluding, however, the Applicable Percentage
included therein, if any) minus (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank Eurodollar market. The agreements in this Section shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
3.17 EUROPEAN MONETARY UNION.
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(a) If, as a result of the implementation of European monetary
union, (i) any Available Foreign Currency ceases to be the lawful
currency of its respective issuing nation and is replaced by a European
single currency or (ii) any Available Foreign Currency and a European
single currency are at the same time recognized by the central bank or
comparable authority of the nation issuing such Available Foreign
Currency as lawful currency of such nation and the Agent shall so
request in a notice delivered to the Borrower, then any amount payable
hereunder by the Agent or the Lenders to the Borrower, or by the
Borrower to the Agent or the Lenders, in such currency shall instead be
payable in the European single currency and the amount so payable shall
be determined by translating the amount payable in such currency to
such European single currency at the exchange rate recognized by the
European Central Bank for the purpose of implementing European monetary
union as of the date such payment is due.
(b) The Borrower agrees, at the request of any Lender, to
compensate such Lender for any reasonable loss, cost, expense or
reduction in return that shall be incurred or sustained by such Lender
(other than as a result of such Lender's gross negligence or willful
misconduct) as a result of the implementation of European monetary
union, that would not have been incurred or sustained but for the
transactions provided for herein and that, to the extent that such
loss, cost, expense or reduction is of a type generally applicable to
extensions of credit similar to the extensions of credit hereunder, is
generally being requested from borrowers subject to similar provisions.
A certificate of a Lender (x) setting forth the amount or amounts
necessary to compensate such Lender, (y) describing the nature of the
loss or expense sustained or incurred by such Lender as a consequence
thereof and (z) setting forth a reasonably detailed explanation of the
calculation thereof shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay to such Lender
the amount shown as due on any such certificate within 10 days after
receipt thereof.
(c) The Borrower agrees, at the request of the Agent or the
Required Lenders, at the time of or at any time following the
implementation of European monetary union, to enter into an agreement
amending this Credit Agreement (subject to obtaining the approval of
the Agent and the Required Lenders) in such manner as the Agent and the
Required Lenders shall reasonably specify in order to reflect the
implementation of such monetary union to place the parties hereto in
the position they would have been in had such monetary union not been
implemented.
SECTION 4
GUARANTY
4.1 GUARANTY OF PAYMENT.
Subject to Section 4.7 below, each of the Guarantors hereby, jointly
and severally,
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unconditionally guarantees to each Lender, each Affiliate of Lender that enters
into any agreement with a Credit Party giving rise to Hedging Obligations of
such Credit Party and the Agent the prompt payment of the Credit Party
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise). The Guarantors additionally, jointly
and severally, unconditionally guarantee to each Lender the timely performance
of all other obligations under the Credit Documents and any agreements giving
rise to Hedging Obligations of any Credit Party. This guaranty is a guaranty of
payment and not of collection and is a continuing guaranty and shall apply to
all Credit Party Obligations whenever arising.
4.2 OBLIGATIONS UNCONDITIONAL.
The obligations of the Guarantors hereunder are absolute and
unconditional, irrespective of the value, genuineness, validity, regularity or
enforceability of any of the Credit Documents or any agreements giving rise to
Hedging Obligations on the part of any Credit Party, or any other agreement or
instrument referred to therein, to the fullest extent permitted by applicable
law, irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor.
Each Guarantor agrees that this guaranty may be enforced by the Lenders without
the necessity at any time of resorting to or exhausting any other security or
collateral and without the necessity at any time of having recourse to the Notes
or any other of the Credit Documents or any collateral, if any, hereafter
securing the Credit Party Obligations or otherwise and each Guarantor hereby
waives the right to require the Lenders to proceed against the Borrower or any
other Person (including a co-guarantor) or to require the Lenders to pursue any
other remedy or enforce any other right. Each Guarantor further agrees that it
shall have no right of subrogation, indemnity, reimbursement or contribution
against the Borrower or any other Guarantor of the Credit Party Obligations for
amounts paid under this guaranty until such time as the Lenders (and any
Affiliates of Lenders entering into any agreement with any Credit Party giving
rise to Hedging Obligations of such Credit Party) have been irrevocably paid in
full and all Commitments under this Credit Agreement have been terminated. Each
Guarantor further agrees that nothing contained herein shall prevent the Lenders
from suing on the Notes or any of the other Credit Documents or any agreements
giving rise to Hedging Obligations on the part of any Credit Party or
foreclosing its security interest in or Lien on any collateral, if any, securing
the Credit Party Obligations or from exercising any other rights available to it
under this Credit Agreement, the Notes, any other of the Credit Documents, or
any other instrument of security, if any, and the exercise of any of the
aforesaid rights and the completion of any foreclosure proceedings shall not
constitute a discharge of any of any Guarantor's obligations hereunder; it being
the purpose and intent of each Guarantor that its obligations hereunder shall be
absolute, independent and unconditional under any and all circumstances. Neither
any Guarantor's obligations under this guaranty nor any remedy for the
enforcement thereof shall be impaired, modified, changed or released in any
manner whatsoever by an impairment, modification, change, release or limitation
of the liability of the Borrower or by reason of the bankruptcy or insolvency of
the Borrower. Each Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Credit Party Obligations and notice of or
proof of reliance of by the Agent or any Lender upon this Guarantee or
acceptance of this Guarantee. The Credit Party Obligations, and any of them,
shall conclusively be deemed to
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have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon this Guarantee. All dealings between the Borrower and
any of the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon this Guarantee.
4.3 MODIFICATIONS.
Each Guarantor agrees that (a) all or any part of the security now or
hereafter held for the Credit Party Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) the Lenders shall not have any
obligation to protect, perfect, secure or insure any such security interests,
liens or encumbrances now or hereafter held, if any, for the Credit Party
Obligations or the properties subject thereto; (c) the time or place of payment
of the Credit Party Obligations may be changed or extended, in whole or in part,
to a time certain or otherwise, and may be renewed or accelerated, in whole or
in part; (d) the Borrower and any other party liable for payment under the
Credit Documents may be granted indulgences generally; (e) any of the provisions
of the Notes or any of the other Credit Documents may be modified, amended or
waived; (f) any party (including any co-guarantor) liable for the payment
thereof may be granted indulgences or be released; and (g) any deposit balance
for the credit of the Borrower or any other party liable for the payment of the
Credit Party Obligations or liable upon any security therefor may be released,
in whole or in part, at, before or after the stated, extended or accelerated
maturity of the Credit Party Obligations, all without notice to or further
assent by such Guarantor, which shall remain bound thereon, notwithstanding any
such exchange, compromise, surrender, extension, renewal, acceleration,
modification, indulgence or release.
4.4 WAIVER OF RIGHTS.
Each Guarantor expressly waives to the fullest extent permitted by
applicable law: (a) notice of acceptance of this guaranty by the Lenders and of
all extensions of credit to the Borrower by the Lenders; (b) presentment and
demand for payment or performance of any of the Credit Party Obligations; (c)
protest and notice of dishonor or of default (except as specifically required in
this Credit Agreement) with respect to the Credit Party Obligations or with
respect to any security therefor; (d) notice of the Lenders obtaining, amending,
substituting for, releasing, waiving or modifying any security interest, lien or
encumbrance, if any, hereafter securing the Credit Party Obligations, or the
Lenders' subordinating, compromising, discharging or releasing such security
interests, liens or encumbrances, if any; (e) all other notices to which such
Guarantor might otherwise be entitled; and (f) demand for payment under this
guaranty. Without limiting the generality of any other provision of this Section
4, each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat.
Sections 26-7 through 26-9, inclusive. Each Guarantor further agrees that such
Guarantor shall have no right of recourse to security for the Credit Parties'
Obligations, except through the exercise of the rights of subrogation pursuant
to Section 4.2 and through the exercise of rights of contribution pursuant to
Section 4.8.
4.5 REINSTATEMENT.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if
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and to the extent that for any reason any payment by or on behalf of any Person
in respect of the Credit Party Obligations is rescinded or must be otherwise
restored by any holder of any of the Credit Party Obligations, whether as a
result of any proceedings in bankruptcy or reorganization or otherwise, and each
Guarantor agrees that it will indemnify the Agent and each Lender on demand for
all reasonable costs and expenses (including, without limitation, reasonable
fees of counsel) incurred by the Agent or such Lender in connection with such
rescission or restoration, including any such costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law.
4.6 REMEDIES.
The Guarantors agree that, as between the Guarantors, on the one hand,
and the Agent and the Lenders, on the other hand, the Credit Party Obligations
may be declared to be forthwith due and payable as provided in Section 9 (and
shall be deemed to have become automatically due and payable in the
circumstances provided in Section 9) notwithstanding any stay, injunction or
other prohibition preventing such declaration (or preventing such Credit Party
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or such Credit Party
Obligations being deemed to have become automatically due and payable), such
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors. The Guarantors
acknowledge and agree that their obligations hereunder are secured in accordance
with the terms of the Security Agreements and the other Collateral Documents and
that the Lenders may exercise their remedies thereunder in accordance with the
terms thereof.
4.7 LIMITATION OF GUARANTY.
Notwithstanding any provision to the contrary contained herein or in
any of the other Credit Documents, (i) to the extent the obligations of any
Guarantor under this Credit Agreement and the other Credit Documents shall be
adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of such Guarantor
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including, without limitation, the
Bankruptcy Code) and (ii) in the case of any Guarantor which is a Foreign
Subsidiary of the Borrower, the obligations of such Guarantor under this Credit
Agreement and the other Credit Documents shall be limited to the extent
necessary to cause such obligations of such Guarantor to be in compliance with
the laws of such Guarantor's jurisdiction of incorporation.
4.8 RIGHTS OF CONTRIBUTION.
The Guarantors hereby agree, as among themselves, that if any Guarantor
shall become an Excess Funding Guarantor (as defined below), each other
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
next sentence hereof), pay to such Excess Funding Guarantor an amount equal to
such Guarantor's Pro Rata Share (as defined below and
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determined, for this purpose, without reference to the properties, assets,
liabilities and debts of such Excess Funding Guarantor) of such Excess Payment
(as defined below). The payment obligation of any Guarantor to any Excess
Funding Guarantor under this Section 4.8 shall be subordinate and subject in
right of payment to the prior payment in full of the obligations of such
Guarantor under the other provisions of this Section 4, and such Excess Funding
Guarantor shall not exercise any right or remedy with respect to such excess
until payment and satisfaction in full of all of such obligations. For purposes
hereof, (i) "Excess Funding Guarantor" shall mean, in respect of any obligations
arising under the other provisions of this Section 4 (hereafter, the "Guaranteed
Obligations"), a Guarantor that has paid an amount in excess of its Pro Rata
Share of the Guaranteed Obligations; (ii) "Excess Payment" shall mean, in
respect of any Guaranteed Obligations, the amount paid by an Excess Funding
Guarantor in excess of its Pro Rata Share of such Guaranteed Obligations; and
(iii) "Pro Rata Share", for the purposes of this Section 4.8, shall mean, for
any Guarantor, the ratio (expressed as a percentage) of (a) the amount by which
the aggregate present fair salable value of all of its assets and properties
exceeds the amount of all debts and liabilities of such Guarantor (including
contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of such Guarantor hereunder) to (b) the amount by which the
aggregate present fair salable value of all assets and other properties of the
Borrower and all of the Guarantors exceeds the amount of all of the debts and
liabilities (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of the Borrower and the Guarantors
hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date
(if any Guarantor becomes a party hereto subsequent to the Closing Date, then
for the purposes of this Section 4.8 such subsequent Guarantor shall be deemed
to have been a Guarantor as of the Closing Date and the information pertaining
to, and only pertaining to, such Guarantor as of the date such Guarantor became
a Guarantor shall be deemed true as of the Closing Date Notwithstanding the
foregoing, all rights of contribution against any Guarantor shall terminate from
and after such time, if ever, that such Guarantor shall be relieved of its
obligations pursuant to Section 8.4.
SECTION 5
CONDITIONS PRECEDENT
5.1 CLOSING CONDITIONS.
The obligation of the Lenders to enter into this Credit Agreement and
make the initial Extension of Credit is subject to satisfaction of the following
conditions:
(a) Executed Credit Documents. Receipt by the Agent of duly
executed copies of (i) this Credit Agreement, (ii) the Notes, (iii) the
Collateral Documents and (iv) all other Credit Documents, each in form
and substance acceptable to the Lenders in their sole discretion.
(b) Corporate Documents. Receipt by the Agent of the
following:
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(i) Charter Documents. Copies of the articles or
certificates of incorporation or other charter documents of
each Credit Party certified to be true and complete as of a
recent date by the appropriate Governmental Authority of the
state or other jurisdiction of its incorporation and certified
by a secretary or assistant secretary of such Credit Party to
be true and correct as of the Closing Date.
(ii) Bylaws. A copy of the bylaws of each Credit
Party certified by a secretary or assistant secretary of such
Credit Party to be true and correct as of the Closing Date.
(iii) Resolutions. Copies of resolutions of the Board
of Directors of each Credit Party approving and adopting the
Credit Documents to which it is a party, the transactions
contemplated therein and authorizing execution and delivery
thereof, certified by a secretary or assistant secretary of
such Credit Party to be true and correct and in force and
effect as of the Closing Date.
(iv) Good Standing. Copies of certificates of good
standing, existence or its equivalent with respect to each
Credit Party certified as of a recent date by the appropriate
Governmental Authorities of the state or other jurisdiction of
incorporation and each other jurisdiction in which the failure
to so qualify and be in good standing would have a Material
Adverse Effect on the business or operations of a Credit Party
in such jurisdiction.
(v) Incumbency. An incumbency certificate of each
Credit Party certified by a secretary or assistant secretary
to be true and correct as of the Closing Date.
(c) Personal Property Collateral. Receipt by the Agent of
the following:
(i) searches of Uniform Commercial Code ("UCC")
filings in the jurisdiction of the chief executive office of
each Credit Party and such other jurisdictions where
Collateral is located (as reasonably determined by the Agent),
copies of the financing statements on file in such
jurisdictions and evidence that no Liens exist other than
Permitted Liens;
(ii) duly executed UCC financing statements for each
appropriate jurisdiction as is necessary, in the Agent's sole
discretion, to perfect the Lenders' security interest in the
Collateral;
(iii) searches of ownership of trademarks in the
appropriate governmental offices and such trademark filings as
requested by the Agent in order to perfect the Agent's
security interest in the Collateral;
(iv) such trademark filings as requested by the
Agent;
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(v) all duly executed consents as are necessary, in
the Agent's sole discretion, to perfect the Lenders' security
interest in the Collateral; and
(vi) an appropriate pledge agreement in form
acceptable to the Agent in respect of the pledge by Moll
Industries, LLC and Moll Plastics, LLC of at least 65% of the
Capital Stock of Moll Plastics SARL, a French limited
liability company.
(d) Opinions of Counsel. The Agent shall have received:
(i) a legal opinion of Choate, Hall & Stewart, dated
as of the Closing Date and substantially in the form of
Schedule 5.1(d)(i);
(ii) a legal opinion of Skadden, Arps, Slate, Meagher
& Flom LLP, dated as of the Closing Date and substantially in
the form of Schedule 5.1(d)(ii);
(iii) a legal opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, dated as of the Closing Date and
substantially in the form of Schedule 5.1(d)(iii); and
(iv) a legal opinion of Gunster, Yoakley,
Valdes-Fauli & Stewart, P.A., dated as of the date that the
Acquisition of Gemini by the Borrower is consummated and
substantially in the form of Schedule 5.1(d)(iv).
(e) Credit Suisse First Boston Payoff Letter, etc. Receipt by
the Agent of (i) a payoff letter in form and substance satisfactory to
the Agent with respect to the Credit Suisse First Boston Facility and
(ii) evidence satisfactory to the Agent that all of the Indebtedness
under the Credit Suisse First Boston Facility shall have repaid in
full.
(f) Evidence of Insurance. Receipt by the Agent of copies of
insurance policies or certificates of insurance of the Consolidated
Parties evidencing liability and casualty insurance meeting the
requirements set forth in the Credit Documents, including, but not
limited to, naming the Agent as sole loss payee on behalf of the
Lenders.
(g) Officer's Certificates. Receipt by the Agent of a
certificate or certificates executed by an Executive Officer of the
Borrower as of the Closing Date stating that (A) each Consolidated
Party is in compliance with all existing material financial
obligations, (B) all governmental, shareholder and third party consents
and approvals, if any, with respect to the Credit Documents and the
transactions contemplated thereby have been obtained, (C) no action,
suit, investigation or proceeding is pending or threatened in any court
or before any arbitrator or governmental instrumentality that purports
to affect any Consolidated Party or any transaction contemplated by the
Credit Documents, if such action, suit, investigation or proceeding
could have or could be reasonably expected to have a Material Adverse
Effect and (D) immediately after giving effect to the
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Transaction, the making of the initial Loans and the issuance of the
initial Letters of Credit, if any, and all the transactions
contemplated by this Credit Agreement to occur on the Closing Date, (1)
each of the Credit Parties is Solvent, (2) no Default or Event of
Default exists and (3) all representations and warranties contained
herein and in the other Credit Documents are true and correct in all
material respects.
(h) Government Consent. Receipt by the Agent of evidence that
all governmental, shareholder and material third party consents in
connection with the Transaction and the financings and other
transactions contemplated hereby and the absence of any action being
taken by any authority that could reasonably be likely to restrain,
prevent or impose any material adverse conditions on such financings
and other transactions or that could reasonably be likely to seek or
threaten any of the foregoing, and no law or regulation shall be
applicable which in the judgment of the Agent could reasonably be
likely to have such effect.
(i) Litigation. There shall not exist any pending or
threatened action, suit, investigation or proceeding against a
Consolidated Party that would have or would reasonably be expected to
have a Material Adverse Effect.
(j) Material Adverse Effect. There shall not have occurred a
change since December 31, 1997 that has had or could reasonably be
expected to have a Material Adverse Effect.
(k) Subordinated Debt. The Borrower shall have received gross
proceeds from the sale of the Subordinated Notes in an aggregate
principal amount of at least $100,000,000 and not more than
$130,000,000. The Agent shall have received a copy, certified by an
officer of the Borrower as true and complete, of the Subordinated Note
Indenture as originally executed and delivered, together with all
exhibits and schedules thereto.
(l) Solvency Opinion. Receipt by the Agent, with a copy for
each Lender, of an opinion letter from Murray, Devine & Co., addressed
to the Agent and each Lender, dated the Closing Date and in form and
substance reasonably acceptable to the Agent, as to the Solvency of the
Credit Parties on a consolidated basis immediately after giving effect
to the Transaction, the making of the initial Loans and the issuance of
the initial Letters of Credit, if any, and all the transactions
contemplated by this Credit Agreement to occur on the Closing Date.
(m) Availability. After giving effect to the Transaction, the
making of the initial Loans and the issuance of the initial Letters of
Credit, if any, and all the transactions contemplated by this Credit
Agreement to occur on the Closing Date, there shall be at least
$35,000,000 of availability existing under the Revolving Committed
Amount and at least $25,000,000 of availability existing under the
Borrowing Base.
(n) Credit Agreement Fees and Expenses. Payment by the
Borrower of all
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fees and expenses owed by it to the Lenders and the Agent.
(o) Other. Receipt by the Lenders of such other documents,
instruments, agreements or information as reasonably requested by any
Lender, including, but not limited to, information regarding
litigation, tax, accounting, labor, insurance, pension liabilities
(actual or contingent), real estate leases, material contracts, debt
agreements, property ownership and contingent liabilities of the
Consolidated Parties.
5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
In addition to the conditions precedent stated elsewhere herein, the
Lenders shall not be obligated to make, continue or convert Loans nor shall an
Issuing Lender be required to issue or extend a Letter of Credit unless:
(a) Notice. The Borrower shall have delivered (i) in the case
of any new Loan, a Notice of Borrowing, duly executed and completed, by
the time specified in Section 2.1, (ii) in the case of any Letter of
Credit, the Issuing Lender shall have received an appropriate request
for issuance in accordance with the provisions of Section 2.2 and (iii)
in the case of any continuation or conversion of a Loan, a duly
executed and completed Notice of Continuation/Conversion by the time
specified in Section 2.4;
(b) Representations and Warranties. The representations and
warranties made by the Credit Parties in any Credit Document are true
and correct in all material respects at and as if made as of such date
except to the extent they expressly relate to an earlier date and
except for changes in facts and circumstances which are expressly
permitted under Section 7 and Section 8;
(c) No Default. No Default or Event of Default shall exist or
be continuing either prior to or after giving effect thereto;
(d) No Bankruptcy Event. There shall not have been commenced
and remain undismissed against any Consolidated Party an involuntary
case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or any case, proceeding or other action for
the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its property or for the winding up or liquidation
of its affairs;
(e) No Material Adverse Effect. No Material Adverse Effect
shall have occurred since December 31, 1997;
(f) Availability. Immediately after giving effect to the
making of a Loan (and the application of the proceeds thereof) or to
the issuance of a Letter of Credit, as the case may be, the Dollar
Amount (as determined as of the most recent Determination Date) of the
aggregate outstanding principal amounts of Revolving Loans, LOC
Obligations and Foreign Currency Loans shall not exceed the lesser of
(A) the Revolving Committed
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Amount and (B) the Borrowing Base; and
(g) No Conflict with Senior Note Indenture. In the case of a
Loan borrowing or Letter of Credit issuance, the incurrence of the
indebtedness represented by such Loan or Letter of Credit, as the case
may be, is permitted under Section 4.09 of the Senior Note Indenture.
The delivery of each Notice of Borrowing, each Notice of Extension/Conversion
and each request for a Letter of Credit shall constitute a representation and
warranty by the Borrower of the correctness of the matters specified in
subsections (b), (c), (d), (e) and (f) above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
The Credit Parties hereby represent to the Agent and each Lender that:
6.1 FINANCIAL CONDITION.
(a) (i) The audited consolidated balance sheet of Anchor
Holdings, Inc. and Anchor as of December 31, 1997 and the audited
consolidated statements of earnings and statements of cash flows of
Anchor Holdings, Inc. and Anchor for the fiscal years ended December
31, 1996 and December 31, 1997 have heretofore been furnished to each
Lender. Such financial statements (including the notes thereto) (A)
have been audited by Coopers & Lybrand L.L.P., (B) have been prepared
in accordance with GAAP consistently, applied throughout the periods
covered thereby and (C) present fairly (on the basis disclosed in the
footnotes to such financial statements) the consolidated financial
condition, results of operations and cash flows of Anchor Holdings,
Inc. and Anchor as of such date and for such periods.
(ii) The unaudited interim balance sheets of Anchor
Holdings, Inc. and Anchor as at the end of, and the related unaudited
interim statements of earnings and of cash flows for, each fiscal
quarterly period ended after December 31, 1997 and prior to the Closing
Date have heretofore been furnished to each Lender. Such interim
financial statements for each such quarterly period, (A) have been
prepared in accordance with GAAP consistently applied throughout the
periods covered thereby and (B) present fairly (on the basis disclosed
in the footnotes to such financial statements) the consolidated
financial condition, results of operations and cash flows of Anchor
Holdings, Inc. and Anchor as of such date and for such periods.
(b) (i) The audited consolidated balance sheet of Moll
(excluding Somomeca) as of December 31, 1997 and the audited
consolidated statements of earnings and statements of cash flows of
Moll (excluding Somomeca) for the fiscal year ended December 31, 1996
have heretofore been furnished to each Lender. Such financial
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statements (including the notes thereto) (A) have been audited by
Arthur Andersen LLP, (B) have been prepared in accordance with GAAP
consistently, applied throughout the periods covered thereby and (C)
present fairly (on the basis disclosed in the footnotes to such
financial statements) the consolidated financial condition, results of
operations and cash flows of Moll, (excluding Somomeca) as of such date
and for such periods.
(ii) The unaudited interim balance sheets of Moll
(including Moll Plastics SARL and its Subsidiaries (successors to
Somomeca)) as at the end of, and the related unaudited interim
statements of earnings and of cash flows for, each fiscal quarterly
period ended after December 31, 1997 and prior to the Closing Date have
heretofore been furnished to each Lender. Such interim financial
statements for each such quarterly period, (A) have been prepared in
accordance with GAAP consistently applied throughout the periods
covered thereby and (B) present fairly (on the basis disclosed in the
footnotes to such financial statements) the consolidated financial
condition, results of operations and cash flows of Moll (including
Somomeca) as of such date and for such periods.
(c) The audited consolidated balance sheet of Somomeca as of
December 31, 1997 and the audited consolidated statements of earnings
and statements of cash flows of Somomeca for the 12-month period ended
December 31, 1997 have heretofore been furnished to each Lender. Such
financial statements (including the notes thereto) (A) have been
audited by Arthur Andersen LLP, (B) have been prepared in accordance
with GAAP consistently, applied throughout the periods covered thereby
and (C) present fairly (on the basis disclosed in the footnotes to such
financial statements) the consolidated financial condition, results of
operations and cash flows of Somomeca as of such date and for such
periods.
(d) During the period from December 31, 1997 to and including
the Closing Date, except as part of the Transaction, there has been no
sale, transfer or other disposition by any Consolidated Party of any
material part of the business or property of the Consolidated Parties,
taken as a whole, no purchase or other acquisition by any Consolidated
Party of any business or property (including any capital stock of any
other Person) material in relation to the consolidated financial
condition of the Consolidated Parties, taken as a whole, no
declaration, payment or making or any dividends or other distributions
upon, nor any redemption, retirement, purchase or other acquisition for
value of, any of the Capital Stock of any Consolidated Party, in each
case except as reflected in the foregoing financial statements or in
the notes thereto or as otherwise disclosed in writing to the Lenders
on or prior to the Closing Date.
(e) The financial statements delivered to the Lenders pursuant
to Section 7.1(a) and (b), (a) have been prepared in accordance with
GAAP (except as may otherwise be permitted under Section 7.1(a) and
(b)) and (b) present fairly (on the basis disclosed in the footnotes to
such financial statements) the consolidated financial condition,
results of operations and cash flows of the Consolidated Parties as of
such date and for such periods. Since December 31, 1997, there has been
no sale, transfer or other
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disposition by any Consolidated Party of any material part of the
business or property of the Consolidated Parties, taken as a whole, and
no purchase or other acquisition by any of them of any business or
property (including any Capital Stock of any other Person) material in
relation to the consolidated financial condition of the Consolidated
Parties, taken as a whole, in each case, which, is not (x) reflected in
the most recent financial statements delivered to the Lenders pursuant
to Section 7.1 or in the notes thereto or (y) otherwise permitted by
the terms of this Credit Agreement and communicated to the Agent.
(c) The pro forma consolidated balance sheet of the
Consolidated Parties as of the Closing Date has heretofore been
furnished to each Lender. Such pro forma balance sheet is based upon
reasonable assumptions made known to the Lenders and upon information
not know to be incorrect or misleading in any material respect.
6.2 NO MATERIAL CHANGE.
Since December 31, 1997, there has been no development or event
relating to or affecting a Consolidated Party which has had or would be
reasonably expected to have a Material Adverse Effect.
