<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1997
REGISTRATION NO. 333-29727
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
VIASYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 36720 43-1777252
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
DAVID M. SINDELAR
CHIEF FINANCIAL OFFICER
101 SOUTH HANLEY ROAD, SUITE 400
ST. LOUIS, MISSOURI 63105
(314) 727-2087
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
JEREMY W. DICKENS
WEIL, GOTSHAL & MANGES LLP
100 CRESCENT COURT, SUITE 1300
DALLAS, TEXAS 75201
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
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 statement number of the earlier
effective registration statement for the same offering. [ ]
---------------
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. [ ]
---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
VIASYSTEMS, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING THE LOCATION IN
THE PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-1
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<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
-------------------------------- ----------------------
<C> <S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................ Cover Page of Registration Statement; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges.... Summary; Summary -- The Company; Risk Factors;
Selected Financial Data
4. Use of Proceeds......................... Use of Proceeds
5. Determination of Offering Price......... Not Applicable
6. Dilution................................ Not Applicable
7. Selling Security Holders................ Not Applicable
8. Plan of Distribution.................... Front Cover Page of Prospectus; Summary; The Exchange
Offer and Plan of Distribution
9. Description of Securities to be
Registered............................ Description of the New Notes
10. Interests of Named Experts and Counsel.. Not Applicable
11. Information with Respect to the
Registrant............................ Cover Page of Registration Statement; Certain
Definitions, Industry Data and Financial
Information; Exchange Rates; Summary; Risk Factors;
Capitalization; Selected Financial Data;
Management's Discussion and Analysis of Results of
Operations and Financial Condition; Business;
Management; Security Ownership of Certain
Beneficial Owners; Certain Transactions;
Description of Senior Credit Facilities; The
Exchange Offer; Description of the New Notes; Legal
Matters and Experts
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................... Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED JULY 31, 1997
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<S> <C> <C>
OFFER TO EXCHANGE ALL OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
FOR
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007 VIASYSTEMS, INC.
VIASYSTEMS, INC. [LOGO]
</TABLE>
Viasystems, Inc., a Delaware corporation (the "Company") hereby offers, upon the
terms and subject to the conditions set forth in this Prospectus and the letter
of transmittal accompanying this Prospectus (the "Letter of Transmittal," which
together constitute the "Exchange Offer"), to exchange $1,000 principal amount
of 9 3/4% Senior Subordinated Notes due 2007 (the "New Notes") issued by the
Company for each $1,000 principal amount of 9 3/4% Senior Subordinated Notes due
2007 (the "Old Notes") issued by the Company, of which an aggregate principal
amount of $400.0 million is outstanding. The form and terms of the New Notes are
identical to the form and terms of the Old Notes except that the New Notes have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), and will not bear any legends restricting their transfer. The New Notes
will evidence the same debt as the Old Notes and will be issued pursuant to, and
entitled to the benefits of, the Indenture (as defined) governing the Old Notes.
The Exchange Offer is being made in order to satisfy certain contractual
obligations of the Company. See "The Exchange Offer" and "Description of New
Notes." The New Notes and the Old Notes are sometimes collectively referred to
herein as the "Notes".
- --------------------------------------------------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NEW NOTES.
- --------------------------------------------------------------------------------
INTEREST ON THE NEW NOTES IS PAYABLE SEMI-ANNUALLY ON JUNE 1 AND DECEMBER 1 OF
EACH YEAR, COMMENCING ON DECEMBER 1, 1997. THE NEW NOTES WILL MATURE ON JUNE 1,
2007. EXCEPT AS DESCRIBED BELOW, THE COMPANY MAY NOT REDEEM THE NEW NOTES PRIOR
TO JUNE 1, 2002. ON AND AFTER SUCH DATE, THE COMPANY MAY REDEEM THE NEW NOTES,
IN WHOLE OR IN PART, AT ANY TIME AT THE REDEMPTION PRICES SET FORTH HEREIN,
TOGETHER WITH ACCRUED AND UNPAID INTEREST, IF ANY, TO THE DATE OF REDEMPTION. IN
ADDITION, AT ANY TIME AND FROM TIME TO TIME PRIOR TO JUNE 1, 2000, THE COMPANY
MAY, SUBJECT TO CERTAIN REQUIREMENTS, REDEEM UP TO $140.0 MILLION OF THE
AGGREGATE PRINCIPAL AMOUNT OF THE NEW NOTES WITH THE NET CASH PROCEEDS RECEIVED
FROM ONE OR MORE EQUITY OFFERINGS (AS DEFINED), SO LONG AS A PUBLIC MARKET (AS
DEFINED) EXISTS AT THE TIME OF SUCH REDEMPTION, AT A REDEMPTION PRICE EQUAL TO
109.75% OF THE PRINCIPAL AMOUNT TO BE REDEEMED, TOGETHER WITH ACCRUED AND UNPAID
INTEREST, IF ANY, TO THE DATE OF REDEMPTION, PROVIDED THAT AT LEAST $200.0
MILLION OF THE AGGREGATE PRINCIPAL AMOUNT OF NEW NOTES REMAINS OUTSTANDING
IMMEDIATELY AFTER EACH SUCH REDEMPTION. THE NEW NOTES WILL NOT BE SUBJECT TO ANY
SINKING FUND REQUIREMENTS. UPON THE OCCURRENCE OF A CHANGE OF CONTROL (AS
DEFINED), (I) THE COMPANY WILL HAVE THE OPTION, AT ANY TIME ON OR PRIOR TO JUNE
1, 2002, TO REDEEM THE NEW NOTES, IN WHOLE BUT NOT IN PART, AT A REDEMPTION
PRICE EQUAL TO 100% OF THE PRINCIPAL AMOUNT THEREOF PLUS THE APPLICABLE PREMIUM
(AS DEFINED), TOGETHER WITH ACCRUED AND UNPAID INTEREST, IF ANY, TO THE DATE OF
REDEMPTION, AND (II) IF THE COMPANY DOES NOT SO REDEEM THE NEW NOTES OR IF SUCH
CHANGE OF CONTROL OCCURS AFTER JUNE 1, 2002, THE COMPANY WILL BE REQUIRED TO
MAKE AN OFFER TO REPURCHASE THE NEW NOTES AT A PRICE EQUAL TO 101% OF THE
PRINCIPAL AMOUNT THEREOF, TOGETHER WITH ACCRUED AND UNPAID INTEREST, IF ANY, TO
THE DATE OF REPURCHASE. SEE "DESCRIPTION OF NEW NOTES."
THE NEW NOTES WILL BE UNSECURED AND WILL BE SUBORDINATED TO ALL EXISTING AND
FUTURE SENIOR INDEBTEDNESS (AS DEFINED) OF THE COMPANY. THE NEW NOTES WILL RANK
pari passu with any future Senior Subordinated Indebtedness (as defined) of the
Company and will rank senior to all Subordinated Indebtedness (as defined) of
the Company. The Indenture under which the New Notes will be issued (the
"Indenture") will permit the Company and its Restricted Subsidiaries (as
defined) to incur additional indebtedness, including Senior Indebtedness,
subject to certain limitations. See "Description of New Notes." As of March 31,
1997, on a pro forma basis after giving effect to the 1997 Transactions (as
defined) and the net proceeds from the sale of the Old Notes (the "Original
Offering"), the aggregate principal amount of the Company's outstanding Senior
Indebtedness would have been approximately $432.4 million (excluding unused
commitments) and the Company would have had no Senior Subordinated Indebtedness,
other than the New Notes, and no Subordinated Indebtedness outstanding. See
"Description of New Notes -- Ranking and Subordination." On the same pro forma
basis as of March 31, 1997, the New Notes would have effectively ranked junior
to approximately $627.5 million of accrued liabilities and obligations of the
Company's consolidated subsidiaries, including borrowings under and guarantees
in respect of the Senior Credit Facilities. See "Description of New
Notes -- Ranking and Subordination."
- --------------------------------------------------------------------------------
The Company will accept for exchange any and all Old Notes validly tendered and
not withdrawn prior to 5:00 p.m., New York City time, on , 1997,
unless extended (as so extended, such time and date being the "Expiration
Date"). Tenders of Old Notes may be withdrawn at any time prior to the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes pursuant to the Exchange Offer, 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. 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, for a period of 90 days after the Expiration Date, to make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
No public market existed for the Old Notes before the Exchange Offer. The
Company currently does not intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system, and no active public market for the New Notes is currently anticipated.
The Company will pay all the expenses incident to the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange pursuant to the Exchange Offer.
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.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 4
AVAILABLE INFORMATION
As a result of the filing of its Registration Statement with the Commission
on Form S-1 under the Securities Act, with respect to the New Notes (the
"Registration Statement"), the Company will become subject to the informational
requirements of the Exchange Act, and in accordance therewith file reports and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information may be inspected and copied at
the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60611, and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
also be obtained at prescribed rates by writing to the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549.
This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain portions
of which have been omitted pursuant to the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document set forth all material elements of such
documents, but are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is hereby made to such exhibit for a more complete description of the
matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. Copies of the Registration Statement and the
exhibits thereto are on file with the Commission and may be examined without
charge at the public reference facilities of the Commission described above.
Copies of such materials can also be obtained at prescribed rates by writing to
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. The reports, proxy statements and other
information may also be obtained from the web site that the Commission maintains
at http://www.sec.gov.
The Company is required by the Indenture to furnish the holders of the New
Notes with copies of the annual reports and of the information, documents and
other reports specified in Sections 13 and 15(d) of the Exchange Act, as long as
any New Notes are outstanding.
i
<PAGE> 5
CERTAIN DEFINITIONS, INDUSTRY DATA
AND FINANCIAL INFORMATION
As used in this Prospectus, unless the context requires otherwise, (i)
"Viasystems Group" means Viasystems Group, Inc., which became the Company's
corporate parent in April 1997; (ii) "Circo Craft" means Circo Craft Co. Inc.
and its subsidiary, which Viasystems Group acquired in October 1996 and
contributed to the Company in April 1997; (iii) "Viasystems Technologies" means
Viasystems Technologies Corp. (which acquired substantially all of the assets of
the Interconnection Technologies Unit of the Microelectronics Group of Lucent
Technologies Inc. in December 1996), which Viasystems Group contributed to the
Company in April 1997; (iv) "Forward Group" means Forward Group PLC and its
subsidiaries, which Viasystems Group acquired and contributed to the Company in
April 1997; (v) "Chips" means Interconnection Systems (Holdings) Limited ("ISL")
and its subsidiaries, which were acquired by Chips Holdings, Inc. in April 1997
and acquired by the Company concurrently with the consummation of the Original
Offering; and (vi) the "Company" means Viasystems, Inc., a wholly-owned
subsidiary of Viasystems Group, and the businesses formerly conducted by Circo
Craft, Viasystems Technologies, Forward Group, Chips and any of their
predecessors. Each of Viasystems Group, Circo Craft, Viasystems Technologies,
Forward Group, and Chips are predecessors to Viasystems, Inc.
The Company relies on and refers to information it has received from
various industry analysts regarding the markets for its principal products,
printed circuit boards ("PCBs") and backpanel assemblies ("backpanels"). Such
information was available from a consistent source only for the United States
and European PCB markets and the North American and European backpanel markets.
This Prospectus discusses certain financial information of Viasystems
Group, Circo Craft, Viasystems Technologies, Forward Group and Chips on a
combined historical basis. For limitations on the reliance that should be placed
on such information, see "Summary -- Summary Supplemental Historical Combined
and Pro Forma Financial Data." The historical combined financial data has been
derived from the financial data of each of the following entities for the
periods indicated:
<TABLE>
<CAPTION>
FISCAL YEARS FISCAL FIRST QUARTERS
----------------------------------------------------------- --------------------------------------
1994 1995 1996 1996 1997
----------------- ----------------- --------------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Viasystems Group......... -- -- August 28 (inception) -- Three Months Ended
to December 31, 1996 March 31, 1997
Circo Craft.............. December 31, 1994 December 31, 1995 9 months ended Three Months Ended --
September 30, 1996 March 31, 1996
Viasystems Technologies.. December 31, 1994 December 31, 1995 11 months ended Three Months Ended --
November 30, 1996 March 31, 1996
Forward Group............ January 31, 1995 January 31, 1996 January 31, 1997 Three Months Ended Three Months Ended
March 31, 1996 March 31, 1997
Chips.................... March 31, 1995 March 29, 1996 April 4, 1997 Three Months Ended Three Months Ended
March 29, 1996 April 4, 1997
</TABLE>
ii
<PAGE> 6
EXCHANGE RATES
For the convenience of the reader, the Company has, in certain instances in
this Prospectus, translated certain financial data from its Canadian and United
Kingdom businesses into United States dollars ("U.S.$" or "$"). The following
table reflects the exchange rates used to translate Canadian dollar ("C$")
amounts for Circo Craft and British pound sterling ("U.K.L") amounts for Forward
Group and Chips into United States dollar amounts for the dates indicated. The
Company does not represent that the Canadian dollar or British pound sterling
amounts shown in this Prospectus could have been converted into United States
dollars at the quoted exchange rates.
<TABLE>
<CAPTION>
Circo Craft
December 31, 1994 December 31, 1995 September 30, 1996 March 31, 1996
----------------- ----------------- ------------------ -----------------------------
<C> <C> <C> <C>
C$1.40 = U.S.$1.00 C$1.36 = U.S.$1.00 C$1.36 = U.S.$1.00 C$1.36 = U.S.$1.00
</TABLE>
<TABLE>
<CAPTION>
Forward Group
January 31, 1995 January 31, 1996 January 31, 1997 March 31, 1996 March 31, 1997
- ----------------------- ----------------------- ----------------------- ----------------------- -----------------------
<C> <C> <C> <C> <C>
U.K.L .63 = U.S.$1.00 U.K.L .66 = U.S.$1.00 U.K.L .62 = U.S.$1.00 U.K.L .66 = U.S.$1.00 U.K.L .61 = U.S.$1.00
</TABLE>
<TABLE>
<CAPTION>
Chips
March 29, 1996 April 4, 1997
March 31, 1995 (quarterly and annual) (quarterly and annual)
- ----------------------- ---------------------- ----------------------
<C> <C> <C>
U.K.L .62 = U.S.$1.00 U.K.L .66 = U.S.$1.00 U.K.L .61 = U.S.$1.00
</TABLE>
Source: The Wall Street Journal.
iii
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless the context otherwise requires, references
herein to the New Notes following the consummation of the Exchange Offer assume
that all outstanding Old Notes are tendered and exchanged for New Notes pursuant
to the Exchange Offer.
THE COMPANY
GENERAL
The Company is the second largest manufacturer and marketer of printed
circuit boards ("PCBs"), and one of the largest manufacturers and marketers of
backpanel assemblies ("backpanels"), in the world. PCBs are the basic platforms
used to interconnect microprocessors, integrated circuits and other components
essential to the functioning of virtually all electronic systems, ranging from
sophisticated computers and industrial products to basic household appliances.
Backpanels are used in electronic systems to distribute and ground power, to
connect PCBs, power supplies and other elements, and to relay information into
and out of electronic systems. The Company currently has 16 manufacturing
facilities, strategically located in North America, Europe, and South Africa.
The Company's principal executive offices are located at 101 South Hanley
Road, Suite 400, St. Louis, Missouri 63105 and its telephone number is (314)
727-2087.
OWNERSHIP AND MANAGEMENT
Hicks Must, Tate & Furst, Incorporated ("Hicks Muse") and Mills & Partners,
Inc. ("Mills & Partners") formed Viasystems Group in August 1996 to make
strategic acquisitions of PCB manufacturers and backpanel assemblers and to
integrate those acquisitions into a global enterprise that is the preferred
manufacturer and marketer of complex PCBs and backpanels.
Hicks Muse is a private investment firm with offices in Dallas, New York,
St. Louis and Mexico City that specializes in leveraged acquisitions,
recapitalizations and other principal investing activities.
With respect to the Company, Hicks Muse is combining its financial
expertise with the operating management experience of Mills & Partners.
Organized in 1985 by James N. Mills, Mills & Partners consists of a group of
senior operating executives who manage a portfolio of companies in a variety of
industries. Mills & Partners and Hicks Muse have established an exclusive
relationship to pursue leveraged acquisitions of diversified commercial and
industrial companies that Mills & Partners will manage.
RECENT HISTORY
In October 1996, Viasystems Group completed the acquisition of Circo Craft,
a rigid PCB manufacturer located in Canada, for a cash purchase price of
approximately $129.9 million. In connection with that transaction, Hicks Muse
and certain affiliates invested approximately $68.0 million in the common stock
of Viasystems Group.
In December 1996, Viasystems Technologies, a wholly owned subsidiary of
Viasystems Group, acquired substantially all the assets of the Interconnection
Technologies Unit of the Microelectronics Group (the "Lucent Division") of
Lucent Technologies, a rigid PCB manufacturer and backpanel assembler located in
the United States, for cash consideration of approximately $170.0 million, plus
the issuance of $30.0 million of preferred stock to Lucent Technologies. In
connection with that transaction, Hicks Muse and its affiliates invested
approximately $7.1 million of additional equity in Viasystems Group, consisting
entirely of preferred stock. In addition, simultaneously with the acquisition of
the Lucent Division, Hicks Muse and certain affiliates exchanged approximately
$38.0 million of the Viasystems Group common stock previously issued to them for
$38.0 million of
1
<PAGE> 8
Viasystems Group's preferred stock. The combination of Circo Craft and the
former Lucent Division created one of the largest independent manufacturers of
PCBs and backpanels in North America.
In April 1997, an affiliate of Hicks Muse acquired Forward Group, a rigid
PCB manufacturer located in the United Kingdom, for a purchase price of
approximately $236.3 million (including the issuance of loan notes in the
principal amount of approximately $23.9 million to certain former shareholders
of the Forward Group (the "Forward Group Loan Notes")), which was funded with
$216.0 million of borrowings under a tender facility (the "Tender Facility") and
the proceeds from the issuance to Hicks Muse of $40.0 million of the preferred
stock of the acquiring entity. Subsequently, Viasystems Group acquired Forward
Group for cost, consisting of the assumption of the Tender Facility and the
Forward Group Loan Notes. In consideration for Hicks Muse's transfer of Forward
Group to Viasystems Group, Viasystems Group issued to Hicks Muse and certain of
its affiliates $40.0 million of Viasystems Group's preferred stock. Concurrently
with that transaction, Viasystems Group organized the Company as its direct
subsidiary and contributed to it the capital stock of Circo Craft, Viasystems
Technologies and Forward Group. The Company applied the proceeds from a
subordinated credit facility (the "Subordinated Credit Facility") to repay the
Tender Facility and to repay $20.0 million of existing indebtedness.
In April 1997, an affiliate of Hicks Muse ("Chips Holdings") acquired
Interconnection Systems (Holdings) Limited, a rigid PCB manufacturer located in
the United Kingdom (the "Chips Acquisition"). In connection with that
transaction, Hicks Muse and its affiliates invested $140.0 million in the equity
capital of Chips Holdings. Concurrently with the consummation of the Original
Offering, Viasystems Group acquired Chips Holdings (the "Chips Merger") in
consideration for the issuance to Hicks Muse and certain affiliates of
Viasystems Group common stock valued at $140.0 million. In connection with the
Chips Merger, Viasystems Group assumed approximately $437.5 million of loan
notes incurred to finance the Chips Acquisition (the "Chips Loan Notes" and,
together with the Forward Group Loan Notes, the "Loan Notes"). Concurrently with
the consummation of the Chips Merger, Hicks Muse and its affiliates exchanged
the $85.0 million liquidation preference of Viasystem Group's preferred stock
owned by them for an equivalent amount of Viasystem Group's common stock. See
"Security Ownership of Certain Beneficial Owners" and "Certain Transactions."
Following the Chips Merger, the Chips operating subsidiaries became
indirect wholly-owned subsidiaries of the Company. To facilitate the Chips
Merger, the Company negotiated an amendment to its existing credit agreement
(the "Senior Credit Facilities"). See "Capitalization" and "Description of
Senior Credit Facilities."
The Circo Craft acquisition, the Lucent Division acquisition, the Forward
Group acquisition, and the Chips Merger are collectively referred to as the
"Transactions." The foregoing transactions, excluding the acquisitions of Circo
Craft and the Lucent Division (both of which occurred in 1996), are collectively
referred to as the "1997 Transactions."
2
<PAGE> 9
THE EXCHANGE OFFER
The Exchange Offer......... $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of Old Notes. As
of the date hereof, Old Notes representing $400
million aggregate principal amount are
outstanding. The terms of the New Notes and the
Old Notes are substantially identical in all
material respects, except that the New Notes will
be freely transferable by the holders thereof
except as otherwise provided herein. See
"Description of New Notes."
Based on an interpretation by the Commission's
staff set forth in no-action letters issued to
third parties unrelated to the Company, the
Company believes that New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes
may be offered for resale, sold and otherwise
transferred by any registered person receiving
the New Notes, whether or not that person is the
registered holder (other than any such holder or
such other person that is an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act or a broker dealer who purchases
such New Notes directly from the Company to
resell pursuant to Rule 144A or any other
available exception under the Securities Act or a
person participating in the distribution of the
New Notes), without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that (i) the New
Notes are acquired in the ordinary course of
business of that holder or such other person,
(ii) neither the holder nor such other person is
engaging in or intends to engage in a
distribution of the New Notes, and (iii) neither
the holder nor such other person has an
arrangement or understanding with any person to
participate in the distribution of the New Notes.
See "The Exchange Offer -- Purpose and Effect."
Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where
those Old Notes were acquired by the
broker-dealer as a result of its market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of these New Notes.
See "Plan of Distribution."
Registration Rights
Agreement................ The Old Notes were sold by the Company on June 6,
1997, in a private placement in reliance on
Section 4(2) of the Securities Act and
immediately resold by the initial purchasers
thereof in reliance on Rule 144A under the
Securities Act (the "Original Offering"). In
connection with the sale, the Company entered
into an Exchange and Registration Rights
Agreement with the initial purchasers of the Old
Notes (the "Registration Rights Agreement")
requiring the Company to make the Exchange Offer.
The Registration Rights Agreement further
provides that the Company must use its reasonable
best efforts to (i) cause the Registration
Statement with respect to the Exchange Offer to
be declared effective on or before November 13,
1997 and (ii) consummate the Exchange Offer on or
before December 13, 1997. See "The Exchange
Offer -- Purpose and Effect."
3
<PAGE> 10
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, , 1997, or such later
date and time to which it is extended by the
Company.
Withdrawal................. The tender of the Old Notes pursuant to the
Exchange Offer may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the
Expiration Date. 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.
Interest on the New
Notes and Old Notes...... Interest on each New Note will accrue from the date
of issuance of the Old Note for which the New
Note is exchanged or from the date of the last
periodic payment of interest on such Old Note,
whichever is later. No additional interest will
be paid on Old Notes tendered and accept for
exchange.
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions, certain of which may be waived by the
Company. See "The Exchange Offer -- Certain
Conditions to Exchange Offer."
Procedures for Tendering
Old Notes.................. Each holder of the Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a copy thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver the
Letter of Transmittal, or the copy, together with
the Old Notes and any other required
documentation, to the Exchange Agent (as defined)
at the address set forth herein. Persons holding
the Old Notes through the Depository Trust
Company ("DTC") and wishing to accept the
Exchange Offer must do so pursuant to the DTC's
Automated Tender Offer Program, by which each
tendering participant will agree to be bound by
the Letter of Transmittal. By executing or
agreeing to be bound by the Letter of
Transmittal, each holder will represent to the
Company that, among other things, (i) 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 registered holder of
the Old Notes, (ii) neither the holder nor any
such other person is engaging in or intends to
engage in a distribution of such New Notes, (iii)
neither the holder nor any such other person has
an arrangement or understanding with any person
to participate in the distribution of such New
Notes, and (iv) neither the holder nor any such
other person is an "affiliate," as defined under
Rule 405 promulgated under the Securities Act, of
the Company. Pursuant to the Registration Rights
Agreement, the Company is required to file a
"shelf" registration statement for a continuous
offering pursuant to Rule 415 under the
Securities Act in respect of the Old Notes if (i)
because of any change in law or applicable
interpretations thereof by the staff of the
Commission, the Company determines that it is not
permitted to effect the Exchange Offer as
contemplated hereby, (ii) validly
4
<PAGE> 11
tendered Old Notes are not exchanged for New
Notes by December 13, 1997, (iii) any holder of
Private Exchange Securities (as defined) so
requests within 60 days of the Exchange Offer,
(iv) any applicable law or interpretations do not
permit any holder of Old Notes to participate in
the Exchange Offer or (v) any holder of Old Notes
that participates in the Exchange Offer does not
receive freely transferable New Notes in exchange
for tendered securities.
Acceptance of Old Notes and
Delivery of New Notes.... The Company will accept for exchange any and all
Old Notes which are properly tendered (and not
withdrawn) in the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration Date.
The New Notes issued pursuant to the Exchange
Offer will be delivered promptly following the
Expiration Date. See "The Exchange Offer -- Terms
of the Exchange Offer."
Exchange Agent............. The Bank of New York is serving as Exchange Agent
(the "Exchange Agent") in connection with the
Exchange Offer.
Federal Income Tax
Considerations........... The exchange pursuant to the Exchange Offer should
not be a taxable event for federal income tax
purposes. See "Certain Federal Income Tax
Considerations."
Effect of Not Tendering.... Old Notes that are not tendered or that are
tendered but not accepted will, following the
completion of the Exchange Offer, continue to be
subject to the existing restrictions upon
transfer thereof. The Company will have no
further obligation to provide for the
registration under the Securities Act of such Old
Notes.
5
<PAGE> 12
THE NEW NOTES
Issuer..................... Viasystems, Inc.
Securities Offered......... $400,000,000 aggregate principal amount of 9 3/4%
Senior Subordinated Notes due 2007.
Maturity................... June 1, 2007.
Interest Payment Dates..... Interest on the New Notes will be payable
semi-annually in arrears on June 1 and December 1
of each year, commencing December 1, 1997.
Sinking Fund............... None.
Optional Redemption........ Except as described below, the Company may not
redeem the New Notes prior to June 1, 2002. On and
after such date, the Company may redeem the New
Notes, in whole or in part, at the redemption
prices set forth herein, together with accrued and
unpaid interest, if any, to the date of redemption.
In addition, at any time and from time to time on
or prior to June 1, 2000, the Company may redeem up
to $140.0 million of the aggregate principal amount
of the New Notes with the net cash proceeds of one
or more Equity Offerings, so long as a Public
Market exists at the time of redemption, at a
redemption price equal to 109.75% of the principal
amount to be redeemed, together with accrued and
unpaid interest, if any, to the date of redemption,
provided that at least $200.0 million of the
aggregate principal amount of the New Notes remains
outstanding after each such redemption. See
"Description of New Notes -- Optional Redemption."
Change of Control.......... Upon the occurrence of a Change of Control, (i) the
Company will have the option, at any time on or
prior to June 1, 2002, to redeem the New Notes in
whole but not in part at a redemption price equal
to 100% of the principal amount thereof plus the
Applicable Premium, plus accrued and unpaid
interest, if any, to the date of redemption, and
(ii) if the Company does not so redeem the New
Notes or if such Change of Control occurs after
June 1, 2002, the Company will be required to make
an offer to repurchase the New Notes at a price
equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any,
to the date of purchase. See "Description of New
Notes -- Change of Control."
Ranking.................... The New Notes will be unsecured and will be
subordinated in right of payment to all existing
and future Senior Indebtedness of the Company. The
New Notes will rank pari passu with any future
Senior Subordinated Indebtedness of the Company and
will rank senior to all Subordinated Indebtedness
of the Company. As of March 31, 1997, on a pro
forma basis after giving effect to the 1997
Transactions and the Original Offering, the
aggregate principal amount of the Company's
outstanding Senior Indebtedness would have been
approximately $432.4 million (excluding unused
commitments) and the Company would have had no
Senior Subordinated Indebtedness, other than the
New Notes, and no Subordinated Indebtedness
outstanding. On the same pro forma basis, as of
March 31, 1997, the New Notes would have
effectively ranked junior to approximately $627.5
million of accrued liabilities and obligations of
the Company's consolidated subsidiaries, in-
6
<PAGE> 13
cluding borrowings under and guarantees in respect
of the Senior Credit Facilities. See "Description
of New Notes -- Ranking and Subordination."
Restrictive Covenants...... The Indenture limits, among other things: (i) the
incurrence of additional indebtedness by the
Company and its Restricted Subsidiaries; (ii) the
payment of dividends on, and redemption of, capital
stock of the Company and its Restricted
Subsidiaries and the redemption of certain
subordinated obligations of the Company and its
Restricted Subsidiaries; (iii) investments; (iv)
sale of assets and Restricted Subsidiary stock; (v)
transactions with affiliates; and (vi)
consolidations, mergers and transfers of all or
substantially all of the Company's assets. The
Indenture also prohibits certain restrictions on
distributions from Restricted Subsidiaries;
however, all of these limitations and prohibitions
are subject to a number of important qualifications
and exceptions. See "Description of New
Notes -- Certain Covenants."
Use of Proceeds............ There will be no cash proceeds to the Company from
the Exchange Offer. The Company used the net
proceeds from the Original Offering: (i) to repay
the Subordinated Credit Facility; (ii) to repay
indebtedness under the Senior Credit Facilities;
and (iii) to pay related fees and expenses.
RISK FACTORS
The risk factors that an investor should consider include, but are not
limited to: (i) the substantial leverage; (ii) the Company's ability to service
its debt; (iii) the Company's restrictive debt covenants of the Indenture and
the Senior Credit facilities; (iv) the subordination of the Notes to Senior
Indebtedness of the Company; (v) the encumbrances that currently exist on
certain of the Company's assets; (vi) the Company's holding company structure;
(vii) the Company's a prior history of combined operations; (viii) the ability
of the Company to implement its operating and acquisition strategy; (ix) the
potential for fluctuations in the Company's operating results and variability of
customer orders; (x) the Company's reliance on Lucent Technologies; (xi) the
rapidly changing technological environment in which the Company operates; (xii)
the Company's dependence upon the electronics industry; (xiii) the international
nature of the Company's operations; (xiv) the Company's ability to protect the
proprietary rights to its intellectual property; (xv) certain environmental
matters; (xvi) industry competition; (xvii) the impact of labor relations on the
Company; (xviii) the existence of a group of stockholders that effectively
control the Company; (xix) certain ERISA considerations; (xx) certain
limitations on a change in control of the Company; and (xxi) the absence of a
public market for the Notes.