6.3 ORGANIZATION AND GOOD STANDING.
Each Consolidated Party (a) is a corporation duly incorporated, validly
existing and (if relevant under the law of such Person's jurisdiction of
incorporation) in good standing under the laws of the State (or other
jurisdiction) of its incorporation, (b) is duly qualified and (if relevant under
the law of the applicable jurisdiction) in good standing as a foreign
corporation and authorized to do business in every jurisdiction unless the
failure to be so qualified, in good standing or authorized would not have a
Material Adverse Effect and (c) has the requisite corporate power and authority
to own its properties and to carry on its business as now conducted and as
proposed to be conducted.
6.4 DUE AUTHORIZATION.
Each Credit Party (a) has the requisite corporate power and authority
to execute, deliver and perform this Credit Agreement and the other Credit
Documents to which it is a party and to incur the obligations herein and therein
provided for and (b) is duly authorized to, and has been authorized by all
necessary corporate action, to execute, deliver and perform this Credit
Agreement and the other Credit Documents to which it is a party.
6.5 NO CONFLICTS.
Except for matters which are listed on Schedule 6.5, neither the
execution and delivery of the Credit Documents, nor the consummation of the
transactions contemplated therein, nor performance of and compliance with the
terms and provisions thereof by such Credit Party will (a) violate or conflict
with any provision of its articles or certificate of incorporation or bylaws or
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other organizational or governing documents of such Person, (b) violate,
contravene or materially conflict with any Requirement of Law or any other law,
regulation (including, without limitation, Regulation U or Regulation X), order,
writ, judgment, injunction, decree or permit applicable to it, (c) violate,
contravene or conflict with contractual provisions of, or cause an event of
default under, any indenture, loan agreement, mortgage, deed of trust, contract
or other agreement or instrument to which it is a party or by which it may be
bound, the violation of which would have or might be reasonably expected to have
a Material Adverse Effect, or (d) result in or require the creation of any Lien
(other than those contemplated in or created in connection with the Credit
Documents) upon or with respect to its properties.
6.6 CONSENTS.
Except for consents, approvals and authorizations (a) which have been
obtained or (b) which are listed on Schedule 6.6, no consent, approval,
authorization or order of, or filing, registration or qualification with, any
court or Governmental Authority or third party in respect of any Credit Party is
required in connection with the execution, delivery or performance of this
Credit Agreement or any of the other Credit Documents by such Credit Party.
6.7 ENFORCEABLE OBLIGATIONS.
This Credit Agreement and the other Credit Documents have been duly
executed and delivered and constitute legal, valid and binding obligations of
each Credit Party enforceable against such Credit Party in accordance with their
respective terms, except as may be limited by bankruptcy or insolvency laws or
similar laws affecting creditors' rights generally or by general equitable
principles.
6.8 NO DEFAULT.
Except for matters which are listed on Schedule 6.5 or Schedule 6.6, no
Consolidated Party is in default in any respect under any contract, lease, loan
agreement, indenture, mortgage, security agreement or other agreement or
obligation to which it is a party or by which any of its properties is bound
which default would have or would be reasonably expected to have a Material
Adverse Effect. No Default or Event of Default has occurred or exists except as
previously disclosed in writing to the Lenders.
6.9 OWNERSHIP.
Each Consolidated Party is the owner of, and has good and marketable
title to, all of its respective assets and none of such assets is subject to any
Lien other than Permitted Liens.
6.10 INDEBTEDNESS.
The Consolidated Parties have no Indebtedness except (a) as disclosed
in the financial statements referenced in Section 6.1, (b) as set forth on
Schedule 6.10-1 and Schedule 6.10-2 and (c) as otherwise permitted by this
Credit Agreement.
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6.11 LITIGATION.
Except as disclosed in Schedule 6.11, there are no actions, suits or
legal, equitable, arbitration or administrative proceedings, pending or, to the
knowledge of any Credit Party, threatened against any Consolidated Party which
will have or might be reasonably expected to have a Material Adverse Effect.
6.12 TAXES.
Except as disclosed in Schedule 6.12, each Consolidated Party has
filed, or caused to be filed, all tax returns (federal, state, local and
foreign) required to be filed and paid (a) all amounts of taxes shown thereon to
be due (including interest and penalties) and (b) all other taxes, fees,
assessments and other governmental charges (including mortgage recording taxes,
documentary stamp taxes and intangibles taxes) owing by it, except for such
taxes (i) which are not yet delinquent or (ii) that are being contested in good
faith and by proper proceedings, and against which adequate reserves are being
maintained in accordance with GAAP. No Credit Party is aware as of the Closing
Date of any proposed tax assessments against it or any other Consolidated Party.
6.13 COMPLIANCE WITH LAW.
Each Consolidated Party is in compliance with all Requirements of Law
and all other laws, rules, regulations, orders and decrees (including without
limitation Environmental Laws) applicable to it, or to its properties, unless
such failure to comply would not have or would not be reasonably expected to
have a Material Adverse Effect. No Requirement of Law would be reasonably
expected to cause a Material Adverse Effect.
6.14 ERISA.
Except as would not result or be reasonably expected to result in a
Material Adverse Effect:
(a) During the five-year period prior to the date on which
this representation is made or deemed made: (i) no ERISA Event has
occurred, and, to the best knowledge of the Credit Parties, no event or
condition has occurred or exists as a result of which any ERISA Event
could reasonably be expected to occur, with respect to any Plan; (ii)
no "accumulated funding deficiency," as such term is defined in Section
302 of ERISA and Section 412 of the Code, whether or not waived, has
occurred with respect to any Plan; (iii) each Plan has been maintained,
operated, and funded in compliance with its own terms and in material
compliance with the provisions of ERISA, the Code, and any other
applicable federal or state laws; and (iv) no lien in favor of the PBGC
or a Plan has arisen or is reasonably likely to arise on account of any
Plan.
(b) The actuarial present value of all "benefit liabilities"
(as defined in Section
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4001(a)(16) of ERISA), whether or not vested, under each Single
Employer Plan, as of the last annual valuation date prior to the date
on which this representation is made or deemed made (determined, in
each case, utilizing the actuarial assumptions used in such Plan's most
recent actuarial valuation report), did not exceed as of such valuation
date the fair market value of the assets of such Plan, or by more than
(i) $1,000,000 as to any such Plan or (ii) $2,500,000 in the aggregate
as to all such Plans.
(c) Neither any Consolidated Party nor any ERISA Affiliate has
incurred, or, to the best knowledge of the Credit Parties, could be
reasonably expected to incur, any withdrawal liability under ERISA to
any Multiemployer Plan or Multiple Employer Plan. No Consolidated Party
would become subject to any withdrawal liability under ERISA if any
Consolidated Party or any ERISA Affiliate were to withdraw completely
from all Multiemployer Plans and Multiple Employer Plans as of the
valuation date most closely preceding the date on which this
representation is made or deemed made. Neither any Consolidated Party
nor any ERISA Affiliate has received any notification that any
Multiemployer Plan is in reorganization (within the meaning of Section
4241 of ERISA), is insolvent (within the meaning of Section 4245 of
ERISA), or has been terminated (within the meaning of Title IV of
ERISA), and no Multiemployer Plan is, to the best knowledge of the
Credit Parties, reasonably expected to be in reorganization, insolvent,
or terminated.
(d) No prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected
or may subject any Consolidated Party nor any ERISA Affiliate to any
liability under Sections 406, 409, 502(i), or 502(l) of ERISA or
Section 4975 of the Code, or under any agreement or other instrument
pursuant to which any Consolidated Party or any ERISA Affiliate has
agreed or is required to indemnify any Person against any such
liability.
(e) Neither any Consolidated Party nor any ERISA Affiliate has
any material liability with respect to "expected post-retirement
benefit obligations" within the meaning of the Financial Accounting
Standards Board Statement 106.
6.15 SUBSIDIARIES.
Set forth on Schedule 6.15 is a complete and accurate list of all
Subsidiaries of each Consolidated Party as of the Closing Date. Information on
Schedule 6.15 includes jurisdiction of incorporation, the number of shares of
each class of Capital Stock outstanding, the number and percentage of
outstanding shares of each class owned (directly or indirectly) by such
Consolidated Party; and the number and effect, if exercised, of all outstanding
options, warrants, rights of conversion or purchase and all other similar rights
with respect thereto. The outstanding Capital Stock of all such Subsidiaries is
validly issued, fully paid and (if relevant under the law of such Person's
jurisdiction of incorporation) non-assessable and is owned by each such
Consolidated Party, directly or indirectly, free and clear of all Liens (other
than those arising under or contemplated in connection with the Credit
Documents). Other than as set forth in
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Schedule 6.15, as of the Closing Date no Consolidated Party has outstanding any
securities convertible into or exchangeable for its Capital Stock nor does any
such Person have outstanding any rights to subscribe for or to purchase or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to its Capital Stock.
6.16 USE OF PROCEEDS; MARGIN STOCK.
The proceeds of the Loans hereunder will be used solely for the
purposes specified in Section 7.10. None of the proceeds of the Loans will be
used for the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U or Regulation X, or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry "margin stock"
or any "margin security" or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of Regulation T, U, or X. No
Consolidated Party owns any "margin stock".
6.17 GOVERNMENT REGULATION.
No Consolidated Party is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company Act
of 1940 or the Interstate Commerce Act, each as amended. In addition, No
Consolidated Party is an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, or a "holding
company," or a "Subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "Subsidiary" or a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended. No
director, executive officer or principal shareholder of any Consolidated Party
is a director, executive officer or principal shareholder of any Lender. For the
purposes hereof the terms "director", "executive officer" and "principal
shareholder" (when used with reference to any Lender) have the respective
meanings assigned thereto in Regulation O issued by the Board of Governors of
the Federal Reserve System.
6.18 ENVIRONMENTAL MATTERS.
Except as set forth on Schedule 6.18 or except as would not have or be
reasonably expected to have a Material Adverse Effect:
(i) Each of the Real Properties and all operations of any
Consolidated Party at the Real Properties are in compliance with all
Environmental Laws, and there is no violation of any Environmental Law
with respect to the Real Properties or the businesses operated by any
Consolidated Party (the "Businesses"), and there are no conditions
relating to Businesses or Real Properties that would be reasonably
expected to give rise to liability under any applicable Environmental
Laws.
(ii) None of the Real Properties contains, or, to the
knowledge of the Credit Parties, has previously contained, any
Hazardous Materials at, on or under the Real
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Properties in amounts or concentrations that, if released, constitute
or constituted a violation of, or could give rise to liability under,
Environmental Laws.
(iii) No Consolidated Party has received any written or oral
notice of, or inquiry from any Governmental Authority regarding, any
violation, alleged violation, non-compliance, liability or potential
liability regarding Hazardous Materials or compliance with
Environmental Laws with regard to any of the Real Properties or the
Businesses, nor does any Credit Party have knowledge or reason to
believe that any such notice is being threatened
(iv) Hazardous Materials have not been transported or disposed
of from the Real Properties, or generated, treated, stored or disposed
of at, on or under any of the Real Properties or any other location, in
each case by, or on behalf or with the permission of, any Consolidated
Party in a manner that would reasonably be expected to give rise to
liability on the part of any Consolidated Party under any Environmental
Law.
(v) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of any Credit Party, threatened,
under any applicable Environmental Law to which any Consolidated Party
is or will be named as a party, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders,
or other administrative or judicial requirements outstanding under any
Environmental Law with respect to any Consolidated Party, the Real
Properties or the Businesses.
(vi) There has been no release or threat of release of
Hazardous Materials at or from the Real Properties, or arising from or
related to the operations (including, without limitation, disposal) of
any Consolidated Party in connection with the Real Properties or
otherwise in connection with the Businesses, except in compliance with
Environmental Laws.
(vii) No Consolidated Party has assumed any liability of any
Person under any applicable Environmental Law.
6.19 INTELLECTUAL PROPERTY.
Each Consolidated Party owns, or has the legal right to use, all
trademarks, tradenames, copyrights, technology, know-how and processes (the
"Intellectual Property") necessary for each of them to conduct its business as
currently conducted except for those the failure to own or have such legal right
to use would not have or be reasonably expected to have a Material Adverse
Effect. No claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does any Credit Party know
of any such claim, and to the Credit Parties' knowledge the use of such
Intellectual property by any Consolidated Party does not infringe on the rights
of any Person, except for such claims and infringements that in the aggregate,
would not have or be reasonably expected to have a Material Adverse Effect.
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6.20 SOLVENCY.
Each Credit Party is (after consummation of the Transaction, the making
of the initial Loans and the issuance of the initial Letters of Credit, if any,
and all the transactions contemplated by this Credit Agreement to occur on the
Closing Date and at all times thereafter), Solvent.
6.21 INVESTMENTS.
All Investments of each Consolidated Party are Permitted Investments.
6.22 LOCATION OF COLLATERAL.
Set forth on Schedule 6.22(a) is a list of all locations where, as of
the Closing Date, any tangible domestic personal property of a Domestic Credit
Party is located, including county and state where located. Set forth on
Schedule 6.22(b) is a list of the chief executive office and principal place of
business of each Domestic Credit Party as of the Closing Date.
6.23 DISCLOSURE.
Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of any Consolidated Party in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein or herein not misleading.
6.24 LICENSES, ETC.
The Consolidated Parties have obtained and hold in full force and
effect, all franchises, licenses, permits, certificates, authorizations,
qualifications, accreditations, easements, rights of way and other rights,
consents and approvals which are necessary for the operation of their respective
businesses as presently conducted, except where the failure to do so would not
have or be reasonably expected to have a Material Adverse Effect.
6.25 NO BURDENSOME RESTRICTIONS.
No Consolidated Party is a party to any agreement or instrument or
subject to any other obligation or any charter or corporate restriction or any
provision of any applicable law, rule or regulation which, individually or in
the aggregate, would have or be reasonably expected to have a Material Adverse
Effect.
6.26 LABOR MATTERS.
There are no domestic collective bargaining agreements or Multiemployer
Plans covering
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the employees of a Consolidated Party as of the Closing Date and
none of the Consolidated Parties has suffered any strikes, walkouts, work
stoppages or other material labor difficulty within the last five years.
6.27 NATURE OF BUSINESS.
As of the Closing Date, the Borrower is engaged principally in the
business of designing, manufacturing and packaging molded plastics and metal
products.
SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans and LOC Obligations, together
with interest, fees and other obligations hereunder, have been paid in full and
the Commitments and Letters of Credit hereunder shall have terminated:
7.1 INFORMATION COVENANTS.
The Credit Parties will furnish, or cause to be furnished, to the Agent
and each of the Lenders:
(a) Annual Financial Statements. As soon as available, and in
any event within 90 days after the close of each fiscal year
(commencing with the fiscal year ending December 31, 1998) of the
Borrower, a consolidated and consolidating balance sheet and income
statement of the Consolidated Parties, as of the end of such fiscal
year, together with related consolidated and consolidating statements
of operations and retained earnings and of cash flows for such fiscal
year, setting forth in comparative form consolidated figures for the
preceding fiscal year, all such financial information described above
to be in reasonable form and detail and audited (with respect to
consolidated financial statements only) by Arthur Andersen LLP (or
other independent certified public accountants of recognized national
standing reasonably acceptable to the Agent), whose opinion shall be to
the effect that such financial statements have been prepared in
accordance with GAAP (except for changes with which such accountants
concur) and shall not be limited as to the scope of the audit or
qualified in any manner.
(b) Quarterly Financial Statements. As soon as available, and
in any event within 45 days (or 90 days in the case of the fiscal
quarter ending in June, 1998) after the close of each fiscal quarter of
the Borrower (other than the fourth fiscal quarter) a consolidated
balance sheet and income statement of the Consolidated Parties as of
the end of such fiscal quarter, together with related consolidated
statements of operations and retained earnings and of cash flows for
such fiscal quarter in each case setting forth in comparative form
consolidated figures for the corresponding period of the preceding
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fiscal year, all such financial information described above to be in
reasonable form and detail and reasonably acceptable to the Agent, and
accompanied by a certificate of an Executive Officer of the Borrower to
the effect that such quarterly financial statements fairly present in
all material respects the financial condition of the Consolidated
Parties and have been prepared in accordance with GAAP (except for the
absence of footnotes), subject to changes resulting from audit and
normal year-end audit adjustments.
(c) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b) above,
a certificate of an Executive Officer of the Borrower substantially in
the form of Exhibit 7.1(c), (i) demonstrating compliance with the
financial covenants contained in Section 7.12 by calculation thereof as
of the end of each such fiscal period and (ii) stating that no Default
or Event of Default exists, or if any Default or Event of Default does
exist, specifying the nature and extent thereof and what action the
Borrower proposes to take with respect thereto.
(d) Borrowing Base Certificates. As soon as available and in
any event within 20 days (or 30 days in the case of the report for the
twelfth fiscal month) after the end of each fiscal month of the
Borrower, a report on the Borrowing Base, in each case as of the end of
the immediately preceding month, substantially in the form of Exhibit
7.1(d), certified by the chief financial officer of Borrower to be true
and correct as of such date.
(e) Annual Business Plan and Budgets. Within 90 days after the
end of each fiscal year of the Borrower, beginning with the fiscal year
ending December 31, 1998, an annual business plan and budget of the
Consolidated Parties on a consolidated basis containing, among other
things, pro forma financial statements for the next fiscal year.
(f) Compliance With Certain Provisions of Credit Agreement.
Within 90 days after the end of each fiscal year of the Borrower, the
Borrower shall deliver a certificate, containing information regarding
the amount of all Asset Dispositions that were made during the prior
fiscal year.
(g) Accountant's Certificate. Within the period for delivery
of the annual financial statements provided in Section 7.1(a), a
certificate of the accountants conducting the annual audit stating that
they have reviewed this Credit Agreement and stating further whether,
in the course of their audit, they have become aware of any Default or
Event of Default and, if any such Default or Event of Default exists,
specifying the nature and extent thereof.
(h) Auditor's Reports. Promptly upon receipt thereof, a copy
of any "management letter" submitted by independent accountants to any
Consolidated Party in connection with any annual, interim or special
audit of the books of any Consolidated Party.
(i) Reports. Promptly upon transmission or receipt thereof,
(a) copies of any filings and registrations with, and reports to or
from, the Securities and Exchange
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Commission, or any successor agency, and copies of all financial
statements, proxy statements, notices and reports as any Consolidated
Party shall send to its shareholders generally or to a holder of any
Indebtedness owed by any Consolidated Party in its capacity as such a
holder and (b) upon the written request of the Agent, all reports and
written information to and from the United States Environmental
Protection Agency, or any state or local agency responsible for
environmental matters in the United States, the United States
Occupational Health and Safety Administration, or any state or local
agency responsible for health and safety matters in the United States,
or any successor agencies or authorities concerning environmental,
health or safety matters.
(j) Notices. Upon any Executive Officer of a Credit Party
obtaining knowledge thereof, such Credit Party will give written notice
to the Agent promptly of (a) the occurrence of an event or condition
consisting of a Default or Event of Default, specifying the nature and
existence thereof and what action the Borrower proposes to take with
respect thereto, and (b) the occurrence of any of the following with
respect to any Consolidated Party (i) the pendency or commencement of
any litigation, arbitral or governmental proceeding against any
Consolidated Party which if adversely determined would have or would be
reasonably expected to have a Material Adverse Effect, (ii) the
institution of any proceedings against any Consolidated Party with
respect to, or the receipt of notice by such Person of potential
liability or responsibility for violation, or alleged violation of any
federal, state or local law, rule or regulation, including but not
limited to, Environmental Laws, which violation would have or would be
reasonably expected to have a Material Adverse Effect or (iii) any
notice or determination concerning the imposition of any withdrawal
liability by a Multiemployer Plan against such Person or any ERISA
Affiliate, the determination that a Multiemployer Plan is, or is
expected to be, in reorganization within the meaning of Title IV of
ERISA or the termination of any Plan. Upon its receipt of any notice
pursuant to this Section 7.1(i), the Agent will promptly notify each of
the Lenders.
(k) ERISA. Upon any Executive Officer of a Credit Party
obtaining knowledge thereof, the Borrower will give written notice to
the Agent promptly (and in any event within five Business Days) of: (i)
of any event or condition, including, but not limited to, any
Reportable Event, that constitutes, or might reasonably lead to, an
ERISA Event, (ii) with respect to any Multiemployer Plan, the receipt
of notice as prescribed in ERISA or otherwise of any withdrawal
liability assessed against any Consolidated Party or any ERISA
Affiliate, or of a determination that any Multiemployer Plan is in
reorganization or insolvent (both within the meaning of Title IV of
ERISA); (iii) the failure to make full payment on or before the due
date (including extensions) thereof of all amounts which any
Consolidated Party or any ERISA Affiliate is required to contribute to
each Plan pursuant to its terms and as required to meet the minimum
funding standard set forth in ERISA and the Code with respect thereto;
(iv) any event has occurred or failed to occur with respect to a Single
Employer Plan, Multiemployer Plan or Multiple Employer Plan sponsored,
maintained or contributed to by an ERISA Affiliate of any Consolidated
Party which would have or would be reasonably expected to have a
Material Adverse Effect or (v) any change in the funding status of any
Plan that
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could have a Material Adverse Effect, together with a description of
any such event or condition or a copy of any such notice and a
statement by an Executive Officer of the Borrower briefly setting forth
the details regarding such event, condition, or notice, and the action,
if any, which has been or is being taken or is proposed to be taken by
the Consolidated Parties with respect thereto. Promptly upon request,
the Borrower shall furnish the Agent and the Lenders with such
additional information concerning any Plan as may be reasonably
requested, including, but not limited to, copies of each annual
report/return (Form 5500 series), as well as all schedules and
attachments thereto required to be filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA and the Code,
respectively, for each "plan year" (within the meaning of Section 3(39)
of ERISA).
(l) Other Information. With reasonable promptness upon any
such request, such other information regarding the business, properties
or financial condition of the Consolidated Parties as the Agent or the
Required Lenders may reasonably request.
7.2 PRESERVATION OF EXISTENCE AND FRANCHISES.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, do all things necessary to preserve and keep in full force and
effect its existence, rights, franchises and authority, except (i) the
reincorporation of Promolde LDA under the laws of a country other than Portugal,
(ii) where the failure to do so would not have a Material Adverse Effect or
(iii) as otherwise permitted by Section 8.4 or Section 8.5.
7.3 BOOKS AND RECORDS.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, keep complete and accurate books and records of its
transactions in accordance with good accounting practices on the basis of GAAP
(including the establishment and maintenance of appropriate reserves).
7.4 COMPLIANCE WITH LAW.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, comply with all laws, rules, regulations and orders, and all
applicable material restrictions imposed by all Governmental Authorities,
applicable to it and its property (including, without limitation, Environmental
Laws), except where the failure to do so would not have or be reasonably
expected to have a Material Adverse Effect.
7.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, pay, settle or discharge all taxes, assessments and
governmental charges or levies imposed upon it, or upon its income or profits,
or upon any of its properties, before they shall become delinquent, all lawful
claims (including claims for labor, materials and supplies) which, if unpaid,
might give rise to a Lien upon any of its properties, and except as prohibited
hereunder, all of its other Indebtedness
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as it shall become due; provided, however, that a Consolidated Party shall not
be required to pay any such tax, assessment, charge, levy, claim or Indebtedness
which is being contested in good faith by appropriate proceedings and as to
which adequate reserves therefor have been established in accordance with GAAP,
unless the failure to make any such payment (i) would give rise to an immediate
right to foreclose on a Lien securing such amounts or (ii) would have a Material
Adverse Effect.
7.6 INSURANCE.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance in
accordance with normal industry practice and/or requirements of law (including
worker's compensation insurance, liability insurance, casualty insurance and
business interruption insurance) in such amounts, covering such risks and
liabilities and with such deductibles or self-insurance retentions as are. All
liability policies with respect to the Borrower and the Subsidiary Guarantors
shall have the Agent, on behalf of the Lenders, as an additional insured and all
casualty policies with respect to inventory owned by the Borrower or any
Subsidiary Guarantor shall have the Agent, on behalf of the Lenders, as loss
payee. The present insurance coverage of the Consolidated Parties is outlined as
to carrier, policy number, expiration date, type and amount on Schedule 7.6.
7.7 MAINTENANCE OF PROPERTY.
Each of the Credit Parties will maintain and preserve its properties
and equipment in good repair, working order and condition, normal wear and tear
excepted.
7.8 PERFORMANCE OF OBLIGATIONS.
Each of the Consolidated Parties will, and will cause each of its
Subsidiaries to, perform in all respects all of its obligations under the terms
of all agreements, indentures, mortgages, security agreements or other debt
instruments to which it is a party or by which it is bound unless the failure to
do so will not have or be reasonably expected to have a material adverse effect
on the ability of a Credit Party to perform its obligations under this Credit
Agreement or the other Credit Documents.
7.9 COLLATERAL.
(a) The Borrower will, and will cause each Domestic Subsidiary
to, cause all of its personal property located in the United States of
the nature and type described in Section 2 of the Security Agreement to
be subject at all times, subject to Permitted Liens, to first priority,
perfected Liens in favor of the Agent pursuant to the terms and
conditions of the Collateral Documents or, with respect to any such
property acquired subsequent to the Closing Date, such other additional
security documents as the Agent shall reasonably request.
(b) Within 60 days after receipt by the Agent and the Lenders
of a Borrowing
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Base Certificate delivered pursuant to Section 7.1(d) indicating that
inventory of the Borrower located in Mexico constitutes for more than
1.5% of the Borrowing Base as set forth in such Borrowing Base
Certificate, the Credit Parties will (i) cause all of the inventory of
the Borrower located at such facility to be subject at all times to a
first priority, perfected Lien in favor of the Agent to secure the
Credit Party Obligations pursuant to the terms and conditions of the
Security Agreement or such other additional security documents as the
Agent shall reasonably request and (ii) deliver such other
documentation as the Agent may reasonably request in connection with
the foregoing, including, without limitation, waivers and/or consents
of third Persons (including without the Mexican Subsidiary) necessary
or desirable to establish and protect a first priority, perfected Lien
in favor of the Agent (to secure the Credit Party Obligations) in such
inventory, certified resolutions of the Borrower and other authorizing
documents of the Borrower, favorable opinions of special Mexican
counsel with respect to the perfection of the Agent's Liens in such
inventory, all in form, content and scope reasonably satisfactory to
the Agent.
(c) If, subsequent to the Closing Date, the Borrower shall
acquire ownership of any material trademarks registered with the United
States Patent and Trademark Office (or with respect to which an
application for registration is pending with the United States Patent
and Trademark Office) and used in connection with any of its inventory,
the Borrower shall promptly notify the Agent of thereof and shall cause
to be taken, at its own expense, such action as requested by the Agent
to ensure that the Agent has a first priority perfected Lien therein to
secure the Credit Party Obligations.
7.10 USE OF PROCEEDS.
The Credit Parties will use proceeds of the Loans solely (a) to
refinance indebtedness of the Borrower and certain of its Subsidiaries existing
as the Closing Date, (b) to pay fees and expenses incurred in connection with
this Credit Agreement, (c) to provide for the working capital needs of the
Borrower and its Subsidiaries, (d) to finance Permitted Investments by the
Borrower and its Subsidiaries, including intercompany loans, (e) to enable the
Borrower to make Restricted Payments to the Parent permitted under Section
8.7(vi) and (f) for general corporate purposes of the Borrower and its
Subsidiaries. The Borrower will use the Letters of Credit solely for the
purposes set forth in Section 2.2(a).
7.11 AUDITS/INSPECTIONS.
(a) Upon at least two Business Days' notice and during normal
business hours, each Consolidated Party will, and will cause each of
its Subsidiaries to, permit representatives appointed by the Agent,
including, without limitation, independent accountants, agents,
attorneys and appraisers to visit and inspect such Person's property,
including its books and records, its accounts receivable and inventory,
its facilities and its other business assets, and to make photocopies
or photographs thereof and to write down and record any information
such representative obtains and shall permit the Agent or its
representatives to investigate and verify the accuracy of information
provided to the
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Lenders and to discuss all such matters with the officers, employees
and representatives of the Consolidated Parties. The Credit Parties
agree that the Agent, and its representatives, may conduct an annual
audit of the Collateral, at the expense of the Borrower.
(b) Without limiting the generality of Section 7.11(a), the
Credit Parties agree that the Agent's examination staff shall be
permitted to conduct, at the expense of the Credit Parties, an annual
field examination of the components of the Borrowing Base of such scope
as shall in each instance be reasonably satisfactory the Agent.
7.12 FINANCIAL COVENANTS.
The Credit Parties hereby agree that:
(a) Interest Coverage Ratio. The Interest Coverage Ratio, as
of the last day of each fiscal quarter of the Consolidated Parties,
shall be greater than or equal to:
(i) for the period from the Closing Date to and
including the next to last day of the fiscal quarter of the
Borrower ending in December, 2000, 2.00 to 1.00;
(ii) for the period from the last day of the fiscal
quarter of the Borrower ending in December, 2000 to and
including the next to last day of the fiscal quarter of the
Borrower ending in December, 2001, 2.15 to 1.00; and
(iii) for the period from the last day of the fiscal
quarter of the Borrower ending in December, 2001 and at all
times thereafter, 2.50 to 1.00.
(b) Leverage Ratio. The Leverage Ratio, as of the last day of
each fiscal quarter of the Consolidated Parties, shall be less than or
equal to:
(i) for the period from the Closing Date to and
including the next to last day of the fiscal quarter of the
Borrower ending in December, 1998, 4.75 to 1.00;
(ii) for the period from the last day of the fiscal
quarter of the Borrower ending in December, 1998 to and
including the next to last day of the fiscal quarter of the
Borrower ending in December, 2000, 4.50 to 1.00; and
(iii) for the period from the last day of the fiscal
quarter of the Borrower ending in December, 2000 and at all
times thereafter, 4.00 to 1.00.
(c) Minimum Net Worth. At all times Consolidated Net Worth
shall be greater than or equal to the sum of ($6,000,000), increased on
a cumulative basis by an amount equal to (i) as of the end of each
fiscal quarter of the Borrower, commencing with the fiscal quarter of
the Borrower ending in September, 1998, 50% of Consolidated Net Income
(to the extent positive) for the fiscal quarter then ended and (ii) as
of the date of
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any Equity Issuance, 100% of the Net Proceeds of any Equity Issuance.
7.13 ADDITIONAL CREDIT PARTIES; ADDITIONAL COLLATERAL.
As soon as practicable and in any event within 30 days after the date
that any Person becomes a direct or indirect Domestic Subsidiary of the
Borrower, a Material Foreign Subsidiary or a Designated Subsidiary, the Borrower
shall provide the Agent with written notice thereof and shall (a) if such Person
is a Designated Subsidiary, cause such Person to execute a Joinder Agreement in
substantially the same form as Exhibit 7.13 (provided, however, if such
Designated Subsidiary is a Foreign Subsidiary of the Borrower, such Joinder
Agreement shall provide that the obligations of such Person under this Credit
Agreement and the other Credit Documents shall be limited to the extent
necessary to cause such obligations to be in compliance with the laws of such
Person's jurisdiction of incorporation), (b) if such Person is a Domestic
Subsidiary of the Borrower or a Material Foreign Subsidiary, cause 100% (if such
Person is a Domestic Subsidiary) or 65% (if such Person is a Material Foreign
Subsidiary) of the Capital Stock of such Person to be pledged to the Agent (and,
to the extent such Capital Stock is certificated, delivered to the Agent
together with undated stock powers signed in blank (unless, with respect to a
Material Foreign Subsidiary, such stock powers are deemed unnecessary by the
Agent in its reasonable discretion under the law of the jurisdiction of
incorporation of such Person)) pursuant to an appropriate pledge agreement(s) in
form acceptable to the Agent and (c) cause such Person to deliver such other
documentation as the Agent may reasonably request in connection with the
foregoing, including, without limitation, appropriate UCC-1 financing
statements, environmental reports, landlord's waivers, certified resolutions and
other organizational and authorizing documents of such Person, favorable
opinions of counsel to such Person (which shall cover, among other things, the
legality, validity, binding effect and enforceability of the documentation
referred to above and the perfection of the Agent's liens thereunder) and other
items of the types required to be delivered pursuant to Section 5.1(c), all in
form, content and scope reasonably satisfactory to the Agent.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans and LOC Obligations, together
with interest and fees hereunder, have been paid in full and the Commitments and
Letters of Credit hereunder shall have terminated:
8.1 INDEBTEDNESS.
The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the
other Credit Documents;
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(b) (i) Indebtedness existing as of the Closing Date and set
forth on Schedule 6.10-1 (and renewals, refinancings and
extensions thereof on terms and conditions no less favorable
to such Person than such existing Indebtedness); and
(b) on and after such time as the Acquisition of
Gemini by the Borrower shall have been consummated,
Indebtedness existing as of the Closing Date and set forth on
Schedule 6.10-2 (and renewals, refinancings and extensions
thereof on terms and conditions no less favorable to the
Borrower than such existing Indebtedness);
(c) purchase money Indebtedness (including any Capital Lease,
but excluding any Operating Lease which is not a Synthetic Lease) or
Synthetic Leases hereafter incurred by the Borrower to finance the
purchase of fixed assets provided that (i) the total of all such
Indebtedness shall not exceed an aggregate principal amount of
$5,000,000 at any one time outstanding (excluding any such Indebtedness
referred to in subsection (b) above); (ii) such Indebtedness when
incurred shall not exceed the purchase price of the asset(s) financed;
and (iii) no such Indebtedness shall be refinanced for a principal
amount in excess of the principal balance outstanding thereon at the
time of such refinancing;
(d) Hedging Obligations;
(e) intercompany Indebtedness arising out of loans and
advances permitted under Section 8.6;
(f) Indebtedness of Foreign Subsidiaries in an aggregate
principal amount not to exceed $10,000,000 at any time outstanding
(excluding any such Indebtedness referred to in subsection (b) above);
(g) Indebtedness arising under the Senior Note Indenture and
the Senior Notes (including without limitation Guaranty Obligations of
any Guarantor arising thereunder or in respect thereof);
(h) Indebtedness arising under the Subordinated Note Indenture
and the Subordinated Notes (including without limitation Guaranty
Obligations of any Guarantor arising thereunder or in respect thereof);
and
(i) other Indebtedness of the Borrower not otherwise permitted
under this Section 8.1 provided that the aggregate principal amount of
all such Indebtedness does not exceed $5,000,000 at any time
outstanding.
8.2 LIENS.
The Credit Parties will not permit any Consolidated Party to contract,
create, incur,
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assume or permit to exist any Lien with respect to any Collateral, whether now
owned or after acquired, except for Permitted Liens.
8.3 NATURE OF BUSINESS.
The Credit Parties will not permit any Consolidated Party to alter the
character of its business from that conducted as of the Closing Date or engage
in any business other than the business conducted as of the Closing Date.
8.4 CONSOLIDATION AND MERGER.
Except in connection with an Asset Disposition permitted by the terms
of Section 8.5, the Credit Parties will not permit any Consolidated Party to
enter into any transaction of merger or consolidation or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution); provided that,
notwithstanding the foregoing provisions of this Section 8.4, (a) the Borrower
may merge or consolidate with any of its Subsidiaries or in connection with the
Acquisition of Gemini pursuant to the Purchase Agreement, provided that in the
case of any such merger with any of its Subsidiaries or Gemini (i) the Borrower
shall be the continuing or surviving corporation, (ii) the Credit Parties shall
cause to be executed and delivered such documents, instruments and certificates
as the Agent may request so as to cause the Credit Parties to be in compliance
with the terms of Section 7.9 after giving effect to such transaction and (iii)
after giving effect to such transaction, no Default or Event of Default would
exist, (b) any Credit Party other than the Parent or the Borrower may merge or
consolidate with any other Credit Party other than the Parent or the Borrower
provided that (i) the Credit Parties shall cause to be executed and delivered
such documents, instruments and certificates as the Agent may request so as to
cause the Credit Parties to be in compliance with the terms of Section 7.9 after
giving effect to such transaction and (ii) after giving effect to such
transaction, no Default or Event of Default would exist, (c) any Consolidated
Party which is not a Credit Party may be merged or consolidated with or into any
Credit Party other than the Parent provided that (i) such Credit Party shall be
the continuing or surviving corporation, (ii) the Credit Parties shall cause to
be executed and delivered such documents, instruments and certificates as the
Agent may request so as to cause the Credit Parties to be in compliance with the
terms of Section 7.9 after giving effect to such transaction and (iii) after
giving effect to such transaction, no Default or Event of Default would exist,
(d) any Consolidated Party which is not a Credit Party may be merged or
consolidated with or into any other Consolidated Party which is not a Credit
Party provided after giving effect to such transaction, no Default or Event of
Default would exist, (e) the Borrower and the Parent may merge or consolidate
with one another in connection with an Initial Public Offering if (i) the Credit
Parties shall cause to be executed and delivered such documents, instruments and
certificates as the Agent may request so as to cause the Credit Parties to be in
compliance with the terms of Section 7.9 after giving effect to such transaction
and (ii) after giving effect to such transaction, no Default or Event of Default
would exist and (f) any wholly-owned Subsidiary of the Borrower may dissolve,
liquidate or wind up its affairs at any time.
8.5 ASSET DISPOSITIONS.
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The Credit Parties will not permit any Consolidated Party to make any
Asset Disposition (including, without limitation, any Sale and Leaseback
Transaction) other than Excluded Asset Dispositions, unless (i) the
consideration paid in connection therewith is cash or Cash Equivalents, (ii) if
such transaction is a Sale and Leaseback Transaction, such transaction is
permitted by the terms of Section 8.13, (iii) except for the issuance of Capital
Stock by the Parent (or in the case of a merger or consolidation between the
Parent and the Borrower in connection therewith, by the continuing or surviving
corporation of such merger or consolidation) in connection with an Initial
Public Offering permitted by the definition of "Change of Control" set forth in
Section 1.1, such transaction does not involve the sale or other disposition of
a minority equity interest in any Consolidated Party other than the Parent and
(iv) no later than 14 days prior to such Asset Disposition, the Agent and the
Lenders shall have received a certificate of an Executive Officer of the
Borrower specifying the anticipated or actual date of such Asset Disposition,
briefly describing the assets to be sold or otherwise disposed of and setting
forth the net book value of such assets, the aggregate consideration and the Net
Cash Proceeds to be received for such assets in connection with such Asset
Disposition, and thereafter the Borrower shall, within the period of 270 days
(or such longer period of time as the Required Lenders shall otherwise agree in
writing with respect to the proceeds of a particular Asset Disposition)
following the consummation of such Asset Disposition (with respect to any such
Asset Disposition, the "Application Period"), apply (or cause to be applied) an
amount equal to the Net Cash Proceeds of such Asset Disposition to (A) make
Eligible Reinvestments or (B) prepay the Loans (and cash collateralize of LOC
Obligations) in accordance with the terms of Section 3.3(b)(iii).
Upon a sale of assets or the sale of Capital Stock of a Consolidated
Party permitted by this Section 8.5, the Agent shall (to the extent applicable
and provided that such Consolidated Party (and all of the assets of such
Consolidated Party) is concurrently released from all of its obligations in
respect of the Senior Note Indenture and the Senior Notes and all of its
obligations in respect of the Subordinated Note Indenture and the Subordinated
Notes) deliver to the Borrower, upon the Borrower's request and at the
Borrower's expense, such documentation as is reasonably necessary to evidence
the release of the Agent's security interest, if any, in such assets or Capital
Stock, including, without limitation, amendments or terminations of UCC
financing statements, if any, the return of stock certificates, if any, and the
release of such Subsidiary from all of its obligations, if any, under the Credit
Documents.
8.6 INVESTMENTS.
The Credit Parties will not permit any Consolidated Party to make any
Investments except for Permitted Investments.
8.7 RESTRICTED PAYMENTS.
The Credit Parties will not permit any Consolidated Party to directly
or indirectly, declare, order, make or set apart any sum for or pay any
Restricted Payment, except (i) to make dividends payable solely in the same
class of Capital Stock of such Person, (ii) to make distributions to former
partners of Moll for tax liabilities of such partners for periods prior to the
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Closing Date in an aggregate 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,
(iii) to make dividends or other distributions payable to any Credit Party,
(iii) to redeem Senior Notes in accordance with the terms of Section 3.07(b) of
the Senior Note Indenture in connection with an Initial Public Offering, (iv) to
redeem Capital Stock of the Parent held by directors and employees pursuant to
employment arrangements provided that all such Restricted Payments pursuant to
this clause (iv) shall not in aggregate amount exceed $1,500,000 in any fiscal
year, (v) dividends or other distributions by the Borrower to the Parent which
are used by the Parent to make Investments of the type described in clause
(f)(i) of the definition of "Permitted Investments" set forth in Section 1.1 and
(vi) as permitted by Section 8.8 or Section 8.11.
8.8 TRANSACTIONS WITH AFFILIATES.
The Credit Parties will not permit any Consolidated Party to enter into
or permit to exist any transaction or series of transactions with any officer,
director, shareholder, Subsidiary or Affiliate of such Person other than (i)
Exempt Affiliate Transactions, (ii) transactions permitted by Section 8.1(b),
Section 8.4, Section 8.5, Section 8.6 or Section 8.7, (iii) normal compensation
and reimbursement of expenses of officers and directors and (iv) except as
otherwise specifically limited in this Credit Agreement, other transactions
which are entered into in the ordinary course of such Person's business on terms
and conditions substantially as favorable to such Person as would be obtainable
by it in a comparable arms-length transaction with a Person other than an
officer, director, shareholder, Subsidiary or Affiliate.
8.9 RESTRICTIONS ON THE PARENT; OWNERSHIP OF SUBSIDIARIES.
(a) The Parent shall (i) not hold any assets other than the
Capital Stock of the Borrower and its other direct Subsidiaries, (ii)
not have any liabilities other than (A) the liabilities under the
Credit Documents, (B) tax liabilities in the ordinary course of
business, (C) loans and advances permitted under Section 8.7 and (D)
corporate, administrative and operating expenses in the ordinary course
of business and (iii) not engage in any business other than (A) owning
the Capital Stock of the Borrower and its other direct Subsidiaries and
activities incidental or related thereto, (B) acting as a Guarantor
hereunder and pledging certain of its assets to the Agent, for the
benefit of the Lenders, in connection herewith, (C) acting as a
guarantor in respect of the Indebtedness arising under the Senior Note
Indenture and the Senior Notes and (D) acting as a guarantor in respect
of the Indebtedness arising under the Subordinated Note Indenture and
the Subordinated Notes.
(b) The Borrower (i) will not permit any Person (other than
the Borrower or any wholly-owned Subsidiary of the Borrower) to own any
Capital Stock of any Subsidiary of the Borrower, (ii) will not permit
any Subsidiary of the Borrower to issue Capital Stock (except to the
Borrower or to a wholly-owned Subsidiary of the Borrower), (iii) will
not permit create, incur, assume or suffer to exist any Lien thereon,
in each case except (a) directors' qualifying shares, (b) if such
Subsidiary merges with another
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Subsidiary of the Borrower, (c) if such Subsidiary ceases to be a
Subsidiary of the Borrower (as a result of the sale of 100% of the
Capital Stock of such Subsidiary) or (d) Permitted Liens and (iv)
notwithstanding anything to the contrary contained in clause (ii)
above, will not permit any Subsidiary of the Borrower to issue any
shares of preferred Capital Stock.
8.10 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS.
Except for the change on or before August 31, 1998 by the Foreign
Subsidiaries of the Borrower incorporated in France to a fiscal year ending
December 31, the Credit Parties will not permit any Consolidated Party to change
its fiscal year or materially change its articles or certificate of
incorporation without the prior written consent of the Required Lenders.
8.11 PREPAYMENT OR MODIFICATION OF INDEBTEDNESS.
The Credit Parties will not permit any Consolidated Party to (i) if any
Default or Event of Default has occurred and is continuing or would be directly
or indirectly caused as a result thereof, (a) after the issuance thereof, amend
or modify (or permit the amendment or modification of) any of the terms of any
Indebtedness if such amendment or modification would add or change any terms in
a manner adverse to the Lenders, including, but not limited to, shortening the
final maturity or average life to maturity or requiring any payment to be made
sooner than originally scheduled or increasing the interest rate applicable
thereto or changing any subordination provision thereof, or (b) except for the
exchange of the Subordinated Notes for notes with identical terms registered
pursuant to the registration rights agreement set forth in the Subordinated Note
Indenture, make (or give any notice with respect thereto) any voluntary or
optional payment or any prepayment or any redemption or any acquisition for
value or any defeasance of (including without limitation, by way of depositing
money or securities with the trustee with respect thereto before due for the
purpose of paying when due), refund, refinance or exchange of any other
Indebtedness (including without limitation any Indebtedness arising under the
Senior Note Agreement and the Senior Notes and any Indebtedness arising under
the Subordinated Note Indenture and the Subordinated Notes) or (ii) except for
the exchange of the Subordinated Notes for notes with identical terms registered
pursuant to the registration rights agreement set forth in the Subordinated Note
Indenture, make (or give any notice with respect thereto) any voluntary or
optional payment or prepayment, redemption, acquisition for value or defeasance
of (including without limitation, by way of depositing money or securities with
the trustee with respect thereto before due for the purpose of paying when due),
refund, refinance or exchange of any Indebtedness arising under the Subordinated
Note Indenture and the Subordinated Notes.
8.12 LIMITATIONS.
The Credit Parties will not permit any Consolidated Party to, directly
or indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any such Person to (a) pay
dividends or make any other distributions to any Credit Party on its Capital
Stock or with respect to any other interest or participation in, or measured by,
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its profits, (b) pay any Indebtedness or other obligation owed to any Credit
Party, (c) make loans or advances to any Credit Party, (d) sell, lease or
transfer any of its properties or assets to any Credit Party, or (e) act as a
Guarantor and pledge its assets pursuant to the Credit Documents or any
renewals, refinancings, exchanges, refundings or extension thereof, except (in
respect of any of the matters referred to in clauses (a)-(d) above) for such
encumbrances or restrictions existing under or by reason of (i) this Credit
Agreement and the other Credit Documents, (ii) the Senior Note Indenture and the
Senior Notes, in each case as in effect as of the Closing Date, (iii) the
Subordinated Note Indenture and the Subordinated Notes, in each case as in
effect as of the Closing Date, (iv) applicable law or (v) any document or
instrument governing Indebtedness incurred pursuant to Section 8.1(c), provided
that any such restriction contained therein relates only to the asset or assets
constructed or acquired in connection therewith.
8.13 SALE LEASEBACKS.
The Credit Parties will not permit any Consolidated Party to, directly
or indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
property (whether real or personal or mixed), whether now owned or hereafter
acquired, (a) which such Consolidated Party has sold or transferred or is to
sell or transfer to a Person which is not a Consolidated Party or (b) which such
Consolidated Party intends to use for substantially the same purpose as any
other property which has been sold or is to be sold or transferred by such
Consolidated Party to another Person which is not a Consolidated Party in
connection with such lease.
8.14 CAPITAL EXPENDITURES.
The Credit Party will not permit Capital Expenditures for any fiscal
year of the Borrower to exceed $20,000,000, plus (for any fiscal year other than
fiscal year 1998) the unused portion of permitted Capital Expenditures for the
immediately preceding fiscal year (without giving effect to any carry forward
from a prior fiscal year).
8.15 NO FURTHER NEGATIVE PLEDGES.
Except (a) pursuant to this Credit Agreement and the other Credit
Documents, (b) pursuant to the Senior Note Indenture and the Senior Notes, in
each case as in effect as of the Closing Date, (c) pursuant to the Subordinated
Note Indenture and the Subordinated Notes, in each case as in effect as of the
Closing Date and (d) pursuant to any document or instrument governing
Indebtedness incurred pursuant to Section 8.1(c), provided that any such
restriction contained therein relates only to the asset or assets constructed or
acquired in connection therewith, the Credit Parties will not permit any
Consolidated Party to enter into, assume or become subject to any agreement
prohibiting or otherwise restricting the creation or assumption of any Lien upon
its properties or assets, whether now owned or hereafter acquired, or requiring
the grant of any security for such obligation if security is given for some
other obligation.
8.16 OPERATING LEASE OBLIGATIONS.
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The Credit Parties will not permit any Consolidated Party to enter
into, assume or permit to exist any obligations for the payment of rental under
Operating Leases which in the aggregate for all such Persons would exceed
$7,000,000 in any fiscal year.
8.17 MEXICAN OPERATIONS.
The Borrower will not maintain any of its inventory in Mexico at any
location other than Matamoros, Mexico unless the Borrower shall have caused to
be executed and delivered such documents, instruments and certificates, if any,
as are required (in the reasonable determination of the Agent) to ensure that
the Credit Parties are at all times in compliance with the terms of Section
7.9(b).
SECTION 9
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall:
(i) default in the payment when due of any principal
of any of the Loans or of any reimbursement obligation arising
from drawings under Letters of Credit; or
(ii) default, and such default shall continue for
three or more Business Days, in the payment when due of any
interest on the Loans, or on any reimbursement obligations
arising from drawings under Letters of Credit or of any fees
or other amounts owing hereunder, under any of the other
Credit Documents or in connection herewith.
(b) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the
other Credit Documents, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto shall prove untrue
in any material respect on the date as of which it was made or deemed
to have been made.
(c) Covenants. Any Credit Party shall:
(i) default in the due performance or observance of
any term, covenant or agreement contained in Sections 7.2,
7.4, 7.5, 7.6, 7.9, 7.10, 7.12, 7.13 or 8.1 through 8.17,
inclusive; or
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(ii) default in the due performance or observance by
it of any term, covenant or agreement (other than those
referred to in subsections (a), (b) or (c)(i) of this Section
9.1) contained in this Credit Agreement and such default shall
continue unremedied for a period of at least 30 days after the
earlier of an Executive Officer of a Credit Party becoming
aware of such default or notice thereof given by the Agent.
(d) Other Credit Documents. (i) Any Consolidated Party shall
default in the due performance or observance of any term, covenant or
agreement in any of the other Credit Documents and such default shall
continue unremedied for a period of at least 30 days after the earlier
of an Executive Officer of a Credit Party becoming aware of such
default or notice thereof given by the Agent, (ii) except pursuant to
the terms thereof, any Credit Document shall fail to be in full force
and effect or any Credit Party shall so assert or (iii) except pursuant
to the terms thereof, any Credit Document shall fail to give the Agent
and/or the Lenders the security interests, liens, rights, powers and
privileges purported to be created thereby.
(e) Guaranties. The guaranty hereunder given by any Guarantor
or any provision thereof shall, except pursuant to the terms thereof,
cease to be in full force and effect, or any guarantor thereunder or
any Person acting by or on behalf of such Guarantor shall deny or
disaffirm such Guarantor's obligations under such guaranty.
(f) Bankruptcy Events. Any Bankruptcy Event shall occur with
respect to any Consolidated Party.
(g) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under this Credit
Agreement and other than matters which are listed on Schedule 6.5 or
Schedule 6.6) of one or more of the Consolidated Parties in an
aggregate principal amount in excess of $1,000,000 (i) a Consolidated
Party shall (A) default in any payment (beyond the applicable grace
period with respect thereto, if any) with respect to any such
Indebtedness, or (B) default (after giving effect to any applicable
grace period) in the observance or performance relating to such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event or condition shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or permit, the holder or holders of such
Indebtedness (or trustee or agent on behalf of such holders) to cause
(determined without regard to whether any notice or lapse of time is
required) any such Indebtedness to become due prior to its stated
maturity; or (ii) any such Indebtedness shall be declared due and
payable prior to the stated maturity thereof.
(h) Judgments. One or more judgments, orders, or decrees shall
be entered against any one or more of the Consolidated Parties
involving a liability of $1,000,000 or more, in the aggregate, (to the
extent not paid or covered by insurance provided by a carrier who has
acknowledged coverage) and such judgments, orders or decrees (i) are
the subject of any enforcement proceeding commenced by any creditor or
(ii) shall continue
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unsatisfied, undischarged and unstayed for 30 days following the last
day on which such judgment, order or decree becomes final and
unappealable.
(i) ERISA. Any of the following events or conditions, if such
event or condition would cause or be reasonably expected to cause a
Material Adverse Effect: (1) any "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA and Section 412 of the
Code, whether or not waived, shall exist with respect to any Plan, or
any lien shall arise on the assets of any Consolidated Party or any
ERISA Affiliate in favor of the PBGC or a Plan; (2) an ERISA Event
shall occur with respect to a Single Employer Plan, which is, in the
reasonable opinion of the Agent, likely to result in the termination of
such Plan for purposes of Title IV of ERISA; (3) an ERISA Event shall
occur with respect to a Multiemployer Plan or Multiple Employer Plan,
which is, in the reasonable opinion of the Agent, likely to result in
(i) the termination of such Plan for purposes of Title IV of ERISA, or
(ii) any Consolidated Party or any ERISA Affiliate incurring any
liability in connection with a withdrawal from, reorganization of
(within the meaning of Section 4241 of ERISA), or insolvency or (within
the meaning of Section 4245 of ERISA) such Plan; (4) any event
occurring or failing to occur with respect to a Single Employer Plan,
Multiemployer or Multiple Employer Plan sponsored, maintained or
contributed to by an ERISA Affiliate of any Consolidated Party; or (5)
any prohibited transaction (within the meaning of Section 406 of ERISA
or Section 4975 of the Code) or breach of fiduciary responsibility
shall occur which may any Consolidated Party or any ERISA Affiliate to
any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or
Section 4975 of the Code, or under any agreement or other instrument
pursuant to which any Consolidated Party or any ERISA Affiliate has
agreed or is required to indemnify any Person against any such
liability.
(j) Senior Note Indenture. There shall occur and be continuing
any Event of Default under and as defined in the Senior Note Indenture.