7
<PAGE> 14
SUMMARY SUPPLEMENTAL HISTORICAL COMBINED AND PRO FORMA FINANCIAL DATA
The following table presents summary supplemental historical combined
financial data of Viasystems Group, Circo Craft, Viasystems Technologies,
Forward Group and Chips on an aggregate basis for the periods indicated. The
financial data for Viasystems Group, Circo Craft, Viasystems Technologies,
Forward Group and Chips used in the preparation of the summary supplemental
historical combined financial data has been derived from the audited and
unaudited financial statements of each entity for the periods indicated. In the
opinion of management, the unaudited financial statements of each entity include
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation. The financial data for Viasystems Technologies reflects the
results of operations of the Lucent Division, which was a captive producer of
PCBs and backpanels for Lucent Technologies. Accordingly, historical financial
results for Viasystems Technologies may not be indicative of its results of
operations as an independent entity.
This combined data should be read in consideration of the fact that such
data has not been prepared in accordance with generally accepted accounting
principles ("GAAP"), which do not allow for the aggregation of financial data
for entities that are not under common ownership. Accordingly, the summary
supplemental historical combined data does not reflect the effect of the
acquisitions by Viasystems Group, other than the effect of the acquisitions of
Circo Craft at October 1, 1996 and the Lucent Division at December 1, 1996, and,
therefore, is not comparable to results subsequent to the acquisitions. In
addition, the accounting policies used by the individual companies are not
necessarily consistent or comparable. Nevertheless, management believes that the
aggregate financial information shown below may be helpful in understanding the
past operations of the companies combined and in evaluating an investment in the
Notes.
The financial data of Circo Craft, Forward Group, and Chips used in the
preparation of the summary supplemental historical combined and pro forma
financial data shown below has been derived from the financial statements of
each entity prepared in accordance with Canadian GAAP or U.K. GAAP, as
appropriate, and adjusted for differences between U.S. GAAP and Canadian GAAP
for Circo Craft and between U.S. GAAP and U.K. GAAP for Forward Group and Chips
(see the notes to the consolidated financial statements of Circo Craft, Forward
Group, and Chips, included elsewhere herein). The data set forth below reflects
translations using currency exchange rates published in The Wall Street Journal.
See "Exchange Rates."
The pro forma financial data of the Company for the fiscal year ended
December 31, 1996 and the fiscal first quarter ended March 31, 1997, has been
derived from the financial data of each entity for the periods indicated in
"Certain Definitions, Industry Data and Financial Information." The pro forma
statement of operations and other related data give effect to the Transactions,
the Original Offering and the Exchange Offer as if they had occurred at the
beginning of the indicated period. The pro forma balance sheet data as of March
31, 1997 gives effect to the 1997 Transactions, the Original Offering and the
Exchange Offer as though they had occurred at the balance sheet date. Neither
the summary supplemental historical combined financial information nor the pro
forma financial data are necessarily indicative of either the future results of
operations or the results of operations that would have occurred if those events
had been consummated on the indicated dates. The following information should be
read in conjunction with the consolidated financial statements of Viasystems
Group, Circo Craft, Viasystems Technologies, Forward Group, and Chips, "Selected
Financial Data," "Unaudited Pro Forma Financial Information," and, in each case,
the related notes, and "Management's Discussion and Analysis of Results of
Operations and Financial Condition," all included elsewhere herein.
8
<PAGE> 15
SUMMARY SUPPLEMENTAL HISTORICAL COMBINED AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL COMBINED FISCAL HISTORICAL COMBINED -----------------------
YEARS FIRST FISCAL QUARTERS FISCAL
------------------------------ --------------------- YEAR FIRST FISCAL
1994 1995 1996 1996 1997 1996 QUARTER 1997
-------- -------- -------- --------- --------- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $564,598 $727,570 $872,424 $208,019 $224,069 $872,424 $ 224,069
Cost of goods sold.............. 432,440 570,980 643,351 155,332 168,407 623,873 168,407
Selling, general and
administrative expenses....... 65,132 71,412 79,470 18,089 17,889 75,803 17,889
Depreciation and amortization... 37,876 50,299 65,750 14,945 18,250 86,778 21,801
Write-off of acquired in-process
research and development(1)... -- -- 50,800 -- -- 50,800 --
Restructuring charges(2)........ -- -- 2,006 -- -- 2,006 --
-------- -------- -------- -------- -------- -------- ----------
Operating income.............. $ 29,150 $ 34,879 $ 31,047 $ 19,653 $ 19,523 33,164 15,972
======== ======== ======== ======== ========
Interest expense, net(3)........ 77,597 19,591
Amortization of deferred
financing costs............... 9,422 2,356
Other income.................... (1,054) (190)
-------- ----------
Loss before income taxes...... (52,801) (5,785)
Benefit from income taxes....... (2,438) (2,424)
-------- ----------
Net loss...................... $(50,363) $ (3,361)
======== ==========
OTHER DATA:
Adjusted EBITDA(4).............. $ 67,026 $ 85,178 $149,603 $ 34,598 $ 37,773 $172,748 $ 37,773
Operating cash flows(5).........
Investing cash flows(5).........
Financing cash flows(5).........
Capital expenditures............ $ 49,329 $ 85,438 $ 93,978 $ 30,291 $ 33,574 $ 93,978 $ 33,574
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents....... $ 10,213
Working capital................. 52,612
Total assets.................... 1,262,356
Total debt, including current
maturities.................... 832,352
Stockholder's equity............ 234,821
</TABLE>
- ---------------
(1) Represents charges relating to the write-off of acquired in-process research
and development costs associated with the purchase accounting for the Circo
Craft and Lucent Division acquisitions. The write-off relates to acquired
research and development for projects that do not have a future alternative
use. See Note 1 to Consolidated Financial Statements of Viasystems Group.
(2) Represents restructuring charges related to the consolidation and
rationalization of several facilities at Forward Group.
(3) Represents interest expense net of interest income.
(4) Adjusted EBITDA is defined as operating income plus depreciation,
amortization and certain non-cash charges in the amounts of $50,800 relating
to the write-off of acquired in-process research and development and $2,006
of restructuring charges for the historical combined and pro forma fiscal
year 1996. The Company believes that Adjusted EBITDA provides additional
information for determining its ability to meet debt service requirements.
Adjusted EBITDA does not represent and should not be considered as an
alternative to net income or cash flow from operations as determined by
GAAP, and does not necessarily indicate whether cash flow will be sufficient
for cash requirements. The calculation of Adjusted EBITDA does not include
the commitments of the Company for capital expenditures and payment of debt
and should not be deemed to represent funds available to the Company.
Adjusted EBITDA, as presented, may not be comparable to similarly-titled
measures of other companies. Charges of $14,565, $18,987 $7,900, and $3,449
net of estimated additional administrative costs to be incurred, for the
historical combined fiscal years 1994, 1995, 1996, and the historical
combined first fiscal quarter 1996 respectively, incurred with respect to
corporate allocations to the Lucent Division by Lucent Technologies, which
are not expected to be incurred by the Company are included in the
historical combined results of operations and have not been eliminated to
calculate Adjusted EBITDA.
(5) Historical combined and pro forma financial cash flow data has not been
prepared due to the absence of cash flow data for the Lucent Division.
Financial statements for the Lucent Division had not been previously
prepared. The financial data available for the Lucent Division has been
derived from financial statements that present only assets purchased in the
Lucent Division acquisition and results of operations related to the Lucent
Division. Any computation of historical cash flow data for the Lucent
Division would be based on arbitrary assumptions of the financial
information necessary to prepare such data. As a result, the historical cash
flow data of the Lucent Division has not been prepared or presented. The
selected historical data of Viasystems Group, Circo Craft, Forward Group and
Chips include financial cash flow data for these entities.
9
<PAGE> 16
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following risk factors
before purchasing the Notes offered hereby.
SUBSTANTIAL LEVERAGE
The Company has indebtedness that is substantial in relation to its
stockholder's equity. As of March 31, 1997, on a pro forma basis after giving
effect to the 1997 Transactions, the Original Offering and the Exchange Offer,
the Company would have had approximately $832.4 million of indebtedness
outstanding and there would have been approximately $146.5 million available for
future borrowings for general corporate purposes and working capital needs and
an additional $100.0 million available for future acquisitions, subject to
certain conditions under the Senior Credit Facilities. See "Capitalization" and
"Description of the Senior Credit Facilities." On the same pro forma basis, the
Company's earnings would have been insufficient to cover fixed charges by
approximately $52.8 million and $5.8 million for the fiscal year ended December
31, 1996 and the first fiscal quarter ended March 31, 1997, respectively. The
Company may incur additional indebtedness in the future, subject to certain
limitations to be contained in the Indenture and the Senior Credit Facilities,
and intends to do so in order to fund future acquisitions as part of its
business strategy. See "Description of New Notes" and "Description of Senior
Credit Facilities."
The Company's high degree of leverage could have several important
consequences to the holders of the New Notes, including, but not limited to, the
following: (i) the Company will have significant cash requirements to service
debt, reducing funds available for operations and future business opportunities
and increasing the Company's vulnerability to adverse general economic and
industry conditions and competition; (ii) the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions, general corporate or other purposes, may be limited; (iii) the
Company's leveraged position and the covenants that will be contained in the
Indenture and the Senior Credit Facilities could limit the Company's ability to
compete, as well as its ability to expand, including through acquisitions, and
to make capital improvements; (iv) the Company may be more leveraged than
certain of its competitors, which may place the Company at a competitive
disadvantage; and (v) the Company's ability to refinance the New Notes in order
to pay the principal of the New Notes at maturity or upon a Change of Control
may be adversely affected.
A portion of the consolidated debt of the Company bears interest at a
floating rate; therefore, the financial results of the Company are and will
continue to be affected by changes in prevailing interest rates. As of March 31,
1997, on a pro forma basis after giving effect to the 1997 Transactions, the
Original Offering and the Exchange Offer, the Company had approximately $432.4
million of debt outstanding bearing interest at floating interest rates. See
"Description of Senior Credit Facilities."
ABILITY TO SERVICE DEBT
The Company's ability to pay interest and principal upon the Senior Credit
Facilities, to pay interest on the Notes, and to satisfy its other debt
obligations will depend upon its future operating performance, which will be
affected by prevailing economic conditions and financial, business and other
factors, certain of which will be beyond its control. In addition, amounts owing
under the Senior Credit Facilities will become due prior to the maturity of the
Notes and such amounts may need to be refinanced. There can be no assurance that
future borrowings or equity refinancing will be available for the payment or
refinancing of the Company's indebtedness. Cash interest and debt repayments of
a total of approximately $55.6 million will be required to be paid from April 1,
1997 to December 31, 1997, giving effect to the amount of debt to be outstanding
on a pro forma basis as of March 31, 1997. Cash interest and debt repayments of
a total of approximately $79.7 million and $101.7 million will be required to be
paid in 1998 and 1999, respectively, giving effect to the amount of debt to be
outstanding on a pro forma basis as of March 31, 1997. Such amounts do not give
consideration to any additional borrowings which may from time to time be
necessary, interest rate
10
<PAGE> 17
fluctuations, or payment of any borrowings before maturity due to any reason. If
the Company is unable to service its indebtedness, however, whether in the
ordinary course of business or upon acceleration of such indebtedness, the
Company will be forced to pursue one or more alternative strategies, such as
restructuring or refinancing its indebtedness, selling assets, reducing or
delaying capital expenditures or seeking additional equity capital. There can be
no assurance that any of these strategies could be effected on satisfactory
terms, if at all. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition -- Liquidity and Capital Resources" and
"Description of Senior Credit Facilities."
RESTRICTIVE DEBT COVENANTS
The Indenture and the Senior Credit Facilities contain certain covenants
that restrict, among other things, the Company's ability to incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, make investments, consummate certain asset sales, enter into certain
transactions with affiliates, impose restrictions on the ability of a subsidiary
to pay dividends or make certain payments to the Company, merge or consolidate
with any other person or sell, assign, transfer, lease, convey, or otherwise
dispose of all or substantially all of the assets of the Company. In addition,
the Senior Credit Facilities contain certain other and more restrictive
covenants including restrictions on prepaying indebtedness, such as the New
Notes, and will also require the Company to maintain specified financial ratios
and to satisfy certain financial condition tests. The Company's ability to meet
these financial ratio and financial condition tests can be affected by events
beyond its control and there can be no assurance that the Company will meet
those tests. A breach of any of these covenants could result in a default under
the Senior Credit Facilities or the Indenture. Upon the occurrence of an event
of default under the Senior Credit Facilities, including a default on certain
other Indebtedness, such as the Notes, the lenders thereunder could elect to
declare all amounts outstanding thereunder, together with accrued interest, to
be immediately due and payable. If the Company were unable to pay those amounts,
the lenders thereunder could proceed against the collateral granted to them to
secure that indebtedness. Substantially all the assets of the Company, including
the stock of certain of its subsidiaries, are pledged as collateral to secure
the Company's obligations under the Senior Credit Facilities. If the
indebtedness under the Senior Credit Facilities were to be accelerated, there
can be no assurance that the assets of the Company would be sufficient to repay
in full that indebtedness and the other indebtedness of the Company, including
the New Notes. In addition, if a default occurs with respect to Senior
Indebtedness, such as the Senior Credit Facilities, the subordination provisions
of such Senior Indebtedness would likely restrict payments to holders of New
Notes. The Indenture also provides that the failure of the Company or any
Restricted Subsidiary (as defined) to pay Indebtedness in a total amount in
excess of $20.0 million within any applicable grace period after the final
maturity of such Indebtedness, or the acceleration by the holders of such
Indebtedness, shall constitute an event of default under the Indenture, unless
such default on the Indebtedness is cured, including by way of repayment, or
such acceleration rescinded after a 10 day period. See "Description of New
Notes -- Certain Covenants," "-- Events of Default" and "Description of Senior
Credit Facilities."
SUBORDINATION OF NOTES TO SENIOR INDEBTEDNESS
The payment of principal, premium, if any, and interest on, and any other
amounts owing in respect of, the New Notes will be subordinated to the prior
payment in full in cash or cash equivalents of all existing and future Senior
Indebtedness of the Company. In the event of the bankruptcy, liquidation,
dissolution, reorganization or other winding-up of the Company, the assets of
the Company will be available to pay obligations on the New Notes only after all
Senior Indebtedness has been so paid in full; accordingly there may not be
sufficient assets remaining to pay amounts due on any or all of the New Notes
then outstanding. In addition, the Company may not pay principal of, premium, if
any, or interest on, or any other amounts owing in respect of the New Notes, or
purchase, redeem or otherwise retire the New Notes, in the event of any default
with
11
<PAGE> 18
respect to Senior Indebtedness, including Senior Indebtedness under the Senior
Credit Facilities. See "Description of Senior Credit Facilities."
As of March 31, 1997, on a pro forma basis after giving effect to the 1997
Transactions, the Original Offering and the Exchange Offer, there would have
been approximately $432.4 million of Senior Indebtedness outstanding
(represented by approximately $49.2 million of direct borrowings by the Company
under the Senior Credit Facilities, $319.3 million for the Chips Reimbursement
Obligation, $24.2 million of Forward Group Loan Notes and $39.6 million of other
indebtedness). In addition, on the same pro forma basis there would have been
approximately $146.5 million available under the Senior Credit Facilities as of
March 31, 1997 for general corporate purposes and working capital needs of the
Company and its subsidiaries and an additional $100.0 million available for
future acquisitions, all of which would be Senior Indebtedness if borrowed. Of
the amount available to be borrowed as of March 31, 1997 on a pro forma basis,
approximately $96.5 million would have been available for borrowing by the
Company's foreign subsidiaries. Additional Senior Indebtedness may be incurred
by the Company from time to time, subject to certain restrictions. See
"Description of New Notes -- Ranking and Subordination," "-- Certain Covenants,"
and "Description of the Senior Credit Facilities."
ENCUMBRANCES ON ASSETS TO SECURE SENIOR CREDIT FACILITIES
In addition to being subordinated to all existing and future Senior
Indebtedness of the Company, the New Notes will not be secured by any assets of
the Company or its subsidiaries; however, obligations under the Senior Credit
Facilities are secured by a pledge of all the capital stock of the Company's
direct U.S. subsidiaries, 65% of the voting stock of its direct foreign
subsidiaries and 100% of the preferred stock of its direct foreign subsidiaries,
and the tangible and intangible assets of the U.S. subsidiaries (including 65%
of the voting stock of their direct foreign subsidiaries) and certain foreign
subsidiaries (including Forward Group and Circo Craft) to secure their
respective obligations only, and will be guaranteed by Viasystems Group, with
such guaranty secured by a pledge of the capital stock of the Company. In
addition, the Company has guaranteed the obligations of its foreign subsidiaries
for borrowings under the Senior Credit Facilities and the Company's U.S.
subsidiaries have guaranteed the obligations of the Company under the Senior
Credit Facilities, including obligations arising under the Company's guarantees.
If the Company becomes insolvent or is liquidated, or if payment under any of
the Senior Credit Facilities is accelerated, the lenders under the Senior Credit
Facilities will be entitled to exercise the remedies available to a secured
lender under applicable law pursuant to the Senior Credit Facilities.
Accordingly, such lenders will have a prior claim with respect to such assets.
See "Description of Senior Credit Facilities."
HOLDING COMPANY STRUCTURE
The New Notes are effectively subordinated to the obligations of the
Company's subsidiaries, including the guarantee by its U.S. subsidiaries of
obligations of the Company under the Senior Credit Facilities, because the
Company is a holding company. In the event of an insolvency, liquidation or
other reorganization of any of the subsidiaries of the Company, the creditors of
the Company (including the holders of the New Notes), as well as shareholders of
the Company, will have no right to proceed against the assets of such
subsidiaries or to cause the liquidation or bankruptcy of such subsidiaries
under applicable bankruptcy laws. Creditors of such subsidiaries, including
lenders under the Senior Credit Facilities, would be entitled to payment in full
from such assets before the Company, as a shareholder, would be entitled to
receive any distribution therefrom. Except to the extent that the Company itself
may be a creditor with recognized claims against such subsidiaries, claims of
creditors of such subsidiaries will have priority with respect to the assets and
earnings of such subsidiaries over the claims of creditors of the Company,
including claims under the New Notes. In addition, as a result of the Company
being a holding company, the Company's operating cash flow and its ability to
service its indebtedness, including the New Notes,
12
<PAGE> 19
is dependent upon the operating cash flow of its subsidiaries and the payment of
funds by such subsidiaries to the Company in the form of loans, dividends or
otherwise. At March 31, 1997, after giving pro forma effect to the 1997
Transactions, the Original Offering and the Exchange Offer, the subsidiaries of
the Company would have had aggregate liabilities, including trade payables and
accrued expenses, of $627.5 million, including amounts borrowed under the Senior
Credit Facilities and guarantees of borrowings made by the Company under the
Senior Credit Facilities. As of March 31, 1997 after giving pro forma effect to
the 1997 Transactions, the Original Offering and the Exchange Offer, the
Company's foreign subsidiaries would have additional availability under the
Senior Credit Facilities of $96.5 million.
NO PRIOR HISTORY OF COMBINED OPERATIONS
Prior to their respective acquisitions, the operations of Circo Craft,
Viasystems Technologies, Forward Group and Chips were conducted as separate and
distinct businesses, each with its own management team, sales and administrative
personnel, and manufacturing facilities. The Company anticipates that the
current operating management of the various subsidiaries will continue to manage
their respective operations and that Mills & Partners will be responsible for
the overall management of the Company. There can be no assurance that the
Company can successfully integrate these operations. Moreover, the historical
financial information and results of operations presented herein may be of
limited utility in assessing the Company's historical and potential results of
operations as an independent, combined entity. See "Summary -- Transactions" and
"Business."
ABILITY TO IMPLEMENT THE COMPANY'S OPERATING AND ACQUISITION STRATEGY
No assurances can be given that the Company or its management team will be
able to implement successfully the operating strategy described herein,
including the ability to identify, negotiate and consummate future acquisitions
on terms management considers favorable. No assurances can be given that the
Company will successfully implement its operating strategies in the future.
The Company may from time to time pursue the acquisitions of other
companies, assets or product lines that complement or expand its existing
business. Acquisitions involve a number of risks that could adversely affect the
Company's operating results, including the diversion of management's attention,
the costs of assimilating the operations and personnel of the acquired
companies, and the potential loss of employees of the acquired companies. No
assurance can be given that any acquisition by the Company will not materially
and adversely affect the Company or that any such acquisition will enhance the
Company's business.
The ability of the Company to implement its operating strategy and to
consummate future acquisitions will require significant additional debt and/or
equity capital, particularly in light of the Company's significant and ongoing
anticipated capital expenditures, and no assurance can be given as to whether,
and on what terms, such additional debt and/or equity capital will be available.
The Company has responded to a letter from the United Kingdom's Office of
Fair Trading ("OFT"), the governmental entity responsible for antitrust control
in the United Kingdom, requesting information regarding Chips and Forward Group
and their respective market shares in the United Kingdom to determine whether
the Fair Trading Act of 1973 applies to the Chips Acquisition. Although no
assurances can be given, the Company believes, after consultation with counsel,
that no adverse consequence will arise from such OFT inquiry.
FLUCTUATIONS IN OPERATING RESULTS; VARIABILITY OF ORDERS
The Company's operating results are affected by a number of factors,
including the timing of orders from and shipments to major customers, the volume
of orders relative to the Company's capacity, the timing of expenditures in
anticipation of future sales, pricing pressures, variations in product mix,
start-up expenses relating to new manufacturing facilities and economic
conditions in
13
<PAGE> 20
the electronics industry. Many of these factors are outside the control of the
Company. Because a significant portion of the Company's operating expenses are
fixed, even a relatively small revenue shortfall can have a disproportionate
effect on the Company's results of operations. Results of operations in any
period should not be considered indicative of the results to be expected for any
future period.
The level and timing of orders placed by the Company's customers vary due
to a number of factors, including customer attempts to manage inventory, changes
in the customers' manufacturing strategies and variation in demand for customer
products due to, among other things, technological change, new product
introductions, product life-cycles, competitive conditions or general economic
conditions. Because the Company generally does not obtain long-term purchase
orders or commitments from its customers, it must attempt to anticipate the
future volume of orders based on discussions with its customers. A substantial
portion of sales in a given quarter may depend on obtaining orders for products
to be manufactured and shipped in the same quarter in which those orders are
received. The Company relies on its estimate of anticipated future volumes when
making commitments regarding the level of business that it will seek and accept,
the mix of products that it intends to manufacture, the timing of production
schedules and the levels and utilization of personnel and other resources. A
variety of conditions, both specific to the individual customer and generally
affecting the customer's industry, may cause customers to cancel, reduce or
delay orders that were previously made or anticipated. A significant portion of
the Company's backlog at any time may be subject to cancellation or postponement
without penalty. The Company cannot assure the timely replacement of canceled,
delayed or reduced orders. Significant or numerous cancellations, reductions or
delays in orders by a customer or group of customers could materially adversely
affect the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Results of Operations and Financial
Condition."
CUSTOMER CONCENTRATION; RELIANCE ON LUCENT TECHNOLOGIES
Sales to Lucent Technologies for fiscal years 1994, 1995, and 1996
accounted for approximately 49%, 39%, and 35% of the Company's combined net
sales, respectively. Lucent Technologies produces telecommunications systems,
including telecommunications switching, transmission and wireless communications
equipment, all of which utilize the Company's products. Any adverse development
or lack of success by Lucent Technologies in any of these product areas could
have a material adverse effect on the Company's business and results of
operations. See "Business -- Markets and Customers."
The Company anticipates that Lucent Technologies will continue to be its
largest customer for at least the next few years, in part because of the
five-year supply agreement (the "Lucent Agreement") that the Company entered
with Lucent Technologies as of November 26, 1996, which agreement will be
renewed upon the satisfaction of certain performance requirements for two
additional one-year periods and thereafter on an ongoing basis until either
party terminates the agreement on 18 months' notice. No assurance can be given,
however, that the contract with Lucent Technologies will be renewed for
additional periods or extended or replaced upon its final expiration.
The Lucent Agreement requires that by January 1, 1999 the Company's prices
for the products supplied to Lucent Technologies shall be reduced to an agreed
upon benchmark standard. Effective January 1, 1997, the Company has reduced
prices on certain products supplied to Lucent Technologies pursuant to the
Lucent Agreement. The financial data for Viasystems Technologies included herein
reflects its results of operations while Viasystems Technologies was a captive
producer for Lucent Technologies. Historical results of Viasystems Technologies
may not be indicative of its results of operations as an independent entity. The
Lucent Agreement also requires Lucent Technologies to make minimum annual
purchases, subject to certain penalties for failing to satisfy such minimum
purchase amounts.
On a combined basis, the Company's five largest customers accounted for
approximately 53% of the Company's net sales for the fiscal year 1996. Although
there is no assurance the Company's
14
<PAGE> 21
principal customers will continue to purchase products from the Company at past
levels, the Company expects a significant portion of its revenue will continue
to be concentrated within a small number of customers. The loss of, or
significant curtailment of purchases by, one or more of these customers could
have a material adverse effect on the Company. See "Business -- Markets and
Customers."
TECHNOLOGICAL CHANGE, PROCESS DEVELOPMENT AND PROCESS DISRUPTION
The market for the Company's products and services is characterized by
rapidly changing technology and continuing process development. The future
success of the Company's business will depend in large part upon its ability to
maintain and enhance its technological capabilities, develop and market products
and services that meet changing customer needs, and successfully anticipate or
respond to technological changes on a cost-effective and timely basis. Research
and development expenses are expected to increase as manufacturers make demands
for higher technology and smaller PCBs. In addition, the PCB and backpanel
industry could in the future encounter competition from new or revised
technologies that render existing electronic interconnect technology less
competitive or obsolete or technologies that may reduce the number of PCBs
required in electronic components. There can be no assurance that the Company
will effectively respond to the technological requirements of the changing
market. To the extent the Company determines that new technologies and equipment
are required to remain competitive, the development, acquisition and
implementation of such technologies and equipment are likely to continue to
require significant capital investment by the Company. There can be no assurance
that capital will be available for these purposes in the future or that
investments in new technologies will result in commercially viable technological
processes. Moreover, the Company's business involves highly complex
manufacturing processes that could in the future be subject to periodic failure
or disruption. Process disruptions can result in delays in certain product
shipments. There can be no assurance that failures or disruptions will not occur
in the future. The loss of revenue and earnings to the Company from such a
technological change, process development or process disruption, as well as any
disruption of the Company's operations resulting from a natural disaster such as
an earthquake, fire or flood, could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Industry -- Overview," "Business -- Business Strategy," "-- Products and
Services," and " -- Manufacturing."
DEPENDENCE ON ELECTRONICS INDUSTRY
The electronics industry, which encompasses the Company's principal
customers, is characterized by intense competition, relatively short product
life-cycles and significant fluctuations in product demand. In addition, the
electronics industry is generally subject to rapid technological change and
product obsolescence. Furthermore, the electronics industry is subject to
economic cycles and has in the past experienced, and is likely in the future to
experience, recessionary periods. A recession or any other event leading to
excess capacity or a downturn in the electronics industry would likely have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition," "Industry -- Overview" and
"Business -- Markets and Customers."
INTERNATIONAL OPERATIONS
A significant portion of the Company's operations are conducted in foreign
countries, and are subject to risks that are inherent in operating abroad,
including governmental regulation, changes in import duties, trade restrictions,
work stoppages, currency restrictions and other restraints and burdensome taxes.
Net sales from international operations during fiscal 1996 and the first fiscal
quarter ended 1997 were approximately $331.6 million and $142.0 million, or
60.9% and 62.4% of net sales, respectively.
15
<PAGE> 22
The Company's operations worldwide and the products it sells are subject to
numerous governmental regulations and inspections. Although the Company believes
it is substantially in compliance with such regulations, changes in legislation
or regulations and actions by regulators, including changes in administration
and enforcement policies, may from time to time require operational improvements
or modifications at various locations or the payment of fines and penalties, or
both.
The Company is subject to a variety of governmental regulations in certain
countries where it markets its products, including import quotas and tariffs,
and taxes.
The Company's operations involve transactions in a variety of currencies.
The results of its operations may be significantly affected by fluctuations of
currency exchange rates. Such fluctuations are significant to the Company's
operations because many of its costs are incurred in currencies different from
those that are received from the sale of its products in foreign markets, and
there is normally a time lag between the incurrence of such costs and collection
of the related sales proceeds. The Company engages from time to time in various
hedging activities to minimize potential losses on cash flows originating in
foreign currencies.
INTELLECTUAL PROPERTY
The Company's success depends in part on proprietary technology and
manufacturing techniques. The Company has few patents for these proprietary
techniques and chooses to rely primarily on trade secret protection. Litigation
may be necessary to protect the Company's technology, to determine the validity
and scope of the proprietary rights of others or to defend against claims of
patent infringement. The Company is not aware of any pending or threatened
claims that affect any of the Company's intellectual property rights. If any
infringement claim is asserted against the Company, the Company may seek to
obtain a license of the other party's intellectual property rights. There is no
assurance that a license would be available on reasonable terms or at all.
Litigation with respect to patents or other intellectual property matters could
result in substantial costs and diversion of management and other resources and
could have a material adverse effect on the Company.