(k) Subordinated Note Indenture. There shall occur and be
continuing any Event of Default under and as defined in the
Subordinated Note Indenture.
(l) Ownership. There shall occur a Change of Control.
9.2 ACCELERATION; REMEDIES.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived in writing by the
Required Lenders (or the Lenders as may be required hereunder), the Agent shall,
upon the request and direction of the Required Lenders, by written notice to the
Borrower, take any of the following actions without prejudice to the rights of
the Agent or any Lender to enforce its claims against the Credit Parties, except
as otherwise specifically provided for herein:
(a) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
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(b) Acceleration of Loans. Declare the unpaid principal of and
any accrued interest in respect of all Loans, any reimbursement
obligations arising from drawings under Letters of Credit and any and
all other indebtedness or obligations of any and every kind owing by a
Credit Party to any of the Lenders hereunder to be due whereupon the
same shall be immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
the Credit Parties.
(c) Cash Collateral. Direct the Borrower to pay (and the
Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default under Section 9.1(f), it will
immediately pay) to the Agent additional cash, to be held by the Agent,
for the benefit of the Lenders, in a cash collateral account as
additional security for the LOC Obligations in respect of subsequent
drawings under all then outstanding Letters of Credit in an amount
equal to the maximum aggregate amount which may be drawn under all
Letters of Credits then outstanding.
(d) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents, including,
without limitation, all rights and remedies existing under the
Collateral Documents, all rights and remedies against a Guarantor and
all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations under Letters of Credit, all accrued
interest in respect thereof, all accrued and unpaid fees and other indebtedness
or obligations owing to the Lenders hereunder shall immediately become due and
payable without the giving of any notice or other action by the Agent or the
Lenders, which notice or other action is expressly waived by the Credit Parties.
SECTION 10
AGENCY PROVISIONS
10.1 APPOINTMENT.
Each Lender hereby designates and appoints NationsBank as Agent of such
Lender to act as specified herein and the other Credit Documents, and each such
Lender hereby authorizes the Agent, as the agent for such Lender, to take such
action on its behalf under the provisions of this Credit Agreement and the other
Credit Documents and to exercise such powers and perform such duties as are
expressly delegated by the terms hereof and of the other Credit Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere herein and in the other
Credit Documents, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein and therein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit
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Documents, or shall otherwise exist against the Agent. The provisions of this
Section are solely for the benefit of the Agent and the Lenders and no
Consolidated Party shall have any rights as a third party beneficiary of the
provisions hereof. In performing its functions and duties under this Credit
Agreement and the other Credit Documents, the Agent shall act solely as an agent
of the Lenders and does not assume and shall not be deemed to have assumed any
obligation or relationship of agency or trust with or for any Consolidated
Party.
10.2 DELEGATION OF DUTIES.
The Agent may execute any of its duties hereunder or under the other
Credit Documents by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
10.3 EXCULPATORY PROVISIONS.
Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection
herewith or in connection with any of the other Credit Documents (except for its
or such Person's own gross negligence or willful misconduct) or responsible in
any manner to any of the Lenders for any recitals, statements, representations
or warranties made by any of the Credit Parties contained herein or in any of
the other Credit Documents or in any certificate, report, document, financial
statement or other written or oral statement referred to or provided for in, or
received by the Agent under or in connection herewith or in connection with the
other Credit Documents, or enforceability or sufficiency therefor of any of the
other Credit Documents, or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Agent shall not be responsible to any
Lender for the effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Credit Agreement, or any of the other
Credit Documents or for any representations, warranties, recitals or statements
made herein or therein or made by any Credit Party in any written or oral
statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Agent to the Lenders or by or on behalf of the Credit
Parties to the Agent or any Lender or be required to ascertain or inquire as to
the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or the use of the Letters of Credit or of the existence or
possible existence of any Default or Event of Default or to inspect the
properties, books or records of the Consolidated Parties. The Agent is not
trustee for the Lenders and owes no fiduciary duty to the Lenders.
10.4 RELIANCE ON COMMUNICATIONS.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and
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upon advice and statements of legal counsel (including, without limitation,
counsel to any of the Credit Parties, independent accountants and other experts
selected by the Agent with reasonable care). The Agent may deem and treat the
Lenders as the owner of its interests hereunder for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Agent in accordance with Section 11.3(b). The Agent shall be
fully justified in failing or refusing to take any action under this Credit
Agreement or under any of the other Credit Documents unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder or under any
of the other Credit Documents in accordance with a request of the Required
Lenders (or to the extent specifically provided in Section 11.6, all the
Lenders) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders (including their successors and
assigns).
10.5 NOTICE OF DEFAULT.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or a Credit Party referring to the Credit
Document, describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Lenders.
10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates has
made any representations or warranties to it and that no act by the Agent or any
affiliate thereof hereinafter taken, including any review of the affairs of any
Consolidated Party, shall be deemed to constitute any representation or warranty
by the Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Credit
Parties and made its own decision to make its Loans hereunder and enter into
this Credit Agreement. Each Lender also represents that it will, independently
and without reliance upon the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Credit Agreement, and to make such investigation as it deems
necessary to inform itself as to the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Credit
Parties. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the
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business, operations, assets, property, financial or other conditions, prospects
or creditworthiness of the Credit Parties which may come into the possession of
the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
10.7 INDEMNIFICATION.
The Lenders agree to indemnify the Agent in its capacity as such (to
the extent not reimbursed by the Borrower and without limiting the obligation of
the Borrower to do so), ratably according to their respective Commitments (or if
the Commitments have expired or been terminated, in accordance with the
respective principal amounts of outstanding Loans and Participation Interest of
the Lenders), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including without limitation at
any time following payment in full of the Credit Party Obligations) be imposed
on, incurred by or asserted against the Agent in its capacity as such in any way
relating to or arising out of this Credit Agreement or the other Credit
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or willful
misconduct of the Agent. If any indemnity furnished to the Agent for any purpose
shall, in the opinion of the Agent, be insufficient or become impaired, the
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished; provided
that the Agent shall not be indemnified for any event caused by its gross
negligence or willful misconduct. The agreements in this Section shall survive
the payment of the Credit Party Obligations and all other amounts payable
hereunder and under the other Credit Documents.
10.8 AGENT IN ITS INDIVIDUAL CAPACITY.
The Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower or any other
Credit Party as though the Agent were not the Agent hereunder. With respect to
the Loans made and Letters of Credit issued and all obligations owing to it, the
Agent shall have the same rights and powers under this Credit Agreement as any
Lender and may exercise the same as though it were not the Agent, and the terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
10.9 SUCCESSOR AGENT.
The Agent may, at any time, resign upon 20 days written notice to the
Lenders. Upon any such resignation, the Required Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
the Required Lenders, and shall have accepted such appointment, within 45 days
after the notice of resignation, then the retiring Agent shall select a
successor Agent provided such successor is a Lender hereunder or a commercial
bank organized under the laws of the United States of America or of any State
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thereof and has a combined capital and surplus of at least $400,000,000. Upon
the acceptance of any appointment as the Agent hereunder by a successor, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations as the Agent, as
appropriate, under this Credit Agreement and the other Credit Documents and the
provisions of this Section 10.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Agent under this Credit
Agreement.
SECTION 11
MISCELLANEOUS
11.1 NOTICES.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) to the
number set out below, (c) the Business Day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address or telecopy numbers set forth on Schedule
11.1, or at such other address as such party may specify by written notice to
the other parties hereto.
11.2 RIGHT OF SET-OFF.
In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default and the commencement of remedies described in
Section 9.2, each Lender is authorized at any time and from time to time,
without presentment, demand, protest or other notice of any kind (all of which
rights being hereby expressly waived), to set-off and to appropriate and apply
any and all deposits (general or special) and any other indebtedness at any time
held or owing by such Lender (including, without limitation, branches, agencies
or Affiliates of such Lender wherever located) to or for the credit or the
account of any Credit Party against obligations and liabilities of such Credit
Party to the Lenders hereunder, under the Notes, the other Credit Documents or
otherwise, irrespective of whether the Agent or the Lenders shall have made any
demand hereunder and although such obligations, liabilities or claims, or any of
them, may be contingent or unmatured, and any such set-off shall be deemed to
have been made immediately upon the occurrence of an Event of Default even
though such charge is made or entered on the books of such Lender subsequent
thereto. The Credit Parties hereby agree that to the extent permitted by law any
Person purchasing a participation in the Loans and Commitments hereunder
pursuant to Section 11.3(c) or 3.10 may exercise all rights of set-off with
respect to its participation interest as fully as if such Person were a Lender
hereunder.
11.3 BENEFIT OF AGREEMENT.
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(a) Generally. This Credit Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided that no Credit Party may
assign and transfer any of its interests without the prior written
consent of the Lenders; and provided further that the rights of each
Lender to transfer, assign or grant participations in its rights and/or
obligations hereunder shall be limited as set forth below in
subsections (b) and (c) of this Section 11.3. Notwithstanding the above
(including anything set forth in subsections (b) and (c) of this
Section 11.3), nothing herein shall restrict, prevent or prohibit any
Lender from (A) pledging its Loans hereunder to a Federal Reserve Bank
in support of borrowings made by such Lender from such Federal Reserve
Bank, or (B) granting assignments or participations in such Lender's
Loans and/or Commitments hereunder to its parent company and/or to any
Affiliate of such Lender or to any existing Lender or Affiliate
thereof.
(b) Assignments. Each Lender may assign all or a portion of
its rights and obligations hereunder, pursuant to an assignment
agreement substantially in the form of Exhibit 11.3, to (i) any Lender,
or any Affiliate or Subsidiary of a Lender, or (ii) any other
commercial bank, financial institution or "accredited investor" (as
defined in Regulation D of the Securities and Exchange Commission)
reasonably acceptable to the Agent and, so long as no Default or Event
of Default has occurred and is continuing, the Borrower; provided that
any such assignment shall (i) unless to a Lender or an Affiliate of a
Lender, be in a minimum aggregate amount of $5,000,000 of the
Commitments and in integral multiples of $1,000,000 above such amount
(or the remaining amount of Commitments held by such Lender) and (ii)
be of a constant, not varying, percentage of all of the assigning
Lender's rights and obligations under the Commitment being assigned.
Any assignment hereunder shall be effective upon satisfaction of the
conditions set forth above and delivery to the Agent of a duly executed
assignment agreement together with a transfer fee of $3,500 payable to
the Agent for its own account. Upon the effectiveness of any such
assignment, the assignee shall become a "Lender" for all purposes of
this Credit Agreement and the other Credit Documents and, to the extent
of such assignment, the assigning Lender shall be relieved of its
obligations hereunder to the extent of the Loans and Commitment
components being assigned. Along such lines the Borrower agrees that
upon notice of any such assignment and surrender of the appropriate
Notes, it will promptly provide to the assigning Lender and to the
assignee separate promissory notes in the amount of their respective
interests substantially in the form of the original Notes (but with
notation thereon that it is given in substitution for and replacement
of the original Notes or any replacement notes thereof).
Notwithstanding the above, a Lender may assign all or a portion of its
Commitments to another Lender without the consent of the Borrower and
without regard to any minimum amount of such assignment.
By executing and delivering an assignment agreement in accordance with
this Section 11.3(b), the assigning Lender thereunder and the assignee
thereunder shall be deemed to confirm to and agree with each other and
the other parties hereto as follows: (i) such
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assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim
and the assignee warrants that it is an Eligible Assignee; (ii) except
as set forth in clause (i) above, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in
connection with this Credit Agreement, any of the other Credit
Documents or any other instrument or document furnished pursuant hereto
or thereto, or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, any of the
other Credit Documents or any other instrument or document furnished
pursuant hereto or thereto or the financial condition of any Credit
Party or the performance or observance by any Credit Party of any of
its obligations under this Credit Agreement, any of the other Credit
Documents or any other instrument or document furnished pursuant hereto
or thereto; (iii) such assignee represents and warrants that it is
legally authorized to enter into such assignment agreement; (iv) such
assignee confirms that it has received a copy of this Credit Agreement,
the other Credit Documents and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision
to enter into such assignment agreement; (v) such assignee will
independently and without reliance upon the Agent, such assigning
Lender or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Credit
Agreement and the other Credit Documents; (vi) such assignee appoints
and authorizes the Agent to take such action on its behalf and to
exercise such powers under this Credit Agreement or any other Credit
Document as are delegated to the Agent by the terms hereof or thereof,
together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with
their terms all the obligations which by the terms of this Credit
Agreement and the other Credit Documents are required to be performed
by it as a Lender.
(c) Participations. Each Lender may sell, transfer, grant or
assign participations in all or any part of such Lender's interests and
obligations hereunder; provided that (i) such selling Lender shall
remain a "Lender" for all purposes under this Credit Agreement (such
selling Lender's obligations under the Credit Documents remaining
unchanged) and the participant shall not constitute a Lender hereunder,
(ii) no such participant shall have, or be granted, rights to approve
any amendment or waiver relating to this Credit Agreement or the other
Credit Documents except to the extent any such amendment or waiver
would (A) reduce the principal of or rate of interest on or fees in
respect of any Loans in which the participant is participating or
increase any Commitments with respect thereto, (B) postpone the date
fixed for any payment of principal (including the extension of the
final maturity of any Loan or the date of any mandatory prepayment
pursuant to Section 2.2(d)), interest or fees in which the participant
is participating, or (C) release all or substantially all of the
collateral or guaranties (except as expressly provided in the Credit
Documents) supporting any of the Loans or Commitments in which the
participant is participating and (iii) sub-participations by the
participant (except to an Affiliate, parent company or Affiliate of a
parent company of the participant) shall be prohibited. In the case of
any such
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participation, the participant shall not have any rights under this
Credit Agreement or the other Credit Documents (the participant's
rights against the selling Lender in respect of such participation to
be those set forth in the participation agreement with such Lender
creating such participation) and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such
participation; provided, however, that such participant shall be
entitled to receive additional amounts under Section 3.16 to the same
extent that the Lender from which such participant acquired its
participation would be entitled to the benefit of such cost protection
provisions.
(d) Registration. The Agent, acting for this purpose solely on
behalf of the Borrower, shall maintain a register (the "Register") for
the recordation of the names and addresses of the Lenders and the
principal amount of the Loans owing to each Lender from time to time.
The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Lenders shall treat
each Person whose name is recorded in the Register as the owner of a
Loan or other obligation hereunder for all purposes of this Credit
Agreement and the other Credit Documents, notwithstanding notice to the
contrary. Any assignment of any Loan or other obligation hereunder
shall be effective only upon appropriate entries with respect thereto
being made in the Register. The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and
from time to time upon reasonable prior notice.
(e) NationsBank Minimum Hold. NationsBank hereby acknowledges
that it is its present intention, in absence of any Event of Default,
to retain a Commitment that is no less than the Commitment of any other
Lender.
11.4 NO WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of the Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between any Consolidated Party and the Agent
or any Lender shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and remedies
provided herein are cumulative and not exclusive of any rights or remedies which
the Agent or any Lender would otherwise have. No notice to or demand on any
Credit Party in any case shall entitle any Credit Party to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of the Agent or the Lenders to any other or further action in any
circumstances without notice or demand.
11.5 PAYMENT OF EXPENSES; INDEMNIFICATION.
The Credit Parties agree to: (a) pay all reasonable out-of-pocket
costs and expenses of (i) the Agent in connection with (A) the negotiation,
preparation, execution and delivery and administration of this Credit Agreement
and the other Credit Documents and the documents and instruments referred to
therein (including, without limitation, the reasonable fees and expenses of
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Moore & Van Allen, special counsel to the Agent and the fees and expenses of
counsel for the Agent in connection with collateral issues), and (B) any
amendment, waiver or consent relating hereto and thereto including, but not
limited to, any such amendments, waivers or consents resulting from or related
to any work-out, renegotiation or restructure relating to the performance by the
Credit Parties under this Credit Agreement and (ii) the Agent and the Lenders in
connection with (A) enforcement of the Credit Documents and the documents and
instruments referred to therein, including, without limitation, in connection
with any such enforcement, the reasonable fees and disbursements of counsel for
the Agent and each of the Lenders, and (B) any bankruptcy or insolvency
proceeding of a Credit Party and (b) indemnify the Agent and each Lender, its
officers, directors, employees, representatives and agents from and hold each of
them harmless against any and all losses, liabilities, claims, damages or
expenses incurred by any of them as a result of, or arising out of, or in any
way related to, or by reason of, any investigation, litigation or other
proceeding (whether or not the Agent or any Lender is a party thereto) related
to (i) the entering into and/or performance of any Credit Document or the use of
proceeds of any Loans (including other extensions of credit) hereunder or the
consummation of any other transactions contemplated in any Credit Document,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of gross negligence or willful
misconduct on the part of the Person to be indemnified), (ii) any Environmental
Claim and (iii) any claims for Non-Excluded Taxes.
11.6 AMENDMENTS, WAIVERS AND CONSENTS.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing and signed by the Required Lenders and the then Credit Parties; provided
that no such amendment, change, waiver, discharge or termination shall without
the consent of each Lender affected thereby,
(a) without the consent of each Lender affected thereby,
(i) extend the Maturity Date,
(ii) reduce the rate or extend the time of payment of interest
(other than as a result of waiving the applicability of any
post-default increase in interest rates) thereon or fees hereunder,
(iii) reduce or waive the principal amount of any Loan,
(iv) increase the Commitment of a Lender over the amount
thereof in effect (it being understood and agreed that a waiver of any
Default or Event of Default or mandatory reduction in the Commitments
shall not constitute a change in the terms of any Commitment of any
Lender),
(v) except as the result of or in connection with an Asset
Dissolution
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permitted by Section 8.5, release all or substantially all of the
Collateral securing the Credit Party Obligations hereunder,
(vi) except as the result of or in connection with a
dissolution, merger or disposition of a Subsidiary permitted under
Section 8.4, release the Borrower or substantially all of the other
Credit Parties from its obligations under the Credit Documents
(provided that the Agent may, without consent from any other Lender,
release any Guarantor that is sold or transferred in conformance with
Section 8.5),
(vii) amend, modify or waive any provision of this Section or
Section 3.5(a), 3.5(b)(i), 3.5(b)(ii), 3.8, 3.9, 3.10, 3.11, 3.12,
3.13, 3.14, 3.15, 3.16, 9.1(a), 11.2, 11.3 or 11.5,
(viii) reduce any percentage specified in, or otherwise
modify, the definition of Required Lenders or
(ix) consent to the assignment or transfer by the Borrower (or
substantially all of the other Credit Parties) of any of its rights and
obligations under (or in respect of) the Credit Documents except as
permitted thereby; and
(b) without the consent of the Agent, no provision of the second
paragraph of Section 2.1(c), Section 3.5(c) or Section 10 may be amended;
(c) without the consent of the Issuing Lender, no provision of Section
2.2 or Section 3.5(b)(iii) may be amended.
Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (x) each Lender is entitled to vote as
such Lender sees fit on any bankruptcy reorganization plan that affects the
Loans or the Letters of Credit, and each Lender acknowledges that the provisions
of Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent
provisions set forth herein and (y) the Required Lenders may consent to allow a
Credit Party to use cash collateral in the context of a bankruptcy or insolvency
proceeding.
11.7 COUNTERPARTS.
This Credit Agreement may be executed in any number of counterparts,
each of which where so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
11.8 PLEADINGS.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
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11.9 DEFAULTING LENDER.
Each Lender understands and agrees that if such Lender is a Defaulting
Lender then notwithstanding the provisions of Section 11.6 it shall not be
entitled to vote on any matter requiring the consent of the Required Lenders or
to object to any matter requiring the consent of all the Lenders adversely
affected thereby; provided, however, that all other benefits and obligations
under the Credit Documents shall apply to such Defaulting Lender.
11.10 SURVIVAL OF INDEMNIFICATION AND REPRESENTATIONS AND
WARRANTIES.
All indemnities set forth herein and all representations and
warranties made herein shall survive the execution and delivery of this Credit
Agreement, the making of the Loans, the issuance of the Letters of Credit and
the repayment of the Loans, LOC Obligations and other obligations and the
termination of the Commitments hereunder.
11.11 GOVERNING LAW; VENUE.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action or proceeding
with respect to this Credit Agreement or any other Credit Document may
be brought in the courts of the State of North Carolina, or of the
United States for the Western District of North Carolina, and, by
execution and delivery of this Credit Agreement, each Credit Party
hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of such courts. Each
Credit Party further irrevocably consents to the service of process out
of any of the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address for notices pursuant to Section 11.1,
such service to become effective 3 days after such mailing. Nothing
herein shall affect the right of a Lender to serve process in any other
manner permitted by law or to commence legal proceedings or to
otherwise proceed against a Credit Party in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Credit Agreement or any other Credit Document brought in the
courts referred to in subsection (a) hereof and hereby further
irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
11.12 WAIVER OF JURY TRIAL.
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TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS
CREDIT AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT
AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
11.13 TIME.
All references to time herein shall be references to Eastern Standard
Time or Eastern Daylight time, as the case may be, unless specified otherwise.
11.14 SEVERABILITY.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.15 ENTIRETY.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
11.16 BINDING EFFECT; TERMINATION OF THIS CREDIT AGREEMENT.
(a) This Credit Agreement shall become effective at such time
on or after the Closing Date when all of the conditions set forth in
Section 5.1 have been satisfied or waived by the Lenders and when it
shall have been executed by each Credit Party and the Agent, and the
Agent shall have received copies hereof (telefaxed or otherwise) which,
when taken together, bear the signatures of each Lender, and thereafter
this Credit Agreement shall be binding upon and inure to the benefit of
each Credit Party, the Agent and each Lender and their respective
successors and assigns.
(b) The Borrower and NationsBank each hereby agrees that, at
such time as this Credit Agreement shall have become effective pursuant
to the terms of subsection (a) above, (i) all of the promissory notes
executed by Anchor in connection with the Existing Credit Agreement
automatically shall be canceled and (ii) the security agreement
executed by Anchor in connection with the Existing Credit Agreement
automatically shall be canceled.
(c) The term of this Credit Agreement shall be until no Loans,
LOC Obligations or any other amounts payable hereunder or under any of
the other Credit
-106-
<PAGE> 107
Documents shall remain outstanding, no Letters of Credit shall be
outstanding, all of the Credit Party Obligations have been irrevocably
satisfied in full and all of the Commitments hereunder shall have
expired or been terminated.
11.17 CONFIDENTIALITY.
Each Lender agrees that it will use its reasonable best efforts to keep
confidential and to cause any representative designated under Section 7.11 to
keep confidential any non-public information from time to time supplied to it
under any Credit Document; provided, however, that nothing herein shall affect
the disclosure of any such information to (i) the extent such Lender in good
faith believes is required by statute, rule, regulation or judicial process,
(ii) counsel for such Lender or to its accountants, (iii) bank examiners or
auditors or comparable Persons, (iv) any affiliate of such Lender, (v) any other
Lender, or any assignee, transferee or participant, or any potential assignee,
transferee or participant, of all or any portion of any Lender's rights under
this Credit Agreement who is notified of the confidential nature of the
information and agrees to be bound by this provision or provisions reasonably
comparable hereto, or (vi) any other Person in connection with any litigation to
which any one or more of the Lenders is a party; and provided further that no
Lender shall have any obligation under this Section 11.17 to the extent any such
information becomes available on a non-confidential basis from a source other
than a Credit Party or that any information becomes publicly available other
than by a breach of this Section 11.17. Each Lender agrees it will use all
confidential information exclusively for the purpose of evaluating, monitoring,
selling, protecting or enforcing its Loans and other rights under the Credit
Documents. Without affecting any other rights of the Borrower and the Credit
Parties, each Lender acknowledges that the Borrower shall be entitled to seek
the remedies of injunction, specific performance and other equitable relief for
any breach of the provisions of this Section 11.17.
11.18 JUDGMENT CURRENCY.
(a) Each Credit Party's obligations under this Credit
Agreement to make payments in Dollars or in any available Available
Foreign Currency (the "Obligation Currency") shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed
in or converted into any currency other than the Obligation Currency,
except to the extent that such tender or recovery results in the
effective receipt by the Agent or a Lender of the full amount of the
Obligation Currency expressed to be payable to the Agent or such Lender
under this Credit Agreement.
(b) If there is a change in the rate of exchange prevailing
between the Judgment Currency Conversion Date and the date of actual
payment of the amount due, such amount payable by the applicable Credit
Party shall be reduced or increased, as applicable, such that the
amount paid in the Judgment Currency, when converted at the rate of
exchange prevailing on the date of payment, will produce the amount of
the Obligation Currency which could have been purchased with the amount
of Judgment Currency stipulated in the judgment or judicial award at
the rate of exchange prevailing on the Judgment Currency Conversion
Date.
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<PAGE> 108
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-108-
<PAGE> 109
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: MOLL INDUSTRIES, INC.,
a Delaware corporation
By: /s/ George T. Votis
Name: George T. Votis
Title: Chairman & CEO
GUARANTOR: ANCHOR HOLDINGS, INC.,
a Delaware corporation
By: /s/ George T. Votis
Name: George T. Votis
Title: Chairman & CEO
[Signatures continued]
109
<PAGE> 110
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
LENDERS: NATIONSBANK, N.A.,
individually in its capacity as a
Lender and in its capacity as Agent
By: /s/ Johns N. Ellington
Name: Johns N. Ellington
Title: Vice-President
<PAGE> 111
SCHEDULE 1.1A
COMMITMENT PERCENTAGES
<TABLE>
<CAPTION>
NAME OF LENDERS COMMITMENT PERCENTAGE DOLLAR AMOUNT
- --------------- --------------------- -------------
<S> <C> <C>
NationsBank, N.A. 100% $50,000,000
TOTAL: 100.00% $50,000,000
</TABLE>
<PAGE> 112
SCHEDULE 1.1B
EXISTING LETTERS OF CREDIT
<PAGE> 113
SCHEDULE 1.1C
CALCULATION OF MLA COST
The MLA Cost for any Foreign Currency Loan denominated in Pounds
Sterling made by any Lender is calculated by each Lender (and rounded upward, if
necessary, to four decimal places) as the rate resulting from the application of
the following formula:
XL + S(L - D) + F x 0.01 % per annum = MLA Cost
------------------------
100 - (X/S)
where on the day of application of the formula:
X is the percentage of Eligible Liabilities (in excess of any
stated minimum) by reference to which the relevant Lender is
required under or pursuant to the Act to maintain cash ratio
deposits with the Bank of England;
L is the percentage rate per annum at which sterling deposits
for the relevant period are offered by the relevant Lender to
leading banks in the London Interbank Market at or about 11:00
a.m. (London time) on that day.
F is the rate of charge payable by the relevant Lender to the
FSA pursuant to paragraph 2.02 or 2.03 (as the case may be) of
the Fees Regulations (but where for this purpose, the figure
at paragraph 2.02 b or 2.03 b (as the case may be) shall be
deemed to be zero) and expressed in pounds per pound sterling
1 million of the Fee Base of the relevant Lender.