ENVIRONMENTAL MATTERS
The Company's operations are regulated under a number of federal, state,
local and foreign environmental laws and regulations, which govern, among other
things, the discharge of hazardous materials into the air and water as well as
the handling, storage and disposal of such materials. Compliance with these
environmental laws are major considerations for all PCB manufacturers because
metals and other hazardous materials are used in the manufacturing process. In
addition, because the Company is a generator of hazardous wastes, the Company,
along with any other person who arranges for the disposal of such wastes, may be
subject to potential financial exposure for costs associated with the
investigation and remediation of sites at which it has arranged for the disposal
of hazardous wastes, if such sites become contaminated. This is true even if the
Company fully complies with applicable environmental laws. In addition, it is
possible that in the future new or more stringent requirements could be imposed.
See "Business -- Environmental."
COMPETITION
The PCB and backpanel industries are highly fragmented and characterized by
intense competition. The Company believes that its major competitors are large
U.S. and international independent and captive producers that also manufacturer
multilayer PCBs and provide backpanels and other electronic assemblies. In
addition, OEMs with captive PCB and backpanel manufacturing operations may seek
orders in the open market to fill excess capacity, thereby increasing price
competition. Moreover, the Company may face additional competitive pressures as
a result of
16
<PAGE> 23
changes in technology. See "-- Technological Change, Process Development and
Process Disruption."
During periods of recession or economic slowdown in the electronics
industry and other periods when excess capacity exists, electronics OEMs become
more price sensitive, which could have a material adverse effect on PCB and
backpanel pricing. In addition, the Company believes that price competition from
PCB and backpanel manufacturers in Asia and other locations may play an
increasing role in the PCB and backpanel markets in which the Company competes.
Competition in the industry has also increased due to the consolidation trend in
the industry, which results in potentially better capitalized, and more
effective competitors. Price has become the most important competitive issue as:
(i) competition from Pacific Rim competitors has intensified; (ii) U.S. and
European manufacturers have shifted production overseas; (iii) the price of
products in end-user industries has declined; (iv) technology and material
enhancements have improved efficiencies and reduced production costs; and (v)
improved quality control has resulted in higher yields. The Company's basic
interconnect technology is generally not subject to significant proprietary
protection, and companies with significant resources or international operations
may enter the market. Increased competition could result in price reductions,
reduced margins or loss of market share, any of which could materially adversely
affect the Company's business, financial condition and results of operations.
LABOR RELATIONS
Approximately 35% of the Company's employees are unionized. Approximately
660 employees of the Company at Forward Group's United Kingdom facilities are
governed by a collective bargaining agreement that is terminable by either party
upon three months notice. Approximately 95 employees of the Company at Forward
Group's South Africa facility are governed by a collective bargaining agreement
that is negotiated annually. A prolonged dispute at one or more facilities could
have a material adverse effect on the Company.
CONTROLLING STOCKHOLDERS
100% of the common stock of the Company is owned by Viasystems Group, which
in turn is controlled by an affiliate of Hicks Muse. As a result, Hicks Muse
effectively will be able to elect all the members of the Board of Directors of
Viasystems Group and therefore direct the management and policies of the
Company. The interests of Hicks Muse and its affiliates as equity owners of
Viasystems Group may differ from the interests of holders of the Notes as
creditors of the Company. See "Summary -- Recent History," "Security Ownership
of Certain Beneficial Owners" and "Certain Transactions."
ERISA CONSIDERATIONS
The Hicks, Muse, Tate & Furst Equity Fund III, L.P. ("Fund III") is a
private investment fund which is managed by an affiliate of Hicks Muse and which
was formed for the principal purpose of making investments in companies. Fund
III currently owns at least 80% of the total outstanding common stock of
Viasystems Group and thereby indirectly possesses at least 80% of the total
combined voting power and total value of shares of all classes of stock of the
Company. Fund III also currently owns and may acquire at least 80% of the total
combined voting power or the total value of shares of all classes of stock of
other companies, some of which may sponsor or contribute to pension plans
subject to Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or Section 412 of the Internal Revenue Code of 1986, as
amended ("Code"). In accordance with the provisions of ERISA and the Code, the
Company is a member of a controlled group of corporations or a group of trades
or businesses under common control that includes Fund III ("Fund III ERISA
Group"), and each member of such group is jointly and severally liable for
certain unfunded pension liabilities and pension contributions which arise
during such member's inclusion within such group. While Hicks Muse expects each
member of the Fund III ERISA Group to satisfy its pension-related obligations
with respect to its employees to the fullest extent permitted by
17
<PAGE> 24
law, without assistance from other members of the Fund III ERISA Group, there
are no assurances that an insolvency, bankruptcy or other condition would not
occur at one member of the Fund III ERISA Group which could result in a
liability to other members of the Fund III ERISA Group (including the Company).
Hicks Muse is not currently aware of any accrued and unpaid pension
contribution, or termination of or withdrawal from a pension plan subject to
Title IV of ERISA or Section 412 of the Code at any member of the Fund III ERISA
Group which would have a material adverse effect on the Company.
LIMITATION ON CHANGE OF CONTROL
Upon a Change of Control, the Company may be required to offer to purchase
all of the New Notes then outstanding at 101% of their principal amount, plus
accrued interest to the date of repurchase. If a Change of Control were to
occur, there can be no assurance that the Company would have sufficient funds to
pay the purchase price for all of the New Notes that the Company might be
required to purchase. In the event that the Company were required to purchase
New Notes pursuant to a Change of Control Offer (as defined), the Company
expects that it would require third party financing; however, there can be no
assurance that the Company would be able to obtain such financing on favorable
terms, if at all. In addition, the Senior Credit Facilities restricts the
Company's ability to repurchase the New Notes, including pursuant to a Change of
Control Offer. A Change of Control will result in an event of default under the
Senior Credit Facilities and may cause the acceleration of other Senior
Indebtedness, if any, in which case the subordination provisions of the New
Notes would require payment in full of the Senior Credit Facilities and any such
Senior Indebtedness before repurchase of the Notes. See "Description of New
Notes -- Change of Control" and "Description of Senior Credit Facilities." The
inability to repay Senior Indebtedness, if accelerated, and to purchase all of
the tendered Notes, would constitute an event of default under the Indenture.
FRAUDULENT CONVEYANCE
The incurrence of indebtedness (such as the New Notes) in connection with
the Transactions and payments to consummate the Transactions with the proceeds
thereof are subject to review under relevant federal and state fraudulent
conveyance statutes in a bankruptcy or reorganization case or a lawsuit by or on
behalf of creditors of the Company. Under these statutes, if a court were to
find that obligations (such as the New Notes) were incurred with the intent of
hindering, delaying or defrauding present or future creditors or that the
Company received less than a reasonably equivalent value of fair consideration
for those obligations and, at the time of the occurrence of the obligations, the
obligor either: (i) was insolvent or rendered insolvent by reason thereof; (ii)
was engaged or was about to engage in a business or transaction for which its
remaining unencumbered assets constituted unreasonably small capital; or (iii)
intended to or believed that it would incur debts beyond its ability to pay such
debts as they matured or became due, such court could void the Company's
obligations under the New Notes, subordinate the New Notes to other indebtedness
of the Company or take other action detrimental to the holders of the New Notes.
Some courts have held that an obligor's purchase of its own capital stock does
not constitute reasonably equivalent value or fair consideration for
indebtedness incurred to finance that purchase.
The measure of insolvency for purposes of a fraudulent conveyance claim
will vary depending upon the law of the jurisdiction being applied. Generally,
however, a company will be considered insolvent at a particular time if the sum
of its debts at that time is greater than the then fair value of its assets or
if the fair saleable value of its assets at that time is less than the amount
that would be required to pay its probable liability on its existing debts as
they become absolute and mature. The Company believes that, after giving effect
to the Transactions, the Company will be: (i) neither insolvent nor rendered
insolvent by the incurrence of indebtedness in connection with the Transactions;
(ii) in possession of sufficient capital to run its business effectively; and
(iii) incurring debts within its ability to pay as the same mature or become
due.
18
<PAGE> 25
There can be no assurance, however, as to what standard a court would apply
to evaluate the parties' intent or to determine whether the Company was
insolvent at the time of, or rendered insolvent upon consummation of, the
Transactions or that, regardless of the standard, a court would not determine
that the Company was insolvent at the time of, or rendered insolvent upon
consummation of, the Transactions.
ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES
Prior to the Exchange Offer, there was no public market for the Old Notes.
The Company does not intend to apply for a listing of the New Notes, on a
securities exchange or on any automated dealer quotation system. There is
currently no established market for the New Notes and there can be no assurance
as to the liquidity of markets that may develop for the New Notes, the ability
of the holders of the New Notes to sell their New Notes or the prices at which
such holders would be able to sell their New Notes. If such markets were to
exist, the New Notes could trade at prices that may be lower than the initial
market value thereof, depending upon many factors, including prevailing interest
rates and the markets for similar securities.
The liquidity of, and trading market for, the New Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
19
<PAGE> 26
USE OF PROCEEDS
The Company will not receive any cash proceeds from the Exchange Offer. The
Company used the net proceeds from the Original Offering (approximately $386.0
million), to (i) repay all amounts outstanding under the Tranche A Loan (as
defined) under the Senior Credit Facilities; (ii) repay a portion of the Tranche
C Loan (as defined) under the Senior Credit Facilities; (iii) repay all amounts
outstanding under the Canadian Term Loan (as defined) under the Senior Credit
Facilities; (iv) repay all amounts outstanding under the Chips Revolving Loan
(as defined); and (v) repay all amounts outstanding under the Subordinated
Credit Facility. See "Capitalization" and "Description of Senior Credit
Facilities."
The Tranche A Loan matured on December 31, 2002, and bears interest, at the
Company's option, at a rate per annum equal to (i) 1.5% above the Alternate Base
Rate, or (ii) 2.5% above the Eurocurrency Base Rate. The Tranche C Loan matures
on June 30, 2005 and bears interest, at the Company's option, at a rate per
annum equal to (i) 2.5% above the Alternate Base Rate, or (ii) 3.5% above the
Eurocurrency Base Rate. The Canadian Term Loan matured on December 31, 2002 and
loans denominated in U.S. dollars bear interest, at the Company's election, at
either (i) the Eurocurrency Base Rate (as defined in the Senior Credit Facility)
plus 2.5% or (ii) the Canadian Alternate Base Rate (as defined in the Senior
Credit Facilities) plus 1.5%, and those loans denominated in Canadian dollars
bear interest, at the Company's option, at a rate per annum equal to (i) the
Canadian Bankers Acceptance Discount Rate plus 2.5%, or (ii) the Canadian Prime
Rate (as defined) plus 1.5%. Pursuant to the Senior Credit Facilities, the Chips
Revolving Loan will have a maturity date of November 30, 2002, and will bear
interest at LIBOR plus 2.5%. The Subordinated Credit Facility had an initial
maturity date of April 11, 1998. At May 30, 1997, the interest rate on such
borrowings (calculated as a fixed spread over a floating interest rate index)
was 14.5% per annum. See "Summary -- Recent History" and "Description of Senior
Credit Facilities."
20
<PAGE> 27
SELECTED FINANCIAL DATA
VIASYSTEMS GROUP, INC.
The selected information below presents financial information of Viasystems
Group for the period during which Circo Craft and Viasystems Technologies were
operated by Viasystems Group and prior to the formation of the Company and
Viasystems Group's contribution of its assets to the Company in April 1997. The
data for the period from inception (August 28, 1996) to December 31, 1996 has
been derived from the audited consolidated financial statements of Viasystems
Group. The data for the three months ended March 31, 1997, has been derived from
the unaudited condensed consolidated financial statements of Viasystems Group.
In the opinion of management, the unaudited condensed consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation. The following information should
be read in conjunction with the audited and unaudited condensed consolidated
financial statements of Viasystems Group and the notes thereto, the "Unaudited
Pro Forma Financial Information," and "Management's Discussion and Analysis of
Results of Operations and Financial Condition," all included elsewhere herein.
<TABLE>
<CAPTION>
FROM INCEPTION THREE MONTHS
(AUGUST 28, 1996) TO ENDED
DECEMBER 31, 1996 MARCH 31, 1997
---------------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................ $ 50,400 $119,884
Cost of goods sold............................... 42,052 90,069
Selling, general and administrative expenses..... 3,844 11,155
Depreciation and amortization.................... 4,635 8,475
Write-off of acquired in-process research and
development(1)................................. 50,800 --
-------- --------
Operating income (loss)........................ (50,931) 10,185
Interest expense................................. 2,503 5,055
Amortization of deferred financing costs......... 470 937
Other expense (income)........................... 262 (52)
-------- --------
Income (loss) before income taxes.............. (54,166) 4,245
Provision (benefit) for income taxes............. (5,424) 1,574
-------- --------
Net income (loss).............................. $(48,742) $ 2,671
======== ========
OTHER DATA:
Adjusted EBITDA(2)............................... $ 4,504 $ 18,660
Operating cash flows............................. 1,662 (2,403)
Investing cash flows............................. (286,286) (8,712)
Financing cash flows............................. 300,713 (2,463)
Capital expenditures............................. 3,563 8,712
Ratio of earnings to fixed charges(3)............ N/A 1.7x
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents........................ $ 16,117 $ 3,556
Working capital.................................. 44,938 45,163
Total assets..................................... 387,741 394,644
Total debt, including current maturities......... 265,620 263,576
Stockholders' equity............................. 54,973 57,647
</TABLE>
- ---------------
(1) Represents charges relating to the write-off of acquired in-process research
and development costs associated with the acquisitions of Circo Craft and
the Lucent Division. The write-off relates to acquired research and
development for projects that do not have a future alternative use. See
"Notes to Consolidated Financial Statements of Viasystems Group."
(2) Adjusted EBITDA is defined as operating income (loss) plus depreciation,
amortization and the non-cash charge in the amount of $50,800 relating to
the write-off of acquired in-process research and development. The Company
believes that Adjusted EBITDA provides additional information for
determining its ability to meet debt service requirements. Adjusted EBITDA
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by GAAP. Adjusted EBITDA
does not necessarily indicate whether cash flow will be sufficient for cash
requirements. The calculation of Adjusted EBITDA does not include the
commitments of the Company for capital expenditures and payment of debt and
should not be deemed to represent funds available to the Company. Adjusted
EBITDA, as presented, may not be comparable to similarly-titled measures of
other companies.
(3) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" represent income (loss) before income taxes plus fixed charges.
"Fixed charges" consist of interest expense, amortization of deferred
financing costs and the component of rental expense that management believes
is representative of the interest component of rent expense. Earnings were
insufficient to cover fixed charges by $54,166 for the period August 28,
1996 to December 31, 1996.
21
<PAGE> 28
CIRCO CRAFT CO. INC.
The selected information below represents the financial information of
Circo Craft for the periods indicated. The data for the four fiscal years ended
December 31, 1995, and the nine months ended September 30, 1996 (the period
prior to the acquisition of Circo Craft by Viasystems Group), and the three
months ended March 31, 1996, set forth in Canadian GAAP in C$, has been derived
from the audited and unaudited condensed consolidated financial statements of
Circo Craft. In the opinion of management, the unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation. The consolidated
financial statements of Circo Craft have been prepared in accordance with
Canadian GAAP, which differs in certain significant respects from U.S. GAAP (see
Note 12 to the consolidated financial statements of Circo Craft). The data for
the two years ended December 31, 1995, the nine months ended September 30, 1996,
and the three months ended March 31, 1996, set forth in U.S. GAAP in U.S.$, has
been derived from the audited and unaudited condensed consolidated financial
statements of Circo Craft and adjusted for differences between Canadian GAAP and
U.S. GAAP. The following information should be read in conjunction with the
audited and unaudited condensed consolidated financial statements of Circo Craft
and the notes thereto, the "Unaudited Pro Forma Financial Information," and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," all included elsewhere herein.
<TABLE>
<CAPTION>
THREE
NINE MONTHS MONTHS
FISCAL YEARS ENDED DECEMBER 31, ENDED ENDED
-------------------------------------------- SEPTEMBER 30, MARCH 31,
1992 1993 1994(1) 1995(1) 1996 1996
-------- --------- --------- --------- ------------- ---------
(DOLLARS IN THOUSANDS)
CANADIAN GAAP (IN C$)
---------------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ C$94,010 C$106,244 C$151,825 C$185,156 C$129,633 C$ 41,357
Cost of goods sold....................... 74,200 88,788 124,929 148,788 101,532 33,611
Selling, general and administrative
expenses............................... 7,395 7,908 10,079 11,087 7,969 2,445
Depreciation and amortization............ 7,095 7,296 7,160 7,931 8,456 2,509
-------- --------- --------- --------- --------- ---------
Operating income....................... 5,320 2,252 9,657 17,350 11,676 2,792
Interest expense......................... 854 337 515 852 646 228
Other income............................. -- -- (195) (915) (880) (284)
Expenses related to sale(2).............. -- -- -- -- 5,907 --
-------- --------- --------- --------- --------- ---------
Income before income taxes............. 4,466 1,915 9,337 17,413 6,003 2,848
Provision for income taxes............... 1,429 1,854 2,719 5,564 3,847 1,362
-------- --------- --------- --------- --------- ---------
Net income before non controlling
interest............................. C$ 3,037 C$ 61 C$ 6,618 C$ 11,849 C$ 2,156 C$ 1,486
======== ========= ========= ========= ========= =========
OTHER DATA:
EBITDA(3)................................ C$12,415 C$ 9,548 C$ 16,817 C$ 25,281 C$ 20,132 C$ 5,301
Capital expenditures..................... 2,704 11,072 6,679 23,764 13,058 4,461
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents...................................... C$ 7,202 C$ 19,231 C$ 28,438
Working capital................................................ 34,260 40,057 41,909
Total assets................................................... 101,175 128,964 134,725
</TABLE>
22
<PAGE> 29
APPROXIMATE AMOUNTS IN U.S. GAAP
<TABLE>
<CAPTION>
IN U.S. $
THREE FOR THE
FISCAL YEARS ENDED NINE MONTHS MONTHS NINE MONTHS
DECEMBER 31, ENDED ENDED ENDED
--------------------- SEPTEMBER 30, MARCH 31, SEPTEMBER 30,
1994(1) 1995(1) 1996 1996 1996
--------- --------- ------------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................ C$142,840 C$194,140 C$129,633 C$41,357 $ 95,318
Cost of goods sold............................... 122,513 148,788 101,532 33,611 74,656
Selling, general and administrative expenses..... 10,217 10,846 8,072 2,453 5,935
Depreciation and amortization.................... 7,160 7,931 8,456 2,509 6,218
--------- --------- --------- -------- --------
Operating income............................... 2,950 26,575 11,573 2,784 8,509
Interest expense................................. 515 852 646 228 475
Other income..................................... (195) (915) (880) (284) (647)
Expenses related to sale(2)...................... -- -- 5,907 -- 4,343
--------- --------- --------- -------- --------
Income before income taxes..................... 2,630 26,638 5,900 2,840 4,338
Provision for income taxes....................... 2,822 6,079 3,680 1,221 2,706
--------- --------- --------- -------- --------
Net income (loss) before non controlling
interest..................................... C$ (192) C$ 20,554 C$ 2,220 C$ 1,619 $ 1,632
========= ========= ========= ======== ========
OTHER DATA:
EBITDA(3)........................................ C$ 10,110 C$ 34,506 C$ 20,029 C$ 5,293 $ 14,727
Operating cash flows............................. 5,653 24,388 18,034 5,896 13,260
Investing cash flows............................. (7,392) (21,790) (14,444) (14,661) (10,621)
Financing cash flows............................. 5,737 9,300 1,222 (237) 899
Capital expenditures............................. 6,679 23,764 13,058 4,461 9,601
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents........................ C$ 4,703 C$ 16,600 C$ 21,411 $ 15,744
Working capital.................................. 25,276 40,057 41,909 30,815
Total assets..................................... 91,139 128,964 134,725 99,063
Total debt, including current maturities......... 14,101 15,998 17,563 12,914
</TABLE>
- ---------------
(1) Under Canadian GAAP in effect at the time, the Company recognized certain
revenues related to a gain on an out-of-court settlement in 1994. Under U.S.
GAAP, that gain would have been deferred and recognized in 1995.
(2) Represents non-recurring expenses incurred in connection with the sale of
Circo Craft to Viasystems Group which includes, among others, brokerage and
legal fees.
(3) EBITDA is defined as operating income plus depreciation and amortization.
The Company believes that EBITDA provides additional information for
determining its ability to meet debt service requirements. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles, and EBITDA does not necessarily indicate whether cash flow will
be sufficient for cash requirements. The calculation of EBITDA does not
include the commitments of the Company for capital expenditures and payment
of debt and should not be deemed to represent funds available to the
Company. EBITDA, as presented, may not be comparable to similarly-titled
measures of other companies.
23
<PAGE> 30
VIASYSTEMS TECHNOLOGIES CORP.
The selected information below presents financial information of the Lucent
Division (renamed Viasystems Technologies) for the periods indicated. The
unaudited financial data for the fiscal years ended December 31, 1992 and 1993
and the three months ended March 31, 1996, has been derived from the unaudited
financial statements of Viasystems Technologies which, in the opinion of
management of the Company, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation. The data for the
fiscal years ended December 31, 1994 and 1995, and the eleven months ended
November 30, 1996 (the period prior to the acquisition of the Lucent Division by
Viasystems Technologies), has been derived from the audited statements of
operations of Viasystems Technologies. Presentation of balance sheet data for
Viasystems Technologies is not meaningful because such business was a division
of Lucent Technologies for the periods indicated. In addition, Viasystems
Technologies was a captive producer for Lucent Technologies and historical
financial results for Viasystems Technologies may not be indicative of its
results of operations as an independent entity. The following information should
be read in conjunction with the audited financial statement of Viasystems
Technologies and the notes thereto, the "Unaudited Pro Forma Financial
Information," and "Management's Discussion and Analysis of Results of Operations
and Financial Condition," all included elsewhere herein.
<TABLE>
<CAPTION>
THREE
ELEVEN MONTHS MONTHS
FISCAL YEARS ENDED DECEMBER 31, ENDED ENDED
----------------------------------------- NOVEMBER 30, MARCH 31,
1992 1993 1994 1995 1996 1996
-------- -------- -------- -------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $247,458 $262,364 $310,559 $325,047 $325,102 $92,551
Cost of goods sold.................. 205,175 217,277 238,623 274,824 244,313 71,430
Selling, general and administrative
expenses.......................... 29,525 24,259 42,930 42,445 34,792 10,479
Depreciation and amortization....... 17,405 17,606 16,111 16,378 18,317 5,547
-------- -------- -------- -------- -------- -------
Operating income (loss)........... (4,647) 3,222 12,895 (8,600) 27,680 5,095
Interest expense(1)................. -- -- 5 204 917 28
Other income........................ (191) (249) (75) (94) (228) (114)
-------- -------- -------- -------- -------- -------
Income (loss) before income
taxes........................... (4,456) 3,471 12,965 (8,710) 26,991 5,181
Provision (benefit) for income
taxes............................. (1,737) 1,319 4,927 (3,310) 10,257 2,072
-------- -------- -------- -------- -------- -------
Net income (loss)................. $ (2,719) $ 2,152 $ 8,038 $ (5,400) $ 16,734 $ 3,109
======== ======== ======== ======== ======== =======
OTHER DATA:
EBITDA(2)........................... $ 12,758 $ 20,828 $ 29,006 $ 7,778 $ 45,997 $10,642
Operating cash flows(3).............
Investing cash flows(3).............
Financing cash flows(3).............
Capital expenditures................ 11,804 9,823 16,884 22,173 16,485 3,920
</TABLE>
- ---------------
(1) Interest expense represents interest incurred on capital leases.
(2) EBITDA is defined as operating income (loss) plus depreciation and
amortization. The Company believes that EBITDA provides additional
information for determining its ability to meet debt service requirements.
EBITDA does not represent and should not be considered as an alternative to
net income or cash flow from operations as determined by generally accepted
accounting principles, and EBITDA does not necessarily indicate whether cash
flow will be sufficient for cash requirements. The calculation of EBITDA
does not include the commitments of the Company for capital expenditures and
payment of debt and should not be deemed to represent funds available to the
Company. EBITDA, as presented, may not be comparable to similarly-titled
measures of other companies. Charges of $10,069, $8,896, $14,565, $18,987,
$7,900 and $3,449, net of estimated additional administrative costs to be
incurred, for fiscal years ended 1992, 1993, 1994, 1995, the eleven months
ended November 30, 1996 and the three months ended March 31, 1996,
respectively, incurred with respect to corporate allocations to the Lucent
Division by Lucent Technologies, which are not expected to be incurred by
the Company are included in the historical results of operations and have
not been eliminated to calculate EBITDA.
(3) Financial statements had not been previously prepared for the Lucent
Division. The data in the table above has been derived from financial
statements that present only assets purchased in the Lucent Division
acquisition and results of operations related to the Lucent Division. Any
computation of historical cash flow data for the Lucent Division would be
based on arbitrary assumptions of the financial information necessary to
prepare such data. As a result, the historical cash flow data of the Lucent
Division has not been prepared or presented.
24
<PAGE> 31
FORWARD GROUP PLC
The selected information below presents financial information of Forward
Group for the periods indicated. The data for the five fiscal years ended
January 31, 1997, set forth in U.K. GAAP in U.K.L, has been derived from the
audited consolidated financial statements of Forward Group. The data for the
three months ended March 31, 1996 and 1997, has been derived from the unaudited
condensed consolidated financial statements of Forward Group. In the opinion of
management the unaudited condensed consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation. The consolidated financial statements of Forward Group have
been prepared in accordance with U.K. GAAP, which differs in certain significant
respects from U.S. GAAP (see Note 25 to the consolidated financial statements of
Forward Group included elsewhere herein). The data for the three fiscal years
ended January 31, 1997 and the three months ended March 31, 1996 and 1997, set
forth in U.S. GAAP in U.S.$, has been derived from the audited and unaudited
condensed financial statements of Forward Group and adjusted for differences
between U.K. GAAP and U.S. GAAP. The following information should be read in
conjunction with the audited and unaudited condensed consolidated financial
statements of Forward Group and the notes thereto, the "Unaudited Pro Forma
Financial Information," and "Management's Discussion and Analysis of Results of
Operations and Financial Condition," all included elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEARS ENDED JANUARY 31, ----------------------
------------------------------------------------------ MARCH 31, MARCH 31,
1993 1994 1995 1996 1997 1996 1997
-------- -------- -------- --------- --------- --------- ---------
(POUNDS AND DOLLARS IN THOUSANDS)
U.K. GAAP (IN U.K.L)
--------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales............................... L 12,459 L 20,663 L 23,819 L 66,839 L 105,029 L 25,907 L 25,287
Costs of goods sold..................... 6,868 11,505.. 17,032 49,850 79,030 19,065 18,938
Selling, general and administrative
expenses.............................. 3,290 5,856 3,179 6,425 11,189 2,007 2,271
Depreciation and amortization........... 914 1,143 1,215 2,701 4,694 921 1,265
Restructuring charges(1)................ -- -- -- 1,244 -- --
-------- -------- -------- --------- --------- --------- ---------
Operating income...................... 1,387 2,159 2,393 7,863 8,872 3,914 2,813
Interest expense........................ 213 208 228 412 996 159 381
Other income............................ (57) (75) (52) (113) (229) (113) (40)
Gain on disposal of discontinued
operation(2).......................... -- -- (1,503) -- -- -- --
Expense related to sale(3).............. -- -- -- -- -- 1,318
-------- -------- -------- --------- --------- --------- ---------
Income before income taxes............ 1,231 2,026 3,720 7,564 8,105 3,868 1,154
Provision for income taxes.............. 428 699 744 2,641 2,707 1,276 833
-------- -------- -------- --------- --------- --------- ---------
Net income............................ L 803 L 1,327 L 2,976 L 4,923 L 5,398 L 2,592 L 321
======== ======== ======== ========= ========= ========= =========
OTHER DATA:
EBITDA(4)............................... L 2,301 L 3,302 L 3,608 L 10,564 L 14,810 L 4,835 L 4,078
Capital expenditures.................... 1,423 3,050 2,724 4,678 11,841 3,488 1,494
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents............... L 3 L 4 L 3 L 789 L -- L --
Working capital......................... (561) (94) 1,245 1,898 (3,074) (3,610)
Total assets............................ 8,997 13,968 15,589 51,124 60,282 63,721
</TABLE>
25
<PAGE> 32
APPROXIMATE AMOUNTS IN U.S. GAAP
<TABLE>
<CAPTION>
IN US$
THREE MONTHS ENDED --------------------------
FISCAL YEARS ENDED --------------------- FISCAL YEAR THREE MONTHS
JANUARY 31, ENDED ENDED
------------------------------- MARCH 31, MARCH 31, JANUARY 31, MARCH 31,
1995 1996 1997 1996 1997 1997 1997
-------- -------- --------- --------- --------- ----------- ------------
(POUNDS AND DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... L 23,819 L 66,839 L 105,029 L 25,907 L 25,287 $ 169,402 $ 41,454
Costs of goods sold............... 17,032 49,850 79,030 19,065 18,938 127,468 31,046
Selling, general and
administrative expenses......... 3,179 6,390 11,029 1,977 2,231 17,789 3,657
Depreciation and amortization..... 1,219 2,787 4,870 957 1,313 7,855 2,152
Restructuring charges(1).......... -- -- 1,244 -- -- 2,006 --
-------- -------- --------- -------- -------- --------- ---------
Operating income................ 2,389 7,812 8,856 3,908 2,805 14,284 4,599
Interest expense.................. 228 412 996 159 381 1,606 625
Other income...................... (52) (113) (229) (113) (40) (369) (66)
Gain on disposal of discontinued
operation(2).................... (1,523) -- -- -- -- -- --
Expense related to sale(3)........ -- -- -- -- 1,318 -- 2,161
-------- -------- --------- -------- -------- --------- ---------
Income before income taxes...... 3,736 7,513 8,089 3,862 1,146 13,047 1,879
Provision for income taxes........ 1,488 2,652 2,760 1,286 846 4,452 1,387
-------- -------- --------- -------- -------- --------- ---------
Net income...................... L 2,248 L 4,861 L 5,329 L 2,576 L 300 $ 8,595 $ 492
======== ======== ========= ======== ======== ========= =========
OTHER DATA:
Adjusted EBITDA(4)................ L 3,608 L 10,599 L 14,970 L 4,865 L 4,118 $ 24,145 $ 6,751
Operating cash flows.............. 1,901 8,594 13,995 3,255 2,687 22,573 4,405
Investing cash flows.............. 301 (12,045) (16,373) (5,037) (488) (26,408) (800)
Financing cash flows.............. (2,203) 4,237 1,589 680 (2,199) 2,563 (3,604)
Capital expenditures.............. 2,724 4,678 11,841 3,488 1,494 19,098 2,449
BALANCE SHEET DATA
(END OF PERIOD):
Cash and cash equivalents......... L 3 L 789 L -- L -- $ -- $ --
Working capital................... 1,534 2,553 (3,074) (3,610) (4,958) (5,917)
Total assets...................... 15,134 56,539 67,406 70,814 108,719 116,088
Total debt, including current
maturities...................... 1,746 7,879 15,535 18,295 25,056 29,992
</TABLE>
- ---------------
(1) Represents non-recurring restructuring charges related to the consolidation
and rationalization of several facilities at Forward Group.