S is the level of interest-bearing Special Deposits, expressed
as a percentage of Eligible Liabilities, which the relevant
Lender is required to maintain by the Bank of England (or
other United Kingdom governmental authorities or agencies);
and
D is the percentage rate per annum payable by the Bank of
England to the relevant Lender on Special Deposits.
(X, L, S and D are to be expressed in the formula as numbers and not as
percentages. A negative result obtained from subtracting D from L shall
be counted as zero.)
The MLA Cost attributable to a Foreign Currency Loan or other sum
denominated in Pounds Sterling for any period shall be calculated at or
about 11:00 a.m. (London time) on the first day of such period for the
duration of such period.
The determination of the MLA Cost in relation to any period shall in
the absence of manifest error, be conclusive and binding on the parties
hereto.
If there is any change in circumstance (including the imposition of
alternative or additional requirements) which in the reasonable opinion
of the Agent renders or will render the above formula (or any element
thereof, or any defined term used therein)
<PAGE> 114
inappropriate or inapplicable or the Agent otherwise determines that
the above formula is inappropriate, then the Agent, following notice to
the Borrower, shall be entitled to vary the same. Any such variation
shall, in the absence of manifest error, be conclusive and binding on
the parties and shall apply from the date specified in such notice.
For the purposes of this Schedule:
The terms Eligible Liabilities and Special Deposits shall bear the
meanings ascribed to them under or pursuant to the Act or by the
Bank of England (as may be appropriate), on the day of the
application of the formula.
Fee Base has the meaning ascribed to it for the purposes of, and
shall be calculated in accordance with, the Fees Regulations.
Fees Regulations means, as appropriate, either:
(a) the Banking Supervision (Fees) Regulations 1998; or
(b) such regulations as from time to time may be in force,
relating to the payment of fees for banking supervision in respect
of periods subsequent to 31 March 1999.
Any reference to a provision of any statute, directive, order or
regulation herein is a reference to that provision as amended or reenacted from
time to time.
<PAGE> 115
SCHEDULE 1.1D
EXISTING INVESTMENTS
<PAGE> 116
SCHEDULE 1.1E-1
EXISTING LIENS (EXCLUDING GEMINI)
<PAGE> 117
SCHEDULE 1.1E-2
EXISTING LIENS (GEMINI)
<PAGE> 118
SCHEDULE 5.1(d)(i)
FORM OF OPINION OF CHOATE, HALL & STEWART
<PAGE> 119
SCHEDULE 5.1(d)(ii)
FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP (U.S.)
<PAGE> 120
SCHEDULE 5.1(d)(ii)
FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP (FRANCE)
<PAGE> 121
SCHEDULE 5.1(d)(iv)
FORM OF OPINION OF GUNSTER, YOAKLEY, VALDES-FAULI & STEWART, P.A.
<PAGE> 122
SCHEDULE 11.1
ADDRESSES FOR NOTICE
NAME AND ADDRESS
if to any Credit Party:
Moll Industries, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
Attn: Phyllis Best
Chief Financial Officer
Telephone: (423) 450-5353
Facsimile: (423) 450-5379
with a copy to:
George T. Votis
President and CEO
GALT INDUSTRIES, INC.
767 Fifth Avenue, Suite 506
New York, NY 10153
Phone: (212) 758-0770
Fax: (212) 758-1336
if to the Agent:
NationsBank, N.A.
101 N. Tryon Street, 15th Floor
Charlotte, North Carolina 28202
Attn: Donna Cox
Telephone: (704) 386-8102
Facsimile: (704) 386-8694
<PAGE> 123
EXHIBIT 1.1A
FORM OF NOTICE OF BORROWING
NationsBank, N.A.,
as Agent for the Lenders
NC-001-15-04
Independence Center, 15th Floor
101 North Tryon Street
Charlotte 28255
Attention: Agency Services*
Ladies and Gentlemen:
The undersigned, MOLL INDUSTRIES, INC. (the "Borrower"), refers to the
Amended and Restated Credit Agreement dated as of June 26, 1998 (as amended,
modified, extended or restated from time to time, the "Credit Agreement"), among
the Borrower, the other Credit Parties party thereto, the Lenders party thereto
and NationsBank, N.A., as Agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. The Borrower hereby gives notice that it requests [Revolving Loan
advance pursuant to the provisions of Section 2.1 of the Credit Agreement]
[Foreign Currency Loan advance pursuant to the provisions of Section 2.3 of the
Credit Agreement], and in connection therewith sets forth below the terms on
which such Loan advance is requested to be made:
(A) Date of Borrowing
(which is a Business Day)
(B) Type of Borrowing
(Revolving or Foreign Currency)
(C) Applicable Available Foreign Currency
(D) Principal Amount of
Borrowing
(E) Interest rate basis
(F) Interest Period and the
last day thereof
*All original notices with respect to Foreign Currency Loans shall be sent to
the address set forth in Section 3.2(b) of the Credit Agreement for payments in
an Available Foreign Currency with a copy to the address set forth in Section
3.2(b) of the Credit Agreement for payments in Dollars.
<PAGE> 124
In accordance with the requirements of Section 5.2, the Borrower hereby
reaffirms the representations and warranties set forth in the Credit Agreement
as provided in subsection (b) of such Section, and confirms that the matters
referenced in subsections (c), (d), (e), (f) and (g) of such Section, are true
and correct. Without limiting the generality of the immediately preceding
sentence, the Borrower hereby represents to the Agent and each Lender in
connection with any Loan borrowing or Letter of Credit issuance that the
incurrence of the indebtedness represented by such Loan or Letter of Credit, as
the case may be, is permitted under Section 4.09 of the Senior Note Indenture.
Very truly yours,
MOLL INDUSTRIES, INC.
By:
Name:
Title:
<PAGE> 125
EXHIBIT 1.1B
FORM OF SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as
of June 26, 1998 among MOLL INDUSTRIES, INC., a Delaware corporation (the
"Borrower"), each Subsidiary Guarantor (individually a "Subsidiary Guarantor"
and collectively the "Subsidiary Guarantors"), MOLL INDUSTRIES, LLC, a Delaware
limited liability company ("M.I. LLC"), MOLL PLASTICS, LLC, a Delaware limited
liability company("M.P. LLC"; together with the Borrower, the Subsidiary
Guarantors and M.I. LLC, individually an "Obligor", and collectively the
"Obligors") which may hereafter execute a Joinder Agreement (as defined in the
Credit Agreement hereinafter referred to), and NATIONSBANK, N.A., in its
capacity as agent (in such capacity, the "Agent") for the lenders from time to
time party to the Credit Agreement described below (the "Lenders").
RECITALS
WHEREAS, pursuant to that certain Amended and Restated Credit
Agreement, dated as of the date hereof (as amended, modified, extended, renewed
or replaced from time to time, the "Credit Agreement"), among the Obligors,
Anchor Holdings, Inc., the Lenders and the Agent, the Lenders have agreed to
make Loans and issue Letters of Credit upon the terms and subject to the
conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue Letters of Credit under the Credit Agreement that the Obligors shall
have executed and delivered this Security Agreement to the Agent for the ratable
benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit
Agreement, and the following terms which are defined in the Uniform
Commercial Code on the date hereof are used herein as so defined:
Accounts, Deposit Accounts, Inventory and Proceeds. For purposes of
this Security Agreement, the term "Lender" shall include any Affiliate
of any Lender to which Hedging Obligations are owed by an Obligor.
(b) In addition, the following terms shall have the following
meanings:
"Secured Obligations": the collective reference to all of the
Credit Party
<PAGE> 126
Obligations, now existing or hereafter arising pursuant to the Credit
Documents, owing from the Borrower or any other Credit Party to any
Lender or the Agent, howsoever evidenced, created, incurred or
acquired, whether primary, secondary, direct, contingent, or joint and
several, including, without limitation, all liabilities arising under
Hedging Agreements and all obligations and liabilities incurred in
connection with collecting and enforcing the foregoing.
"Subsidiary Assets": (i) any and all of each Obligor's equity
ownership interests in any partnership or limited liability company
which is a direct or indirect Domestic Subsidiary of the Borrower on
Schedule 1(a) attached hereto or (ii) each Obligor's equity ownership
interests in Moll Plastics SARL, a French limited liability company,
listed on such Schedule 1(a) (collectively, the "LLCs"), including,
without limitation, (A) all related rights, title and interest to
participate in the operation or management of the LLCs and all its
rights to properties, assets, partnership interests and distributions
under the operating, partnership or other applicable organic agreement
in respect thereof (collectively, the "LLC Interests"), (B) all related
rights to receive dividends, distributions or such other payments
arising out of such operating, partnership or other applicable organic
agreement in respect of such Obligor's LLC Interests and (C) all
related General Intangibles arising out of or constituted by such
operating, partnership or other applicable organic agreement in respect
of such Obligor's LLC Interests.
"Trademark License": any agreement, written or oral, providing
for the grant by or to an Obligor of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule 1(b)
hereto.
"Trademarks": (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Schedule 1(b) hereto, and (b) all renewals
thereof.
2. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time, acceleration
or otherwise, of the Secured Obligations, each Obligor hereby grants to the
Agent, for the benefit of the Lenders, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Obligor
in and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "Collateral"):
(a) all Accounts;
(b) all Inventory;
<PAGE> 127
(c) all Trademarks;
(d) all Trademark Licenses;
(e) all actions of infringement, including the rights to sue
for and to recover and retain all damages and profits arising from past
infringements concerning any Trademarks or Trademark Licenses;
(f) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks, and related data processing software
(owned by such Obligor or in which (i) it has an interest and (ii) a
security interest may be granted) that at any time evidence or contain
information relating to any Collateral or are otherwise necessary or
helpful in the collection thereof or realization thereupon;
(g) all Subsidiary Assets;
(h) all cash and Cash Equivalents maintained on deposit with
the Agent; and
(i) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest created hereby in the
Collateral (i) constitutes continuing collateral security for all of the Secured
Obligations, whether now existing or hereafter arising and (ii) is not to be
construed as an assignment of any Trademarks or Trademark Licenses.
3. Provisions Relating to Accounts.
(a) Anything herein to the contrary notwithstanding, each of
the Obligors shall remain liable under each of the Accounts to observe
and perform all the material conditions and obligations to be observed
and performed by it thereunder so long as the applicable account party
is not in default in respect thereof, all in accordance with the terms
of any agreement giving rise to each such Account. Neither the Agent
nor any Lender shall have any obligation or liability under any Account
(or any agreement giving rise thereto) by reason of or arising out of
this Security Agreement or the receipt by the Agent or any Lender of
any payment relating to such Account pursuant hereto, nor shall the
Agent or any Lender be obligated in any manner to perform any of the
obligations of an Obligor under or pursuant to any Account (or any
agreement giving rise thereto), to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party under any
Account (or any agreement giving rise thereto), to present or file any
claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which
it may be entitled at any time or times.
<PAGE> 128
(b) Once during each calendar year or at any time after the
occurrence and during the continuation of an Event of Default, the
Agent shall have the right, but not the obligation, to (i) subject to
the terms of the immediately succeeding sentence, make test
verifications of the Accounts in any manner and through any medium that
it reasonably considers advisable, and the Obligors shall furnish all
such assistance and information as the Agent may require in connection
with such test verifications and (ii) upon written request, to have the
Obligors, at their own expense, cause independent public accountants or
others satisfactory to the Agent to furnish to the Agent reports
showing reconciliations, aging and test verifications of, and trial
balances for, the Accounts. The Agent in its own name or in the name of
others may communicate with account debtors on the Accounts to verify
with them to the Agent's satisfaction the existence, amount and terms
of any Accounts, provided that if no Event of Default is existing, the
Agent shall first obtain the consent of the Borrower (such consent not
to be unreasonably withheld).
4. Representations and Warranties. Each Obligor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Secured Obligations remain outstanding or any Credit Document is in effect
or any Letter of Credit shall remain outstanding, and until all of the
Commitments shall have been terminated:
(a) Chief Executive Office; Books & Records. Each Obligor's
chief executive office and chief place of business is (and for the
prior four months have been) located at the locations set forth on
Schedule 4(a) hereto, and each Obligor keeps its books and records at
such locations.
(b) Location of Collateral. The location of all Collateral
owned by each Obligor is as shown on Schedule 4(b) hereto.
(c) Ownership. Each Obligor is the legal and beneficial owner
of its Collateral and has the right to pledge, sell, assign or transfer
the same. Each Obligor's legal name is as shown in this Security
Agreement and no Obligor has in the past four months changed its name,
been party to a merger, consolidation or other change in structure or
used any tradename except in connection with the Transaction or as set
forth in Schedule 4(c) attached hereto.
(d) Security Interest/Priority. This Security Agreement
creates a valid security interest in favor of the Agent, for the
benefit of the Lenders, in the Collateral of such Obligor and, when
properly perfected by filing of Uniform Commercial Code financing
statements, shall constitute a valid perfected security interest in
such Collateral, to the extent such security can be perfected by filing
under the UCC, free and clear of all Liens except for Permitted Liens.
(e) Farm Products. None of the Collateral constitutes, or is
the Proceeds of, Farm Products.
(f) Accounts. (i) Each Account of the Obligors and the papers
and documents
<PAGE> 129
relating thereto are genuine and in all material respects what they
purport to be, (ii) each Account arises out of (A) a bona fide sale of
goods sold and delivered by such Obligor (or is in the process of being
delivered) or (B) services theretofore actually rendered by such
Obligor to, the account debtor named therein, (iii) no Account of an
Obligor is evidenced by any Instrument or Chattel Paper unless such
Instrument or Chattel Paper has been theretofore endorsed over and
delivered to the Agent and (iv) no surety bond was required or given in
connection with any Account of an Obligor or the contracts or purchase
orders out of which they arose.
(g) Inventory. No Inventory is held by an Obligor pursuant to
consignment, sale or return, sale on approval or similar arrangement.
(h) Trademarks.
(i) Schedule 1(b) hereto includes all
Trademarks and Trademark Licenses owned by the Obligors in
their own names as of the date hereof.
(ii) To the best of each Obligor's
knowledge, each Trademark of such Obligor is valid,
subsisting, unexpired, enforceable and has not been abandoned.
(iii) Except as set forth in Schedule 1(b)
hereto, none of the Trademarks are the subject of any
licensing or franchise agreement.
(iv) No holding, decision or judgment has
been rendered by any Governmental Authority which would limit,
cancel or question the validity of any Trademark.
(v) No action or proceeding is pending
seeking to limit, cancel or question the validity of any
Trademark, or which, if adversely determined, would have a
Material Adverse Effect.
(vi) All applications pertaining to the
Trademarks of each Obligor have been duly and properly filed,
and all registrations or letters pertaining to such Trademarks
have been duly and properly filed and issued, and all of such
Trademarks are valid and enforceable.
(vii) No Obligor has made any assignment or
agreement in conflict with the security interest in the
Trademarks of each Obligor hereunder.
5. Covenants. Each Obligor covenants that, so long as any of the
Secured Obligations remain outstanding or any Credit Document is in effect or
any Letter of Credit shall remain outstanding, and until all of the Commitments
shall have been terminated, such Obligor shall:
(a) Other Liens. Defend the Collateral against the claims and
demands of all
<PAGE> 130
other parties claiming an interest therein, keep the Collateral free
from all Liens, except for Permitted Liens, and not sell, exchange,
transfer, assign, lease or otherwise dispose of the Collateral or any
interest therein, except as permitted under the Credit Agreement.
(b) Preservation of Collateral. Keep the Collateral in good
order, condition and repair and not use the Collateral in violation of
the provisions of this Security Agreement or any other agreement
relating to the Collateral or any policy insuring the Collateral or any
applicable statute, law, bylaw, rule, regulation or ordinance.
(c) Instruments/Chattel Paper. If any amount payable under or
in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, immediately deliver such Instrument
or Chattel Paper to the Agent, duly indorsed in a manner satisfactory
to the Agent, to be held as Collateral pursuant to this Security
Agreement.
(d) Change in Location, etc. Not, without providing 30 days
prior written notice to the Agent and without filing such amendments to
any previously filed financing statements as the Agent may require, (a)
change the location of its chief executive office and chief place of
business from the locations set forth on Schedule 4(a) hereto, (b)
change the location of its Collateral from the locations set forth for
such Obligor on Schedule 4(b) hereto, or (c) except for transactions
expressly permitted by the Credit Agreement, change its name, be party
to a merger, consolidation or other change in structure or use any
tradename other than as set forth on Schedule 4(c) attached hereto.
(e) Inspection. Allow the Agent or its representatives to
visit and inspect the Collateral as set forth in Section 7.11 of the
Credit Agreement.
(f) Perfection of Security Interest. Execute and deliver to
the Agent such agreements, assignments or instruments (including
affidavits, notices, reaffirmations and amendments and restatements of
existing documents, as the Agent may reasonably request) and do all
such other things as the Agent may reasonably deem necessary or
appropriate (i) to assure to the Agent its security interests
hereunder, including (A) such financing statements (including renewal
statements) or amendments thereof or supplements thereto or other
instruments as the Agent may from time to time reasonably request in
order to perfect and maintain the security interests granted hereunder
in accordance with the UCC, (B) with regard to Trademarks, a Notice of
Grant of Security Interest in Trademarks for filing with the United
States Patent and Trademark Office in the form of Schedule 5(f)(i)
attached hereto, (ii) to consummate the transactions contemplated
hereby and (iii) to otherwise protect and assure the Agent of its
rights and interests hereunder. To that end, each Obligor agrees that
the Agent may file one or more financing statements disclosing the
Agent's security interest in any or all of the Collateral of such
Obligor without, to the extent permitted by law, such Obligor's
signature thereon, and further each Obligor also hereby irrevocably
makes, constitutes and appoints the Agent, its nominee or any other
person whom the Agent may designate, as such Obligor's attorney in fact
with full power and for the limited purpose to sign in the name of such
<PAGE> 131
Obligor any such financing statements, or amendments and supplements to
financing statements, renewal financing statements, notices or any
similar documents which in the Agent's reasonable discretion would be
necessary, appropriate or convenient in order to perfect and maintain
perfection of the security interests granted hereunder, such power,
being coupled with an interest, being and remaining irrevocable so long
as the Credit Agreement is in effect or any amounts payable thereunder
or under any other Credit Document, any Letter of Credit shall remain
outstanding, and until all of the Commitments thereunder shall have
terminated. Each Obligor hereby agrees that a carbon, photographic or
other reproduction of this Security Agreement or any such financing
statement is sufficient for filing as a financing statement by the
Agent without notice thereof to such Obligor wherever the Agent may in
its sole discretion desire to file the same. In the event for any
reason the law of any jurisdiction other than North Carolina becomes or
is applicable to the Collateral of any Obligor or any part thereof, or
to any of the Secured Obligations, such Obligor agrees to execute and
deliver all such instruments and to do all such other things as the
Agent in its sole discretion reasonably deems necessary or appropriate
to preserve, protect and enforce the security interests of the Agent
under the law of such other jurisdiction (and, if an Obligor shall fail
to do so promptly upon the request of the Agent, then the Agent may
execute any and all such requested documents on behalf of such Obligor
pursuant to the power of attorney granted hereinabove). If any
Collateral is in the possession or control of an Obligor's agents and
the Agent so requests, such Obligor agrees to notify such agents in
writing of the Agent's security interest therein and, upon the Agent's
request, instruct them to hold all such Collateral for the Lenders'
account and subject to the Agent's instructions.
(g) Treatment of Accounts. Not grant or extend the time for
payment of any Account, or compromise or settle any Account for less
than the full amount thereof, or release any person or property, in
whole or in part, from payment thereof, or allow any credit or discount
thereon, other than as normal and customary in the ordinary course of
an Obligor's business.
(h) New Trademarks. Promptly provide the Agent with (i) a
listing of all applications, if any, for new Trademarks (together with
a listing of the issuance of registrations or letters on present
applications), which new applications and issued registrations or
letters shall be subject to the terms and conditions hereunder, and
(ii) (A) with respect to Trademarks, a duly executed Notice of Security
Interest in Trademarks or (B) such other duly executed documents as the
Agent may request in a form acceptable to counsel for the Agent and
suitable for recording to evidence the security interest in the
Trademark which is the subject of such new application.
(i) Insurance. Insure the Collateral of such Obligor as set
forth in Section 7.6 of the Credit Agreement. All insurance proceeds
shall be subject to the security interest of the Agent hereunder.
6. Advances by Lenders. On failure of any Obligor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion,
<PAGE> 132
perform the same and in so doing may expend such sums as the Agent may
reasonably deem advisable in the performance thereof, including, without
limitation, the payment of any insurance premiums, the payment of any taxes, a
payment to obtain a release of a Lien or potential Lien, expenditures made in
defending against any adverse claim and all other expenditures which the Agent
or the Lenders may make for the protection of the security hereof or which may
be compelled to make by operation of law. All such sums and amounts so expended
shall be repayable by the Obligors on a joint and several basis promptly upon
timely notice thereof and demand therefor, shall constitute additional Secured
Obligations and shall bear interest from the date said amounts are expended at
the default rate specified in Section 3.1(b) of the Credit Agreement for
Revolving Loans that are Base Rate Loans. No such performance of any covenant or
agreement by the Agent or the Lenders on behalf of any Obligor, and no such
advance or expenditure therefor, shall relieve the Obligors of any default under
the terms of this Security Agreement or the other Credit Documents. The Lenders
may make any payment hereby authorized in accordance with any bill, statement or
estimate procured from the appropriate public office or holder of the claim to
be discharged without inquiry into the accuracy of such bill, statement or
estimate or into the validity of any tax assessment, sale, forfeiture, tax lien,
title or claim except to the extent such payment is being contested in good
faith by an Obligor in appropriate proceedings and against which adequate
reserves are being maintained in accordance with GAAP.
7. Events of Default.
The occurrence of an event which under the Credit Agreement would
constitute an Event of Default shall be an Event of Default hereunder (an "Event
of Default").
8. Remedies.
(a) General Remedies. Upon the occurrence of an Event of
Default and during continuation thereof, the Lenders shall have, in
addition to the rights and remedies provided herein, in the Credit
Documents or by law (including, but not limited to, the rights and
remedies set forth in the Uniform Commercial Code of the jurisdiction
applicable to the affected Collateral), the rights and remedies of a
secured party under the UCC (regardless of whether the UCC is the law
of the jurisdiction where the rights and remedies are asserted and
regardless of whether the UCC applies to the affected Collateral), and
further, the Agent may, with or without judicial process or the aid and
assistance of others, to the extent not prohibited by applicable law,
(i) enter on any premises on which any of the Collateral may be located
and, without resistance or interference by the Obligors, take
possession of the Collateral, (ii) dispose of any Collateral on any
such premises, (iii) require the Obligors to assemble and make
available to the Agent at the expense of the Obligors any Collateral at
any place and time designated by the Agent which is reasonably
convenient to both parties, (iv) remove any Collateral from any such
premises for the purpose of effecting sale or other disposition
thereof, and/or (v) without demand and without advertisement, notice,
hearing or process of law, all of which each of the Obligors hereby
waives to the fullest extent permitted by law, at any place and time or
times, sell and deliver any or all Collateral held by or for it
<PAGE> 133
at public or private sale, by one or more contracts, in one or more
parcels, for cash, upon credit or otherwise, at such prices and upon
such terms as the Agent deems advisable, in its sole discretion
(subject to any and all mandatory legal requirements). In addition to
all other sums due the Agent and the Lenders with respect to the
Secured Obligations, the Obligors shall pay the Agent and each of the
Lenders all reasonable documented costs and expenses incurred by the
Agent or any such Lender, including, but not limited to, reasonable
attorneys' fees and court costs, in obtaining or liquidating the
Collateral, in enforcing payment of the Secured Obligations, or in the
prosecution or defense of any action or proceeding by or against the
Agent or the Lenders or the Obligors concerning any matter arising out
of or connected with this Security Agreement, any Collateral or the
Secured Obligations, including, without limitation, any of the
foregoing arising in, arising under or related to a case under the
Bankruptcy Code. To the extent the rights of notice cannot be legally
waived hereunder, each Obligor agrees that any requirement of
reasonable notice shall be met if such notice is delivered to the
Borrower in accordance with the notice provisions of Section 11.1 of
the Credit Agreement at least 10 days before the time of sale or other
event giving rise to the requirement of such notice. The Agent and the
Lenders shall not be obligated to make any sale or other disposition of
the Collateral regardless of notice having been given. To the extent
permitted by law, any Lender may be a purchaser at any such sale. To
the extent permitted by applicable law, each of the Obligors hereby
waives all of its rights of redemption with respect to any such sale.
Subject to the provisions of applicable law, the Agent and the Lenders
may postpone or cause the postponement of the sale of all or any
portion of the Collateral by announcement at the time and place of such
sale, and such sale may, without further notice, to the extent
permitted by law, be made at the time and place to which the sale was
postponed, or the Agent and the Lenders may further postpone such sale
by announcement made at such time and place.
(b) Remedies relating to Accounts. Upon the occurrence of an
Event of Default and during the continuation thereof, whether or not
the Agent has exercised any or all of its rights and remedies
hereunder, (i) each Obligor will promptly upon request of the Agent
instruct all account debtors to remit all payments in respect of
Accounts to a mailing location selected by the Agent and (ii) the Agent
or its designee may notify any Obligor's customers and account debtors
that the Accounts of such Obligor have been assigned to the Agent or of
the Agent's security interest therein, and may (either in its own name
or in the name of an Obligor or both) demand, collect (including
without limitation by way of a lockbox arrangement), receive, take
receipt for, sell, sue for, compound, settle, compromise and give
acquittance for any and all amounts due or to become due on any
Account, and, in the Agent's discretion, file any claim or take any
other action or proceeding to protect and realize upon the security
interest of the Lenders in the Accounts. Each Obligor acknowledges and
agrees that the Proceeds of its Accounts remitted to or on behalf of
the Agent in accordance with the provisions hereof shall be solely for
the Agent's own convenience and that such Obligor shall not have any
right, title or interest in such Accounts or in any such other amounts
except as expressly provided herein. The Agent and the Lenders shall
have no liability or responsibility to any Obligor for acceptance of a
check, draft or other order for payment of money bearing
<PAGE> 134
the legend "payment in full" or words of similar import or any other
restrictive legend or endorsement or be responsible for determining the
correctness of any remittance. Each Obligor hereby agrees to indemnify
the Agent and the Lenders from and against all liabilities, damages,
losses, actions, claims, judgments, costs, expenses, charges and
reasonable attorneys' fees suffered or incurred by the Agent or the
Lenders because of the maintenance of the foregoing arrangements except
as relating to or arising out of the gross negligence or willful
misconduct of the Agent or a Lender or its officers, employees or
agents.
(c) Access. In addition to the rights and remedies hereunder,
upon the occurrence of an Event of Default and during the continuance
thereof, the Agent shall have the right to enter and remain upon the
various premises of the Obligors without cost or charge to the Agent,
and use the same, together with materials, supplies, books and records
of the Obligors for the purpose of collecting and liquidating the
Collateral, or for preparing for sale and conducting the sale of the
Collateral, whether by foreclosure, auction or otherwise. In addition,
the Agent may remove Collateral, or any part thereof, from such
premises and/or any records with respect thereto, in order to
effectively collect or liquidate such Collateral.