(2) Represents the gain recognized from the sale of an unrelated business in
December 1994.
(3) Represents non-recurring expenses incurred in connection with the sale of
Forward Group which includes, among others, brokerage and legal fees.
(4) Adjusted EBITDA is defined as operating income plus depreciation,
amortization and the non-cash charges related to the restructuring of
facilities discussed in note (1) above in the amount of L1,244, with respect
to the U.K. GAAP presentation, and $2,006, with respect to the U.S. GAAP
presentation. The Company believes that Adjusted EBITDA provides additional
information for determining its ability to meet debt service requirements.
Adjusted EBITDA does not represent and should not be considered as an
alternative to net income or cash flow from operations as determined by
generally accepted accounting principles, and does not necessarily indicate
whether cash flow will be sufficient for cash requirements. The calculation
of Adjusted EBITDA does not include the commitments of the Company for
capital expenditures and payment of debt and should not be deemed to
represent funds available to the Company. Adjusted EBITDA, as presented, may
not be comparable to similarly-titled measures of other companies.
26
<PAGE> 33
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED ("CHIPS")
The selected information below presents financial information of Chips as
of and for the periods indicated. The data as of and for the fiscal years ended
April 2, 1993, April 1, 1994, March 31, 1995, March 29, 1996, and April 4, 1997
set forth in U.K.L, has been derived from the audited consolidated financial
statements of Chips. The data for the three months ended March 29, 1996 and
April 4, 1997, has been derived from the unaudited condensed consolidated
financial statements of Chips. In the opinion of management of the Company, the
unaudited condensed consolidated financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation. The results for the three months ended March 29, 1996 and April 4,
1997, are included in the statement of operations data for the fiscal years
ended March 29, 1996 and April 4, 1997. The consolidated financial statements of
Chips have been prepared in accordance with U.K. GAAP, which differs in certain
significant respects from U.S. GAAP (see Note 25 to the consolidated financial
statements of Chips included elsewhere herein). The data as of and for the
fiscal years ended March 31, 1995, March 29, 1996 and April 4, 1997, and for the
three months ended March 29, 1996, and April 4, 1997, set forth in U.S. GAAP in
U.S.$, has been derived from the audited and unaudited condensed consolidated
financial statements of Chips and adjusted for differences between U.K. GAAP and
U.S. GAAP. The following information should be read in conjunction with the
audited and unaudited condensed consolidated financial statements of Chips and
the notes thereto, the "Unaudited Pro Forma Financial Information," and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," all included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THREE MONTHS ENDED
------------------------------------------------------- ---------------------
APRIL 2, APRIL 1, MARCH 31, MARCH 29, APRIL 4, MARCH 29, APRIL 4,
1993 1994 1995 1996 1997 1996 1997
-------- -------- --------- --------- --------- --------- ---------
(POUNDS AND DOLLARS IN THOUSANDS)
U.K. GAAP (IN U.K.L)
--------------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................... L 36,750 L 51,852 L 70,805 L 104,611 L 141,643 L 30,231 L 38,266
Costs of goods sold.......................... 25,793 36,024 49,149 73,407 94,466 19,999 28,848
Selling, general and administrative
expenses................................... 4,207 6,264 6,242 7,522 10,514 1,869 1,895
Depreciation and amortization................ 3,198 6,561 10,822 17,302 19,123 4,415 5,050
-------- -------- --------- --------- --------- -------- ---------
Operating income........................... 3,552 3,003 4,592 6,380 17,540 3,948 2,473
Interest expense............................. 830 449 921 807 818 262 260
Other income................................. (27) (200) (109) -- (44) -- (44)
-------- -------- --------- --------- --------- -------- ---------
Income before income taxes................. 2,749 2,754 3,780 5,573 16,766 3,686 2,257
Provision for income taxes................... 997 1,488 2,539 4,422 6,874 2,015 668
-------- -------- --------- --------- --------- -------- ---------
Net income................................. L 1,752 L 1,266 L 1,241 L 1,151 L 9,892 L 1,671 L 1,589
======== ======== ========= ========= ========= ======== =========
OTHER DATA:
EBITDA(1).................................... L 6,750 L 9,564 L 15,414 L 23,682 L 36,663 L 8,363 L 7,523
Capital expenditures......................... 5,292 11,434 14,477 25,544 27,591 11,752 13,672
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents.................... L 33 L 27 L 2,087 L 2,636 L 26,244 L 26,244
Working capital.............................. 1,027 (2,948) (1,094) (5,851) 11,516 11,516
Total assets................................. 26,928 36,067 52,616 67,349 129,921 129,921
</TABLE>
27
<PAGE> 34
APPROXIMATE AMOUNTS IN U.S. GAAP
<TABLE>
<CAPTION>
IN U.S.$
--------------------------
FISCAL YEARS ENDED THREE MONTHS ENDED FISCAL YEAR THREE MONTHS
--------------------------------- --------------------- ENDED ENDED
MARCH 31, MARCH 29, APRIL 4, MARCH 29, APRIL 4, APRIL 4, APRIL 4,
1995 1996 1997 1996 1997 1997 1997
--------- --------- --------- --------- --------- ----------- ------------
(POUNDS AND DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ L 70,805 L104,611 L 141,643 L 30,231 L 38,266 $232,202 $ 62,731
Costs of goods sold...................... 49,149 73,407 94,466 19,999 28,848 154,862 47,292
Selling, general and administrative
expenses............................... 6,112 7,464 10,437 1,855 1,877 17,110 3,077
Depreciation and amortization............ 9,124 15,752 17,522 4,028 4,650 28,725 7,623
-------- --------- --------- -------- --------- -------- --------
Operating income....................... 6,420 7,988 19,218 4,349 2,891 31,505 4,739
Interest expense......................... 921 807 818 262 260 1,341 426
Other income............................. (109) -- (44) -- (44) (72) (72)
-------- --------- --------- -------- --------- -------- --------
Income before income taxes............. 5,608 7,181 18,444 4,087 2,675 30,236 4,385
Provision for income taxes............... 2,080 2,584 6,112 1,556 351 10,020 576
-------- --------- --------- -------- --------- -------- --------
Net income............................. L 3,528 L 4,597 L 12,332 L 2,531 L 2,324 $ 20,216 $ 3,809
======== ========= ========= ======== ========= ======== ========
OTHER DATA:
EBITDA(1)................................ L 15,544 L 23,740 L 36,740 L 8,377 L 7,541 $ 60,230 $ 12,362
Operating cash flows..................... 10,763 18,670 27,826 7,823 8,243 45,616 13,513
Investing cash flows..................... (12,670) (16,816) (24,119) (3,632) (9,490) (39,539) (15,557)
Financing cash flows..................... 3,967 (1,305) 19,901 (1,555) 5,229 32,625 8,572
Capital expenditures..................... 14,477 25,544 27,591 11,752 13,672 45,231 22,413
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents................ L 2,087 L 2,636 L 26,244 L 26,244 $ 43,023 $ 43,023
Working capital.......................... (677) (3,929) 14,276 14,276 23,403 23,403
Total assets............................. 45,193 62,669 105,452 105,452 172,872 172,872
Total debt, including current
maturities............................. 11,295 15,699 35,754 35,754 58,613 58,613
</TABLE>
- ---------------
(1) EBITDA is defined as operating income plus depreciation and amortization.
The Company believes that EBITDA provides additional information for
determining its ability to meet debt service requirements. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles, and EBITDA does not necessarily indicate whether cash flow will
be sufficient for cash requirements. The calculation of EBITDA does not
include the commitments of the Company for capital expenditures and payment
of debt and should not be deemed to represent funds available to the
Company. EBITDA, as presented, may not be comparable to similarly-titled
measures of other companies.
28
<PAGE> 35
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") of the Company is based on the audited and unaudited
condensed consolidated financial statements of Viasystems Group, the audited and
unaudited condensed consolidated financial statements of Circo Craft, the
audited and unaudited condensed financial statements of Viasystems Technologies,
the audited and unaudited condensed consolidated financial statements of Forward
Group, and the audited and unaudited condensed consolidated financial statements
of Chips, all included elsewhere herein. Due to the differing yearend of Forward
Group and Chips, compared to the Company, the results of Forward Group for the
month of January and Chips for the three months ended April 4, 1997 are included
in the unaudited pro forma statements of operations for both the year ended
December 31, 1996, and the three months ended March 31, 1997. The unaudited pro
forma statement of operations for the year ended December 31, 1996 gives effect
to the acquisitions of Circo Craft, Viasystems Technologies and Forward Group,
the Chips Merger and the consummation of the Original Offering and the Exchange
Offer, as though each such transaction had occurred at January 1, 1996. The
unaudited pro forma statement of operations for the three months ended March 31,
1997, gives effect to the 1997 Transactions, the consummation of the Original
Offering and the Exchange Offer, as though such transactions had occurred at
January 1, 1996. The pro forma balance sheet as of March 31, 1997, gives effect
to the acquisition of Forward Group, the Chips Merger, the consummation of the
Original Offering and the Exchange Offer as though each such transaction had
occurred at such date. The financial data for Circo Craft, Forward Group and
Chips used in the preparation of the Pro Forma Financial Information has been
adjusted for the differences between Canadian GAAP or U.K. GAAP, as the case may
be, and U.S. GAAP (see notes to the consolidated financial statements of Circo
Craft, Forward Group and Chips, all included elsewhere herein).
The Pro Forma Financial Information gives effect to pro forma adjustments
that are based upon available information and certain assumptions that the
Company believes are reasonable. The acquisitions of Forward Group and the Chips
Merger will be accounted for using the purchase method of accounting. The
purchase price in excess of the book value of net assets as of March 31, 1997
for Forward Group and as of April 4, 1997 for Chips has been allocated to
goodwill for purposes of the pro forma presentation. The final allocations of
purchase prices will be determined based upon independent appraisals and other
estimates of fair value. The Pro Forma Financial Information does not give
effect to certain charges permitted under GAAP and expected to be recorded in
the Company's second quarter related to the anticipated write-off of acquired
in-process research and development costs associated with the acquisition of
Forward Group and the Chips Merger. It is anticipated that a portion of the
acquired intangibles will be identified as in-process research and development
and written off for research and development projects that do not have a future
alternative use to the acquired in-process research and development projects.
The amount assigned to acquired in-process research and development may be a
significant portion of the purchase price of Forward Group and Chips. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition." The Pro Forma Financial Information should be read in conjunction
with the historical financial statements of Viasystems Group, Circo Craft,
Viasystems Technologies, Forward Group and Chips, and the related notes thereto,
all included elsewhere herein.
The Pro Forma Financial Information does not purport to be indicative of
the results that would have been obtained had such transactions been completed
as of the assumed dates and for the periods presented or that may be obtained in
the future.
29
<PAGE> 36
VIASYSTEMS, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ORIGINAL
OFFERING AND
1997 1997 EXCHANGE
HISTORICAL TRANSACTIONS TRANSACTIONS OFFER ADJUSTED
COMBINED(1) ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
----------- ------------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 46,579 $(36,366)(2) $ 10,213 $ -- $ 10,213
Accounts receivable............. 134,400 -- 134,400 -- 134,400
Inventories..................... 66,702 -- 66,702 -- 66,702
Prepaid expenses and other...... 8,219 -- 8,219 -- 8,219
-------- -------- ---------- ------- ----------
Total current assets..... 255,900 (36,366) 219,534 -- 219,534
Property, plant and equipment,
net............................. 341,824 -- 341,824 -- 341,824
Deferred financing costs, net..... 26,616 33,054(3) 59,670 1,872(4) 61,542
Intangible assets, net............ 59,264 568,064(5) 627,328 -- 627,328
-------- -------- ---------- ------- ----------
Total assets............. $683,604 $564,752 $1,248,356 $ 1,872 $1,250,228
======== ======== ========== ======= ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term
obligations................... $ 38,712 $(26,329)(6) $ 12,383 $ -- $ 12,383
Accounts payable................ 71,866 -- 71,866 -- 71,866
Accrued and other liabilities... 64,287 -- 64,287 -- 64,287
Income taxes payable............ 18,386 -- 18,386 -- 18,386
-------- -------- ---------- ------- ----------
Total current
liabilities............ 193,251 (26,329) 166,922 -- 166,922
Deferred taxes.................... 9,225 -- 9,225 (4,851)(7) 4,374
Long-term obligations, less
current maturities.............. 313,469 492,500(6) 805,969 14,000(8) 819,969
Other noncurrent liabilities...... 16,019 15,400(9) 31,419 -- 31,419
Stockholder's equity.............. 151,640 83,181(10) 234,821 (7,277)(11) 227,544
-------- -------- ---------- ------- ----------
Total liabilities and
stockholder's equity... $683,604 $564,752 $1,248,356 $ 1,872 $1,250,228
======== ======== ========== ======= ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Balance Sheet.
30
<PAGE> 37
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(DOLLARS IN THOUSANDS)
(1) The following historical balance sheets of Viasystems Group and Forward
Group as of March 31, 1997, and Chips as of April 4, 1997 were derived from
the unaudited interim financial statements of Viasystems Group and Forward
Group and the audited financial statements of Chips included elsewhere
herein.
<TABLE>
<CAPTION>
VIASYSTEMS FORWARD HISTORICAL
GROUP GROUP CHIPS COMBINED
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............... $ 3,556 $ -- $ 43,023 $ 46,579
Accounts receivable..................... 60,131 30,833 43,436 134,400
Inventories............................. 39,789 11,943 14,970 66,702
Prepaid expenses and other.............. 6,709 1,510 -- 8,219
-------- -------- -------- --------
Total current assets............ 110,185 44,286 101,429 255,900
Property, plant and equipment, net........ 211,596 59,251 70,977 341,824
Deferred financing costs, net............. 26,616 -- -- 26,616
Intangible assets, net.................... 46,247 12,551 466 59,264
-------- -------- -------- --------
Total assets.................... $394,644 $116,088 $172,872 $683,604
======== ======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term
obligations.......................... $ 10,691 $ 19,472 $ 8,549 $ 38,712
Accounts payable........................ 18,871 18,534 34,461 71,866
Accrued and other liabilities........... 34,214 7,323 22,750 64,287
Income taxes payable.................... 1,246 4,874 12,266 18,386
-------- -------- -------- --------
Total current liabilities....... 65,022 50,203 78,026 193,251
Deferred taxes............................ 4,035 5,190 -- 9,225
Long-term obligations, less current
maturities.............................. 252,885 10,520 50,064 313,469
Other noncurrent liabilities.............. 15,055 964 -- 16,019
Stockholder's equity...................... 57,647 49,211 44,782 151,640
-------- -------- -------- --------
Total liabilities and
stockholder's equity............ $394,644 $116,088 $172,872 $683,604
======== ======== ======== ========
</TABLE>
(2) Adjustment reflects the assumption that cash on hand at March 31, 1997 would
have been used in lieu of a portion of the debt financing applied to
consummate the 1997 Transactions.
(3) Adjustment reflects the deferred financing costs incurred in connection with
the 1997 Transactions.
(4) Adjustment reflects estimated fees and expenses of the Original Offering and
the Exchange Offer and the write-off of debt financing fees related to the
debt retired before maturity with the proceeds of the Original Offering. The
write-off is to be recorded as an extraordinary item.
(5) Adjustment reflects the purchase price of Forward Group and Chips in excess
of the book value of net assets acquired. The purchase price in excess of
book value has been allocated to goodwill for purposes of the pro forma
presentation. The final allocations of purchase prices will be determined
based upon independent appraisals and other estimates of fair value.
31
<PAGE> 38
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(6) Adjustments reflect the consummation of the 1997 Transactions to show pro
forma combined debt as follows:
<TABLE>
<S> <C>
Chips Reimbursement Obligation.............................. $319,250
Forward Group Loan Notes.................................... 24,243
Subordinated Credit Facility................................ 216,000
--------
Total............................................. 559,493
Less:
Repayment of Tranche A Loan............................... (20,000)
Repayment of Forward Group and Chips debt -- long-term
portion................................................ (46,993)
--------
Net impact to long-term obligations, less current
maturities................................................ $492,500
========
Repayment of Forward Group and Chips debt -- current
maturities................................................ $(26,329)
========
</TABLE>
(7) Adjustment reflects the deferred tax impact of the write-off of deferred
financing fees related to the debt retired before maturity with the
proceeds of the Original Offering. The write-off is to be recorded as an
extraordinary item.
(8) Adjustment reflects the change in long-term obligations related to the
Original Offering and the Exchange Offer and use of proceeds therefrom as
follows:
<TABLE>
<S> <C>
Issuance of 9 3/4% Senior Subordinated Notes due 2007....... $ 400,000
Repayment of:
Canadian Revolving Loan................................... (1,231)
Tranche A Loan............................................ (45,000)
Tranche B Loan............................................ (5,774)
Tranche C Loan............................................ (55,000)
Canadian Term Loan........................................ (62,995)
Subordinated Credit Facility.............................. (216,000)
---------
Total............................................. $ 14,000
=========
</TABLE>
(9) Adjustment reflects other non-current liabilities incurred in connection
with the Transactions.
(10) Adjustment reflects:
<TABLE>
<S> <C>
Capital contribution related to the acquisition of Forward
Group..................................................... $ 40,000
Capital contribution related to the acquisition of Chips.... 140,000
Transaction costs related to capital contributions.......... (2,826)
--------
Net equity contribution................................... 177,174
Less:
Purchase accounting adjustment to eliminate the historical
stockholders' equity of Forward Group and Chips........ (93,993)
--------
Net adjustment to stockholder's equity............ $ 83,181
========
</TABLE>
(11) Adjustment reflects the net of tax impact to retained earnings of the
write-off of deferred financing fees related to the debt retired before
maturity with the proceeds of the Original Offering. The write-off is to be
recorded as an extraordinary item.
32
<PAGE> 39
VIASYSTEMS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ORIGINAL
OFFERING
AND EXCHANGE
HISTORICAL TRANSACTIONS TRANSACTIONS OFFER
COMBINED(1) ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA(2)
------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................. $872,424 $ -- $872,424 $ -- $872,424
Costs of goods sold................... 643,351 (19,478)(3) 623,873 -- 623,873
Selling, general and administrative
expenses............................ 79,470 (3,667)(4) 75,803 -- 75,803
Depreciation and amortization......... 65,750 21,028(5) 86,778 -- 86,778
Write-off of acquired in-process
research and development............ 50,800 -- 50,800 -- 50,800
Restructuring charges................. 2,006 -- 2,006 -- 2,006
-------- -------- -------- -------- --------
Operating income.................... 31,047 2,117 33,164 -- 33,164
Interest expense, net(6).............. 6,842 70,589(7) 77,431 166(8) 77,597
Amortization of deferred financing
costs............................... 470 7,552(9) 8,022 1,400(10) 9,422
Expenses related to sale.............. 4,343 (4,343)(11) -- -- --
Other income.......................... (1,054) -- (1,054) -- (1,054)
-------- -------- -------- -------- --------
Income (loss) before income taxes... 20,446 (71,681) (51,235) (1,566) (52,801)
Provision (benefit) for income
taxes............................... 22,011 (23,823)(12) (1,812) (626)(12) (2,438)
-------- -------- -------- -------- --------
Net loss......................... $ (1,565) $(47,858) $(49,423) $ (940) $(50,363)
======== ======== ======== ======== ========
Ratio of earnings to fixed
charges(13)......................... N/A N/A
</TABLE>
See accompanying notes to Unaudited Pro Forma Statement of Operations.
33
<PAGE> 40
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(1) The following combined historical operating data of Viasystems Group for the
period from inception (August 28, 1996) to December 31, 1996, Circo Craft
for the nine months ended September 30, 1996 (the period prior to the
acquisition of Circo Craft by Viasystems Group), Viasystems Technologies for
the eleven months ended November 30, 1996 (the period prior to the
acquisition of the Lucent Division by Viasystems Technologies), Forward
Group for the year ended January 31, 1997, and Chips for the year ended
April 4, 1997 was derived from the audited historical statements of
operations of Viasystems Group, Circo Craft, Viasystems Technologies,
Forward Group, and Chips all included elsewhere herein.
<TABLE>
<CAPTION>
VIASYSTEMS CIRCO VIASYSTEMS FORWARD COMBINED
GROUP CRAFT TECHNOLOGIES GROUP CHIPS HISTORICAL
---------- ------- ------------ -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales................ $ 50,400 $95,318 $325,102 $169,402 $232,202 $872,424
Costs of goods sold...... 42,052 74,656 244,313 127,468 154,862 643,351
Selling, general and
administrative
expenses............... 3,844 5,935 34,792 17,789 17,110 79,470
Depreciation and
amortization........... 4,635 6,218 18,317 7,855 28,725 65,750
Write-off of acquired in-
process research and
development............ 50,800 -- -- -- -- 50,800
Restructuring charges.... -- -- -- 2,006 -- 2,006
-------- ------- -------- -------- -------- --------
Operating income
(loss).............. (50,931) 8,509 27,680 14,284 31,505 31,047
Interest expense......... 2,503 475 917 1,606 1,341 6,842
Amortization of deferred
financing costs........ 470 -- -- -- -- 470
Expenses related to
sale................... -- 4,343 -- -- -- 4,343
Other expense (income)... 262 (647) (228) (369) (72) (1,054)
-------- ------- -------- -------- -------- --------
Income (loss) before
income taxes........ (54,166) 4,338 26,991 13,047 30,236 20,446
Provision (benefit) for
income taxes........... (5,424) 2,706 10,257 4,452 10,020 22,011
-------- ------- -------- -------- -------- --------
Net income (loss)... $(48,742) $ 1,632 $ 16,734 $ 8,595 $ 20,216 $ (1,565)
======== ======= ======== ======== ======== ========
</TABLE>
(2) The Unaudited Pro Forma Statement of Operations does not reflect the
following non-recurring charges that will result from the 1997 Transactions
and the Original Offering. Such charges are, or are anticipated to be,
recorded in the first and second quarters of 1997. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition -- Anticipated Second Quarter Adjustments":
(a) Write-off anticipated to be recorded in the second quarter of $12,128
of debt financing fees associated with the acquisition of Forward
Group.
(b) Write-off anticipated to be recorded in the second quarter of acquired
in-process research and development related to the acquisitions of
Forward Group and Chips. The Company is currently undertaking an
appraisal to determine the value to be assigned to this intangible
asset and written off in accordance with U.S. GAAP.
(c) Expenses of the seller of approximately $2,161 related to the
acquisition of Forward Group have been recorded by Forward Group as of
March 1997. See "Viasystems, Inc. Unaudited Pro Forma Statement of
Operations for the Three Months Ended March 31, 1997" and accompanying
notes thereto.
34
<PAGE> 41
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(3) Adjustment reflects the following:
<TABLE>
<S> <C>
(a) Effect on cost of goods sold as
a result of purchase accounting
adjustments.................... $ (1,844)
(b) Elimination of corporate
allocations to the Lucent
Division by Lucent Technologies
that are not anticipated to be
incurred by the Company on a
stand-alone basis.............. (6,004)
(c) Savings associated with the
change to certain benefits of
manufacturing personnel........ (11,630)
---------
Total......................... $ (19,478)
=========
(4) Adjustment reflects the following:
(a) Elimination of corporate
allocations to the Lucent
Division by Lucent Technologies
that are not anticipated to be
incurred by the Company on a
stand-alone basis, net of
estimated additional
administrative costs to be
incurred....................... $ (1,896)
(b) Elimination of public company
expenses not anticipated to be
incurred by the Company........ (1,771)
---------
Total......................... $ (3,667)
=========
</TABLE>
(5) Adjustment reflects the full year effect of the acquisitions of the Lucent
Division and Circo Craft and the full year effect of the amortization of
goodwill related to the acquisition of Forward Group and Chips. For pro
forma purposes, goodwill related to the acquisitions of Forward Group and
Chips is being amortized over 40 years. The actual amortization of Forward
Group and Chips intangibles will be based upon an appraisal after giving
effect to the write-off of acquired in-process research and development.
While the Company cannot presently determine the amount to be assigned to
acquired in-process research and development, the Company believes that 40
years results in a fair estimation of the annual amortization to be
incurred.
(6) Interest expense, net, is interest expense net of interest income. A
one-half of one percent change in interest rates would impact interest
expense by approximately $317 in the aggregate for borrowings under the
Tranche B Loan, the Tranche C Loan, the Canadian Term Loan, and the Forward
Group Loan Notes remaining outstanding on a pro forma basis after giving
effect to the Transactions, the Original Offering and the Exchange Offer.
(7) Adjustment reflects the net impact to interest expense of the following
borrowings as if the Transactions had been consummated as of the beginning
of the period:
<TABLE>
<S> <C>
Senior Credit Facilities:
Canadian Revolving Loan -- $1,235 at 8.0%................. $ 99
Tranche A Loan -- $35,000 at 8.0%......................... 2,800
Tranche B Loan -- $55,000 at 8.5%......................... 4,675
Tranche C Loan -- $55,000 at 9.0%......................... 4,950
Canadian Term Loan -- $63,345 at 5.5%..................... 3,484
Chips Reimbursement Obligation(a)......................... 30,258
Forward Group Loan Notes -- $23,852 at 7.0%................. 1,669
Subordinated Credit Facility -- $216,000 at 12.1%........... 26,190
Other -- $41,324 at 8.0%.................................... 3,306
-------
77,431
Elimination of historical interest.......................... (6,842)
-------
$70,589
=======
</TABLE>
--------------------
(a) Interest on the Chips Reimbursement Obligation consists of:
<TABLE>
<S> <C>
Chips Loan Notes -- $437,500 at 6.2%................... $27,213
Letter of credit fee -- $346,463 at 2.5%............... 8,662
Letter of credit fee on the Cash Collateral
Reimbursement Account -- $118,250 at 0.25%............ 296
Less: Interest income on the Cash Collateral
Reimbursement Account -- $118,250 at 5.0%............. (5,913)
-------
$30,258
=======
</TABLE>
35
<PAGE> 42
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(8) Adjustment reflects the net impact to interest expense as a result of the
Original Offering and the Exchange Offer:
<TABLE>
<S> <C>
Issuance of Senior Subordinated Notes due 2007 -- $400,000
at 9.75%................................................ $ 39,000
Repayment of:
Canadian Revolving Loan -- $1,235 at 8.0%................ (99)
Tranche A Loan -- $35,000 at 8.0%........................ (2,800)
Tranche B Loan -- $15,420 at 8.5%........................ (1,311)
Tranche C Loan -- $55,000 at 9.0%........................ (4,950)
Canadian Term Loan -- $63,345 at 5.5%.................... (3,484)
Subordinated Credit Facility -- $216,000 at 12.1%........ (26,190)
--------
$ 166
========
</TABLE>
(9) Adjustment reflects the amortization of deferred financing costs associated
with the Transactions as if the Transactions had been consummated as of the
beginning of the period. These costs are amortized over the term of the
related debt using the effective interest method and the straight-line
method, which approximates the effective interest method.
(10) Adjustment reflects the amortization of deferred financing costs associated
with the Original Offering and the Exchange Offer as if the Original
Offering and the Exchange Offer had been consummated as of the beginning of
the period. These costs are amortized over the term of the related debt
using the straight-line method, which approximates the effective interest
method.
(11) Adjustment reflects the elimination of expenses of Circo Craft related to
the acquisition of Circo Craft.
(12) Adjustments reflect the pro forma tax effect of the adjustments described
above based on effective tax rates of 40% for all entries impacting U.S.
pro forma results and 33% for all entries impacting non-U.S. pro forma
results.
(13) For purposes of calculating the ratio of earnings to fixed charges
available to cover fixed charges, "earnings" represent earnings before
income taxes plus fixed charges. "Fixed charges" consist of interest on all
indebtedness, amortization of deferred financing costs and the portion
(approximately 1/3) of rental expenses that management believes is
representative of the interest component of rent expense. Earnings on a pro
forma basis were insufficient to cover fixed charges by $52,801.
36
<PAGE> 43
VIASYSTEMS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ORIGINAL
OFFERING AND
HISTORICAL TRANSACTIONS TRANSACTIONS EXCHANGE OFFER
COMBINED(1) ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA(2)
----------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $224,069 $ -- $224,069 $ -- $224,069
Costs of goods sold.................... 168,407 -- 168,407 -- 168,407
Selling, general and administrative
expenses............................. 17,889 -- 17,889 -- 17,889
Depreciation and amortization.......... 18,250 3,551(3) 21,801 -- 21,801
-------- -------- -------- ----- --------
Operating income..................... 19,523 (3,551) 15,972 -- 15,972
Interest expense, net(4)............... 6,106 13,150(5) 19,256 335(6) 19,591
Amortization of deferred financing
costs................................ 937 1,069(7) 2,006 350(8) 2,356
Expenses related to sale............... 2,161 (2,161)(9) -- -- --
Other income........................... (190) -- (190) -- (190)
-------- -------- -------- ----- --------
Income (loss) before income taxes.... 10,509 (15,609) (5,100) (685) (5,785)
Provision (benefit) for income taxes... 3,537 (5,687)(10) (2,150) (274)(10) (2,424)
-------- -------- -------- ----- --------
Net loss.......................... $ 6,972 $ (9,922) $ (2,950) $(411) $ (3,361)
======== ======== ======== ===== ========
Ratio of earnings to fixed
charges(11).......................... N/A N/A
</TABLE>
See accompanying notes to Unaudited Pro Forma Statement of Operations.