(d) Nonexclusive Nature of Remedies. Failure by the Agent or
the Lenders to exercise any right, remedy or option under this Security
Agreement, any other Credit Document or as provided by law, or any
delay by the Agent or the Lenders in exercising the same, shall not
operate as a waiver of any such right, remedy or option. No waiver
hereunder shall be effective unless it is in writing, signed by the
party against whom such waiver is sought to be enforced and then only
to the extent specifically stated, which in the case of the Agent or
the Lenders shall only be granted as provided herein. To the extent
permitted by law, neither the Agent, the Lenders, nor any party acting
as attorney for the Agent or the Lenders, shall be liable hereunder for
any acts or omissions or for any error of judgment or mistake of fact
or law other than their gross negligence or willful misconduct
hereunder. The rights and remedies of the Agents and the Lenders under
this Security Agreement shall be cumulative and not exclusive of any
other right or remedy which the Agent or the Lenders may have.
(e) Retention of Collateral. The Agent may, after providing
the notices required by Section 9-505(2) of the UCC or otherwise
complying with the requirements of applicable law of the relevant
jurisdiction, to the extent the Agent is in possession of any of the
Collateral, retain the Collateral in satisfaction of the Secured
Obligations. Unless and until the Agent shall have provided such
notices, however, the Agent shall not be deemed to have retained any
Collateral in satisfaction of any Secured Obligations for any reason.
(f) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which
the Agent or the Lenders are legally entitled, the Obligors shall be
jointly and severally liable for the deficiency, together with interest
thereon at the default rate specified in Section 3.1(b) of the Credit
<PAGE> 135
Agreement for Revolving Loans that are Base Rate Loans, together with
the costs of collection and the reasonable fees of any attorneys
employed by the Agent to collect such deficiency. Any surplus remaining
after the full payment and satisfaction of the Secured Obligations
shall be returned to the Obligors or to whomsoever a court of competent
jurisdiction shall determine to be entitled thereto.
9. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Obligor hereby designates and appoints the
Agent, on behalf of the Lenders, and each of its designees or agents,
as attorney-in-fact of such Obligor, irrevocably and with power of
substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuance of an Event of
Default:
(i) to demand, collect, settle, compromise, adjust,
give discharges and releases, all as the Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any
court for the purposes of collecting any Collateral and
enforcing any other right in respect thereof;
(iii) to defend, settle or compromise any action
brought and, in connection therewith, give such discharge or
release as the Agent may deem reasonably appropriate;
(iv) receive, open and dispose of mail addressed to
an Obligor and endorse checks, notes, drafts, acceptances,
money orders, bills of lading, warehouse receipts or other
instruments or documents evidencing payment, shipment or
storage of the goods giving rise to the Collateral of such
Obligor on behalf of and in the name of such Obligor, or
securing, or relating to such Collateral;
(v) sell, assign, transfer, make any agreement in
respect of, or otherwise deal with or exercise rights in
respect of, any Collateral or the goods or services which have
given rise thereto, as fully and completely as though the Bank
were the absolute owner thereof for all purposes;
(vi) adjust and settle claims under any insurance
policy relating thereto;
(vii) execute and deliver all assignments,
conveyances, statements, financing statements, renewal
financing statements, security agreements, affidavits, notices
and other agreements, instruments and documents that the Agent
may determine necessary in order to perfect and maintain the
security interests and liens granted in this Security
<PAGE> 136
Agreement and in order to fully consummate all of the
transactions contemplated therein;
(viii) institute any foreclosure proceedings that the
Agent may deem appropriate; and
(ix) do and perform all such other acts and things as
the Agent may reasonably deem to be necessary, proper or
convenient in connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Secured Obligations remain
outstanding, any Credit Document is in effect or any Letter of Credit
shall remain outstanding and (ii) until all of the Commitments shall
have been terminated. The Agent shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and
options expressly or implicitly granted to the Agent in this Security
Agreement, and shall not be liable for any failure to do so or any
delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in
its individual capacity or its capacity as attorney-in-fact except acts
or omissions resulting from its gross negligence or willful misconduct.
This power of attorney is conferred on the Agent solely to protect,
preserve and realize upon its security interest in the Collateral.
(b) Performance by the Agent of Obligations. If any Obligor
fails to perform any agreement or obligation contained herein, the
Agent itself may perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection
therewith shall be payable by the Obligors on a joint and several basis
pursuant to Section 11 hereof.
(c) The Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while
being held by the Agent hereunder, the Agent shall have no duty or
liability to preserve rights pertaining thereto, it being understood
and agreed that the Obligors shall be responsible for preservation of
all rights in the Collateral, and the Agent shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering the
surrender of it to the Obligors. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Agent accords its own property,
which shall be no less than the treatment employed by a reasonable and
prudent agent in the industry, it being understood that the Agent shall
not have responsibility for taking any necessary steps to preserve
rights against any parties with respect to any of the Collateral.
10. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Agent or
any of the Lenders in cash or its equivalent, will be applied in reduction of
the Secured Obligations in the order set forth in Section 3.8 of the Credit
<PAGE> 137
Agreement, and each Obligor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Agent shall have the continuing and exclusive right to apply and reapply any and
all such payments and proceeds in the Agent's sole discretion, notwithstanding
any entry to the contrary upon any of its books and records.
11. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Security
Agreement, or to take action or make a response in or with respect to any legal
or arbitral proceeding relating to this Security Agreement or relating to the
Collateral, or to protect the Collateral or exercise any rights or remedies
under this Security Agreement or with respect to the Collateral, then the
Obligors agree to promptly pay upon demand any and all such reasonable
documented costs and expenses of the Agent or the Lenders, all of which costs
and expenses shall constitute Secured Obligations hereunder.
12. Continuing Agreement.
(a) This Security Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long as any
of the Secured Obligations remain outstanding, any Credit Document is
in effect or any Letter of Credit shall remain outstanding, and until
all of the Commitments thereunder shall have terminated (other than any
obligations with respect to the indemnities and the representations and
warranties set forth in the Credit Documents). Upon such payment and
termination, this Security Agreement shall be automatically terminated
and the Agent and the Lenders shall, upon the request and at the
expense of the Obligors, forthwith release all of its liens and
security interests hereunder and shall execute and deliver all UCC
termination statements and/or other documents reasonably requested by
the Obligors evidencing such termination. Notwithstanding the foregoing
all releases and indemnities provided hereunder shall survive
termination of this Security Agreement.
(b) This Security Agreement shall continue to be effective or
be automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Secured Obligations is
rescinded or must otherwise be restored or returned by the Agent or any
Lender as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had
not been made; provided that in the event payment of all or any part of
the Secured Obligations is rescinded or must be restored or returned,
all reasonable costs and expenses (including without limitation any
reasonable legal fees and disbursements) incurred by the Agent or any
Lender in defending and enforcing such reinstatement shall be deemed to
be included as a part of the Secured Obligations.
13. Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 11.6 of the Credit Agreement.
14. Successors in Interest. This Security Agreement shall create a
continuing security
<PAGE> 138
interest in the Collateral and shall be binding upon each Obligor, its
successors and assigns and shall inure, together with the rights and remedies of
the Agent and the Lenders hereunder, to the benefit of the Agent and the Lenders
and their successors and permitted assigns; provided, however, that none of the
Obligors may assign its rights or delegate its duties hereunder without the
prior written consent of each Lender or the Required Lenders, as required by the
Credit Agreement. To the fullest extent permitted by law, each Obligor hereby
releases the Agent and each Lender, and its successors and assigns, from any
liability for any act or omission relating to this Security Agreement or the
Collateral, except for any liability arising from the gross negligence or
willful misconduct of the Agent, or such Lender, or its officers, employees or
agents.
15. Notices. All notices required or permitted to be given under this
Security Agreement shall be in conformance with Section 11.1 of the Credit
Agreement.
16. Counterparts. This Security Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
17. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
18. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
Any legal action or proceeding with respect to this Security Agreement
may be brought in the courts of the State of North Carolina (including
Mecklenburg County, North Carolina) or of the United States for the
Western District of North Carolina, and, by execution and delivery of
this Security Agreement, each Obligor hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally,
the jurisdiction of such courts. Each Obligor further irrevocably
consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the delivery of copies
thereof in accordance with the notice provisions of Section 11.1 of the
Credit Agreement. Nothing herein shall affect the right of the Agent to
serve process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against any Obligor in any other
jurisdiction.
(b) Each Obligor hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Security Agreement
<PAGE> 139
brought in the courts referred to in subsection (a) hereof and hereby
further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
19. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE PARTIES TO THIS SECURITY AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
20. Severability. If any provision of any of the Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
21. Entirety. This Security Agreement and the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
22. Survival. All representations and warranties of the Obligors
hereunder shall survive the execution and delivery of this Security Agreement
and the other Credit Documents, the delivery of the Notes and the making of the
Loans and the issuance of the Letters of Credit under the Credit Agreement.
23. Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Agent and the
Lenders shall have the right to proceed against such other property, guarantee
or endorsement upon the occurrence of any Event of Default, and the Agent and
the Lenders have the right, in their sole discretion, to determine which rights,
security, liens, security interests or remedies the Agent and the Lenders shall
at any time pursue, relinquish, subordinate, modify or take with respect
thereto, without in any way modifying or affecting any of them or any of the
Agent's and the Lenders' rights or the Secured Obligations under this Security
Agreement, under any other of the Credit Documents.
24. Joint and Several Obligations of Obligors.
(a) Each of the Obligors is accepting joint and several
liability hereunder in consideration of the financial accommodation to
be provided by the Lenders under the Credit Agreement, for the mutual
benefit, directly and indirectly, of each of the Obligors and in
consideration of the undertakings of each of the Obligors to accept
joint and several liability for the obligations of each of them.
<PAGE> 140
(b) Each of the Obligors jointly and severally hereby
irrevocably and unconditionally accepts, not merely as a surety but
also as a co-debtor, joint and several liability with the other
Obligors with respect to the payment and performance of all of the
Secured Obligations arising under this Security Agreement and the other
Credit Documents, it being the intention of the parties hereto that all
the Obligations shall be the joint and several obligations of each of
the Obligors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained
herein or in any other of the Credit Documents, to the extent the
obligations of a Subsidiary Guarantor shall be adjudicated to be
invalid or unenforceable for any reason (including, without limitation,
because of any applicable state or federal law relating to fraudulent
conveyances or transfers) then the obligations of each Subsidiary
Guarantor hereunder shall be limited to the maximum amount that is
permissible under applicable law (whether federal or state and
including, without limitation, the Bankruptcy Code).
25. Moll Plastics SARL. Each party hereto acknowledges that the
provisions of this Security Agreement shall govern in respect the pledge of
shares of Moll Plastics SARL only to the extent that such provisions do not
contradict the provisions of that certain Contrat De Nontissement De Parts
Sociales dated as of June 26, 1998 among M.I. LLC, M.P. LLC and the Agent.
26. Rights of Required Lenders. All rights of the Agent hereunder, if
not exercised by the Agent, may be exercised by the Required Lenders.
[remainder of page intentionally left blank]
<PAGE> 141
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
MOLL INDUSTRIES, INC.,
a Delaware corporation
By: /s/ George T. Votis
Name: George T. Votis
Title: Chairman & CEO
MOLL INDUSTRIES, LLC,
a Delaware limited liability
By: /s/ George T. Votis
Name: George T. Votis
Title: Chairman & CEO of
Moll Industries, Inc. Manager
MOLL PLASTICS, LLC,
a Delaware limited liability
By: /s/ George T. Votis
Name: George T. Votis
Title: Manager
Accepted and agreed to in Charlotte, North Carolina as of the date
first above written.
NATIONSBANK, N.A., as Agent
By: /s/ Johns N. Ellington
Name: Johns N. Ellington
Title: Vice-President
<PAGE> 142
SCHEDULE 1(a)
DESCRIPTION OF PARTNERSHIP AND LIMITED LIABILITY COMPANY INTERESTS
(a) All equity ownership interests in any partnership or limited liability
company which is a direct or indirect Domestic Subsidiary of the
Borrower, including without limitation the interests in Moll Industries
LLC and Moll Plastics LLC listed below; and
(b) the equity ownership interests in Moll Plastics SARL, a French limited
liability company, listed below (such equity ownership interests
constituting approximately 65% of the total equity ownership interests
in Moll Plastics SARL as of the Closing Date).
<TABLE>
<CAPTION>
- --------------------------------------- ------------------------------- ---------------------------------
ISSUER OWNER(S) NUMBER OF SHARES
- --------------------------------------- ------------------------------- ---------------------------------
<S> <C> <C>
Moll Industries, LLC Moll Industries, Inc. 100%
- --------------------------------------- ------------------------------- ---------------------------------
Moll Plastics, LLC Moll Industries, LLC 100%
- --------------------------------------- ------------------------------- ---------------------------------
7 shares owned by Moll
Industries, LLC and 320 shares
Moll Plastics SARL Moll Industries, LLC and Moll owned by Moll Plastics, LLC
Plastics, LLC
- --------------------------------------- ------------------------------- ---------------------------------
</TABLE>
<PAGE> 143
SCHEDULE 1(b)
TRADEMARKS
<PAGE> 144
SCHEDULE 4(a)
CHIEF EXECUTIVE OFFICE
<PAGE> 145
SCHEDULE 4(b)
LOCATIONS OF COLLATERAL
<PAGE> 146
SCHEDULE 4(c)
MERGERS, CONSOLIDATIONS, CHANGE IN STRUCTURE OR USE OF TRADENAMES
None
<PAGE> 147
SCHEDULE 5(f)(i)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
TRADEMARKS
United States Patent and Trademark Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
June 26, 1998 (the "Security Agreement") by and among the Obligors party thereto
(each an "Obligor" and collectively, the "Obligors") and NationsBank, N.A., as
Agent (the "Agent") for the lenders referenced therein (the "Lenders"), the
undersigned Obligor has granted a continuing security interest in and continuing
lien upon, the trademarks and trademark applications shown below to the Agent
for the ratable benefit of the Lenders:
TRADEMARKS
Description of Trademark Date of
Trademark No. Item
Trademark
Trademark Applications
Trademark Description of Trademark Date of Trademark
Applications No. Applied For Applications
<PAGE> 148
The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest in the foregoing trademarks and
trademark applications (i) may only be terminated in accordance with the terms
of the Security Agreement and (ii) is not to be construed as an assignment of
any trademark or trademark application.
Very truly yours,
--------------------
[Obligor]
By:
Name:
Title:
Acknowledged and Accepted:
NATIONSBANK, N.A., as Agent
By:
Name:
Title:
<PAGE> 149
EXHIBIT 2.1(d)
FORM OF REVOLVING NOTE
$____________ June 26, 1998
FOR VALUE RECEIVED, MOLL INDUSTRIES, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
____________, its successors and permitted assigns (the "Lender"), at the office
of NationsBank, N.A., as Agent (the "Agent"), at Independence Center, 15th
Floor, 101 North Tryon Street (or at such other place or places as the holder
hereof may designate in writing to the Borrower pursuant to the terms of the
Credit Agreement), at the times set forth in the Amended and Restated Credit
Agreement dated as of the date hereof among the Borrower, the other Credit
Parties party thereto, the Lenders party thereto and the Agent (as it may be
amended, modified, extended or restated from time to time, the "Credit
Agreement"; all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Credit Agreement), but in no event later than the
Maturity Date, in Dollars and in immediately available funds, the principal
amount of _________ MILLION DOLLARS ($_________) or, if less than such principal
amount, the aggregate unpaid principal amount of all Revolving Loans made by the
Lender to the Borrower pursuant to the Credit Agreement, and to pay interest
from the date hereof on the unpaid principal amount hereof, in like money, at
said office, on the dates and at the rates provided in the Credit Agreement.
Upon the occurrence and during the continuance of an Event of Default,
the balance outstanding hereunder shall bear interest as provided in Section
3.1(b) of the Credit Agreement. Further, in the event the payment of all sums
due hereunder is accelerated under the terms of the Credit Agreement, this
Revolving Note, and all other indebtedness of the Borrower to the Lender shall
become immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Borrower.
In the event this Revolving Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees.
This Revolving Note and the Revolving Loans evidenced hereby may be
assigned only in accordance with Section 11.3 of the Credit Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Revolving Note to be
duly executed by its duly authorized officer as of the day and year first above
written.
MOLL INDUSTRIES, INC.
By:
Name:
Title:
<PAGE> 150
EXHIBIT 2.1(d)
FORM OF FOREIGN CURRENCY NOTE
June 26, 1998
FOR VALUE RECEIVED, MOLL INDUSTRIES, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
____________, its successors and permitted assigns (the "Lender"), at the place
and account specified in Section 3.2(b) of the Credit Agreement (or at such
other place or places as the holder hereof may designate in writing to the
Borrower pursuant to the terms of the Credit Agreement), at the times set forth
in the Amended and Restated Credit Agreement dated as of the date hereof among
the Borrower, the other Credit Parties party thereto, the Lenders party thereto
and the Agent (as it may be amended, modified, extended or restated from time to
time, the "Credit Agreement"; all capitalized terms not otherwise defined herein
shall have the meanings set forth in the Credit Agreement), but in no event
later than the Maturity Date, in Dollars and in immediately available funds, the
aggregate unpaid principal amount of all Foreign Currency Loans made by the
Lender to the Borrower pursuant to the Credit Agreement, and to pay interest
from the date hereof on the unpaid principal amount hereof, in like money, at
said office, on the dates and at the rates provided in the Credit Agreement.
Upon the occurrence and during the continuance of an Event of Default,
the balance outstanding hereunder shall bear interest as provided in Section
3.1(b) of the Credit Agreement. Further, in the event the payment of all sums
due hereunder is accelerated under the terms of the Credit Agreement, this
Foreign Currency Note, and all other indebtedness of the Borrower to the Lender
shall become immediately due and payable, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the Borrower.
In the event this Foreign Currency Note is not paid when due at any
stated or accelerated maturity, the Borrower agrees to pay, in addition to the
principal and interest, all costs of collection, including reasonable attorneys'
fees.
This Foreign Currency Note and the Foreign Currency Loans evidenced
hereby may be assigned only in accordance with Section 11.3 of the Credit
Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Foreign Currency Note
to be duly executed by its duly authorized officer as of the day and year first
above written.
MOLL INDUSTRIES, INC.
By:
Name:
Title:
<PAGE> 151
EXHIBIT 2.4
FORM OF NOTICE OF CONTINUATION/CONVERSION
NationsBank, N.A.,
as Agent for the Lenders
NC-001-15-04
Independence Center, 15th Floor
101 North Tryon Street
Charlotte, North Carolina 28255
Attention: Agency Services
Ladies and Gentlemen:
The undersigned, MOLL INDUSTRIES, INC. (the "Borrower"), refers to the
Amended and Restated Credit Agreement dated as of June 26, 1998 (as amended,
modified, extended or restated from time to time, the "Credit Agreement"), among
the Borrower, the other Credit Parties party thereto, the Lenders party thereto
and NationsBank, N.A., as Agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. The Borrower hereby gives notice pursuant to Section 2.4 of the
Credit Agreement that it requests a continuation or conversion of a Loan
outstanding under the Credit Agreement, and in connection therewith sets forth
below the terms on which such continuation or conversion is requested to be
made:
(A) Date of Continuation or Conversion
(which is the last day of the
the applicable Interest Period)
(B) Type of Loan (Revolving or Foreign Currency)
(C) Applicable Available Foreign Currency
(D) Principal Amount of
Continuation or Conversion
(E) Interest rate basis
(F) Interest Period and the
last day thereof
In accordance with the requirements of Section 5.2, the Borrower hereby
reaffirms the representations and warranties set forth in the Credit Agreement
as provided in subsection (b) of such Section, and confirms that the matters
referenced in subsections (c), (d), (e), (f) and (g) of such Section, are true
and correct.
Very truly yours,
MOLL INDUSTRIES, INC.
By:
Name:
Title:
<PAGE> 152
EXHIBIT 7.1(c)
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
For the fiscal quarter ended _________________, ____.
I, ______________________, [Title] of MOLL INDUSTRIES, INC. (the
"Borrower") hereby certify that, to the best of my knowledge and belief, with
respect to that certain Amended and Restated Credit Agreement dated as of June
26, 1998 (as amended, modified, extended or restated from time to time, the
"Credit Agreement"; all of the defined terms in the Credit Agreement are
incorporated herein by reference) among the Borrower, the other Credit Parties
party thereto, the Lenders party thereto and NationsBank, N.A., as Agent:
a. The company-prepared financial statements which accompany this
certificate are true and correct in all material respects and have been prepared
in accordance with GAAP applied on a consistent basis, subject to changes
resulting from normal year-end audit adjustments.
b. Since ___________ (the date of the last similar certification, or, if
none, the Closing Date) no Default or Event of Default has occurred and is
continuing under the Credit Agreement; and
Delivered herewith are detailed calculations demonstrating compliance by the
Credit Parties with the financial covenants contained in Section 7.12 of the
Credit Agreement as of the end of the fiscal period referred to above.
This ______ day of ___________, ____.
MOLL INDUSTRIES, INC.
By:
Name:
Title:
<PAGE> 153
Attachment to Officer's Certificate
COMPUTATION OF FINANCIAL COVENANTS
<PAGE> 154
EXHIBIT 7.1(d)
FORM OF BORROWING BASE REPORT
<PAGE> 155
EXHIBIT 7.13
FORM OF JOINDER AGREEMENT
THIS JOINDER AGREEMENT (the "Agreement"), dated as of _____________,
____, is by and between _____________________, a ___________________ (the
"Subsidiary"), and NATIONSBANK, N.A., in its capacity as Agent under that
certain Amended and Restated Credit Agreement (as it may be amended, modified,
extended or restated from time to time, the "Credit Agreement"), dated as of
June 26, 1998 , by and among Moll Industries, Inc., a Delaware corporation (the
"Borrower"), the other Credit Parties party thereto, the Lenders party thereto
and NationsBank, N.A., as Agent. All of the defined terms in the Credit
Agreement are incorporated herein by reference.
The Credit Parties are required by Section 7.13 of the Credit Agreement
to cause the Subsidiary to become a "Guarantor".
Accordingly, the Subsidiary hereby agrees as follows with the Agent, for
the benefit of the Lenders:
[1. If the Subsidiary is a Designated Subsidiary, the Subsidiary hereby
acknowledges, agrees and confirms that, by its execution of this Agreement, the
Subsidiary will be deemed to be a party to the Credit Agreement and a
"Guarantor" for all purposes of the Credit Agreement, and shall have all of the
obligations of a Guarantor thereunder as if it had executed the Credit
Agreement. The Subsidiary hereby ratifies, as of the date hereof, and agrees to
be bound by, all of the terms, provisions and conditions applicable to the
Guarantors contained in the Credit Agreement. Without limiting the generality of
the foregoing terms of this paragraph 1, the Subsidiary hereby, jointly and
severally together with the other Guarantors, guarantees to each Lender and the
Agent, as provided in Section 4 of the Credit Agreement, the prompt payment and
performance of the Borrower's Obligations in full when due (whether at stated
maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in
accordance with the terms thereof. Notwithstanding anything to the contrary set
forth in this Section 1, if the Subsidiary is a Foreign Subsidiary of the
Borrower, this Joinder Agreement shall provide that the obligations of the
Subsidiary under the Credit Agreement and the other Credit Documents shall be
limited to the extent necessary to cause such obligations to be in compliance
with the laws of the Subsidiary's jurisdiction of incorporation.]
[2. If the Subsidiary is a direct or indirect Domestic Subsidiary of the
Borrower, the Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Security Agreement and an "Obligor" for all purposes of the Security Agreement,
and shall have all of the obligations of an Obligor thereunder as if it had
executed the Security Agreement. The Subsidiary hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions and conditions
applicable to the Obligors contained in the Security Agreement. Without limiting
the generality of the
<PAGE> 156
foregoing terms of this paragraph 2, the Subsidiary hereby grants to the Agent,
for the benefit of the Lenders, a continuing security interest in, and a right
of set off against, any and all right, title and interest of the Subsidiary in
and to the Collateral (as such term is defined in Section 2 of the Security
Agreement) of the Subsidiary. The Subsidiary hereby represents and warrants to
the Agent that:
(i)
The Subsidiary's chief executive office and chief place of business are
(and for the prior four months have been) located at the locations set
forth in Schedule 1 attached hereto and the Subsidiary keeps its books
and records at such locations.
(ii)
The type of Collateral owned by the Subsidiary and the location of all
Collateral owned by the Subsidiary is as shown on Schedule 2 attached
hereto.
(iii)
The Subsidiary's legal name is as shown in this Agreement and the
Subsidiary has not changed its name, been party to a merger,
consolidation or other change in structure or used any tradenames
except as set forth in Schedule 3 attached hereto.
(iv)
The trademarks listed on Schedule 4 attached hereto constitute all of
the registrations and applications for the trademarks owned by the
Subsidiary.]
3.
The Subsidiary hereby waives acceptance by the Agent and the Lenders of
the guaranty by the Subsidiary under Section 4 of the Credit Agreement
upon the execution of this Agreement by the Subsidiary.
4.
This Agreement 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 contract.
5.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of North Carolina.
<PAGE> 157
IN WITNESS WHEREOF, the Subsidiary has caused this Joinder Agreement to
be duly executed by its authorized officers, and the Agent, for the benefit of
the Lenders, has caused the same to be accepted by its authorized officer, as of
the day and year first above written.
[SUBSIDIARY]
By:
Name:
Title:
Acknowledged and accepted:
NATIONSBANK, N.A., as Agent
By:
Name:
Title:
<PAGE> 158
EXHIBIT 11.3
FORM OF ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT AND ACCEPTANCE dated as of _______________, ____ is
entered into between ________________ ("Assignor") and ____________________
("Assignee").
Reference is made to the Amended and Restated Credit Agreement dated as
of June 26, 1998 , as amended and modified from time to time thereafter (the
"Credit Agreement") among Moll Industries, Inc., the other Credit Parties party
thereto, the Lenders party thereto and NationsBank, N.A., as Agent. Terms
defined in the Credit Agreement are used herein with the same meanings.
1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor,
effective as of the Effective Date set forth below, the interests set forth
below (the "Assigned Interest") in the Assignor's rights and obligations under
the Credit Agreement, including, without limitation, the interests set forth
below in the Commitments and outstanding Loans of the Assignor on the effective
date of the assignment designated below (the "Effective Date"), together with
unpaid fees accrued on the assigned Commitments to the Effective Date and unpaid
interest accrued on the assigned Loans to the Effective Date. Each of the
Assignor and the Assignee hereby makes and agrees to be bound by all the
representations, warranties and agreements set forth in Section 11.3(b) of the
Credit Agreement, a copy of which has been received by the Assignee. From and
after the Effective Date (i) the Assignee, if it is not already a Lender under
the Credit Agreement, shall be a party to and be bound by the provisions of the
Credit Agreement and, to the extent of the interests purchased and assumed by
the Assignee under this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent of
the interests sold and assigned by the Assignor under this Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Credit Agreement.
2. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of North Carolina.
3. Terms of Assignment
(a)
Date of Assignment:
(b)
Legal Name of Assignor:
(c)
Legal Name of Assignee:
<PAGE> 159
(d)
Effective Date of Assignment:
Commitment Percentage Assigned (expressed as
a percentage set forth to at least 8
decimals) %
(f)
Commitment Percentage of Assignee
after giving effect to this Assignment and Acceptance as of the
Effective Date (set forth to at least 8 decimals) %
(g)
Commitment Percentage of Assignor after giving effect
to this Assignment and Acceptance as of the Effective
Date (set forth to at least 8 decimals) %
(h)
Revolving Committed Amount
as of Effective Date $_____________
(i)
Dollar Amount of Assignor's Commitment Percentage
as of the Effective Date (the amount set forth in (h)
multiplied by the percentage set forth in (g)) $_____________
(j)
Dollar Amount of Assignee's
Commitment Percentage as of
the Effective Date (the amount
set forth in (h) multiplied by
the percentage set forth in (f)) $_____________
(k)
Total Revolving Loans outstanding
as of Effective Date $_____________
(l)
Principal Amount of Revolving
Loans assigned on Effective
Date (the amount set forth
in (k) multiplied by the
percentage set forth in (f)) $_____________
(m)
Total Foreign Currency Loans
outstanding as of Effective Date $_____________
(n)
Principal Amount of Foreign
<PAGE> 160
<TABLE>
<S> <C>
Currency Loans assigned on
Effective Date (the amount
set forth in (l) multiplied
by the percentage set forth in (f)) $_____________
</TABLE>
4. This Assignment and Acceptance shall be effective only upon consent of the
Borrower and the Agent, if applicable, delivery to the Agent of this Assignment
and Acceptance together with the transfer fee payable pursuant to Section
11.3(b) in connection herewith and recordation in the Register pursuant to
Section 11.3(d) of the terms hereof.
This Assignment and Acceptance may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Assignment and Acceptance to
produce or account for more than one such counterpart.
[The remainder of this page has been left blank intentionally.]
<PAGE> 161
The terms set forth above are hereby agreed to:
____________________, as Assignor
By:
Name:
Title:
_____________________, as Assignee
By:
Name:
Title:
Notice address of Assignee:
((Assignee))
--------------------------
--------------------------
--------------------------
Attn: _____________________
Telephone: (___) ________
Telecopy: (___) ________
CONSENTED TO (IF REQUIRED BY THE TERMS OF SECTION 11.3(b)):
NATIONSBANK, N.A.,
as Agent
By:
Name:
Title:
MOLL INDUSTRIES, INC.
By:
Name:
Title:
<PAGE> 1
EXHIBIT 4.13
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 (collectively, the "Guarantors") 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)
<PAGE> 2
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 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) 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 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.
2
<PAGE> 3
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS SUBSTITUTE NOTE GUARANTEE.
[Signature on following page]
3
<PAGE> 4
MOLL S.P.R.L.
By: /s/ Jean-Jacques de Boissieu
_____________________________
Authorized Signatory
Executed on August 14, 1998
4
<PAGE> 1
EXHIBIT 4.15
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as
of June 26, 1998 among MOLL INDUSTRIES, INC., a Delaware corporation (the
"Borrower"), each Subsidiary Guarantor (individually a "Subsidiary Guarantor"
and collectively the "Subsidiary Guarantors"), MOLL INDUSTRIES, LLC, a Delaware
limited liability company ("M.I. LLC"), MOLL PLASTICS, LLC, a Delaware limited
liability company("M.P. LLC"; together with the Borrower, the Subsidiary
Guarantors and M.I. LLC, individually an "Obligor", and collectively the
"Obligors") which may hereafter execute a Joinder Agreement (as defined in the
Credit Agreement hereinafter referred to), and NATIONSBANK, N.A., in its
capacity as agent (in such capacity, the "Agent") for the lenders from time to
time party to the Credit Agreement described below (the "Lenders").
RECITALS
WHEREAS, pursuant to that certain Amended and Restated Credit
Agreement, dated as of the date hereof (as amended, modified, extended, renewed
or replaced from time to time, the "Credit Agreement"), among the Obligors,
Anchor Holdings, Inc., the Lenders and the Agent, the Lenders have agreed to
make Loans and issue Letters of Credit upon the terms and subject to the
conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue Letters of Credit under the Credit Agreement that the Obligors shall
have executed and delivered this Security Agreement to the Agent for the ratable
benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit
Agreement, and the following terms which are defined in the Uniform
Commercial Code on the date hereof are used herein as so defined:
Accounts, Deposit Accounts, Inventory and Proceeds. For purposes of
this Security Agreement, the term "Lender" shall include any Affiliate
of any Lender to which Hedging Obligations are owed by an Obligor.
(b) In addition, the following terms shall have the following
meanings:
<PAGE> 2
"Secured Obligations": the collective reference to all of the
Credit Party Obligations, now existing or hereafter arising pursuant to
the Credit Documents, owing from the Borrower or any other Credit Party
to any Lender or the Agent, howsoever evidenced, created, incurred or
acquired, whether primary, secondary, direct, contingent, or joint and
several, including, without limitation, all liabilities arising under
Hedging Agreements and all obligations and liabilities incurred in
connection with collecting and enforcing the foregoing.
"Subsidiary Assets": (i) any and all of each Obligor's equity
ownership interests in any partnership or limited liability company
which is a direct or indirect Domestic Subsidiary of the Borrower on
Schedule 1(a) attached hereto or (ii) each Obligor's equity ownership
interests in Moll Plastics SARL, a French limited liability company,
listed on such Schedule 1(a) (collectively, the "LLCs"), including,
without limitation, (A) all related rights, title and interest to
participate in the operation or management of the LLCs and all its
rights to properties, assets, partnership interests and distributions
under the operating, partnership or other applicable organic agreement
in respect thereof (collectively, the "LLC Interests"), (B) all related
rights to receive dividends, distributions or such other payments
arising out of such operating, partnership or other applicable organic
agreement in respect of such Obligor's LLC Interests and (C) all
related General Intangibles arising out of or constituted by such
operating, partnership or other applicable organic agreement in respect
of such Obligor's LLC Interests.
"Trademark License": any agreement, written or oral, providing
for the grant by or to an Obligor of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule 1(b)
hereto.
"Trademarks": (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Schedule 1(b) hereto, and (b) all renewals
thereof.
2. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time, acceleration
or otherwise, of the Secured Obligations, each Obligor hereby grants to the
Agent, for the benefit of the Lenders, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Obligor
in and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "Collateral"):
(a) all Accounts;
(b) all Inventory;
-2-
<PAGE> 3
(c) all Trademarks;
(d) all Trademark Licenses;
(e) all actions of infringement, including the rights to
sue for and to recover and retain all damages and
profits arising from past infringements concerning
any Trademarks or Trademark Licenses;
(f) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks, and
related data processing software (owned by such
Obligor or in which (i) it has an interest and (ii) a
security interest may be granted) that at any time
evidence or contain information relating to any
Collateral or are otherwise necessary or helpful in
the collection thereof or realization thereupon;
(g) all Subsidiary Assets;
(h) all cash and Cash Equivalents maintained on deposit
with the Agent; and
(i) to the extent not otherwise included, all Proceeds
and products of any and all of the foregoing.
The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest created hereby in the
Collateral (i) constitutes continuing collateral security for all of the Secured
Obligations, whether now existing or hereafter arising and (ii) is not to be
construed as an assignment of any Trademarks or Trademark Licenses.
3. Provisions Relating to Accounts.
(a) Anything herein to the contrary notwithstanding, each of
the Obligors shall remain liable under each of the Accounts to observe
and perform all the material conditions and obligations to be observed
and performed by it thereunder so long as the applicable account party
is not in default in respect thereof, all in accordance with the terms
of any agreement giving rise to each such Account. Neither the Agent
nor any Lender shall have any obligation or liability under any Account
(or any agreement giving rise thereto) by reason of or arising out of
this Security Agreement or the receipt by the Agent or any Lender of
any payment relating to such Account pursuant hereto, nor shall the
Agent or any Lender be obligated in any manner to perform any of the
obligations of an Obligor under or pursuant to any Account (or any
agreement giving rise thereto), to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party under any
Account (or any agreement giving rise thereto), to present or file any
claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which
it may be entitled at any time or times.
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(b) Once during each calendar year or at any time after the
occurrence and during the continuation of an Event of Default, the
Agent shall have the right, but not the obligation, to (i) subject to
the terms of the immediately succeeding sentence, make test
verifications of the Accounts in any manner and through any medium that
it reasonably considers advisable, and the Obligors shall furnish all
such assistance and information as the Agent may require in connection
with such test verifications and (ii) upon written request, to have the
Obligors, at their own expense, cause independent public accountants or
others satisfactory to the Agent to furnish to the Agent reports
showing reconciliations, aging and test verifications of, and trial
balances for, the Accounts. The Agent in its own name or in the name of
others may communicate with account debtors on the Accounts to verify
with them to the Agent's satisfaction the existence, amount and terms
of any Accounts, provided that if no Event of Default is existing, the
Agent shall first obtain the consent of the Borrower (such consent not
to be unreasonably withheld).
4. Representations and Warranties. Each Obligor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Secured Obligations remain outstanding or any Credit Document is in effect
or any Letter of Credit shall remain outstanding, and until all of the
Commitments shall have been terminated:
(a) Chief Executive Office; Books & Records. Each Obligor's
chief executive office and chief place of business is (and for the
prior four months have been) located at the locations set forth on
Schedule 4(a) hereto, and each Obligor keeps its books and records at
such locations.
(b) Location of Collateral. The location of all Collateral
owned by each Obligor is as shown on Schedule 4(b) hereto.
(c) Ownership. Each Obligor is the legal and beneficial owner
of its Collateral and has the right to pledge, sell, assign or transfer
the same. Each Obligor's legal name is as shown in this Security
Agreement and no Obligor has in the past four months changed its name,
been party to a merger, consolidation or other change in structure or
used any tradename except in connection with the Transaction or as set
forth in Schedule 4(c) attached hereto.
(d) Security Interest/Priority. This Security Agreement
creates a valid security interest in favor of the Agent, for the
benefit of the Lenders, in the Collateral of such Obligor and, when
properly perfected by filing of Uniform Commercial Code financing
statements, shall constitute a valid perfected security interest in
such Collateral, to the extent such security can be perfected by filing
under the UCC, free and clear of all Liens except for Permitted Liens.
(e) Farm Products. None of the Collateral constitutes, or is
the Proceeds of, Farm Products.
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<PAGE> 5
(f) Accounts. (i) Each Account of the Obligors and the papers
and documents relating thereto are genuine and in all material respects
what they purport to be, (ii) each Account arises out of (A) a bona
fide sale of goods sold and delivered by such Obligor (or is in the
process of being delivered) or (B) services theretofore actually
rendered by such Obligor to, the account debtor named therein, (iii) no
Account of an Obligor is evidenced by any Instrument or Chattel Paper
unless such Instrument or Chattel Paper has been theretofore endorsed
over and delivered to the Agent and (iv) no surety bond was required or
given in connection with any Account of an Obligor or the contracts or
purchase orders out of which they arose.
(g) Inventory. No Inventory is held by an Obligor pursuant to
consignment, sale or return, sale on approval or similar arrangement.
(h) Trademarks.
(i) Schedule 1(b) hereto includes all
Trademarks and Trademark Licenses owned by the Obligors in
their own names as of the date hereof.
(ii) To the best of each Obligor's
knowledge, each Trademark of such Obligor is valid,
subsisting, unexpired, enforceable and has not been abandoned.
(iii) Except as set forth in Schedule 1(b)
hereto, none of the Trademarks are the subject of any
licensing or franchise agreement.
(iv) No holding, decision or judgment has
been rendered by any Governmental Authority which would limit,
cancel or question the validity of any Trademark.
(v) No action or proceeding is pending
seeking to limit, cancel or question the validity of any
Trademark, or which, if adversely determined, would have a
Material Adverse Effect.
(vi) All applications pertaining to the
Trademarks of each Obligor have been duly and properly filed,
and all registrations or letters pertaining to such Trademarks
have been duly and properly filed and issued, and all of such
Trademarks are valid and enforceable.
(vii) No Obligor has made any assignment or
agreement in conflict with the security interest in the
Trademarks of each Obligor hereunder.
5. Covenants. Each Obligor covenants that, so long as any of the
Secured Obligations remain outstanding or any Credit Document is in effect or
any Letter of Credit shall remain outstanding, and until all of the Commitments
shall have been terminated, such Obligor shall:
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<PAGE> 6
(a) Other Liens. Defend the Collateral against the claims and
demands of all other parties claiming an interest therein, keep the
Collateral free from all Liens, except for Permitted Liens, and not
sell, exchange, transfer, assign, lease or otherwise dispose of the
Collateral or any interest therein, except as permitted under the
Credit Agreement.
(b) Preservation of Collateral. Keep the Collateral in good
order, condition and repair and not use the Collateral in violation of
the provisions of this Security Agreement or any other agreement
relating to the Collateral or any policy insuring the Collateral or any
applicable statute, law, bylaw, rule, regulation or ordinance.
(c) Instruments/Chattel Paper. If any amount payable under or
in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, immediately deliver such Instrument
or Chattel Paper to the Agent, duly indorsed in a manner satisfactory
to the Agent, to be held as Collateral pursuant to this Security
Agreement.
(d) Change in Location, etc. Not, without providing 30 days
prior written notice to the Agent and without filing such amendments to
any previously filed financing statements as the Agent may require, (a)
change the location of its chief executive office and chief place of
business from the locations set forth on Schedule 4(a) hereto, (b)
change the location of its Collateral from the locations set forth for
such Obligor on Schedule 4(b) hereto, or (c) except for transactions
expressly permitted by the Credit Agreement, change its name, be party
to a merger, consolidation or other change in structure or use any
tradename other than as set forth on Schedule 4(c) attached hereto.
(e) Inspection. Allow the Agent or its representatives to
visit and inspect the Collateral as set forth in Section 7.11 of the
Credit Agreement.
(f) Perfection of Security Interest. Execute and deliver to
the Agent such agreements, assignments or instruments (including
affidavits, notices, reaffirmations and amendments and restatements of
existing documents, as the Agent may reasonably request) and do all
such other things as the Agent may reasonably deem necessary or
appropriate (i) to assure to the Agent its security interests
hereunder, including (A) such financing statements (including renewal
statements) or amendments thereof or supplements thereto or other
instruments as the Agent may from time to time reasonably request in
order to perfect and maintain the security interests granted hereunder
in accordance with the UCC, (B) with regard to Trademarks, a Notice of
Grant of Security Interest in Trademarks for filing with the United
States Patent and Trademark Office in the form of Schedule 5(f)(i)
attached hereto, (ii) to consummate the transactions contemplated
hereby and (iii) to otherwise protect and assure the Agent of its
rights and interests hereunder. To that end, each Obligor agrees that
the Agent may file one or more financing statements disclosing the
Agent's security interest in any or all of the Collateral of such
Obligor without, to the extent permitted by law, such Obligor's
signature thereon, and further each Obligor also hereby irrevocably
makes, constitutes and appoints the Agent, its nominee or any other
person whom the Agent may designate, as such Obligor's attorney in fact
with full power and for
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<PAGE> 7
the limited purpose to sign in the name of such Obligor any such
financing statements, or amendments and supplements to financing
statements, renewal financing statements, notices or any similar
documents which in the Agent's reasonable discretion would be
necessary, appropriate or convenient in order to perfect and maintain
perfection of the security interests granted hereunder, such power,
being coupled with an interest, being and remaining irrevocable so long
as the Credit Agreement is in effect or any amounts payable thereunder
or under any other Credit Document, any Letter of Credit shall remain
outstanding, and until all of the Commitments thereunder shall have
terminated. Each Obligor hereby agrees that a carbon, photographic or
other reproduction of this Security Agreement or any such financing
statement is sufficient for filing as a financing statement by the
Agent without notice thereof to such Obligor wherever the Agent may in
its sole discretion desire to file the same. In the event for any
reason the law of any jurisdiction other than North Carolina becomes or
is applicable to the Collateral of any Obligor or any part thereof, or
to any of the Secured Obligations, such Obligor agrees to execute and
deliver all such instruments and to do all such other things as the
Agent in its sole discretion reasonably deems necessary or appropriate
to preserve, protect and enforce the security interests of the Agent
under the law of such other jurisdiction (and, if an Obligor shall fail
to do so promptly upon the request of the Agent, then the Agent may
execute any and all such requested documents on behalf of such Obligor
pursuant to the power of attorney granted hereinabove). If any
Collateral is in the possession or control of an Obligor's agents and
the Agent so requests, such Obligor agrees to notify such agents in
writing of the Agent's security interest therein and, upon the Agent's
request, instruct them to hold all such Collateral for the Lenders'
account and subject to the Agent's instructions.
(g) Treatment of Accounts. Not grant or extend the time for
payment of any Account, or compromise or settle any Account for less
than the full amount thereof, or release any person or property, in
whole or in part, from payment thereof, or allow any credit or discount
thereon, other than as normal and customary in the ordinary course of
an Obligor's business.
(h) New Trademarks. Promptly provide the Agent with (i) a
listing of all applications, if any, for new Trademarks (together with
a listing of the issuance of registrations or letters on present
applications), which new applications and issued registrations or
letters shall be subject to the terms and conditions hereunder, and
(ii) (A) with respect to Trademarks, a duly executed Notice of Security
Interest in Trademarks or (B) such other duly executed documents as the
Agent may request in a form acceptable to counsel for the Agent and
suitable for recording to evidence the security interest in the
Trademark which is the subject of such new application.
(i) Insurance. Insure the Collateral of such Obligor as set
forth in Section 7.6 of the Credit Agreement. All insurance proceeds
shall be subject to the security interest of the Agent hereunder.
6. Advances by Lenders. On failure of any Obligor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion,
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<PAGE> 8
perform the same and in so doing may expend such sums as the Agent may
reasonably deem advisable in the performance thereof, including, without
limitation, the payment of any insurance premiums, the payment of any taxes, a
payment to obtain a release of a Lien or potential Lien, expenditures made in
defending against any adverse claim and all other expenditures which the Agent
or the Lenders may make for the protection of the security hereof or which may
be compelled to make by operation of law. All such sums and amounts so expended
shall be repayable by the Obligors on a joint and several basis promptly upon
timely notice thereof and demand therefor, shall constitute additional Secured
Obligations and shall bear interest from the date said amounts are expended at
the default rate specified in Section 3.1(b) of the Credit Agreement for
Revolving Loans that are Base Rate Loans. No such performance of any covenant or
agreement by the Agent or the Lenders on behalf of any Obligor, and no such
advance or expenditure therefor, shall relieve the Obligors of any default under
the terms of this Security Agreement or the other Credit Documents. The Lenders
may make any payment hereby authorized in accordance with any bill, statement or
estimate procured from the appropriate public office or holder of the claim to
be discharged without inquiry into the accuracy of such bill, statement or
estimate or into the validity of any tax assessment, sale, forfeiture, tax lien,
title or claim except to the extent such payment is being contested in good
faith by an Obligor in appropriate proceedings and against which adequate
reserves are being maintained in accordance with GAAP.
7. Events of Default.
The occurrence of an event which under the Credit Agreement would
constitute an Event of Default shall be an Event of Default hereunder (an "Event
of Default").
8. Remedies.
(a) General Remedies. Upon the occurrence of an Event of
Default and during continuation thereof, the Lenders shall have, in
addition to the rights and remedies provided herein, in the Credit
Documents or by law (including, but not limited to, the rights and
remedies set forth in the Uniform Commercial Code of the jurisdiction
applicable to the affected Collateral), the rights and remedies of a
secured party under the UCC (regardless of whether the UCC is the law
of the jurisdiction where the rights and remedies are asserted and
regardless of whether the UCC applies to the affected Collateral), and
further, the Agent may, with or without judicial process or the aid and
assistance of others, to the extent not prohibited by applicable law,
(i) enter on any premises on which any of the Collateral may be located
and, without resistance or interference by the Obligors, take
possession of the Collateral, (ii) dispose of any Collateral on any
such premises, (iii) require the Obligors to assemble and make
available to the Agent at the expense of the Obligors any Collateral at
any place and time designated by the Agent which is reasonably
convenient to both parties, (iv) remove any Collateral from any such
premises for the purpose of effecting sale or other disposition
thereof, and/or (v) without demand and without advertisement, notice,
hearing or process of law, all of which each of the Obligors hereby
waives to the fullest extent permitted by law, at any place and time or
times, sell and deliver any or all Collateral held by or for it at
public or private sale, by one or more contracts, in one or more
parcels, for cash, upon credit or otherwise, at such prices and upon
such terms as the Agent deems
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<PAGE> 9
advisable, in its sole discretion (subject to any and all mandatory
legal requirements). In addition to all other sums due the Agent and
the Lenders with respect to the Secured Obligations, the Obligors shall
pay the Agent and each of the Lenders all reasonable documented costs
and expenses incurred by the Agent or any such Lender, including, but
not limited to, reasonable attorneys' fees and court costs, in
obtaining or liquidating the Collateral, in enforcing payment of the
Secured Obligations, or in the prosecution or defense of any action or
proceeding by or against the Agent or the Lenders or the Obligors
concerning any matter arising out of or connected with this Security
Agreement, any Collateral or the Secured Obligations, including,
without limitation, any of the foregoing arising in, arising under or
related to a case under the Bankruptcy Code. To the extent the rights
of notice cannot be legally waived hereunder, each Obligor agrees that
any requirement of reasonable notice shall be met if such notice is
delivered to the Borrower in accordance with the notice provisions of
Section 11.1 of the Credit Agreement at least 10 days before the time
of sale or other event giving rise to the requirement of such notice.
The Agent and the Lenders shall not be obligated to make any sale or
other disposition of the Collateral regardless of notice having been
given. To the extent permitted by law, any Lender may be a purchaser at
any such sale. To the extent permitted by applicable law, each of the
Obligors hereby waives all of its rights of redemption with respect to
any such sale. Subject to the provisions of applicable law, the Agent
and the Lenders may postpone or cause the postponement of the sale of
all or any portion of the Collateral by announcement at the time and
place of such sale, and such sale may, without further notice, to the
extent permitted by law, be made at the time and place to which the
sale was postponed, or the Agent and the Lenders may further postpone
such sale by announcement made at such time and place.
(b) Remedies relating to Accounts. Upon the occurrence of an
Event of Default and during the continuation thereof, whether or not
the Agent has exercised any or all of its rights and remedies
hereunder, (i) each Obligor will promptly upon request of the Agent
instruct all account debtors to remit all payments in respect of
Accounts to a mailing location selected by the Agent and (ii) the Agent
or its designee may notify any Obligor's customers and account debtors
that the Accounts of such Obligor have been assigned to the Agent or of
the Agent's security interest therein, and may (either in its own name
or in the name of an Obligor or both) demand, collect (including
without limitation by way of a lockbox arrangement), receive, take
receipt for, sell, sue for, compound, settle, compromise and give
acquittance for any and all amounts due or to become due on any
Account, and, in the Agent's discretion, file any claim or take any
other action or proceeding to protect and realize upon the security
interest of the Lenders in the Accounts. Each Obligor acknowledges and
agrees that the Proceeds of its Accounts remitted to or on behalf of
the Agent in accordance with the provisions hereof shall be solely for
the Agent's own convenience and that such Obligor shall not have any
right, title or interest in such Accounts or in any such other amounts
except as expressly provided herein. The Agent and the Lenders shall
have no liability or responsibility to any Obligor for acceptance of a
check, draft or other order for payment of money bearing the legend
"payment in full" or words of similar import or any other restrictive
legend or endorsement or be responsible for determining the correctness
of any remittance. Each Obligor hereby agrees to indemnify
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<PAGE> 10
the Agent and the Lenders from and against all liabilities, damages,
losses, actions, claims, judgments, costs, expenses, charges and
reasonable attorneys' fees suffered or incurred by the Agent or the
Lenders because of the maintenance of the foregoing arrangements except
as relating to or arising out of the gross negligence or willful
misconduct of the Agent or a Lender or its officers, employees or
agents.
(c) Access. In addition to the rights and remedies hereunder,
upon the occurrence of an Event of Default and during the continuance
thereof, the Agent shall have the right to enter and remain upon the
various premises of the Obligors without cost or charge to the Agent,
and use the same, together with materials, supplies, books and records
of the Obligors for the purpose of collecting and liquidating the
Collateral, or for preparing for sale and conducting the sale of the
Collateral, whether by foreclosure, auction or otherwise. In addition,
the Agent may remove Collateral, or any part thereof, from such
premises and/or any records with respect thereto, in order to
effectively collect or liquidate such Collateral.
(d) Nonexclusive Nature of Remedies. Failure by the Agent or
the Lenders to exercise any right, remedy or option under this Security
Agreement, any other Credit Document or as provided by law, or any
delay by the Agent or the Lenders in exercising the same, shall not
operate as a waiver of any such right, remedy or option. No waiver
hereunder shall be effective unless it is in writing, signed by the
party against whom such waiver is sought to be enforced and then only
to the extent specifically stated, which in the case of the Agent or
the Lenders shall only be granted as provided herein. To the extent
permitted by law, neither the Agent, the Lenders, nor any party acting
as attorney for the Agent or the Lenders, shall be liable hereunder for
any acts or omissions or for any error of judgment or mistake of fact
or law other than their gross negligence or willful misconduct
hereunder. The rights and remedies of the Agents and the Lenders under
this Security Agreement shall be cumulative and not exclusive of any
other right or remedy which the Agent or the Lenders may have.
(e) Retention of Collateral. The Agent may, after providing
the notices required by Section 9-505(2) of the UCC or otherwise
complying with the requirements of applicable law of the relevant
jurisdiction, to the extent the Agent is in possession of any of the
Collateral, retain the Collateral in satisfaction of the Secured
Obligations. Unless and until the Agent shall have provided such
notices, however, the Agent shall not be deemed to have retained any
Collateral in satisfaction of any Secured Obligations for any reason.
(f) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which
the Agent or the Lenders are legally entitled, the Obligors shall be
jointly and severally liable for the deficiency, together with interest
thereon at the default rate specified in Section 3.1(b) of the Credit
Agreement for Revolving Loans that are Base Rate Loans, together with
the costs of collection and the reasonable fees of any attorneys
employed by the Agent to collect such deficiency. Any surplus remaining
after the full payment and satisfaction of the Secured Obligations
shall be
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<PAGE> 11
returned to the Obligors or to whomsoever a court of competent
jurisdiction shall determine to be entitled thereto.
9. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Obligor hereby designates and appoints the
Agent, on behalf of the Lenders, and each of its designees or agents,
as attorney-in-fact of such Obligor, irrevocably and with power of
substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuance of an Event of
Default:
(i) to demand, collect, settle, compromise, adjust,
give discharges and releases, all as the Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any
court for the purposes of collecting any Collateral and
enforcing any other right in respect thereof;
(iii) to defend, settle or compromise any action
brought and, in connection therewith, give such discharge or
release as the Agent may deem reasonably appropriate;
(iv) receive, open and dispose of mail addressed to
an Obligor and endorse checks, notes, drafts, acceptances,
money orders, bills of lading, warehouse receipts or other
instruments or documents evidencing payment, shipment or
storage of the goods giving rise to the Collateral of such
Obligor on behalf of and in the name of such Obligor, or
securing, or relating to such Collateral;
(v) sell, assign, transfer, make any agreement in
respect of, or otherwise deal with or exercise rights in
respect of, any Collateral or the goods or services which have
given rise thereto, as fully and completely as though the Bank
were the absolute owner thereof for all purposes;
(vi) adjust and settle claims under any insurance
policy relating thereto;
(vii) execute and deliver all assignments,
conveyances, statements, financing statements, renewal
financing statements, security agreements, affidavits, notices
and other agreements, instruments and documents that the Agent
may determine necessary in order to perfect and maintain the
security interests and liens granted in this Security
Agreement and in order to fully consummate all of the
transactions contemplated therein;
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<PAGE> 12
(viii) institute any foreclosure proceedings that the
Agent may deem appropriate; and
(ix) do and perform all such other acts and things as
the Agent may reasonably deem to be necessary, proper or
convenient in connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Secured Obligations remain
outstanding, any Credit Document is in effect or any Letter of Credit
shall remain outstanding and (ii) until all of the Commitments shall
have been terminated. The Agent shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and
options expressly or implicitly granted to the Agent in this Security
Agreement, and shall not be liable for any failure to do so or any
delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in
its individual capacity or its capacity as attorney-in-fact except acts
or omissions resulting from its gross negligence or willful misconduct.
This power of attorney is conferred on the Agent solely to protect,
preserve and realize upon its security interest in the Collateral.
(b) Performance by the Agent of Obligations. If any Obligor
fails to perform any agreement or obligation contained herein, the
Agent itself may perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection
therewith shall be payable by the Obligors on a joint and several basis
pursuant to Section 11 hereof.
(c) The Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while
being held by the Agent hereunder, the Agent shall have no duty or
liability to preserve rights pertaining thereto, it being understood
and agreed that the Obligors shall be responsible for preservation of
all rights in the Collateral, and the Agent shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering the
surrender of it to the Obligors. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Agent accords its own property,
which shall be no less than the treatment employed by a reasonable and
prudent agent in the industry, it being understood that the Agent shall
not have responsibility for taking any necessary steps to preserve
rights against any parties with respect to any of the Collateral.
10. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Agent or
any of the Lenders in cash or its equivalent, will be applied in reduction of
the Secured Obligations in the order set forth in Section 3.8 of the Credit
Agreement, and each Obligor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Agent shall have the continuing and
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<PAGE> 13
exclusive right to apply and reapply any and all such payments and proceeds in
the Agent's sole discretion, notwithstanding any entry to the contrary upon any
of its books and records.
11. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Security
Agreement, or to take action or make a response in or with respect to any legal
or arbitral proceeding relating to this Security Agreement or relating to the
Collateral, or to protect the Collateral or exercise any rights or remedies
under this Security Agreement or with respect to the Collateral, then the
Obligors agree to promptly pay upon demand any and all such reasonable
documented costs and expenses of the Agent or the Lenders, all of which costs
and expenses shall constitute Secured Obligations hereunder.
12. Continuing Agreement.
(a) This Security Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long as any
of the Secured Obligations remain outstanding, any Credit Document is
in effect or any Letter of Credit shall remain outstanding, and until
all of the Commitments thereunder shall have terminated (other than any
obligations with respect to the indemnities and the representations and
warranties set forth in the Credit Documents). Upon such payment and
termination, this Security Agreement shall be automatically terminated
and the Agent and the Lenders shall, upon the request and at the
expense of the Obligors, forthwith release all of its liens and
security interests hereunder and shall execute and deliver all UCC
termination statements and/or other documents reasonably requested by
the Obligors evidencing such termination. Notwithstanding the foregoing
all releases and indemnities provided hereunder shall survive
termination of this Security Agreement.
(b) This Security Agreement shall continue to be effective or
be automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Secured Obligations is
rescinded or must otherwise be restored or returned by the Agent or any
Lender as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had
not been made; provided that in the event payment of all or any part of
the Secured Obligations is rescinded or must be restored or returned,
all reasonable costs and expenses (including without limitation any
reasonable legal fees and disbursements) incurred by the Agent or any
Lender in defending and enforcing such reinstatement shall be deemed to
be included as a part of the Secured Obligations.
13. Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 11.6 of the Credit Agreement.
14. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the
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benefit of the Agent and the Lenders and their successors and permitted assigns;
provided, however, that none of the Obligors may assign its rights or delegate
its duties hereunder without the prior written consent of each Lender or the
Required Lenders, as required by the Credit Agreement. To the fullest extent
permitted by law, each Obligor hereby releases the Agent and each Lender, and
its successors and assigns, from any liability for any act or omission relating
to this Security Agreement or the Collateral, except for any liability arising
from the gross negligence or willful misconduct of the Agent, or such Lender, or
its officers, employees or agents.
15. Notices. All notices required or permitted to be given under this
Security Agreement shall be in conformance with Section 11.1 of the Credit
Agreement.
16. Counterparts. This Security Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
17. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
18. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
Any legal action or proceeding with respect to this Security Agreement
may be brought in the courts of the State of North Carolina (including
Mecklenburg County, North Carolina) or of the United States for the
Western District of North Carolina, and, by execution and delivery of
this Security Agreement, each Obligor hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally,
the jurisdiction of such courts. Each Obligor further irrevocably
consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the delivery of copies
thereof in accordance with the notice provisions of Section 11.1 of the
Credit Agreement. Nothing herein shall affect the right of the Agent to
serve process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against any Obligor in any other
jurisdiction.
(b) Each Obligor hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Security Agreement brought in the courts referred to in subsection
(a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
-14-
<PAGE> 15
19. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE PARTIES TO THIS SECURITY AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
20. Severability. If any provision of any of the Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
21. Entirety. This Security Agreement and the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
22. Survival. All representations and warranties of the Obligors
hereunder shall survive the execution and delivery of this Security Agreement
and the other Credit Documents, the delivery of the Notes and the making of the
Loans and the issuance of the Letters of Credit under the Credit Agreement.
23. Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Agent and the
Lenders shall have the right to proceed against such other property, guarantee
or endorsement upon the occurrence of any Event of Default, and the Agent and
the Lenders have the right, in their sole discretion, to determine which rights,
security, liens, security interests or remedies the Agent and the Lenders shall
at any time pursue, relinquish, subordinate, modify or take with respect
thereto, without in any way modifying or affecting any of them or any of the
Agent's and the Lenders' rights or the Secured Obligations under this Security
Agreement, under any other of the Credit Documents.
24. Joint and Several Obligations of Obligors.
(a) Each of the Obligors is accepting joint and several
liability hereunder in consideration of the financial accommodation to
be provided by the Lenders under the Credit Agreement, for the mutual
benefit, directly and indirectly, of each of the Obligors and in
consideration of the undertakings of each of the Obligors to accept
joint and several liability for the obligations of each of them.
(b) Each of the Obligors jointly and severally hereby
irrevocably and unconditionally accepts, not merely as a surety but
also as a co-debtor, joint and several liability with the other
Obligors with respect to the payment and performance of all of the
Secured Obligations arising under this Security Agreement and the other
Credit Documents,
-15-
<PAGE> 16
it being the intention of the parties hereto that all the Obligations
shall be the joint and several obligations of each of the Obligors
without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained
herein or in any other of the Credit Documents, to the extent the
obligations of a Subsidiary Guarantor shall be adjudicated to be
invalid or unenforceable for any reason (including, without limitation,
because of any applicable state or federal law relating to fraudulent
conveyances or transfers) then the obligations of each Subsidiary
Guarantor hereunder shall be limited to the maximum amount that is
permissible under applicable law (whether federal or state and
including, without limitation, the Bankruptcy Code).
25. Moll Plastics SARL. Each party hereto acknowledges that the
provisions of this Security Agreement shall govern in respect the pledge of
shares of Moll Plastics SARL only to the extent that such provisions do not
contradict the provisions of that certain Contrat De Nontissement De Parts
Sociales dated as of June 26, 1998 among M.I. LLC, M.P. LLC and the Agent.
26. Rights of Required Lenders. All rights of the Agent hereunder, if
not exercised by the Agent, may be exercised by the Required Lenders.
[remainder of page intentionally left blank]
-16-
<PAGE> 17
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
MOLL INDUSTRIES, INC.,
a Delaware corporation
By: /s/ George T. Votis
----------------------
Name: George T. Votis
----------------------
Title: Chairman & CEO
----------------------
MOLL INDUSTRIES, LLC,
a Delaware limited liability
By: /s/ George T. Votis
----------------------
Name: George T. Votis
----------------------
Title: Chairman & CEO of Moll
----------------------
Industries, Inc., Manager
-------------------------
MOLL PLASTICS, LLC,
a Delaware limited liability
By: /s/ George T. Votis
----------------------
Name: George T. Votis
----------------------
Title: Manager
----------------------
Accepted and agreed to in Charlotte, North Carolina as of the date
first above written.
NATIONSBANK, N.A., as Agent
By: /s/ Johns N. Ellington
----------------------
Name: Johns N. Ellington
----------------------
Title: Vice President
----------------------
-17-
<PAGE> 18
SCHEDULE 1(a)
DESCRIPTION OF PARTNERSHIP AND LIMITED LIABILITY COMPANY INTERESTS
(a) All equity ownership interests in any partnership or limited liability
company which is a direct or indirect Domestic Subsidiary of the
Borrower, including without limitation the interests in Moll Industries
LLC and Moll Plastics LLC listed below; and
(b) the equity ownership interests in Moll Plastics SARL, a French limited
liability company, listed below (such equity ownership interests
constituting approximately 65% of the total equity ownership interests
in Moll Plastics SARL as of the Closing Date).
<TABLE>
<CAPTION>
ISSUER OWNER(S) NUMBER OF SHARES
<S> <C> <C>
Moll Industries, LLC Moll Industries, Inc. 100%
Moll Plastics, LLC Moll Industries, LLC 100%
7 shares owned by Moll
Moll Plastics SARL Moll Industries, LLC Industries, LLC and 320 shares
and Moll Plastics, LLC owned by Moll Plastics, LLC
</TABLE>
<PAGE> 19
SCHEDULE 1(b)
TRADEMARKS
MOLL INDUSTRIES, INC.
(SUCCESSOR TO ANCHOR ADVANCED PRODUCTS, INC.)
U.S. TRADEMARKS
PENDING APPLICATIONS
MARK APPLICATION SERIAL NO. FILING DATE
SMOOTH-MOVE 75/024,345 11/27/95
REGISTERED MARKS
MARK REGISTRATION NO. REGISTRATION DATE
ANCHOR 1,404,994 8/12/86
Design Mark 1,114,131 2/27/79
ANCODENT (Stylized) 612,523 9/20/55
<PAGE> 20
SCHEDULE 4(a)
CHIEF EXECUTIVE OFFICE
CHIEF EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS
BORROWER/PARENT
1111 NORTHSHORE DRIVE, SUITE N600
KNOXVILLE, TN 37919-4048
MOLL PLASTICS, LLC/MOLL INDUSTRIES,LLC
1571 HEIL QUAKER BOULEVARD
LAVERGNE, TN 37086
<PAGE> 21
SCHEDULE 4(b)
LOCATIONS OF COLLATERAL
1. ELK GROVE, COOK COUNTY, ILLINOIS
2. HARLINGEN, CAMERON COUNTY, TX
3. KNOXVILLE, KNOX COUNTY, TN
4. MORRISTOWN, HAMBLIN COUNTY, TN
5. ROUND ROCK, WILLIAMSON COUNTY, TX
6. SANFORD, LEE COUNTY, NC
7. SEAGROVE,NC
8. WATERBURY, NEW HAVEN COUNTY, CT
9. DAVIE, BROWARD COUNTY, FL
10. FAIRPORT, MONROE COUNTY, NY
11. FORT SMITH, AK 72901
12. NEWBERG, OR 97132
13. EVANSVILLE, IN 47711
14. SAN ANTONIO, TX 78227
15. AUSTIN, TX 78728
16. LA VERGNE, TN 37086
<PAGE> 22
SCHEDULE 4(c)
MERGERS, CONSOLIDATIONS, CHANGE IN STRUCTURE OR USE OF TRADENAMES
The Borrower contemplates that Gemini will merge into it, with the
Borrower as the surviving entity.
None
<PAGE> 23
SCHEDULE 5(f)(i)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
TRADEMARKS
United States Patent and Trademark Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
June 26, 1998 (the "Security Agreement") by and among the Obligors party thereto
(each an "Obligor" and collectively, the "Obligors") and NationsBank, N.A., as
Agent (the "Agent") for the lenders referenced therein (the "Lenders"), the
undersigned Obligor has granted a continuing security interest in and continuing
lien upon, the trademarks and trademark applications shown below to the Agent
for the ratable benefit of the Lenders:
TRADEMARKS
Description of Trademark Date of
Trademark No. Item Trademark
Trademark Applications
Trademark Description of Trademark Date of Trademark
Applications No. Applied For Applications
<PAGE> 24
The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest in the foregoing trademarks and
trademark applications (i) may only be terminated in accordance with the terms
of the Security Agreement and (ii) is not to be construed as an assignment of
any trademark or trademark application.
Very truly yours,
------------------------------------
[Obligor]
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Acknowledged and Accepted:
NATIONSBANK, N.A., as Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 1
EXHIBIT 5.1
November 2, 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.
November 2, 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 and Amendment No. 1 thereto filed
with the Commission on November 2, 1998 (as so amended, 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 Delaware corporate 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.
November 2, 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 Delaware corporate 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 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to inclusion in the Prospectus constituting part of this
Amendment No. 1 to the Registration Statement on Form S-4 (File No. 333-60857)
of Moll Industries, Inc. of our report dated February 20, 1998, relating to the
financial statements of Anchor Holdings, Inc., which report appears in such
Prospectus. We also consent to the references to us under the heading "Experts"
in the Prospectus.
PricewaterhouseCoopers LLP
Knoxville, Tennessee
October 28, 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
October 30, 1998
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
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,
PURSUANT TO THE PROSPECTUS, DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT P.M. NEW YORK CITY TIME,
ON [ ], 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN PRIOR TO [ ] P.M.,
NEW YORK CITY TIME, ON THE EXPIRATION DATE.
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.
The undersigned acknowledges that he has received and reviewed the
Prospectus, dated [ ], 1998 (the "Prospectus"), of Moll Industries,
Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal
(the "Letter"), which together constitute the Company's offer (the "Exchange
Offer") to exchange an aggregate principal amount of up to $130,000,000 of the
Company's 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 the Company's issued and
outstanding 10 1/2% Senior Subordinated Notes due 2008 (the "Old Notes") from
the registered holders thereof (the "Holders").
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
<PAGE> 2
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.
This Letter is to be completed by a holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for Old
Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer--Book-Entry Transfer" section of the Prospectus. Holders of Old
Notes whose certificates are not immediately available, or who are unable to
deliver their certificates or confirmation of the book-entry tender of their Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation") and all other documents required by this Letter to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES 1 2 3
- -------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT OF AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S)* OLD NOTE(S) TENDERED**
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
TOTAL
- -------------------------------------------------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes
represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes tendered hereby must be
in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1.
- --------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
----------------------------------------------
Account Number Transaction Code Number
------------------------- ----------------------------------------------
2
<PAGE> 3
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s)
---------------------------------------------
Window Ticket Number (if any)
---------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-------------------------
Name of Institution Which Guaranteed Delivery
------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number Transaction Code Number
------------------------------- -------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
----------------------------------------------------------------------------
Address:
----------------------------------------------------------------------------
The undersigned represents 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. If the undersigned
is a broker-dealer that will receive New Notes for its own account in exchange
for Old Notes that were acquired as a result of market-making activities or
other trading activities, it acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act, in connection with any resale of
such New Notes; however, by so acknowledging and by delivering such a prospectus
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. If the undersigned is a broker-dealer that
will receive New Notes, it represents that the Old Notes to be exchanged for the
New Notes were acquired as a result of market-making activities or other trading
activities.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the undersigned's true and lawful agent and attorney-in-fact with
respect to such tendered Old Notes, with full power of substitution, among other
things, to cause the Old Notes to be assigned, transferred and exchanged. The
undersigned hereby represents and warrants that the undersigned has full power
and authority to tender, sell, assign and transfer the Old Notes, and to acquire
Exchange Notes issuable upon the exchange of such tendered Old Notes, and that,
when the same are accepted for exchange, the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim when the same are accepted
by the Company. The undersigned hereby further represents that any New Notes
acquired in exchange for Old Notes tendered hereby will have been acquired in
the ordinary course of business of the person receiving such New Notes, whether
or not such person is the undersigned, that neither the Holder of such Old Notes
nor any such other person is participating in, intends to participate in or has
an arrangement or understanding with any person to participate in the
distribution of
3
<PAGE> 4
such New Notes and that neither the Holder of such Old Notes nor any such other
person is an "affiliate," as defined in Rule 405 under the Securities Act, of
the Company.
The undersigned acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Notes issued pursuant to the Exchange Offer in exchange
for the Old Notes may be offered for resale, resold or otherwise transferred by
Holders thereof (other than any such Holder that 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 SEC 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 SEC would make a
similar determination with respect to the Exchange Offer as in such other
circumstances. The undersigned represents 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 acknowledges and agrees 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 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. If the
undersigned is a broker-dealer that will receive New Notes for its own account
in exchange for Old Notes, it represents that the Old Notes to be exchanged for
the New Notes were acquired by it as a result of market-making activities or
other trading activities and acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus
meeting the requirements of the Securities Act, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section
of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, please send the New Notes (and, if
applicable, substitute certificates representing Old Notes for any Old Notes not
exchanged) to the undersigned at the address shown above in the box entitled
"Description of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
4
<PAGE> 5
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
- --------------------------------------------------------------------------------
To be completed ONLY if certificates for Old Notes not exchanged and/or
New Notes are to be issued in the name of and sent to someone other than the
person or persons whose signature(s) appear(s) on this Letter above, or if Old
Notes delivered by book-entry transfer which are not accepted for exchange are
to be returned by credit to an account maintained at the Book-Entry Transfer
Facility other than the account indicated above.
Issue: New Notes and/or Old Notes to:
Name(s)
------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
------------------------------------------------------------------------------
------------------------------------------------------------------------------
(ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
[ ] Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below.
------------------------------------------------------------------------------
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
- -------------------------------------------------------------------------------
To be completed ONLY if certificates for Old Notes not exchanged and/or
New Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter above or to such person or persons at an
address other than shown in the box entitled "Description of Old Notes" on
this Letter above.
Mail: New Notes and/or Old Notes to:
Name(s)
-----------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
-----------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(ZIP CODE)
- ------------------------------------------------------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES
FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR
THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR
TO [ ] P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
5
<PAGE> 6
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
X
- ------------------------------------------------------------------------- , 1998
X
- ------------------------------------------------------------------------- , 1998
- --------------------------------------------------------------------------------
Signature(s) of Owner Date
Area Code and Telephone Number
--------------------------------------
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old
Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Name(s):
- --------------------------------------------------------------------------------
(Please Type or Print)
Capacity:
------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution:
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name and Firm)
Dated: , 1998
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE
10 1/2% SENIOR SUBORDINATED NOTES DUE 2008 OF MOLL INDUSTRIES, INC. IN EXCHANGE
FOR THE
10 1/2% SENIOR SUBORDINATED NOTES DUE 2008 OF MOLL INDUSTRIES, INC.,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by holders of Old Notes either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter (or manually signed
facsimile hereof) and any other documents required by this Letter, must be
received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Old Notes tendered hereby must be in
denominations of principal amount of $1,000 and any integral multiple thereof.
Holders whose certificates for Old Notes are not immediately available or
who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution,
(ii) prior to [ ] P.M., New York City time, on the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter (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 this Letter 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 this
Letter, are received by the Exchange Agent within three NYSE trading days after
the date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering holders, but the delivery
will be deemed made only when actually received or confirmed by the Exchange
Agent. If Old Notes are sent by mail, it is suggested that the mailing be
registered mail, properly insured, with return receipt requested, made
sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent prior to [ ] P.M., New York City time, on the Expiration Date.
No letters or Old Notes should be sent to the Company.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTEHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Old Notes evidenced by a submitted certificate are
to be tendered, the tendering holder(s) should fill in the aggregate principal
amount of Old Notes to be tendered in the box above entitled "Description of Old
Notes--Principal Amount Tendered." A reissued certificate representing the
balance of nontendered Old Notes will be sent to such tendering holder, unless
otherwise provided in the appropriate box on this Letter, promptly after the
Expiration Date. ALL OF THE OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE
DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED.
7
<PAGE> 8
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Old Notes tendered
hereby, the signature must correspond exactly with the name as written on the
face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be issued,
or any untendered Old Notes are to be reissued, to a person other than the
registered holder, then endorsements of any certificates transmitted hereby or
separate bond powers are required. Signatures on such certificate(s) must be
guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers 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.
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS 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 (EACH AN "ELIGIBLE INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, PROVIDED THE OLD NOTES ARE TENDERED: (I) BY A REGISTERED HOLDER OF
OLD NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY
PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A
SECURITY POSITION LISTING AS THE HOLDER OF SUCH OLD NOTES) WHO HAS NOT COMPLETED
THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY
INSTRUCTIONS" ON THIS LETTER, OR (II) FOR THE ACCOUNT OF AN ELIGIBLE
INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer and or
substitute certificates evidencing Old Notes not exchanged are to be issued or
sent, if different from the name or address of the person signing this Letter.
In the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated. Noteholders
tendering Old Notes by book-entry transfer may request that Old Notes not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such noteholder may designate hereon. If no such instructions are
given, such Old Notes not exchanged will be returned to the name and address of
the person signing this Letter.
5. TAXPAYER IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose Old
Notes are accepted for exchange must provide the Company (as payor) with such
holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below, which in the case of a tendering holder who is an individual, is his or
her social security number. If the Company is not provided with the current TIN
or an adequate basis for an exemption from backup withholding, such tendering
holder may be subject to a $50 penalty imposed by the
8
<PAGE> 9
Internal Revenue Service. In addition, the Exchange Agent may be required to
withhold 31% of the amount of any reportable payments made after the exchange to
such tendering holder of New Notes. If withholding results in an overpayment of
taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the Substitute Form W-9 set forth below,
certifying, under penalties of perjury, that the TIN provided is correct (or
that such holder is awaiting a TIN) and that (i) the holder is exempt from
backup withholding, or (ii) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
a failure to report all interest or dividends or (iii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to backup
withholding. If the tendering holder of Old Notes is a nonresident alien or
foreign entity not subject to backup withholding, such holder must give the
Exchange Agent a completed Form W-8, Certificate of Foreign Status. These forms
may be obtained from the Exchange Agent. If the Old Notes are in more than one
name or are not in the name of the actual owner, such holder should consult the
W-9 Guidelines for information on which TIN to report. If such holder does not
have a TIN, such holder should consult the W-9 Guidelines for instructions on
applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write
"applied for" in lieu of its TIN. Note: Checking this box and writing "applied
for" on the form means that such holder has already applied for a TIN or that
such holder intends to apply for one in the near future. If the box in Part 2 of
the Substitute Form W-9 is checked, the Exchange Agent will retain 31% of
reportable payments made to a holder during the sixty (60) day period following
the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent
with his or her TIN within sixty (60) days of the Substitute Form W-9, the
Exchange Agent will remit such amounts retained during such sixty (60) day
period to such holder and no further amounts will be retained or withheld from
payments made to the holder thereafter. If, however, such holder does not
provide its TIN to the Exchange Agent within such sixty (60) day period, the
Exchange Agent will remit such previously withheld amounts to the Internal
Revenue Service as backup withholding and will withhold 31% of all reportable
payments to the holder thereafter until such holder furnishes its TIN to the
Exchange Agent.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New
Notes and/or substitute Old Notes not exchanged are to be delivered to, or are
to be registered or issued in the name of, any person other than the registered
holder of the Old Notes tendered hereby, or if tendered Old Notes are registered
in the name of any person other than the person signing this Letter, or if a
transfer tax is imposed for any reason other than the transfer of Old Notes to
the Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
9
<PAGE> 10
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter, shall
waive any right to receive notice of the acceptance of their Old Notes for
exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
10. WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to [ ] P.M., New
York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written notice
of withdrawal must be received by the Exchange Agent at the address set forth
above prior to [ ] P.M., New York City time, on the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having tendered the
Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including certificate number or numbers and the principal amount of
such Old Notes), (iii) contain a statement that such holder is withdrawing his
election to have such Old Notes exchanged, (iv) be signed by the holder in the
same manner as the original signature on the Letter by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer to have the Trustee with respect to the Old Notes register
the transfer of such Old Notes in the name of the person withdrawing the tender
and (v) specify the name in which such Old Notes are registered, if different
from that of the Depositor. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer set forth in "The Exchange Offer--Book-Entry
Transfer" section of the Prospectus, 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,
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 and no New Notes will be issued with respect
thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes
that 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 set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus, such Old Notes will be
credited to an account maintained with the 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 the procedures described above at any time on or prior
to [ ] P.M., New York City time, on the Expiration Date.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, and requests for Notices of
Guaranteed Delivery and other related documents may be directed to the Exchange
Agent, at the address and telephone number indicated above.
10
<PAGE> 11
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: STATE STREET BANK AND TRUST COMPANY
- --------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT THE RIGHT
FORMW-9 AND CERTIFY BY SIGNING AND DATING BELOW.
TIN: --------------------------
Social Security Number or
Employer Identification Number
-------------------------------------------------------------------------------------------
PART 2--TIN Applied For [ ]
---------------------------------------------------------------------------------------------
Department of the CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
Treasury, Internal
Revenue Service (1) the number shown on this form is my correct Taxpayer Identification Number (or
PAYOR'S REQUEST FOR I am waiting for a number to be issued to me);
TAXPAYER IDENTIFICATION
NUMBER ("TIN") AND (2) I am not subject to backup withholding because: (a) I am exempt from backup
CERTIFICATION withholding, or (b) I have not been notified by the Internal Revenue Service
(the "IRS") that I am subject to backup withholding as a result of a failure to
report all interest or dividend, or (c) the IRS has notified me that I am no
longer subject to backup withholding, and
(3) any other information provided on this form is true and correct.
SIGNATURE----------------------------------------------- DATE------------------
- --------------------------------------------------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject
to backup withholding because of underreporting interest or dividends on your tax return and you have not
been notified by the IRS that you are no longer subject to backup withholding.
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of the
exchange, 31 percent of all reportable payments made to me thereafter will be
withheld until I provide a number.
- --------------------------------------------- -----------------------------
Signature Date
11