37
<PAGE> 44
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
(1) The following combined interim operating data of Viasystems Group and
Forward Group for the three month period ended March 31, 1997, and of Chips
for the three month period ended April 4, 1997 was derived from the
unaudited interim statement of operations all included elsewhere herein.
<TABLE>
<CAPTION>
VIASYSTEMS FORWARD COMBINED
GROUP GROUP CHIPS HISTORICAL
---------- -------- ------- ----------
<S> <C> <C> <C> <C>
Net sales...................................... $119,884 $ 41,454 $62,731 $224,069
Costs of goods sold............................ 90,069 31,046 47,292 168,407
Selling, general and administrative expenses... 11,155 3,657 3,077 17,889
Depreciation and
amortization................................. 8,475 2,152 7,623 18,250
-------- -------- ------- --------
Operating income............................. 10,185 4,599 4,739 19,523
Interest expense............................... 5,055 625 426 6,106
Amortization of deferred financing costs....... 937 -- -- 937
Expenses related to sale....................... -- 2,161 -- 2,161
Other income................................... (52) (66) (72) (190)
-------- -------- ------- --------
Income before income taxes................... 4,245 1,879 4,385 10,509
Provision for income taxes..................... 1,574 1,387 576 3,537
-------- -------- ------- --------
Net income................................ $ 2,671 $ 492 $ 3,809 $ 6,972
======== ======== ======= ========
</TABLE>
(2) The Unaudited Pro Forma Statement of Operations does not reflect the
following non-recurring charges that will result from the 1997 Transactions
and the Original Offering. Such charges are anticipated to be recorded in
the second quarter. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition -- Anticipated Second Quarter
Adjustments":
(a) Write-off of $12,128 of debt financing fees associated with the
acquisition of Forward Group.
(b) Write-off of acquired in-process research and development related to
the acquisitions of Forward Group and Chips. The Company is currently
undertaking an appraisal to determine the value to be assigned to this
intangible asset and written off in accordance with U.S. GAAP.
(3) Adjustment reflects the three month effect of the acquisitions of Forward
Group and Chips. For pro forma purposes, goodwill related to the acquisition
of Forward Group and Chips is being amortized over 40 years. The actual
amortization of intangibles will be based upon an appraisal after giving
effect to the write-off of acquired in-process research and development.
While the Company cannot presently determine the amount to be assigned to
acquired in-process research and development, the Company believes that 40
years results in a fair estimation of the annual amortization to be
incurred.
(4) Interest expense, net, is interest expense net of interest income. A
one-half of one percent change in interest rates would impact interest
expense by approximately $92 in the aggregate for borrowings under the
Tranche B Loan, and the Forward Group Loan Notes remaining outstanding on a
pro forma basis after giving effect to the 1997 Transactions, the Original
Offering and the Exchange Offer.
38
<PAGE> 45
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(5) Adjustment reflects the net impact to interest expense of the following
borrowings as if the 1997 Transactions had been consummated as of January
1, 1996:
<TABLE>
<S> <C>
Senior Credit Facilities:
Canadian Revolving Loan -- $1,231 at 5.8%................. $ 18
Tranche A Loan -- $45,000 at 8.1%......................... 908
Tranche B Loan -- $55,000 at 8.6%......................... 1,178
Tranche C Loan -- $55,000 at 9.1%......................... 1,247
Canadian Term Loan -- $62,995 at 5.5%..................... 871
Chips Reimbursement Obligation(a)......................... 7,565
Forward Group Loan Notes -- $24,243 at 7.0%................. 429
Subordinated Credit Facility -- $216,000 at 11.6%........... 6,247
Other -- $39,633 at 8.0%.................................... 793
-------
19,256
Elimination of historical interest.......................... (6,106)
-------
$13,150
=======
</TABLE>
--------------------
(a) Interest on the Chips Reimbursement Obligation consists of:
<TABLE>
<S> <C>
Chips Loan Notes -- $437,500 at 6.2%................... $ 6,803
Letter of credit fee -- $346,463 at 2.5%............... 2,166
Letter of credit fee on the Cash Collateral
Reimbursement Account -- $118,250 at 0.25%............ 74
Less: Interest income on the Cash Collateral
Reimbursement Account -- $118,250 at 5.0%............. (1,478)
-------
$ 7,565
=======
</TABLE>
(6) Adjustment reflects the net impact to interest expense as a result of the
Original Offering and the Exchange Offer:
<TABLE>
<S> <C>
Issuance of Senior Subordinated Notes due 2007 -- $400,000
at 9.75%.................................................. $ 9,750
Repayment of:
Canadian Revolving Loan -- $1,231 at 5.8%................. (18)
Tranche A Loan -- $45,000 at 8.1%......................... (908)
Tranche B Loan -- $5,774 at 8.6%.......................... (124)
Tranche C Loan -- $55,000 at 9.1%......................... (1,247)
Canadian Term Loan -- $62,995 at 5.5%..................... (871)
Subordinated Credit Facility -- $216,000 at 11.6%......... (6,247)
--------
$ 335
========
</TABLE>
(7) Adjustment reflects the amortization of deferred financing costs associated
with the 1997 Transactions as if the 1997 Transactions had been consummated
as of the beginning of the period. These costs are amortized over the term
of the related debt using the effective interest method and the
straight-line method, which approximates the effective interest method.
(8) Adjustment reflects the amortization of deferred financing costs associated
with the Original Offering and the Exchange Offer as if the Original
Offering and the Exchange Offer had been
39
<PAGE> 46
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 -- (CONTINUED)
(DOLLARS IN THOUSANDS)
consummated as of the beginning of the period. These costs are amortized
over the term of the related debt using the straight-line method, which
approximates the effective interest method.
(9) Adjustment reflects the elimination of expenses of Forward Group related to
the acquisition of Forward Group.
(10) Adjustments reflect the pro forma tax effect of the adjustments described
above based on effective tax rates of 40% for all entries impacting U.S.
pro forma results and 33% for all entries impacting non U.S. pro forma
results.
(11) For purposes of calculating the ratio of earnings to fixed charges
available to cover fixed charges, "earnings" represent earnings before
income taxes plus fixed charges. "Fixed charges" consist of interest on all
indebtedness, amortization of deferred financing costs and the portion
(approximately 1/3) of rental expenses that management believes is
representative of the interest component of rent expense. Earnings on a pro
forma basis were insufficient to cover fixed charges by $5,785.
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<PAGE> 47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
Hicks Muse and Mills & Partners formed Viasystems Group in August 1996 to
make strategic acquisitions of PCB manufacturers and backpanel assemblers and to
integrate those acquisitions into a global enterprise that is the preferred
manufacturer and marketer of PCBs and backpanels. In October 1996, Viasystems
Group completed the acquisition of Circo Craft, a rigid PCB manufacturer, for a
cash purchase price of approximately $129.9 million. In December 1996,
Viasystems Technologies, a wholly owned subsidiary of Viasystems Group, acquired
substantially all the assets of the Lucent Division, in a transaction valued at
$200.0 million. The combination of Circo Craft and the former Lucent Division
created one of the largest independent manufacturers of PCBs and backpanels in
North America. Prior to its acquisition by Viasystems Technologies, the Lucent
Division was a captive supplier of Lucent Technologies. Accordingly, its
historical results of operations are not indicative of the results of operations
to be expected for a stand-alone enterprise.
In April 1997, an affiliate of Hicks Muse acquired Forward Group, a rigid
PCB manufacturer located in the United Kingdom, for a cash purchase price of
approximately $236.0 million. Subsequently, Viasystems Group acquired Forward
Group from the Hicks Muse affiliate. Concurrently with that transaction,
Viasystems Group organized the Company as its direct subsidiary and contributed
to it the capital stock of Circo Craft, Viasystems Technologies and Forward
Group.
In April 1997, Chips Holdings acquired Chips. Concurrently with the
consummation of the Original Offering, Viasystems Group acquired Chips in
consideration for the issuance to Hicks Muse and certain of its affiliates of
Viasystems Group's common stock valued at $140.0 million. In connection with the
Chips Merger, Viasystems Group assumed the Chips Loan Notes. Following the Chips
Merger, the Chips operating subsidiaries became indirect wholly-owned
subsidiaries of the Company. See "Summary -- Recent History."
To facilitate a meaningful comparison, the following discussion and
analysis is based on the combined historical results of fiscal year-end
operations of Viasystems Group, Circo Craft, Viasystems Technologies, Forward
Group and Chips. The financial data of the Company for the fiscal years
discussed below, has been derived from the financial data of each entity for the
periods indicated in "Certain Definitions, Industry Data and Financial
Information." This combined data should be read in consideration of the fact
that such data has not been prepared in accordance with generally accepted
accounting principles ("GAAP"), which do not allow for the aggregation of
financial data for entities that are not under common ownership. Accordingly,
the summary historical combined data does not reflect the effect of the
acquisitions by Viasystems Group, other than the effect of the acquisitions of
Circo Craft at October 1, 1996 and the Lucent Division at December 1, 1996, and,
therefore, is not comparable to results subsequent to the acquisitions. In
addition, the accounting policies used by the individual companies are not
necessarily consistent or comparable. Nevertheless, management believes that the
aggregate financial information shown below may be helpful in understanding the
past operations of the companies combined and in evaluating an investment in the
Notes. See "Summary -- Summary Supplemental Historical Combined and Pro Forma
Financial Data."
The financial data of Circo Craft, Forward Group, and Chips used in the
preparation of the historical combined financial data shown below has been
adjusted for differences between U.S. GAAP and Canadian GAAP for Circo Craft and
between U.S. GAAP and U.K. GAAP for Forward Group and Chips (see notes to the
consolidated financial statements of Circo Craft, Forward Group, and Chips,
included elsewhere herein). In addition, the results of operations of Circo
Craft have been converted from Canadian dollars into U.S. dollars, and the
results of operations of Forward Group and Chips have been converted from
British pounds into U.S. dollars. See "Exchange Rates."
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<PAGE> 48
The following table presents the major components of the statement of
operations (i) on a supplemental historical combined basis and (ii) expressed as
a percentage of net sales on a historical combined basis.
<TABLE>
<CAPTION>
SUPPLEMENTAL HISTORICAL COMBINED
SUPPLEMENTAL HISTORICAL COMBINED FISCAL YEARS FIRST FISCAL QUARTERS
------------------------------------------------------ -----------------------------------
1994 1995 1996 1996 1997
---------------- ---------------- ---------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............ $564,598 100.0% $727,570 100.0% $872,424 100.0% $208,019 100.0% $224,069 100.0%
Cost of goods sold... 432,440 76.6 570,980 78.5 643,351 73.7 155,332 74.7 168,407 75.2
Selling, general and
administrative
expenses........... 65,132 11.5 71,412 9.8 79,470 9.1 18,089 8.7 17,889 8.0
Depreciation and
amortization....... 37,876 6.7 50,299 6.9 65,750 7.5 14,945 7.2 18,250 8.1
Write-off of acquired
in-process research
and
development(1)..... -- -- -- -- 50,800 5.8 -- -- -- --
Restructuring
charges(2)......... -- -- -- -- 2,006 0.2 -- -- -- --
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income... $ 29,150 5.2% $ 34,879 4.8% $ 31,047 3.6% $ 19,653 9.4% $ 19,523 8.7%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
OTHER DATA:
Adjusted EBITDA(3)... $ 67,026 11.9% $ 85,178 11.7% $149,603 17.1% $ 34,598 16.6% $ 37,773 16.9%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
- ---------------
(1) Represents charges relating to the write-off of acquired in-process research
and development costs associated with the acquisitions of Circo Craft and
the Lucent Division. The write-off relates to acquired research and
development projects that were not deemed to have a future alternative use.
See Note To Consolidated Financial Statements of Viasystems Group.
(2) Represents restructuring charges related to the consolidation and
rationalization of several facilities at Forward Group.
(3) Adjusted EBITDA is defined as operating income plus depreciation,
amortization and certain non-cash charges in the amount of $50,800 relating
to the write-off of acquired in process research and development and $2,006
of restructuring charges for historical combined fiscal year 1996. The
Company believes that Adjusted EBITDA provides additional information for
determining its ability to meet debt service requirements. Adjusted EBITDA
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by GAAP and does not
necessarily indicate whether cash flow will be sufficient for cash
requirements. The calculation of Adjusted EBITDA does not include the
commitments of the Company for capital expenditures and payment of debt and
should not be deemed to represent funds available to the Company. Adjusted
EBITDA, as presented, may not be comparable to similarly-titled measures of
other companies. Charges of $14,565, $18,987, $7,900 and $3,499, net of
estimated additional administrative costs to be incurred, for fiscal years
1994, 1995, 1996 and for the first fiscal quarter 1996, respectively,
incurred with respect to corporate allocations to the Lucent Division by
Lucent Technologies, which are not expected to be incurred by the Company
are included in the results of operations and have not been eliminated to
calculate Adjusted EBITDA.
RESULTS OF OPERATIONS
COMBINED FIRST FISCAL QUARTER 1997 TO COMBINED FIRST FISCAL QUARTER 1996
Net Sales. Net sales for the first fiscal quarter of 1997 were $224.1
million, representing a $16.1 million, or 7.7%, increase over the first fiscal
quarter of 1996. This sales increase was primarily due to volume growth. In
North America, the volume growth was mostly in the automotive sector, while
telecommunications sector sales remained relatively flat. In Europe, the volume
growth was primarily within the telecommunications and computer sectors.
Cost of Goods Sold. Cost of goods sold for the first fiscal quarter of 1997
was $168.4 million, representing a $13.1 million, or 8.4%, increase over the
first fiscal quarter of 1996, due primarily to the increased net sales volume
for the first fiscal quarter of 1997. Cost of goods sold as a
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<PAGE> 49
percentage of net sales increased to 75.2% for the first fiscal quarter of 1997
from 74.7% for the first fiscal quarter of 1996. This increase was due primarily
to the impact of the above-mentioned acquisitions, which historically have had a
higher cost of goods sold percentage, and the scrapping of certain products due
to a process changeover.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the first fiscal quarter of 1997 were $17.9 million,
representing a $0.2 million, or 1.1%, decrease over the first fiscal quarter of
1996. The decrease in selling, general and administrative expenses was due
primarily to the elimination of corporate charges from Lucent Technologies. As a
percentage of net sales, selling, general and administrative expenses decreased
to 8.0% for the first fiscal quarter of 1997 from 8.7% for the first fiscal
quarter of 1996.
COMBINED FISCAL 1996 COMPARED TO COMBINED FISCAL 1995
Net Sales. Net sales for fiscal 1996 were $872.4 million, representing a
$144.8 million, or 19.9%, increase over fiscal 1995. Internally generated net
sales increased $67.4 million over fiscal 1995 due to increased demand for
higher layer count PCBs and more complex backpanels. This growth was partially
offset by industry wide price declines for PCBs and backpanels, particularly for
higher layer count products. Notwithstanding these general price declines, the
Company's product mix continued to shift toward higher priced, higher layer
count PCBs and more complex backpanels. Fiscal 1996 net sales were favorably
affected by the full-year impact of Forward Group's June 1995 acquisition of
Exacta Circuits, a medium to high volume manufacturer of rigid PCBs in Europe,
and three other smaller companies which added $49.5 million in net sales in
fiscal 1996. Furthermore, net sales were favorably affected by changes in
exchange rates between fiscal 1996 and fiscal 1995 which resulted in a $27.9
million increase in net sales.
Net sales in North America for fiscal 1996 were $470.8 million,
representing a $3.0 million, or 0.6%, increase over fiscal 1995. This increase
was due primarily to increased demand for higher layer count PCBs and more
complex backpanels by the telecommunications industry, offset by industry wide
price declines. Net sales in Europe for fiscal 1996 were $401.6 million,
representing a $141.8 million, or 54.6%, increase over fiscal 1995. Internal net
sales in Europe grew $64.4 million primarily from increased sales of higher
layer count PCBs for the telecommunications and computer industries. Forward
Group's acquisition of Exacta Circuits contributed $49.5 million to the
improvement in European fiscal 1996 net sales over fiscal 1995. Favorable
currency exchange rate changes contributed $27.9 million to the increase in
European fiscal 1996 net sales.
Cost of Goods Sold. Cost of goods sold for fiscal 1996 was $643.4 million,
representing a $72.4 million, or 12.7%, increase over fiscal 1995, due almost
entirely to the increased net sales volume for fiscal 1996, including sales of
higher margin, higher layer count PCBs and more complex backpanels. Cost of
goods sold as a percentage of net sales decreased to 73.7% for fiscal 1996 from
78.5% for fiscal 1995 as a result of the favorable impact of productivity
improvements achieved by the Company.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal 1996 were $79.5 million, representing a $8.1
million, or 11.3%, increase over fiscal 1995. The increase in selling, general
and administrative expenses was due primarily to the fiscal 1996 increase in net
sales. As a percentage of net sales, selling, general and administrative
expenses decreased to 9.1% for fiscal 1996 from 9.8% for fiscal 1995.
Write-off of Acquired In-Process Research and Development. As part of its
purchase accounting for the Circo Craft and Viasystems Technologies
acquisitions, the Company retained an independent appraiser to value the assets
acquired. The appraisal valued acquired in-process research development projects
for which there was no alternative future use at approximately $50.8 million. In
accordance with U.S. GAAP, the Company wrote off the value of that intangible
asset.
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<PAGE> 50
COMBINED FISCAL 1995 COMPARED TO COMBINED FISCAL 1994
Net Sales. Net sales for fiscal 1995 were $727.6 million, representing a
$163.0 million, or 28.9%, increase over fiscal 1994. The Company's net sales
growth was due primarily to an increase in demand for PCBs and backpanels and
the June 1995 acquisition of Exacta Circuits by Forward Group. Lower pricing in
fiscal 1995 partially offset the unit increases as a result of the reduction by
Viasystems Technologies, previously a captive producer for Lucent Technologies,
of prices across all product lines sold to Lucent Technologies, its largest
customer. Notwithstanding these general price declines, the Company's product
mix continued to shift toward higher priced, higher layer count PCBs and more
complex backpanels. The acquisition of Exacta Circuits increased net sales for
fiscal 1995 by $54.9 million.
Net sales in North America for fiscal 1995 were $467.8 million,
representing a $55.2 million, or 13.4%, increase over fiscal 1994. This increase
was due primarily to increased demand in the telecommunications, computer and
automotive industries, somewhat offset by lower pricing as discussed above. Net
sales in Europe for fiscal 1995 were $259.8 million, representing a $107.8
million, or 70.9%, increase over fiscal 1994. This growth was primarily the
result of increased demand for higher layer count PCBs and more complex
backpanels and the acquisition of Exacta Circuits.
Cost of Goods Sold. Cost of goods sold for fiscal 1995 was $571.0 million,
representing a $138.6 million, or 32.1%, increase over fiscal 1994. This
increase was due primarily to the increased net sales volume for fiscal 1995,
including sales of higher margin, higher layer count PCBs and more complex
backpanels sold in fiscal 1995 and the acquisition of Exacta Circuits. Cost of
goods sold as a percentage of net sales increased to 78.5% for fiscal 1995 from
76.6% for fiscal 1994 due primarily to the downward pricing pressure in North
America discussed above.
Selling, General and Administrative Expenses. Selling, general, and
administrative expenses for fiscal 1995 were $71.4 million, representing a $6.3
million, or 9.6%, increase over fiscal 1994 due primarily to increased net sales
volume. As a percentage of net sales, these expenses decreased to 9.8% for
fiscal 1995 from 11.5% for fiscal 1994 due primarily to higher absorption of
fixed expenses and the impact of certain productivity improvements instituted in
response to the downward pricing pressure in North America.
LIQUIDITY AND CAPITAL RESOURCES
Following the consummation of the Chips Merger and the Original Offering,
the Company's principal liquidity requirements consist of debt service
requirements under the Senior Credit Facilities, the New Notes and other
outstanding indebtedness, and for working capital needs and capital
expenditures. In addition, the acquisition of other businesses by the Company in
the future likely would require external sources of debt and/or equity
financing.
After giving effect to the repayment of a portion of the Tranche C Loan and
all amounts outstanding under the Tranche A Loan, the Canadian Term Loan and the
Chips Revolving Loan, with a portion of the proceeds of the Original Offering,
the remaining Term Loans under the Senior Credit Facilities will require
periodic principal repayments in increasing amounts through the final maturity
of the Senior Credit Facilities in 2005. In addition, borrowings under the
Senior Credit Facilities bear interest at floating rates and will require
interest payments on varying dates depending on the interest rate option
selected by the Company. The Company has entered into interest rate hedge
agreements that provide a Eurocurrency Base Rate (as defined) ceiling until
March 10, 1998 of 7.0% per annum for up to $120.0 million of Term Loans for
which the Eurodollar Base Rate is in effect and a ceiling of 8.0% per annum
until March 11, 1999. See "Description of Senior Credit Facilities."
The New Notes will bear interest at the rate of 9 3/4% per annum, which
will be payable semiannually in arrears.
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<PAGE> 51
The Chips Loan Notes bear interest initially at the rate of approximately
6.2% per annum and thereafter at a varying discount to the Chase Manhattan
Bank's prime rate. The Company is liable for payment of interest on the Chips
Loan Notes through the Chips Reimbursement Obligation. The holders of the Chips
Loan Notes will receive payment for interest and principal in respect of the
Chips Loan Notes pursuant to "direct-pay" letters of credit issued by Chase
Manhattan Bank Delaware. Any such payments made pursuant to the "direct-pay"
letters of credit will be required to be reimbursed by the Company pursuant to
the Chips Reimbursement Obligation and Bisto pursuant to the Cash Collateral
Reimbursement Obligation. Pursuant to the terms of the Chips Reimbursement
Obligation and the Cash Collateral Reimbursement Obligation, the Company will be
responsible for (a) reimbursing Chase Manhattan Bank Delaware, the issuer under
the Letter of Credit securing the Chips Loan Notes, for drawings to pay (x)
$319.3 million of principal of the Chips Loan Notes and (y) interest on the
Chips Loan Notes less any portion of such interest actually paid by Bisto.
Accordingly, to the extent the interest income earned by Bisto on the $118.3
million of cash it holds is insufficient to fund interest on $118.3 million
principal amount of the Chips Loan Notes, the Company will be required pursuant
to the terms of the Chips Reimbursement Obligation to fund any such shortfall.
When principal is paid on the Chips Loan Notes pursuant to the "direct-pay"
letters of credit, the first $118.3 million of principal payments will be funded
by Bisto and the remainder will be funded by the Company. In order to fund such
principal, the Senior Credit Facilities contain a committed, unfunded term loan
facility that may be drawn upon by the Company so that it may satisfy its
reimbursement obligations in respect of the $319.3 million principal amount of
the Chips Loan Notes. See "Description of Senior Credit Facilities."
The Company's capital expenditures were $49.3 million, $85.4 million, and
$94.0 million in fiscal years 1994, 1995 and 1996, respectively, and $30.3
million and $33.6 million for the first fiscal quarters ended 1996 and 1997,
respectively. The Company estimates that in fiscal 1997, on a pro forma basis,
it will spend approximately $100.0 million on capital expenditures, primarily
for the expansion of capacity, productivity and process improvements and
maintenance. Of this amount, approximately $39.0 million will be spent on the
construction of the Company's new facility in Newcastle, England. The Company's
fiscal 1997 capital expenditures are anticipated to include approximately $20.0
million for maintenance, which the Company believes will provide it with the
ability to maintain its existing volume production levels. The Company's ability
to make capital expenditures is subject to restrictions in the Senior Credit
Facilities. See "Description of Senior Credit Facilities."
The Company expects that its primary sources of cash will be cash from
operating activities and revolving borrowings under the Senior Credit
Facilities. As of March 31, 1997, on a pro forma basis after giving effect to
the consummation of the 1997 Transactions, the Original Offering and the
Exchange Offer, there would have been no amounts outstanding under the Revolving
Loans under the Senior Credit Facilities, and approximately $246.5 million
($100.0 million of which would only be available for future acquisitions) of
available borrowing capacity thereunder, subject to certain limitations. The
Company believes that cash from operating activities and Revolving Loans will be
sufficient to fund its debt service requirements, working capital needs, and
capital expenditures for the foreseeable future, although no assurances can be
given in this regard. As noted above, future acquisitions, if any, may require
additional third party financing and there can be no assurance that such funds
would be available on terms satisfactory to the Company, if at all. In addition,
the Company's future operating performance and ability to meet its financial
obligations will be subject to future economic conditions and to financial,
business and other factors, many of which will be beyond the Company's control.
Although Adjusted EBITDA does not necessarily indicate whether cash flows
will be sufficient for cash requirements, the Company believes that Adjusted
EBITDA provides additional information for determining its ability to meet debt
service requirements. The Company's Adjusted EBITDA for fiscal 1994, 1995, and
1996, and the first fiscal quarters of 1996 and 1997 was $67.0 million, $85.2
million, $149.6 million, $34.6 million, and $37.8 million, respectively. As a
percentage of sales,
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<PAGE> 52
Adjusted EBITDA was 11.9%, 11.7%, 17.1%, 16.6%, and 16.9%, respectively, for the
same periods. Adjusted EBITDA is also one of the financial measures in the
covenants to the Senior Credit Facilities.
INTERNATIONAL OPERATIONS
The Company conducts manufacturing operations in several foreign countries,
including Canada, the United Kingdom, Spain, and South Africa. The Company also
conducts sales and marketing operations in Canada, Mexico, England, Scotland,
Ireland, France, Germany, Spain, Netherlands, Sweden, Israel and South Africa.
Net sales from international operations during fiscal 1996 and the first fiscal
quarter ended 1997 were approximately $531.6 million and $142.0 million, or
60.9% and 63.4% of net sales, respectively.
The Company's international operations may be subject to volatility because
of currency fluctuations, inflation and changes in political and economic
conditions in these countries. Most of the net sales and costs and expenses of
the Company's operations in these countries are denominated in the local
currencies. The financial position and results of operations of the Company's
foreign subsidiaries are measured using the local currency as the functional
currency, although United States dollars would be used if any of these countries
were deemed hyperinflationary in accordance with Statement of Financial
Accounting Standards No. 52 ("FASB 52").
Assets and liabilities and statement of operations' accounts of the
Company's foreign subsidiaries are translated at the balance sheet date and
period-end exchange rate. Translation adjustments, which amounted to
approximately $79,000 and $76,000 at December 31, 1996 and March 31, 1997,
respectively, arise from differences in exchange rates from period to period and
are included on the Company's balance sheet as a cumulative translation
adjustment.
Fluctuations in exchange rates, as well as higher inflation rates, may have
an adverse effect on the Company. The Company may periodically use foreign
currency forward option contracts to offset the effects of exchange rate
fluctuations on cash flows denominated in foreign currencies. The balance of
these contracts as of December 31, 1996 and March 31, 1997 was not material, and
the Company does not use derivative financial instruments for trading or
speculative purposes.
No country in which the Company has significant operations is deemed
hyperinflationary in accordance with FASB 52. Inventories in countries outside
the United States are primarily accounted for using the first-in first-out
(FIFO) basis and, therefore, the charge to cost of sales does not necessarily
reflect current cost. If the Company's operations were restated to reflect
higher cost of goods sold to replace existing inventories, the Company estimates
that reported income would not be significantly decreased.
The Company's financial performance in future periods may be adversely
impacted as a result of changes in the above factors which are largely beyond
the control of the Company. See "Risk Factors -- International Operations."
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<PAGE> 53
ANTICIPATED SECOND QUARTER ADJUSTMENTS
In accordance with principles of purchase accounting, the Company has
retained an appraiser to value all of the assets acquired in the acquisitions of
Forward Group and Chips. Pursuant to GAAP, the Company will record a one-time,
non-cash write-off of certain acquired in-process research and development
projects. Investors should be aware that a significant portion of the purchase
price of Forward Group and Chips may be allocated to acquired in-process
research and development projects and any such portion will be recorded as a
write-off, as described above. In addition, the Company anticipates recording as
an extraordinary item a one-time, non-cash write-off of financing charges
associated with the acquisition of Forward Group of approximately $12.1 million
in accordance with GAAP. Such financing charges were incurred on debt which has
been retired prior to maturity.
INFLATION
The Company does not believe that inflation has had a material impact on
its financial position or results of operations.
SEASONALITY
The Company does not believe that its results of operations fluctuate
materially due to seasonality.
VIASYSTEMS GROUP
Viasystems Group's net sales for the period from inception (August 28,
1996) to December 31, 1996 were $50.4 million and cost of goods sold were $42.1
million, or 83.4% of net sales. Selling, general and administrative expenses for
the same period were $3.8 million, or 7.6% of net sales. During the period from
inception (August 28, 1996) to December 31, 1996, net cash provided by operating
activities was $1.7 million. For the same period, Viasystems Group used
approximately $286.3 million in investing activities primarily for the
acquisitions of Circo Craft and the Lucent Division. The acquisitions were
funded through the issuance of $238.3 million of long-term obligations and the
proceeds of $73.8 million of equity offerings offset by $11.4 million of
financing costs.
Viasystems Group's net sales for the three months ended March 31, 1997 were
$119.9 million and cost of goods sold were $90.1 million, or 75.1% of net sales.
Selling, general and administrative expenses for the same period were $11.2
million, or 9.3% of net sales. During the three months ended March 31, 1997, net
cash used in operations was $2.4 million. For the same period, Viasystems Group
used approximately $8.7 million for capital expenditures and repaid
approximately $2.5 million of long-term obligations.
The Company believes that the operating results of Viasystems Group are not
comparable to the operating results expected to be achieved in the future due
to, among other things, the 1997 Transactions, the Original Offering and the
Exchange Offer.
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<PAGE> 54
BUSINESS
GENERAL
The Company is the second largest manufacturer and marketer of PCBs, and
one of the largest manufacturers and marketers of backpanels, in the world. PCBs
are the basic platforms used to interconnect microprocessors, integrated
circuits and other components essential to the functioning of virtually all
electronic systems, ranging from sophisticated computers and industrial products
to basic household appliances. Backpanels are used in electronic systems to
distribute and ground power, to connect PCBs, power supplies and other elements,
and to relay information into and out of electronic systems. The Company
supplies over 800 customers globally, serving, among others, the
telecommunications, computer, automotive, industrial and instrumentation,
military, and consumer electronics industries. The Company currently has 16
manufacturing facilities, strategically located in North America, Europe, and
South Africa, including one of the world's largest PCB and backpanel
manufacturing plants.
PRODUCTS AND SERVICES
The Company's offering of products and services includes the following:
Design and Development. The Company provides design and engineering
assistance in the early stages of product development to assure that both
mechanical and electrical considerations are integrated to achieve a high
quality and cost-effective product. Through development groups located at
various facilities, the Company identifies, develops and markets new
technologies that it believes will benefit its customers. These development
groups work closely with customers during all stages of product life-cycles. For
instance, process design changes and refinements required for volume production
are identified and implemented prior to production. The Company also evaluates
customer designs in light of manufacturing considerations and, when appropriate,
recommends design changes to reduce manufacturing costs or lead times or to
increase manufacturing yields or the quality of finished PCBs.
Quick-Turnaround Prototype. Prototypes typically require lead times of
three to seven days, although lead times can be as short as 24 hours. The
Company provides quick-turnaround prototype services to customers to facilitate
their testing of products in development. Prototype development at the Company
has included multilayer PCBs of up to 24 layers, embedded discrete components,
and various high performance substrates for the high frequency microwave market.
Pre-Production. Pre-production is the manufacture of limited quantities of
PCBs and backpanels during the transition period from prototype to volume
production. Pre-production generally requires quick-turnaround delivery to
accommodate time-to-volume pressures or as a temporary solution for
unpredictable customer demands.
Medium to High Volume Production. Volume production is characterized by
longer lead times and increased emphasis on lower cost as the product moves to
full-scale commercial production. As customers increasingly demand a quick
transition from prototype to volume production, few independent manufacturers
can provide complex PCBs of 18 or more layers in the volume provided by the
Company's larger facilities. The Company operates nine facilities that have
medium and/or high volume PCB production capabilities.
Backpanels. Backpanels are generally larger and thicker PCBs on which
connectors, pins and other components are mounted to interconnect PCBs,
integrated circuits and other electronic components. The Company incorporates
its own PCBs in backpanels to provide customers with a high level of PCB
technology on a quick-turnaround and volume basis. Net sales of backpanels
accounted for, on a combined basis, approximately 22%, 18% and 17% of the
Company's combined net sales during fiscal 1994, 1995 and 1996, respectively.
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<PAGE> 55
Specialty Production. The Company also manufactures the following specialty
products in quick-turnaround and medium to high volume quantities:
High-Performance PCBs. High-performance PCBs are used in electronic
products that require high frequency interconnect solutions, such as
cellular phone base stations and other telecommunications products, and are
manufactured using specialty materials with properties that address the
need for higher operating temperatures, higher frequencies and increased
density. The Company has the expertise and specialized engineering
processes required to manufacture high-performance PCBs with a broad range
of materials and technological requirements.
PCMCIA Products. Personal Computer Memory Card International Association
("PCMCIA") products are credit card-sized, plug-in PCBs, a significant
portion of which are memory and communication cards tailored to the mobile
computing market. PCMCIA production requires the ability to produce very
thin, dense packaging.
MANUFACTURING
The production of PCBs involves a variety of manufacturing disciplines,
including mechanical operations (such as lamination, drilling and routing),
chemical operations (such as copper deposition and etching), and graphics
operations (such as phototool generation, photoprinting and screen printing).
Much of the equipment is automated and highly specialized.
The Company's customers require that their suppliers be qualified under
various industry standards, for manufacture of PCBs, including Bellcore
standards for telecommunications products, and UL (Underwriters Laboratories)
standards for electronics. All of the Company's facilities are ISO-9002
registered. This registration facilitates worldwide acceptance of the Company's
products. ISO-9002 registration is based on successful implementation of certain
quality assurance requirements and includes ongoing monitoring of the Company's
business and periodic compliance audits conducted by an independent quality
assessor.
The Company's primary manufacturing processes are described below:
Drilling. Complex multilayer PCBs require large numbers of small (less than
0.019 inches) holes in order to interconnect the various PCB layers.
Automatic Plating. The Company has custom designed, computer controlled
plating lines that are capable of plating significant volumes of high quality
PCBs. The plating lines are installed above a special purpose basement where
chemicals are prepared and pumped to the manufacturing lines, chemical wastes
are pre-processed and water is pre-treated and recycled.
Automatic Optical Inspection ("AOI") and Electrical Test ("ET")
Equipment. Because defects in complex circuitry cannot be readily detected by
conventional visual inspection, sophisticated AOI and ET equipment is necessary
to improve yields and reduce the potential for customer returns.
Surface Mount Technology. The Company incorporates the use of surface mount
technology to achieve greater component packaging densities. Surface mount
technology allows components to be soldered to the surface of a PCB. The
traditional through-hole technique requires components to be affixed to PCBs by
inserting leads through the board. The use of surface mount technology has
facilitated several overall improvements in PCBs, including: (i) the
miniaturization of PCBs; (ii) end-user innovations using smaller and more
complex designs; and (iii) more reliable interconnection within the PCB.
MARKETS AND CUSTOMERS
The Company provides double-sided PCBs, multilayer PCBs and backpanels to
its diverse customer base. The Company's position as a strategic supplier of
prototype quick-turnaround and medium to high volume PCBs and backpanel assembly
fosters close relationships with customers.
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SALES AND MARKETING
The Company markets its products through its own sales and marketing
organization and manufacturers' representatives. This global sales organization
is structured to ensure geographic coverage and account coordination. As of
April 1, 1997, the Company employed 99 sales and marketing employees, of which
22 are direct sales representatives strategically located throughout 13
countries in North America, Europe, the Middle East and South Africa. The
Company is also represented by 19 manufacturers' representative organizations in
North America. The North American sales organization is divided into 5 regions
which are jointly serviced by direct sales representatives and manufacturers'
representatives. In Europe and South Africa, the Company's sales force is
focused by country and for the specialty products, by customer. North America,
Europe and South Africa each have a support staff of sales engineers, technical
service personnel and customer service organizations to ensure high-quality,
customer-focused service. The global marketing organization further supports the
sales organization through market research, market development and
communications.
The Company has a unique, long-term supplier relationship with Lucent
Technologies, one of the world's leading designers, developers and manufacturers
of telecommunications systems, software and products. To ensure itself a stable
and consistent supply of PCBs and backpanels in the future, Lucent Technologies
entered into a five-year supply agreement with the Company, through Viasystems
Technologies. The agreement contains automatic renewal provisions for two
additional one-year periods upon the Company's satisfaction of certain specified
performance requirements for cost, quality and service. Under the agreement
Lucent Technologies is required to purchase a minimum annual dollar volume of
PCBs and backpanels from the Company. Lucent Technologies is also required to
compensate the Company if Lucent Technologies fails to purchase such minimum
annual dollar volume. The agreement requires that by January 1, 1999 the
Company's prices for products supplied shall be reduced to an agreed upon
benchmark standard. See "Risk Factors -- Customer Concentration; Reliance on
Lucent Technologies." After the expiration of the two additional annual renewal
periods, the agreement continues to renew unless either party terminates the
agreement on 18 months' notice. Lucent Technologies has also designated the
Company as a preferred supplier and afforded it the right to bid for all of
Lucent Technologies' product requirements for which the Company demonstrates
capability.
SUPPLIER RELATIONSHIPS
The Company orders materials and supplies based on purchase orders received
and accepted and seeks to minimize its inventory of materials that are not
identified for use in filling specific orders. Certain raw materials used in the
Company's products consist mainly of inorganic chemicals, copper foil, copper
clad epoxy glass laminate, epoxy glass prepreg and dryfilm resist. Although the
Company uses a select group of suppliers, the materials used in manufacturing
PCBs are generally readily available in the open market. The Company works with
its suppliers to develop just-in-time supply systems which reduce inventory
carrying costs. The Company also maintains a Supplier Certification Program
which evaluates potential vendors on the basis of such factors as quality,
on-time delivery, cost, technical capability, and potential technical
advancement. In addition, the Company works closely with certain of its
suppliers to improve the raw materials used in PCB and backpanel production.
Although adequate amounts of raw materials have been available in the past,
there can be no assurances this will continue in the future. The Company
purchases significant quantities of pins and similar products from Berg
Electronics Corp., which is controlled by Hicks Muse and managed by Mills &
Partners. See "Certain Transactions."
TECHNOLOGY, DEVELOPMENT AND PATENTS
The Company maintains a strong commitment to research and development,
focusing its efforts on enhancing existing product lines as well as developing
new products based on the Company's existing technologies and production
capabilities. The Company's research and development staff
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of over 650 experienced engineers, chemists and laboratory technicians works
together with the Company's sales staff to identify specific needs and develop
innovative, high performance solutions which satisfy those needs. This method of
product development allows the customer to become a member of the development
team, develops close ongoing working relationships between the Company and its
customers and, in many instances, permits the Company to gain an in-depth
understanding of its customers' businesses, thereby enabling it to better
anticipate and serve their needs. The Company also seeks to apply advancements
resulting from this process to other high-margin end user markets.
The Company has developed proprietary techniques and manufacturing
expertise, particularly in the area of complex multilayer PCBs. The Company has
received certain (U.S. and foreign) patents, including patents on advanced
registration and positioning techniques, solder leveling, drilling and pin
insertion, but chooses to rely primarily on trade secret protection. Although
such techniques and expertise are subject to misappropriation or obsolescence,
the Company intends to continue to develop improved methods, processes and
techniques as dictated by the technological needs of the business. See "Risk
Factors -- Intellectual Property."
COMPETITION
The PCB and backpanel industry is highly fragmented and characterized by
intense competition. The Company believes that its major competitors are the
independent and captive producers that manufacture multilayer PCBs and provide
backpanel and other electronic assemblies.
The demand for PCBs has continued to be affected by the development of
smaller, more powerful electronic components requiring less PCB area but a
higher layer count. Expansion of the Company's existing products or services
could expose the Company to new competition. Moreover, new developments in the
electronics industry could render existing technology obsolete or less
competitive and could potentially introduce new competition into the industry.
There can be no assurance that the Company will continue to compete successfully
against present and future competitors or that competitive pressures faced by
the Company will not have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company competes on the basis of product quality, timeliness of
delivery, price, customer technical support and its integrated offering from
development and design through volume production and backpanel assembly.
FACILITIES
In addition to its executive offices in St. Louis, Missouri, the Company
operates 16 principal manufacturing and research facilities located in six
different countries with a total area of approximately 2.2 million square feet.
The Company owns approximately 1.8 million square feet and leases approximately
400,000 square feet. The Company is currently constructing what it believes will
be, upon its completion, the largest PCB manufacturing facility in Europe. The
Company believes its plants and equipment include state-of-the-art technology
and to be well-maintained. Production facilities for certain of the Company's
products are operating at or near capacity.
All of the Company's owned facilities are subject to mortgages pursuant to
the Senior Credit Facilities.
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The Company's facilities are as follows:
<TABLE>
<CAPTION>
SIZE TYPE OF DESCRIPTION OF
LOCATION (APPROX. SQ. FT.) INTEREST PRODUCTS/SERVICES PROVIDED
-------- ----------------- -------- --------------------------
<S> <C> <C> <C>
UNITED STATES
Richmond, Virginia................ 700,000 Owned High volume PCBs and
backpanels
San German, Puerto Rico........... 185,000 Leased(1) High volume inner layer
and high density PCBs
CANADA
Kirkland, Quebec.................. 117,000 Owned High volume, high density
PCBs
Pointe-Claire, Quebec............. 160,000 Owned High volume inner layers
and prototype and
pre-production
Granby, Quebec.................... 103,000 Owned High volume, high density
PCBs
EUROPE
Tres Cantos, Spain................ 5,000 Leased(2) Backpanels
Galashiels, Scotland.............. 121,000 Owned High volume PCBs
Selkirk, Scotland................. 142,000 Owned/Leased(3) High volume complex PCBs
and quick-turnaround
Rugby, England.................... 36,000 Leased(4) Pre-production PCBs
Tamworth, England................. 62,000 Owned Prototype, quick-
turnaround complex PCBs
Telford, England.................. 44,000 Leased(5) Medium volume PCBs
Manchester, England............... 30,000 Owned Advanced prototype and
pre-production PCBs
Portsmouth, England............... 27,000 Leased(6) High reliability thick
film hybrids
South Shields, England............ 320,000 Owned High volume PCBs;
quick-turnaround
Newcastle, England................ 500,000 Under High volume PCBs
construction
SOUTH AFRICA
TI, Wilsonia, East London......... 82,000 Leased(7) Double-sided PCBs
Swift, Fort Jackson, East 22,000 Leased(7) Single-sided PCBs
London..........................
</TABLE>
- ---------------
(1) -- Lease expires December 31, 2002.
(2) -- Lease expires November 11, 1997.
(3) -- Lease portion of facility (approximately 30,000 sq. ft.) expires May 15,
2004 (includes options to renew through May 15, 2024 and to purchase).
(4) -- Lease expires June 24, 2009.
(5) -- Lease expires June 24, 2987 (999 year lease).
(6) -- Lease expires October 1, 2004.
(7) -- Leases expire March 31, 2000.
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LEGAL
The operations of the Company have from time to time been involved in
claims and litigation. The nature of the Company's business is such that it is
anticipated that the Company will be involved from time to time in claims and
litigation considered to be in the ordinary course of its business. Based on
experience with similar claims and litigation, the Company does not anticipate
that these matters will have a material adverse effect on the Company.
The Company anticipates that it may, from time to time, receive
notifications alleging infringements of patents generally held by other
manufacturers. Disputes over patent infringement are common in the electronics
industry and typically begin with notices of the type described above. Although
the ultimate resolution of the legal action and infringement notices described
above cannot be predicted, the Company believes that such resolution, including
any ultimate liability, will not have a material adverse effect on the Company.
ENVIRONMENTAL
Certain operations of the Company are subject to federal, state, local and
foreign environmental laws and regulations, which govern, among other things,
the discharge of pollutants into the air and water, as well as the handling and
disposal of solid and hazardous wastes. The Company believes that it is in
material compliance with applicable environmental laws and the costs of
compliance with such current or proposed environmental laws and regulations will
not have a material adverse effect on the Company. Further, the Company is not a
party to any claim or proceeding and is not aware of any threatened claim or
proceeding under environmental laws, that could, if adversely decided,
reasonably be expected to have a material adverse effect. Currently, remedial
activities are being undertaken at the Company's facilities in Virginia and
Puerto Rico. While the cost of such remediation could be material, the prior
owners are conducting the requisite remedial actions pursuant to governmental
orders and have agreed to indemnify the Company for costs associated with the
remediations. Accordingly, the Company does not believe that any of these
matters are reasonably likely to have a material adverse effect on the Company.
EMPLOYEES
As of April 1, 1997, the Company had approximately 7,100 employees.
Approximately 2,485 employees, or about 35%, are represented by various unions
pursuant to collective bargaining agreements. The Company has not experienced
any labor problems resulting in a work stoppage, and believes it has good
relations with its employees.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names and positions of the respective directors and
executive officers of the Company. All directors hold office until the next
annual meeting of stockholders of the Company and until their successors are
duly elected and qualified.
<TABLE>
<S> <C> <C>
James N. Mills....................... 59 Chairman of the Board and Chief Executive Officer
of the Company and Viasystems Group
Thomas O. Hicks...................... 51 Director of the Company and Viasystems Group
Jack D. Furst........................ 38 Director of the Company and Viasystems Group
Richard W. Vieser.................... 70 Director of the Company and Viasystems Group
Kenneth F. Yontz..................... 52 Director of the Company and Viasystems Group
Robert N. Mills...................... 55 President, Chief Operating Officer and Director
of the Company and Viasystems Group
David M. Sindelar.................... 39 Senior Vice President, Chief Financial Officer of
the Company and Viasystems Group
Larry S. Bacon....................... 51 Senior Vice President, Human Resources of the
Company
W. Thomas McGhee..................... 61 Secretary and General Counsel of the Company
Gerald C. Nelson..................... 45 Executive Vice President -- Operations of the
Company
James G. Powers...................... 35 Vice President -- Finance of the Company
</TABLE>
James N. Mills has been Chairman of the Board and Chief Executive Officer
of Viasystems Group since January 1997 and the Chairman of the Board and Chief
Executive Officer of the Company since April 1997. Mr. Mills is the Chairman,
President and Chief Executive Officer of Mills & Partners. Mr. Mills is also
Chairman of the Board and Chief Executive Officer of Berg Electronics Corp.,
Chairman of the Board and sole director of Berg Electronics Group, Inc.,
Chairman of the Board and Chief Executive Officer of International Wire Holding
Company, International Wire Group, Inc., Crain Holdings Corp., Crain Industries,
Inc. and Copy USA Holdings Corp. Mr. Mills was Chairman of the Board and Chief
Executive Officer of Jackson Holding Company and Jackson Products, Inc. from
February 1993 through August 1995. Mr. Mills was Chairman of the Board and Chief
Executive Officer of Thermadyne Holdings Corporation from February 1989 through
February 1995. Mr. Mills was Executive Vice President of McGraw-Edison Company
from 1978 to 1985, and served as Industrial Group President and President of the
Bussman Division of the McGraw-Edison Company from 1980 to 1984. Mr. Mills also
serves as a director of Hat Brands Holding Corporation and Hat Brands, Inc.
Thomas O. Hicks has been a director of Viasystems Group since January 1997
and a director of the Company since May 1997. Mr. Hicks is Chairman of the Board
and Chief Executive Officer of Hicks Muse. From 1984 to May 1989, Mr. Hicks was
Co-Chairman of the Board and Co-Chief Executive Officer of Hicks & Haas
Incorporated, a Dallas-based private investment firm. Mr. Hicks serves as a
director of Berg Electronics Corp., Chancellor Broadcasting Company,
International Home Foods, Inc., D.A.C. Vision, Inc., Sybron International
Corporation, Capstar Broadcasting Partners, Inc., Cooperative Computing Holding
Company, Inc., and Neodata Corporation.
Jack D. Furst has been a director of Viasystems Group since August 1996 and
a director of the Company since May 1997. Mr. Furst is a Managing Director and
Principal of Hicks Muse and has held such position since 1989. Mr. Furst has
approximately 15 years of experience in leveraged acquisitions and private
investments. Mr. Furst is involved in all aspects of Hicks Muse's business and
has been actively involved in originating, structuring and monitoring its
investments. Mr. Furst is primarily responsible for managing the relationship
with Mills & Partners. Prior to joining Hicks Muse, Mr. Furst was a Vice
President and subsequently a Partner of Hicks & Haas, Incorporated, a
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Dallas-based private investment firm from 1987 to May 1989. From 1984 to 1986,
Mr. Furst was a merger and acquisition/corporate finance specialist for The
First Boston Corporation in New York. Before joining First Boston, Mr. Furst was
a financial consultant at Price Waterhouse. Mr. Furst serves on the board of
directors of Neodata Corporation, Desa Holdings Corporation, International Wire
Holding Company and Cooperative Computing, Inc.
Richard W. Vieser has been a director of Viasystems Group since January
1997 and a director of the Company since May 1997. Mr. Vieser is the retired
Chairman of the Board, Chief Executive Officer and President of Lear Siegler,
Inc. (a diversified manufacturing company), the former Chairman of the Board and
Chief Executive Officer of FL Industries, Inc. and FL Aerospace (also
diversified manufacturing companies), and the former President and Chief
Operating Officer of McGraw-Edison Co. He is also a director of Ceridian
Corporation (formerly Control Data Corporation), Berg Electronics Corp., Dresser
Industries, Inc. INDRESCO Inc., Sybron International Corporation and Varian
Associates, Inc.
Kenneth F. Yontz has been a director of Viasystems Group since January 1997
and a director of the Company since May 1997. Mr. Yontz is the Chairman,
President and Chief Executive Officer of Sybron International Corporation, a
manufacturer and marketer of laboratory apparatus products, dental sundry
supplies and orthodontic appliances. Mr. Yontz is also a director of Playtex
Products, Inc. and Berg Electronics Corp. Prior to joining Sybron, Mr. Yontz was
Group Vice President and Executive Vice President of the Allen-Bradley Company.
Mr. Yontz also held various managerial and professional positions with Chemetron
from 1974 to 1980 and at Ford Motor Company from 1966 to 1974.
Robert N. Mills has been a director of Viasystems Group since January 1997
and has been President, Chief Operating Officer since the Company's formation in
April 1997 and a director of the Company since May 1997. Mr. Mills is also Vice
Chairman of Berg Electronics Corp. and served as President of Berg Electronics
Corp. since June 1995, and as Chief Operating Officer of Berg Electronics Corp.
and as President and Chief Executive Officer of Berg Electronics Group since
March 1993. Mr. Mills served as a Vice President of the Berg Electronics Corp.
from March 1993 through June 1995, Mr. Mills is a Vice President of Mills &
Partners, Inc. Prior to joining Berg in March 1993, Mr. Mills was Vice President
of Thermadyne Industries, Inc. and President of Stoody Deloro Stellite and has
held such positions since February 1990 and July 1989, respectively. Prior
thereto, he served as President, Chief Operating Officer and Director of Tridex
Corporation from 1987 through 1989, and Vice President and General Manager of
Elco Corporation, a subsidiary of Wickes Manufacturing Company, from 1983
through 1987. Robert N. Mills is the brother of James N. Mills.
David M. Sindelar has been a Senior Vice President since January 1997 and
Chief Financial Officer of Viasystems Group since its inception and has been
Senior Vice President, Chief Financial Officer and Treasurer of the Company
since its formation in April 1997. Mr. Sindelar is also Senior Vice President
and Chief Financial Officer of Mills & Partners, Berg Electronics Corp.,
International Wire Holding Company, Crain Industries, Inc. and Crain Holdings
Corp. Mr. Sindelar was Senior Vice President and Chief Financial Officer of
Jackson Holding Company from February 1993 through August 1995. From 1987 to
February 1995, Mr. Sindelar held various other positions at Thermadyne Holdings
Corporation including Senior Vice President and Chief Financial Officer, Vice
President -- Corporate Controller and Controller. Mr. Sindelar was employed by
Arthur Andersen & Co. from 1979 to 1987.
Larry S. Bacon has been a Senior Vice President of Viasystems Group since
January 1997 and Senior Vice President of the Company since May, 1997. Mr. Bacon
is also Senior Vice President of Mills & Partners, Berg Electronics Corp., Crain
Industries, Inc., Crain Holdings Corp. and International Wire Holding Company.
Mr. Bacon was Senior Vice President of Jackson Holding Company from February
1993 through August 1995. Previously, Mr. Bacon was Senior Vice President --
Human Resources of Thermadyne Holdings Corporation from September 1987 until
February 1995.
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Prior to that, he held a variety of senior human resources management positions
with Cooper Industries, McGraw-Edison Company and Hoechst Celanese.
W. Thomas McGhee has been Secretary and General Counsel of Viasystems Group
since January 1997 and has been Secretary of the Company since its formation in
April 1997. Mr. McGhee is also a partner of the law firm of Herzog, Crebs and
McGhee and has held that position since 1987. In addition, Mr. McGhee serves as
Secretary and General Counsel of International Wire Holding Company,
International Wire Group, Inc., Berg Electronics Corp., Crain Industries, Inc.
and Crain Holdings Corp.
Gerald C. Nelson is Executive Vice President, Operations of the Company and
has held that position since May, 1997. Prior to joining the Company, Mr. Nelson
held several executive positions, such as President of the Harness Division of
International Wire Group, Inc. and President and Chief Operating Officer of the
Wear Resistance Division of Thermadyne Industries, Inc.
James G. Powers has been a Vice President of Viasystems Group since April
1997 and a Vice President of the Company since its formation in April 1997.
Prior to joining the Company, Mr. Powers served as Vice President -- Finance of
Crain Industries, Inc. He also held various positions at Berg Electronics Corp.,
including Vice President -- Controller, from June 1993 to August 1995.
Previously, Mr. Powers was Controller of Moog Automotive, Inc. from 1991 through
1993 and was employed by Arthur Andersen & Co. from 1983 to 1991.
COMPENSATION OF DIRECTORS
The directors of Viasystems Group and the Company did not receive
compensation from either Viasystems Group or the Company for services rendered
in that capacity during the prior fiscal year. Directors who are officers,
employees or otherwise an affiliate of Viasystems Group or the Company are not
presently expected to receive compensation for their services as directors.
Directors of Viasystems Group and the Company are entitled to reimbursement of
their reasonable out-of-pocket expenses in connection with their travel to and
attendance at meetings of the board of directors or committees thereof. No
determination has yet been made with respect to annual fees or board attendance
fees, if any, to be paid to directors of Viasystems Group or the Company who are
not also officers, employees, or otherwise an affiliate of Viasystems Group or
the Company.
COMPENSATION OF EXECUTIVE OFFICERS
The executive officers of Viasystems Group and the Company did not receive
any compensation from either Viasystems Group or the Company during the prior
fiscal year. Viasystems Group and the Company have entered into employment
agreements with Messrs. J. Mills, R. Mills, Sindelar and Nelson, and certain
other executive offices of Viasystems Group and the Company. The compensation to
be paid to the executive officers of Viasystems Group and the Company will be
determined by the terms of those agreements, the Chairman of the Board of
Viasystems Group and the Company, and the Board of Directors of Viasystems Group
and the Company.
EMPLOYMENT AGREEMENTS
James N. Mills Executive Employment Agreement. Mr. James N. Mills entered
into an executive employment agreement with Viasystems Group, Viasystems
Technologies and Circo Craft as of January 1, 1997. Pursuant to his employment
agreement, Mr. J. Mills will serve as the Chairman of the Board of Directors and
Chief Executive Officer of Viasystems Group through December 31, 2001, unless
terminated earlier as provided therein. Mr. J. Mills is required to devote such
time as is reasonably necessary to faithfully and adequately supervise the
overall executive management of Viasystems Group and its subsidiaries, both
direct and indirect. Subject to the foregoing limitation on his activities, Mr.
J. Mills is free to participate in other endeavors.
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The compensation provided to Mr. J. Mills under his executive employment
agreement includes an annual base salary of not less than $395,000, subject to
upward adjustment at the sole discretion of the Board of Directors of Viasystems
Group, and such benefits as are customarily accorded the executives of
Viasystems Group as long as the executive employment agreement is in force. In
addition, Mr. J. Mills is entitled to an annual bonus in an amount determined in
accordance with the Senior Executive Incentive Compensation Plan and
reimbursement for expenses to own and maintain an automobile.
Mr. J. Mills' executive employment agreement also provides that if Mr. J.
Mills' employment is terminated without cause, Mr. J. Mills will continue to
receive his then current salary, which shall not be less than $395,000, for the
longer of the remainder of the period the executive employment agreement is in
force or a period of one year following such termination. The executive
employment agreement terminates upon death or "total disability" (as defined
therein) and no further compensation shall be payable except that he or his
estate, heirs or beneficiaries, as applicable, shall receive his then current
salary for a period of 18 months, in addition to benefits otherwise specifically
provided for. The agreement also provides medical benefits for his and his
spouse's lifetime.
Robert N. Mills Executive Employment Agreement. Mr. Robert N. Mills entered
into an executive employment agreement with Viasystems Group, Viasystems
Technologies and Circo Craft as of January 1, 1997. Pursuant to his employment
agreement, Mr. R. Mills will serve as the President and Chief Operating Officer
of Viasystems Group through December 31, 2001, unless terminated earlier as
provided therein. Mr. R. Mills is required to devote such time as is reasonably
necessary to faithfully and adequately supervise the overall financial
management of Viasystems Group and its subsidiaries, both direct and indirect.
Subject to the foregoing limitation on his activities, Mr. R. Mills is free to
participate in other endeavors.
The compensation provided to Mr. R. Mills under his executive employment
agreement includes an annual base salary of not less than $482,000, subject to
upward adjustment at the sole discretion of the Chairman of the Board of
Directors of Viasystems Group, and such benefits as are customarily accorded the
executives of Viasystems Group as long as the executive employment agreement is
in force. In addition, Mr. R. Mills is entitled to an annual bonus in an amount
determined in accordance with the Senior Executive Incentive Compensation Plan
and reimbursement for expenses to own and maintain an automobile.
Mr. R. Mills' executive employment agreement also provides that if Mr. R.
Mills' employment is terminated without cause, Mr. R. Mills will continue to
receive his then current salary, which shall not be less than $482,000, for the
longer of the remainder of the period the executive employment agreement is in
force or a period of one year following such termination. The executive
employment agreement terminates upon death or "total disability" (as defined
therein) and no further compensation shall be payable except that he or his
estate, heirs or beneficiaries, as applicable, shall receive his then current
salary for a period of 18 months, in addition to benefits otherwise specifically
provided for. The agreement also provides medical benefits for his and his
spouse's lifetime.
David M. Sindelar Executive Employment Agreement. Mr. David M. Sindelar
entered into an executive employment agreement with Viasystems Group, Viasystems
Technologies and Circo Craft as of January 1, 1997. Pursuant to his employment
agreement, Mr. Sindelar will serve as the Senior Vice President and Chief
Financial Officer of Viasystems Group through December 31, 2001, unless
terminated earlier as provided therein. Mr. Sindelar is required to devote such
time as is reasonably necessary to faithfully and adequately supervise the
overall financial management of Viasystems Group and its subsidiaries, both
direct and indirect. Subject to the foregoing limitation on his activities, Mr.
Sindelar is free to participate in other business endeavors.
The compensation provided to Mr. Sindelar under his executive employment
agreement includes an annual base salary of not less than $168,200, subject to
upward adjustment at the sole
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discretion of the Chairman of the Board of Directors of Viasystems Group, and
such benefits as are customarily accorded the executives of Viasystems Group as
long as the executive employment agreement is in force. In addition, Mr.
Sindelar is entitled to an annual bonus in an amount determined in accordance
with the Senior Executive Incentive Compensation Plan and reimbursement for
expenses to own and maintain an automobile.
Mr. Sindelar's executive employment agreement also provides that if Mr.
Sindelar's employment is terminated without cause, Mr. Sindelar will continue to
receive his then current salary, which shall not be less than $168,200, for the
longer of the remainder of the period the executive employment agreement is in
force or a period of one year following such termination. The executive
employment agreement terminates upon death or "total disability" (as defined
therein) and no further compensation shall be payable except that he or his
estate, heirs or beneficiaries, as applicable, shall receive his then current
salary for a period of 18 months, in addition to benefits otherwise specifically
provided for. The agreement also provides medical benefits for his and his
spouse's lifetime.
Gerald C. Nelson Executive Employment Agreement. Mr. Gerald C. Nelson
entered into an executive employment agreement with Viasystems Group, Viasystems
Technologies and Circo Craft as of January 1, 1997. Pursuant to his employment
agreement, Mr. Nelson will serve as the Senior Vice President -- Operations of
Viasystems Group through December 31, 2001, unless terminated earlier as
provided therein. Mr. Nelson is required to devote such time as is reasonably
necessary to faithfully and adequately supervise the operations of Viasystems
Group and its subsidiaries, both direct and indirect.
The compensation provided to Mr. Nelson under his executive employment
agreement includes an annual base salary of not less than $275,000, subject to
upward adjustment at the sole discretion of the Chairman of the Board of
Directors of Viasystems Group, and such benefits as are customarily accorded the
executive of Viasystems Group as long as the executive employment agreement is
in force. In addition, Mr. Nelson is entitled to an annual bonus in an amount
determined in accordance with the Senior Executive Incentive Compensation Plan
and reimbursement for expenses to own and maintain an automobile.
Mr. Nelson's executive employment agreement also provides that if Mr.
Nelson's employment is terminated without cause, Mr. Nelson will continue to
receive his then current salary, which shall not be less than $275,000, for the
longer of the remainder of the period the executive employment agreement is in
force or a period of one year following such termination. The executive
employment agreement terminates upon death or "total disability" (as defined
therein) and no further compensation shall be payable except that he or his
estate, heirs or beneficiaries, as applicable, shall receive his then current
salary for a period of 18 months, in addition to benefits otherwise specifically
provided for and medical benefits for his lifetime.
BENEFIT PLANS
Stock Option Plan
Viasystems Group has adopted the Viasystems Group, Inc. 1997 Stock Option
Plan (the "Stock Option Plan") pursuant to which incentive and non-qualified
stock options, stock appreciation rights, stock awards, performance awards and
stock units may be issued to such employees of Viasystems Group and any parent
or subsidiary corporation designated by the Board of Directors of Viasystems
Group. A total of 8,409,782 shares of Viasystems Group Common Stock will be
reserved for issuance under the Stock Option Plan, of which 7,420,386 of such
shares were reserved in connection with the Chips Merger and related
transactions. As of the date of this Prospectus, options to purchase an
aggregate of 605,000 shares of Viasystems Group Common Stock subject to the
terms and conditions of the Stock Option Plan are outstanding.
The Stock Option Plan provides that it is to be administered by a committee
of the Board of Directors of Viasystems Group or a subcommittee of such a
committee (the "Committee"). The
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Committee has the authority to grant to any participant one or more stock
options, and to establish the terms and conditions of such options, subject to
certain limitations specified in the Stock Option Plan. For example, the
per-share exercise price of each option must not be less than 100% of the fair
market value of the Viasystems Group Common Stock on the date such option is
granted, and no option may be exercisable later than ten years after the date of
grant. In the event of a change in control (as defined in the Stock Option
Plan), the Committee, in its discretion, may take such actions as it deems
appropriate with respect to outstanding awards, including, without limitation,
accelerating the exercisability or vesting of such awards.
The Stock Option Plan became effective as of February 4, 1997. Effective
concurrent with the consummation of the Chips Merger, the Stock Option Plan was
amended to increase the number of shares of Viasystems Group Common Stock
reserved for issuance under the Stock Option Plan. The Stock Option Plan, as
amended, is subject to stockholder approval and will terminate on February 4,
2007, unless sooner terminated by the Committee.
Performance Options
On November 26, 1996, Viasystems Group granted options (the "Performance
Options") to purchase 1,085,187 shares of Viasystems Group Common Stock. Messrs.
J. Mills and Sindelar were granted Performance Options to purchase 336,408 and
227,889 shares of Viasystems Group Common Stock, respectively, and Performance
Options to purchase the remaining 520,890 shares of Viasystems Group Common
Stock were granted to certain officers of the Company who are also affiliated
with Mills & Partners. Upon the consummation of the Original Offering,
Viasystems Group granted Performance Options to purchase 8,138,904 shares of
Viasystems Group Common Stock. Messrs. J. Mills and Sindelar were granted
Performance Options to purchase 2,132,392 and 1,318,501 shares of Viasystems
Group Common Stock, respectively, and Performance Options to purchase the
remaining 4,688,011 shares of Viasystems Group Common Stock were granted to
certain officers of the Company who are also affiliated with Mills & Partners.
Pursuant to the terms of the option agreements (the "Performance Option
Agreements") related to the Performance Options, the Performance Options will
become options to purchase an identical number of shares of Viasystems Group
Common Stock.
The Performance Options are exercisable only in the event that HM Fund III
has, as of the exercise date, realized an overall rate of return of at least 35%
per annum, compounded annually, on all equity funds invested by it in Viasystems
Group. Subject to the foregoing, the Performance Options are exercisable (i)
immediately prior to the consummation of a Liquidity Event (as hereinafter
defined), (ii) concurrently with the consummation of a Qualified IPO (as
hereinafter defined), or (iii) on the ten year anniversary of their grant. A
"Liquidity Event" generally means (i) one or more sales or other dispositions of
Viasystems Group Common Stock if, thereafter, the amount of Viasystems Group
Common Stock owned by HM Fund III is reduced by 50%, (ii) any merger,
consolidation or other business combination of Viasystems Group pursuant to
which any person or group acquires a majority of the common stock of the
resulting entity, or (iii) any sale of all or substantially all of the assets of
Viasystems Group. A "Qualified IPO" means a firm commitment underwritten public
offering of Viasystems Group Common Stock for gross proceeds of at least $50
million pursuant to an effective registration statement under the Securities
Act.
The exercise price for the Performance Options is initially equal to $1.00
per share and, effective each anniversary of the grant date, the per share
exercise price for the Performance Options is equal to the per share exercise
price for the prior year multiplied by 1.08. The exercise price of the
Performance Options and the number of shares of Viasystems Group Common Stock
for which the Performance Options are exercisable is subject to adjustment in
the event of certain fundamental changes in the capital structure of Viasystems
Group. All Performance Options terminate on the ten year anniversary of their
grant.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
All the issued and outstanding shares of common stock of the Company are
held by Viasystems Group. The following table sets forth certain information
regarding the expected beneficial ownership of the voting securities of
Viasystems Group upon the consummation of the Transactions, by each person who
is expected to beneficially own more than 5% of any class of Viasystems Group
voting securities and by the directors and certain executive officers of
Viasystems Group, individually, and by the directors and executive officers of
Viasystems Group as a group, following the consummation of the Transactions. The
Viasystems Group Class A Common Stock votes together with the Viasystems Group
Common Stock as a single class and is entitled to one vote for each share.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------------------------
VIASYSTEMS GROUP
VIASYSTEMS GROUP CLASS A
COMMON STOCK COMMON STOCK(1)
------------------------ -----------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF PERCENT OF
SHARES CLASS SHARES CLASS TOTAL
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
5% STOCKHOLDERS:
HM Parties(2)........................... 255,000,004 99.9% -- -- 87.9%
c/o Hicks, Muse, Tate & Furst
Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
OFFICERS AND DIRECTORS:
James N. Mills(3)..................... -- -- 34,835,832 100.0% 12.0%
Thomas O. Hicks(2).................... 255,000,004 99.9% -- -- 87.9%
Jack D. Furst(2)...................... 255,000,004 99.9% -- -- 87.9%
Richard W. Vieser(4).................. 200,000 * -- -- *
Kenneth F. Yontz...................... 200,000 * -- -- *
Robert N. Mills....................... -- -- 7,140,000 20.5% 2.5%
David M. Sindelar(5).................. -- -- 7,333,331 21.1% 2.5%
All executive officers and directors
as a group (11 persons)(6).......... 255,200,004 100.0% 34,835,832 100.0% 100.0%
</TABLE>
- ---------------
* Represents less than 1%.
(1) Viasystems Group Class A Common Stock is convertible into Viasystems Group
Common Stock (i) at the option of any holder thereof at any time, (ii) at
the option of Viasystems Group upon the occurrence of a Triggering Event (as
defined below), and (iii) automatically on September 30, 2006. A "Triggering
Event" means any sale of substantially all of the assets of Viasystems Group
or any merger, consolidation or other business combination of Viasystems
Group in which Hicks Muse and its affiliates cease to beneficially own,
directly or indirectly, at least 50% of the resulting entity. Each share of
Viasystems Group Class A Common Stock is convertible into a fraction of a
share of Viasystems Group Common Stock equal to the quotient of (i) the fair
market value of a share of Viasystems Group Common Stock at the time of
conversion less the sum of $.99 plus imputed interest thereon at a rate of
8% per annum, compounded annually, at the time of conversion, divided by
(ii) the fair market value of a share of Viasystems Group Common Stock at
the time of conversion. Because the fraction of a share of Viasystems Group
Common Stock into which Viasystems Group Class A Common Stock is convertible
is determinable only at the time of a conversion, shares of Viasystems Group
Common Stock that may be issuable upon conversion of Viasystems Group Class
A Common Stock are not included in the shares of Viasystems Group Common
Stock beneficially owned in the foregoing table.
(2) Includes (i) shares owned of record by Hicks, Muse, Tate & Furst Equity Fund
III, L.P. ("Fund III"), a limited partnership, of which the ultimate general
partner of Fund III is Hicks, Muse, Tate & Furst Fund III, Incorporated, an
affiliate of Hicks Muse; and (ii) shares owned of record by HM3 Coinvestors,
L.P., a limited partnership of which the ultimate general partner is
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<PAGE> 67
Fund III. Thomas O. Hicks is a controlling stockholder of Hicks Muse and
serves as Chairman of the Board, President, Chief Executive Officer, Chief
Operating Officer and Secretary of Hicks Muse. Accordingly, Mr. Hicks may be
deemed to be the beneficial owner of Viasystems Group Common Stock held by
Fund III and HM3 Coinvestors, L.P. John R. Muse, Charles W. Tate, Jack D.
Furst, Lawrence D. Stuart Jr., Michael J. Levitt and Alan B. Menkes are
officers, directors and minority stockholders of Hicks Muse and as such may
be deemed to share with Mr. Hicks the power to vote or dispose of Viasystems
Group Common Stock held by Fund III and HM3 Coinvestors, L.P. Each of
Messrs. Hicks, Muse, Tate, Furst, Stuart, Levitt and Menkes disclaims the
existence of a group and disclaims beneficial ownership of Viasystems Group
Common Stock not respectively owned of record by him.
(3) Includes shares of Viasystems Group Common Stock and Viasystems Group Class
A Common Stock held by James N. Mills and shares of Viasystems Group Common
Stock and Viasystems Group Class A Common Stock owned of record by certain
individuals, including Messrs. R. Mills and D. Sindelar, subject to an
irrevocable proxy in favor of Mr. Mills. See "Certain Transactions." Does
not include 2,468,800 shares of Viasystems Group Common Stock issuable to
Mr. Mills upon the exercise of Performance Options that are not currently
exercisable. See "Management -- Benefit Plans -- Stock Option Plan."
(4) Includes 100,000 shares of Viasystems Group Common Stock that may be
acquired by Mr. Vieser upon the exercise of options granted to him pursuant
to a stock option agreement with Viasystems Group.
(5) Does not include 1,546,390 shares of Viasystems Group Common Stock issuable
to Mr. Sindelar upon exercise of Performance Options that are not currently
exercisable. See "Management -- Benefit Plans -- Performance Options."
(6) Does not include 9,224,091 shares of Viasystems Group Common Stock issuable
to executive officers of Viasystems Group upon the exercise of Performance
Options that are not currently exercisable. See "Management -- Benefit
Plans -- Performance Options."
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<PAGE> 68
CERTAIN TRANSACTIONS
In April 1997, an affiliate of Hicks Muse acquired Forward Group, a rigid
PCB manufacturer located in the United Kingdom, for a purchase price of
approximately $236.0 million (including the issuance of the Forward Group Loan
Notes), which was funded with $216.0 million of borrowings under the Tender
Facility and the proceeds from the issuance to Hicks Muse of $40.0 million
initial liquidation preference of preferred stock. Subsequently, Viasystems
Group acquired Forward Group for cost, consisting of the assumption of the
Tender Facility and the issuance to Hicks Muse and certain affiliates of $40.0
million initial liquidation preference of Viasystem Group's preferred stock.
In April 1997, Chips Holdings acquired Chips, a rigid PCB manufacturer
located in the United Kingdom. In connection with such transaction, Hicks Muse
and its affiliates invested $140.0 million in the equity capital of Chips
Holdings. The Chips Merger was consummated concurrently with the consummation of
the Original Offering, in consideration for the issuance to Hicks Muse and
certain affiliates of common stock valued at $140.0 million. In addition, the
Company became the obligor on the Chips Reimbursement Obligation.
Viasystems Group and its subsidiaries have entered into a ten-year
agreement (the "Monitoring and Oversight Agreement") with an affiliate of Hicks
Muse ("Hicks Muse Partners") which was amended upon consummation of the
Transactions and pursuant to which Viasystems Group and its subsidiaries will
pay Hicks Muse Partners an annual fee payable quarterly for oversight and
monitoring services to the Company. The annual fee is adjustable on January 1 of
each calendar year to an amount equal to 0.2% of the budgeted consolidated
annual net sales of Viasystems Group and its subsidiaries for the then-current
fiscal year, but in no event less than $1,750,000 (the "Base Fee"). Upon the
acquisition by Viasystems Group or any of its subsidiaries of another entity or
business, the fee shall be adjusted prospectively in the same manner using the
pro forma combined budgeted consolidated annual net sales of Viasystems Group
and its subsidiaries. Thomas O. Hicks and Jack D. Furst, directors of Viasystems
Group and the Company, are each principals of Hicks Muse Partners. Hicks Muse
Partners is also entitled to reimbursement for any expenses incurred by it in
connection with rendering services allocable to the Company under the Monitoring
and Oversight Agreement. In addition, Viasystems Group and its subsidiaries,
jointly and severally, have agreed to indemnify Hicks Muse Partners, its
affiliates, and their respective directors, officers, controlling persons,
agents and employes from and against all claims, liabilities, losses, damages,
expenses and fees and disbursements of counsel related to or arising out of or
in connection with the services rendered by Hicks Muse Partners under the
Monitoring and Oversight Agreement and not resulting primarily from the bad
faith, gross negligence, or willful misconduct of Hicks Muse Partners. The
Monitoring and Oversight Agreement makes available the resources of Hicks Muse
Partners concerning a variety of financial and operational matters. The Company
does not believe that the services that have been and will continue to be
provided to the Company by Hicks Muse Partners could otherwise be obtained by
the Company without the addition of personnel or the engagement of outside
professional advisors. In the Company's opinion, the fees provided for under the
Monitoring and Oversight Agreement reasonably reflect the benefits received and
to be received by Viasystems Group, the Company and their respective
subsidiaries.
Chips Holdings and its subsidiaries entered into a ten-year agreement (the
"Chips Monitoring and Oversight Agreement") with Hicks Muse Partners pursuant to
which Chips and its subsidiaries agreed to pay Hicks Muse Partners an annual fee
on terms substantially similar to those under the Monitoring and Oversight
Agreement except that the Base Fee thereunder is $530,000. Upon consummation of
the Transactions, the Chips Monitoring and Oversight Agreement was terminated.
Viasystems Group and its subsidiaries entered into a ten-year agreement
(the "Financial Advisory Agreement"), pursuant to which Hicks Muse Partners is
entitled to receive a fee equal to 1.5% of the "transaction value" (as defined)
for each "add-on transaction" (as defined) in which Viasystems Group or any of
its subsidiaries is involved. In respect of the acquisitions to date, Hicks Muse
has received aggregate fees of approximately $4.9 million under the Financial
Advisory
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<PAGE> 69
Agreement. The term "transaction value" means the total value of the add-on
transaction including without limitation, the aggregate amount of the funds
required to complete the add-on transaction (excluding any fees payable pursuant
to the Financial Advisory Agreement), including the amount of any indebtedness,
preferred stock or similar terms assumed (or remaining outstanding). The term
"add-on transaction" means any future proposal for a tender offer, acquisition,
sale, merger, exchange offer, recapitalization, restructuring or other similar
transaction directly involving Viasystems Group or any of its subsidiaries or
any of their respective subsidiaries and any other person or entity. In
addition, Viasystems Group and its subsidiaries, jointly and severally, have
agreed to indemnify Hicks Muse Partners, its affiliates, and their respective
directors, officers, controlling persons, agents and employees from and against
all claims, liabilities, losses, damages, expenses and fees related to or
arising out of or in connection with the services rendered by Hicks Muse
Partners under the Financial Advisory Agreement and not resulting primarily from
the bad faith, gross negligence, or willful misconduct of Hicks Muse Partners.
The Financial Advisory Agreement makes available the resources of Hicks Muse
Partners concerning a variety of financial and operational matters. The Company
does not believe that the services that have been and will continue to be
provided by Hicks Muse Partners could otherwise be obtained by the Company
without the addition of personnel or the engagement of outside professional
advisors. In the Company's opinion, the fees provided for under the Financial
Advisory Agreement reasonably reflect the benefits received and to be received
by Viasystems Group, the Company and their respective subsidiaries. No fee will
be paid under the Financial Advisory Agreement in connection with the Chips
Merger.
Forward Group and its subsidiaries previously entered into a ten-year
agreement (the "Forward Group Financial Advisory Agreement"), pursuant to which
Hicks Muse Partners was entitled to receive certain fees on terms substantially
identical to those described in the Financial Advisory Agreement. In respect of
acquisitions to date, Hicks Muse Partners has received aggregate fees of
approximately $3.5 million under the Forward Group Financial Advisory Agreement.
Upon consummation of the acquisition of Forward Group, the Forward Group
Financial Advisory Agreement was terminated and no fees were paid in connection
with the Company's acquisition of the Forward Group.
Chips Holdings and its subsidiaries entered into a ten-year agreement (the
"Chips Financial Advisory Agreement"), pursuant to which Hicks Muse Partners is
entitled to receive certain fees on terms substantially identical to those fees
described in the Financial Advisory Agreement. In respect of the acquisitions to
date, Hicks Muse Partners has received aggregate fees of approximately $6.9
million under the Chips Financial Advisory Agreement. Upon consummation of the
Chips Merger, the Chips Financial Advisory Agreement was terminated and no fee
was paid in connection with the Chips Merger.
Effective concurrent with the consummation of the Transactions, each
investor in any class of common stock of Viasystems Group entered into an
amended and restated stockholders agreement (the "Stockholders Agreement"). The
Stockholders Agreement, among other things, grants preemptive rights and certain
registration rights to the parties thereto and contains provisions requiring the
parties thereto to sell their shares of common stock in connection with certain
sales of Viasystems Group Common Stock by Fund III ("drag-along rights") and
granting the parties thereto the right to include a portion of their shares of
common stock in certain sales in which Fund III does not exercise its drag-along
rights ("tag-along rights"). All parties to the Stockholders Agreement agreed to
take all action within their respective power (including the voting of
Viasystems Group Common Stock and Viasystems Group Class A Common Stock) to
cause the Board of Directors of the Company to at all times be constituted by
the members designated by Fund III. The Stockholders Agreement contains an
irrevocable proxy pursuant to which all parties to the Stockholders Agreement
(other than the initial holders of Viasystems Group Class A Common Stock and
their transferees) grant to Fund III the power to vote all shares of Viasystems
Group Common Stock held by such parties on all matters submitted to the
Company's stockholders.
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<PAGE> 70
Further, the Stockholders Agreement contains an irrevocable proxy pursuant to
which the initial holders of Viasystems Group Class A Common Stock and their
transferees grant to James N. Mills (or to Fund III if Mr. Mills is no longer an
officer or director of Viasystems Group) the power to vote all shares of
Viasystems Group Class A Common Stock held by such parties on all matters
submitted to the Company's stockholders. The Stockholders Agreement terminates
on its tenth anniversary date, although the preemptive rights, drag-along rights
and tag-along rights contained therein terminate earlier upon the consummation
of a firm commitment underwritten public offering of Viasystems Group Common
Stock.
The Company purchases certain connectors and other products needed to
manufacture PCBs and backpanels from Berg. Prior to the Company's acquisition of
the Lucent Division, the Lucent Division purchased certain electronic
connections from Berg pursuant to a written supply contract (the "Berg Supply
Agreement"). Berg and the Company have agreed to continue to supply and purchase
products on the same terms and condition as set forth in the Berg Supply
Agreement. Berg is controlled by Hicks Muse, through its affiliates, and managed
by Mills and Partners. In addition, certain of the Company's directors and
executive officers have financial interests in Berg. In fiscal year 1996, the
Company and the Lucent Division collectively purchased approximately $38.8
million of product from Berg. In fiscal years 1994 and 1995, the Lucent Division
purchased $30.1 million and $37.1 million, respectively, of product from Berg.
The Company expects to continue to purchase product from Berg on terms and
conditions substantially similar to the terms and conditions of the Berg Supply
Agreement, which the Company believes to be comparable to the terms that would
be reached in an arm's-length transaction.
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<PAGE> 71
DESCRIPTION OF SENIOR CREDIT FACILITIES
In connection with the consummation of the Chips Merger and the Original
Offering, the Senior Credit Facilities were amended and restated (the
"Amendments") as described below. The description set forth below sets forth all
material elements of the Senior Credit Facilities and the Amendments, but does
not purport to be complete and is qualified in its entirety by reference to
certain agreements setting forth the principal terms and conditions of the
Senior Credit Facilities, which are available upon request from the Company.
Capitalized terms used but not otherwise defined in this "Description of Senior
Credit Facilities" shall have the meaning to be ascribed to them in the Senior
Credit Facilities.
The Company, Circo Craft, PCB Investments PLC ("PCB Investments"), which is
the direct parent of Forward Group, Chips Acquisition Limited ("Chips Limited"),
which is the direct parent of Chips, Chips and Forward Group (collectively the
"Borrowers") entered into a Second Amended and Restated Credit Agreement (the
"Senior Credit Facilities") dated as of June 5, 1997 among Viasystems Group, as
Guarantor, the Borrowers, the several lenders party thereto, The Chase Manhattan
Bank of Canada ("Canadian Agent"), Chase Manhattan International Limited, and
The Chase Manhattan Bank, as Administrative Agent. The Senior Credit Facilities
includes (i) a $88.0 million term loan facility in (the "U.S. Term Loan") and a
$150.0 million revolving credit facility (the "U.S. Revolving Loan" and together
with the U.S. Term Loan, the "U.S. Loans"); (ii) a U.S.$25.0 million revolving
credit facility; (iii) a L32.0 million revolving credit facility (the "Forward
Group Revolving Loan") and a L27.6 million revolving credit facility (the "Chips
Revolving Loan", and together with the Forward Group Revolving Loan, the "U.K.
Revolving Loans", and together with the U.S. Revolving Loan and the Canadian
Revolving Loan, the "Revolving Loans") and (iv) US$346.25 million Letter of
Credit Facility in respect of the Chips Loan Notes comprised of (i) a US$319.3
million term loan facility ("the Chips Term Loans" and together with the US Term
Loan, the "Term Loans") in respect of the principal portion of the Chips Loan
Notes (up to US$249.2 of which may be converted to pounds sterling) and (ii) a
US$27.2 million facility in respect of interest on the Chips Loan Notes.
The U.S. Term Loan consists of two tranches: (i) $55.0 million of tranche B
term loans (the "Tranche B Loan") and (ii) $33.0 million of tranche C term loans
(the "Tranche C Loan"). The Tranche B Loan amortizes semi-annually over seven
years and Tranche C Loan amortizes semi-annually over eight years. The Chips
Term Loans amortize semi-annually over six years.
The Borrowers may use the Revolving Loans for letters of credit in an
amount not to exceed $15.0 million, in the case of both the U.S. Revolving Loan
and the Canadian Revolving Loan, and related letters of credit and bankers'
acceptances in an amount not to exceed L5.0 million in the case of the Forward
Group Revolving Loan and L10,000,000 in the case of the Chips Revolving Loan
(collectively, the "Accommodations"). L16.0 million of the Forward Group
Revolving Loan is available solely to finance obligations of PCB Investments in
respect of the Forward Group Loan Notes and $100.0 million of the U.S. Revolving
Loan is available solely to finance future acquisitions. The Revolving Loans and
the Accommodations are available until November 30, 2002.
The Borrowers may optionally prepay the Term Loans from time to time in
whole or in part, without premium or penalty. At the Borrowers' option,
Revolving Loans may be prepaid, and revolving credit commitments may be
permanently reduced, in whole or in part, at any time.
The Borrowers will be required to make mandatory prepayments of Term Loans,
in the amounts, at the times and subject to exceptions to be agreed upon, (a) in
respect of 75% of excess cash flow of the Company and its subsidiaries, and (b)
in respect of 100% of the net cash proceeds of certain dispositions of assets,
issuances of stock or incurrences of indebtedness by Viasystems Group, the
Company or any of their subsidiaries.
The obligations of the Borrowers under the Senior Credit Facilities are
unconditionally and irrevocably guaranteed by Viasystems Group. In addition, the
obligations of Forward Group, PCB Investments, Chips Limited, and Circo Craft
under their respective loans are unconditionally and
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<PAGE> 72
irrevocably guaranteed by the Company. The Domestic Subsidiaries (as defined in
the Credit Agreement) of the Company have also unconditionally and irrevocably
guaranteed the obligations of the Company for the U.S. Loans and its guarantees
of the other loans. In addition, to the extent permitted by applicable
contractual and legal provisions, the Borrowers and the Guarantors have granted
and/or pledged a first priority or equivalent security interests in all of their
respective tangible and intangible assets and the capital stock of, or other
equity interests in, each direct subsidiary (which is limited to 65% of the
voting capital stock of, or other equity interests in, each direct foreign
subsidiary of the Company).
The U.S. Loans bear interest, at the Company's election, at either: (i) the
Eurocurrency Base Rate plus (x) 2.5% in the case of the Chips Term Loan and U.S.
Revolving Loan, (y) 3.0% in the case of Tranche B Loan, or (z) 3.5% in the case
of Tranche C Loan; or (ii) the Alternate Base Rate plus (x) 1.5% in the case of
the Chips Term Loan or U.S. Revolving Loan, (y) 2.0% in the case of Tranche B
Loan, or (z) 2.5% in the case of Tranche C Loan. The Alternate Base Rate is the
highest of The Chase Manhattan Bank's Prime Rate, the Three-Month Secondary CD
Rate (as defined therein) plus 1.0%, and the Federal Funds Effective Rate (as
defined therein) plus 0.5%. The Canadian Revolving Loan denominated in US
dollars bears interest, at Circo Craft's election, at either (i) the
Eurocurrency Base Rate plus 2.5% or (ii) the Canadian Alternate Base Rate plus
1.5%. The Canadian Revolving Loan denominated in Canadian Dollars bears
interest, at Circo Craft's election either (i) the Canadian Bankers Acceptance
Discount Rate plus 2.5% or (ii) the Canadian Prime Rate plus 1.5%. The Canadian
Alternate Base Rate is equal to the higher of Canadian Agent's prime rate or the
Federal Funds Effective Rate (as defined in the Credit Agreement) plus 0.5%. The
U.K. Revolving Loans and any Chips Term Loans converted to pounds sterling bear
interest at the Eurocurrency Base Rate plus 2.5%.
The applicable margin with respect to extensions of credit under the
Canadian Revolving Loan is reduced by the amount of the applicable margin for
the Facility Fee (hereinafter described) thereunder. In addition, the applicable
margin with respect to the Chips Terms Loan and Revolving Loans and the Facility
Fee and Commitment Fee (hereinafter described) are eligible for certain
step-downs after January 1, 1998 based on a ratio of Consolidated Total Debt to
Consolidated EBITDA (each as defined in the Senior Credit Facilities).
The Borrowers pay a per annum fee equal to the applicable margin on their
respective Revolving Loans which bear interest at the Eurocurrency Base Rate, of
the average daily face amount of their respective outstanding Accommodations,
other than with respect to the Chips Letter of Credit, which fee is equal to the
applicable margin on the Chips Term Loan bearing interest at the Eurocurrency
Base Rate. Each of the Company, Chips Limited and Forward Group pay a Commitment
Fee equal to 0.5% on the undrawn portion of the commitments in respect of their
respective Revolving Loans and Circo Craft pays a Facility Fee equal to 0.5% on
the Canadian revolving credit commitment. In addition, US Borrower pays a fee of
0.25% per annum of Bisto's $118.3 million portion of the Chips Letter of Credit
to the extent not paid by Bisto.
The Senior Credit Facilities contain a number of covenants customary for
facilities similar to the Senior Credit Facilities that, among other things,
restrict the ability of the Company and its subsidiaries to incur additional
indebtedness (other than certain exceptions customary for facilities of this
type, including intercompany indebtedness (whether as the result of intercompany
asset transfers or otherwise), indebtedness existing on the date of the Senior
Credit Facilities with certain increases therein, purchase money and capital
lease indebtedness, seller unsecured indebtedness in connection with permitted
acquisitions or indebtedness assumed in connection with any permitted
acquisition, indebtedness of foreign subsidiaries that are not credit parties
for working capital purposes and under unsecured overdraft facilities,
indebtedness arising out of the sale of accounts receivable in a receivables
transaction permitted under the Senior Credit Facilities, unsecured senior
subordinated indebtedness in the amount of $400 million, indebtedness in the
amount of $5.0 million, indebtedness of Bisto in respect of reimbursement
obligations, indebtedness arising out of agreements with governmental
authorities of foreign countries or subdivisions thereof relating to the
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construction of plants and purchase and installation of equipment, indebtedness
in respect of the Loan Notes, additional indebtedness of the Company's indirect
Puerto Rican subsidiary not to exceed $3.0 million and additional indebtedness
of subsidiaries of Group not to exceed $35.0 million and certain other
exceptions, in each case upon the conditions set forth in the Senior Credit
Facilities), create liens on assets, incur guarantee obligations, enter into
mergers, consolidations or amalgamations or liquidate, wind up or dissolve,
dispose of assets, pay dividends, make capital expenditures in excess of $115
million in 1997, $100 million in 1998, $90 million in 1999 and thereafter
(provided that (i) the Company may make additional capital expenditures of up to
$16.0 million to build a facility in the United States, (ii) 100% of any amount
not used in a fiscal year may be carried forward into the next succeeding fiscal
year, and (iii) additional capital expenditures may be made with the Company's
share of excess cash flow to the extent such monies are not used to make
additional investments), make advances, loans, extensions of credit, capital
contributions to, or purchases of any stock, bonds, notes, debentures or other
securities, prepay certain indebtedness (including the New Notes) or amend other
debt instruments (including the Indenture), engage in certain transactions with
subsidiaries and affiliates, enter into sale and leaseback transactions, make
changes in their fiscal year, limit the ability of subsidiaries to incur, assume
or suffer to exist liens (other than certain exceptions customary for facilities
of this type, including liens granted in connection with the Senior Credit
Facilities, liens for taxes not yet due or which are being contested in
accordance with the provisions of the Senior Credit Facilities, carriers',
landlord's, warehousemen's, mechanics', materialmen's, repairmen's or similar
liens, deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, insurance contracts, surety and appeal bonds, performance
bonds and other obligations of similar nature, easements, rights-of-way, zoning
restrictions, restrictions and other similar encumbrances, liens existing on the
date of the Senior Credit Facilities, purchase money liens and in respect
capital expenditures, liens in favor of landlords, licenses, leases and
subleases permitted under the Credit Facilities, attachment or judgement Liens
not constituting an event of default, precautionary UCC filings with respect to
operating leases or consignment arrangements, liens in favor of banking
institutions, liens arising from the sale of accounts receivables in a
transaction permitted under the Senior Credit Facilities, liens on cash
collateral of Bisto, liens securing property financing by government grants
otherwise permitted under the Senior Credit Facilities, and other liens securing
obligations not exceeding $10.0 million, in each case upon the conditions set
forth in the Senior Credit Facilities), or pay dividends or make other
distributions or pay indebtedness owed to Viasystems Group or any of its
subsidiaries and otherwise restricts certain corporate activities. In addition,
under the Senior Credit Facilities, the Company is required to comply with
specified financial ratios and tests, including minimum interest coverage
(increasing from 1.75:1.00 in the second quarter of fiscal 1997 to 3.00:1.00
commencing with the first quarter of fiscal 2002 for the remainder of the term
of the loans) and maximum leverage ratios (decreasing from 5.75:1.00 in the
second quarter of fiscal 1997 to 4.00:1.00 commencing with the fourth quarter of
fiscal 2003 for the remainder of the term of the loans) and a trailing four
quarter minimum EBITDA test (increasing from $37.0 million in the second quarter
of fiscal 1997 to $250.0 million in the fourth quarter of fiscal 2003 for the
remainder of the term of the loans).
The Senior Credit Facilities also contain customary events of default
including failure to pay principal on any Loan or any Accommodation when due or
any interest or other amount that becomes due within five days after the due
date thereof, any representation or warranty made or deemed made is incorrect in
any material respect on or as of the date made or deemed made, the default in
the performance of certain negative covenants or a default in the performance of
certain other covenants or agreements for a period of thirty days, default in
other indebtedness or guarantee obligations with a principal amount in excess of
$5.0 million beyond the period of grace, certain insolvency events, certain
ERISA events, and other customary events of default for facilities similar to
the Senior Credit Facilities.
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<PAGE> 74
THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company on June 2, 1997, in the Original
Offering. In connection with that placement, the Company entered into the
Registration Rights Agreement, which requires that the Company file the
Registration Statement under the Securities Act with respect to the New Notes
and, upon the effectiveness of that Registration Statement, offer to the holders
of the Old Notes the opportunity to exchange their Old Notes for a like
principal amount of New Notes, which will be issued without a restrictive legend
and which generally may be reoffered and resold by the holder without
registration under the Securities Act. The Registration Rights Agreement further
provides that the Company must use its reasonable best efforts to (i) cause the
Registration Statement with respect to the Exchange Offer to be declared
effective on or before November 13, 1997 and (ii) consummate the Exchange Offer
on or before December 13, 1997. Except as provided below, upon the completion of
the Exchange Offer, the Company's obligations with respect to the registration
of the Old Notes and the New Notes will terminate. A copy of the Registration
Rights Agreement has been filed as an exhibit to the Registration Statement, of
which this Prospectus is a part, and the summary herein of the material
provisions thereof does not purport to be complete and is qualified in its
entirety by reference thereto. As a result of the filing and the effectiveness
of the Registration Statement, certain liquidated damages provided for in the
Registration Rights Agreement will not become payable by the Company. Following
the completion of the Exchange Offer (except as set forth in the paragraph
immediately below), holders of Old Notes not tendered will not have any further
registration rights and those Old Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market for the Old
Notes could be adversely affected upon completion of the Exchange Offer.
In order to participate in the Exchange Offer, a holder must represent to
the Company, among other things, that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving the New Notes, (ii) neither the holder nor any such other
person is engaging in or intends to engage in a distribution of the New Notes,
(iii) neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of the New
Notes, and (iv) neither the holder nor any such other person is an "affiliate,"
as defined under Rule 405 promulgated under the Securities Act, of the Company.
Pursuant to the Registration Rights Agreement, the Company is required to file a
"shelf" registration statement for a continuous offering pursuant to Rule 415
under the Securities Act in respect of the Old Notes if (i) because of any
change in law or applicable interpretations thereof by the staff of the
Commission, the Company determines that it is not permitted to effect the
Exchange Offer as contemplated hereby, (ii) validly tendered Old Notes are not
exchanged for New Notes by December 13, 1997, (iii) any holder of Private
Exchange Securities so requests within 60 days of the Exchange Offer, (iv) any
applicable law or interpretations do not permit any holder of Old Notes to
participate in the Exchange Offer, or (v) any holder of Old Notes that
participates in the Exchange Offer does not receive freely transferable New
Notes in exchange for tendered securities. In the event that the Company is
obligated to file a "shelf" registration statement, it will be required to keep
such "shelf" registration statement effective for at least two years. Other than
as set forth in this paragraph, no holder will have the right to participate in
the "shelf" registration statement nor otherwise to require that the Company
register such holder's shares of Old Notes under the Securities Act. See
"-- Procedures for Tendering."
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third-parties unrelated to the Company, the Company believes
that, with the exceptions set forth below, New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any person receiving such New Notes, whether or not
such person is the registered holder (other than any such holder or such other
person which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without
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<PAGE> 75
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the New Notes are acquired in the ordinary course
of business of the holder or such other person and neither the holder nor such
other person has an arrangement or understanding with any person to participate
in the distribution of such New Notes. Any holder who tenders in the Exchange
Offer for the purpose of participating in a distribution of the New Notes cannot
rely on this interpretation by the Commission's staff and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. 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."
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the Exchange Offer (except as set forth in the
second paragraph under "-- Purpose and Effect" above), holders of Old Notes not
tendered will not have any further registration rights and those Old Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for a holder's Old Notes could be adversely affected
upon completion of the Exchange Offer if the holder does not participate in the
Exchange Offer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New Notes
in exchange for each $1,000 principal amount of outstanding Old Notes accepted
in the Exchange Offer. Holders may tender some or all of their Old Notes
pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000 in principal amount.
The form and terms of the New Notes are substantially the same as the form
and terms of the Old Notes except that the New Notes have been registered under
the Securities Act and will not bear legends restricting their transfer. The New
Notes will evidence the same debt as the Old Notes and will be issued pursuant
to, and entitled to the benefits of, the Indenture pursuant to which the Old
Notes were issued.
As of June 1, 1997, Old Notes representing $400.0 million aggregate
principal amount were outstanding and there was one registered holder, a nominee
of DTC. This Prospectus, together with the Letter of Transmittal, is being sent
to such registered Holder and to others believed to have beneficial interests in
the Old Notes. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as, and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Company. If any tendered Old
Notes are not accepted for exchange because of an invalid tender, the occurrence
of certain other events set forth herein or otherwise, certificates for any such
unaccepted Old Notes will be returned, without expense, to the tendering holder
thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Fees and Expenses."
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<PAGE> 76
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended. In order to extend the
Exchange Offer, the Company will notify the Exchange Agent and each registered
holder of any extension by oral or written notice prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if any of the
conditions set forth under "The Exchange Offer -- Conditions to Exchange Offer"
shall not have been satisfied, to terminate the Exchange Offer, by giving oral
or written notice of such delay, extension or termination to the Exchange Agent,
or (ii) to amend the terms of the Exchange Offer in any manner.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender the Old Notes in the Exchange Offer.
Except as set forth under "The Exchange Offer -- Book Entry Transfer," to tender
in the Exchange Offer a holder must complete, sign, and date the Letter of
Transmittal, or a copy thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver the Letter
of Transmittal or copy to the Exchange Agent 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 prior to the Expiration
Date, or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Notes, if that procedure is available, into the
Exchange Agent's account at DTC (the "Book-Entry Transfer Facility") pursuant to
the procedure for book-entry transfer described below, 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. To be tendered
effectively, the Letter of Transmittal and other required documents must be
received by the Exchange Agent at the address set forth under "The Exchange
Offer -- Exchange Agent" prior to the Expiration Date.
The tender by a holder that is not withdrawn before the Expiration Date
will constitute an agreement between that holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the beneficial
owner wishes to tender on the owner's own behalf, the owner must, prior to
completing and executing the Letter of Transmittal and delivering the owner's
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in the beneficial owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless Old Notes tendered pursuant thereto
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<PAGE> 77
are tendered (i) by a registered holder who has not completed the box entitled
"Special Registration Instruction" or "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. If
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, the guarantee must be by any eligible
guarantor institution that is a member of or participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program, the Stock Exchange Medallion Program, or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, the Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as that registered holder's name appears on the Old Notes.
If the Letter of Transmittal or any Old Notes 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 evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal unless waived by the Company.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities, or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent, nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding after the
Expiration Date or, as set forth under "The Exchange Offer -- Conditions," to
terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions, or
otherwise. The terms of any such purchases or offers could differ from the terms
of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) 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 registered holder, (ii) neither the
holder nor any such other person is engaging in or intends to engage in a
distribution of such New Notes, (iii) neither the holder nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such New Notes, and (iv) neither the holder nor any such other
person is an "affiliate," as defined under Rule 405 of the Securities Act, of
the Company.
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
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Transmittal (or, with respect to the DTC and its participants, electronic
instructions in which the tendering holder acknowledges its receipt of and
agreement to be bound by the Letter of Transmittal), and all other required
documents. 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 desires to exchange, such
unaccepted or non-exchanged Old Notes will be returned without expense to the
tendering Holder thereof (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 below, such
nonexchanged 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.
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."
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 being tendered 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 copy thereof, with
any required signature guarantees and any other required documents, must, in any
case other than as set forth in the following paragraph, be transmitted to and
received by the Exchange Agent at the address set forth under "The Exchange
Offer -- Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system in lieu of sending a signed, hard copy Letter of
Transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender Old Notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the character by which the participant acknowledges its receipt of and
agrees to be bound by the Letter of Transmittal.
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 received 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 telegram, telex,
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
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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 5:00 pm., New
York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
(for DTC participants) electronic ATOP transmission notice of withdrawal must be
received by the Exchange Agent at its address set forth on the back cover page
of this Prospectus prior to 5:00 pm., New York City time, on the Expiration
Date. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Old Notes), (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee register the
transfer of such Old Notes into the name of the person withdrawing the tender,
and (iv) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. 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. 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 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 under "The Exchange Offer -- Procedures for Tendering" at any
time on or prior to the Expiration Date.
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, the Company determines that the Exchange Offer
violates applicable law, any applicable interpretation of the staff of the
Commission or any order of any governmental agency or court of competent
jurisdiction.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "TIA"). In any such event the Company is required to use every reasonable
effort to obtain the withdrawal of any stop order at the earliest possible time.
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EXCHANGE AGENT
All executed Letters of Transmittal should be directed to the Exchange
Agent. The Bank of New York has been appointed as Exchange Agent for the
Exchange Offer. Questions, requests for assistance and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed to
the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand:
The Bank of New York The Bank of New York
101 Barclays Street 101 Barclays Street
Floor 7-E Corporate Trust Services Window
New York, New York 10286 Ground Level
New York, New York 10286
Attn: Reorganization Section
Attn: Reorganization Section
By Overnight Courier: By Facsimile:
The Bank of New York (212) 571-3080
101 Barclays Street
Corporate Trust Services Window For Information or
Ground Level Confirmation by Telephone:
New York, New York 10286 (212) 815-6333
Attn: Reorganization Section
</TABLE>
(Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.)
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
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
$230,000, which includes fees and expenses of the Exchange Agent, accounting,
legal, printing, and related fees and expenses.
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.
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DESCRIPTION OF NEW NOTES
GENERAL
The New Notes are to be issued under the Indenture, dated as of June 6,
1997 (the "Indenture"), between the Company and The Bank of New York, as Trustee
(the "Trustee"), a copy of which is available upon request to the Company. The
Old Notes were also issued under the Indenture. Upon the effectiveness of the
Exchange Offer, the Indenture will be subject to and governed by the TIA. The
following summary of certain provisions of the Indenture and the Notes sets
forth all material elements of such documents, but does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Indenture (including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of 1939,
as amended) and the Notes. A copy of the Indenture has been filed as an exhibit
to the Company's registration statement on Form S-1 relating to the Exchange
Offer.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee in New York, New York), except
that, at the option of the Company, payment of interest may be made by check
mailed to the address of the holders as such address appears in the Note
Register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF NOTES
The Notes will be unsecured, senior subordinated obligations of the
Company, limited to $400 million aggregate principal amount, and will mature on
June 1, 2007. Each Note will bear interest at 9.750% per annum from the date of
issuance, or from the most recent date to which interest has been paid or
provided for, payable semiannually on June 1 and December 1 of each year
commencing on December 1, 1997 to holders of record at the close of business on
the May 15 or November 15 immediately preceding the interest payment date.
OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the option
of the Company prior to June 1, 2002. On and after such date, the Notes will be
redeemable, at the Company's option, in whole or in part, at any time upon not
less than 30 nor more than 60 days prior notice mailed by first-class mail to
each holder's registered address, at the following redemption prices (expressed
in percentages of principal amount), plus accrued and unpaid interest to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date):
If redeemed during the 12-month period commencing on June 1 of the years
set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------ ----------
<S> <C>
2002........................................................ 104.875%
2003........................................................ 103.250%
2004........................................................ 101.625%
2005 and thereafter......................................... 100.000%
</TABLE>
In addition, at any time and from time to time prior to June 1, 2000, the
Company may redeem in the aggregate up to $140.0 million of the Notes with the
net cash proceeds of one or more Equity Offerings by the Company or Viasystems
Group (to the extent, in the case of Viasystems Group, that the Net Cash
Proceeds thereof are contributed to the common or non-redeemable preferred
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equity capital of the Company) so long as there is a Public Market at the time
of such redemption, at a redemption price (expressed as a percentage of
principal amount) of 109.75%, plus accrued and unpaid interest, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date in
respect of then outstanding Notes); provided, however, that at least $200.0
million of the Notes must remain outstanding after each such redemption.
At any time on or prior to June 1, 2002, the Notes may also be redeemed as
a whole at the option of the Company upon the occurrence of a Change of Control,
upon not less than 30 nor more than 60 days prior notice (but in no event more
than 90 days after the occurrence of such Change of Control) mailed by
first-class mail to each holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as of,
and accrued and unpaid interest, if any, to, the date of redemption (the
"Redemption Date") (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date in
respect of then outstanding Notes).
"Applicable Premium" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at June 1, 2002 (such redemption price being described under "-- Optional
Redemption") plus (2) all required interest payments due on such Note through
June 1, 2002, computed using a discount rate equal to the Treasury Rate plus 100
basis points, over (B) the principal amount of such Note.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to June 1, 2002; provided, however, that if the
period from the Redemption Date to June 1, 2002 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the period from the Redemption Date to June 1, 2002 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
Selection. In the case of any partial redemption, selection of the Notes
for redemption will be made by the Trustee on a pro rata basis, by lot or by
such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating 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.
RANKING AND SUBORDINATION
The payment of the principal of, premium (if any), and interest on the
Notes is subordinated in right of payment, as set forth in the Indenture, to the
payment when due of all Senior Indebtedness of the Company. However, payment
from the money or the proceeds of U.S. Government Obligations held in any
defeasance trust described under "Defeasance" below is not subordinate to any
Senior Indebtedness or subject to the restrictions described herein. As of March
31, 1997, on a pro forma basis after giving effect to the 1997 Transactions, the
Original Offering and the Exchange Offer, there would have been approximately
$432.4 million of Senior Indebtedness outstanding. In addition, on the same pro
forma basis, there would have been approximately $146.5 million available under
the Senior Credit Facilities as of December 31, 1996 for the general corporate
purposes and
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working capital needs of the Company and an additional $100.0 million available
for future acquisitions, all of which would be Senior Indebtedness if borrowed.
Of the amount available to be borrowed as of March 31, 1997 on a pro forma
basis, approximately $96.5 million would have been available for borrowings by
the Company's Subsidiaries. Although the Indenture contains limitations on the
amount of additional Indebtedness that the Company may incur, under certain
circumstances the amount of such Indebtedness could be substantial and, in any
case, such Indebtedness may be Senior Indebtedness. See "Certain
Covenants -- Limitation on Indebtedness" below.
"Senior Indebtedness" is defined, whether outstanding on the Issue Date or
thereafter issued, as the Bank Indebtedness and all other Indebtedness of the
Company, including interest and fees thereon, unless, in the instrument creating
or evidencing the same or pursuant to which the same is outstanding, it is
provided that the obligations in respect of such Indebtedness are not superior
in right of payment to the Notes; provided, however, that Senior Indebtedness
will not include (1) any obligation of the Company to any Subsidiary, (2) any
liability for Federal, state, foreign, local or other taxes owed or owing by the
Company, (3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including Guarantees thereof or instruments
evidencing such liabilities), or (4) any Indebtedness, Guarantee or obligation
of the Company that is expressly subordinate or junior in right of payment to
any other Indebtedness, Guarantee or obligation of the Company, including any
Senior Subordinated Indebtedness and any Subordinated Indebtedness.
The Notes are effectively subordinated to the obligations of the Company's
Subsidiaries, including the guarantee by its U.S. Subsidiaries of obligations
under the Senior Credit Facilities, because the Company is a holding company. In
the event of an insolvency, liquidation or other reorganization of any of the
Subsidiaries of the Company, the creditors of the Company (including the holders
of the Notes), as well as shareholders of the Company, will have no right to
proceed against the assets of such Subsidiaries or to cause the liquidation or
bankruptcy of such Subsidiaries under applicable bankruptcy laws. Creditors of
such Subsidiaries, including lenders under the Senior Credit Facilities, would
be entitled to payment in full from such assets before the Company, as a
shareholder, would be entitled to receive any distribution therefrom. Except to
the extent that the Company itself may be a creditor with recognized claims
against such Subsidiaries, claims of creditors of such Subsidiaries will have
priority with respect to the assets and earnings of such Subsidiaries over the
claims of creditors of the Company, including claims under the Notes.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not incur, directly or indirectly, any Indebtedness that is subordinate or
junior in right of payment to Senior Indebtedness unless such Indebtedness is
Senior Subordinated Indebtedness or is contractually subordinated in right of
payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not
deemed to be subordinate or junior to Secured Indebtedness merely because it is
unsecured nor is any Indebtedness deemed to be subordinate or junior to other
Indebtedness merely because it matures after such other Indebtedness.
The Company may not pay principal of, premium (if any), or interest on, the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not otherwise purchase, redeem or retire any Notes
(collectively, "pay the Notes") if (i) any Senior Indebtedness is not paid when
due or (ii) any other default on Senior Indebtedness occurs and the maturity of
such Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, the default has been cured or waived and any such acceleration has
been rescinded or such Senior Indebtedness has been paid in full. However, the
Company may pay the Notes without regard to the foregoing if the Company and the
Trustee receive written notice approving such payment from the Representative of
the Senior Indebtedness with respect to which either of the events set forth in
clause (i) or (ii) of the immediately preceding sentence has occurred and is
continuing. During the continuance of any default (other than a default
described in clause (i) or (ii) of the second
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preceding sentence) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay the
Notes (except in (i) Capital Stock (other than Disqualified Stock) issued by the
Company to pay interest on the Notes or issued in exchange for the Notes, (ii)
in securities substantially identical to the Notes issued by the Company in
payment of interest thereon or (iii) in securities issued by the Company which
are subordinated to Senior Indebtedness at least to the same extent as the Notes
and having an Average Life at least equal to the remaining Average Life of the
Notes) for a period (a "Payment Blockage Period") commencing upon the receipt by
the Trustee (with a copy to the Company) of written notice (a "Blockage Notice")
of such default from the Representative of the holders of such Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee and the Company from the Person
or Persons who gave such Blockage Notice, (ii) because the default giving rise
to such Blockage Notice is no longer continuing or (iii) because such Designated
Senior Indebtedness has been repaid in full). Notwithstanding the provisions
described in the immediately preceding sentence, unless the holders of such
Designated Senior Indebtedness or the Representative of such holders have
accelerated the maturity of such Designated Senior Indebtedness, the Company may
resume payments on the Notes after the end of such Payment Blockage Period. Not
more than one Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period; provided, that if a Blockage Notice is given by
holders of Designated Senior Indebtedness other than the Bank Indebtedness, the
Representative of the Bank Indebtedness may deliver a subsequent Blockage Notice
during such 360-day period, but the total duration of all Payment Blockage
Periods during such 360-day period shall not exceed 179 days.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization or bankruptcy of or
similar proceeding relating to the Company or its property, the holders of
Senior Indebtedness will be entitled to receive payment in full of the Senior
Indebtedness before the holders of the Notes are entitled to receive any
payment, and until the Senior Indebtedness is paid in full, any payment or
distribution to which holders of the Notes would be entitled but for the
subordination provisions of the Indenture will be made to holders of the Senior
Indebtedness as their interests may appear.
If a distribution is made to holders of the Notes that, due to the
subordination provisions, should not have been made to them, such holders are
required to hold it in trust for the holders of Senior Indebtedness and pay it
over to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company and the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until five Business Days after such holders or
the Representative of the Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the Notes only if the subordination
provisions of the Indenture otherwise permit payment at that time.
By reason of the subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder will have the right to require the Company to repurchase
all or any part of such holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of holders of record on the relevant
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record date to receive accrued and unpaid interest due on the relevant interest
payment date in respect of then outstanding Notes):
(i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets
of the Company and its Subsidiaries to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a "Group")
(whether or not otherwise in compliance with the provisions of the
Indenture), other than to Hicks Muse, Mills & Partners, or any of their
Affiliates, officers and directors (the "Permitted Holders"); or
(ii) a majority of the Board of Directors of the Company shall consist
of Persons who are not Continuing Directors; or
(iii) the acquisition by any Person or Group (other than the Permitted
Holders or any direct or indirect Subsidiary of any Permitted Holder) of
the power, directly or indirectly, to vote or direct the voting of
securities having more than 50% of the ordinary voting power for the
election of directors of the Company.
Within 30 days following any Change of Control, unless the Company has
mailed a redemption notice with respect to all the outstanding Notes in
connection with such Change of Control, the Company shall mail a notice to each
holder with a copy to the Trustee stating: (1) that a Change of Control has
occurred and that such holder has the right to require the Company to purchase
such holder's Notes at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of holders of record on a record date to receive accrued
and unpaid interest on the relevant interest payment date in respect of the then
outstanding Notes); (2) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and (3) the
procedures determined by the Company, consistent with the Indenture, that a
holder must follow in order to have its Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. The
Company will also comply, to the extent applicable, with the requirements of the
applicable securities laws and regulations in connection with any offer made
pursuant to this covenant, including Rule 14e-1 under the Exchange Act. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
The definition of "Change of Control" includes, among other transactions, a
disposition of all or substantially all of the property and assets of the
Company and its Subsidiaries. With respect to the disposition of property or
assets, the phrase "all or substantially all" as used in the Indenture varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under New York law (which is the choice of law under
the Indenture) and is subject to judicial interpretation. Accordingly, in
certain circumstances there may be a degree of uncertainty in ascertaining
whether a particular transaction would involve a disposition of "all or
substantially all" of the property or assets of a Person, and therefore it may
be unclear whether a Change of Control has occurred and whether the Company is
required to make an offer to repurchase the Notes as described above.
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the Credit Agreement. Future Senior
Indebtedness of the Company and future Indebtedness of its Subsidiaries may also
contain prohibitions of certain events that would constitute a Change of Control
or require such Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the holders of their right to require the Company to
repurchase the Notes could cause a default under Senior Indebtedness of the
Company, even if the Change of
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Control itself does not. Finally, the Company's ability to pay cash to the
holders upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases. Even if sufficient
funds were otherwise available, the terms of the Bank Indebtedness will prohibit
the Company's prepayment of Notes prior to their scheduled maturity.
Consequently, if the Company is not able to prepay the Bank Indebtedness and any
other Senior Indebtedness containing similar restrictions or obtain requisite
consents, as described above, the Company will be unable to fulfill its
repurchase obligations if holders of Notes exercise their repurchase rights
following a Change of Control, thereby resulting in a default under the
Indenture.
CERTAIN COVENANTS
The Indenture contains certain covenants including, among others, the
following:
Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; provided, however, that the Company and
any of its Restricted Subsidiaries may incur Indebtedness if on the date thereof
the Consolidated Coverage Ratio would be greater than 2.00: 1.00, if such
Indebtedness is Incurred on or prior to December 31, 1999, and 2.25:1.00, if
such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may incur the following Indebtedness: (i) Indebtedness
Incurred pursuant to (A) the Credit Agreement (including, without limitation,
any renewal, extension, refunding, restructuring, replacement or refinancing
thereof referred to in clause (ii) of the definition thereof) or (B) any other
agreements or indentures governing Senior Indebtedness; provided, however, that
the aggregate principal amount of all Indebtedness Incurred pursuant to this
clause (i) does not exceed $710.0 million at any time outstanding, less the
aggregate principal amount thereof repaid with the net proceeds of Asset
Dispositions (to the extent, in the case of a repayment of revolving credit
Indebtedness, the commitment to advance the loans repaid has been terminated);
(ii) Indebtedness represented by Capitalized 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 used in a Related Business or Incurred to Refinance any
such purchase price or cost of construction or improvement, in each case
Incurred no later than 365 days after the date of such acquisition or the date
of completion of such construction or improvement; provided, however, that the
principal amount of any Indebtedness Incurred pursuant to this clause (ii) shall
not exceed $25.0 million at any time outstanding; (iii) Permitted Indebtedness;
and (iv) Indebtedness (other than Indebtedness described in clauses (i) - (iii))
in a principal amount which, when taken together with the principal amount of
all other Indebtedness Incurred pursuant to this clause (iv) and then
outstanding, will not exceed $75.0 million (it being understood that any
Indebtedness Incurred under this clause (iv) shall cease to be deemed Incurred
or outstanding for purposes of this clause (iv) (but shall be deemed to be
Incurred for purposes of paragraph (a)) from and after the first date on which
the Company or its Restricted Subsidiaries could have Incurred such Indebtedness
under the foregoing paragraph (a) without reliance upon this clause (iv)).
(c) In addition, the Company shall not Incur any Secured Indebtedness which
is not Senior Indebtedness unless contemporaneously therewith effective
provision is made to secure the Notes equally and ratably with such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
(d) The Company will not permit any Unrestricted Subsidiary to Incur any
Indebtedness other than Non-Recourse Debt; provided, however, if any such
Indebtedness ceases to be Non-Recourse Debt, such event shall be deemed to
constitute an Incurrence of Indebtedness by the Company or a Restricted
Subsidiary.
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(e) For purposes of determining compliance with any U.S. dollar-denominated
restriction on the Incurrence of Indebtedness, the U.S. dollar-equivalent
principal amount of Indebtedness denominated in a foreign currency shall be
calculated based on the relevant currency exchange rate in effect on the date
such Indebtedness was Incurred, in the case of term debt, or first committed, in
the case of revolving credit debt; provided that (x) the U.S. dollar-equivalent
principal amount of any such Indebtedness outstanding or committed on the Issue
Date shall be calculated based on the relevant currency exchange rate in effect
on March 31, 1997, and (y) if such Indebtedness is Incurred to refinance other
indebtedness denominated in a foreign currency, and such refinancing would cause
the applicable U.S. dollar-denominated restriction to be exceeded if calculated
at the relevant currency exchange rate in effect on the date of such
refinancing, such U.S. dollar-denominated restriction shall be deemed not to
have been exceeded so long as the principal amount of such refinancing
Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced. The principal amount of any Indebtedness incurred to refinance other
Indebtedness, if Incurred in a different currency from the Indebtedness being
refinanced, shall be calculated based on the currency exchange rate applicable
to the currencies in which such respective Indebtedness is denominated that is
in effect on the date of such refinancing.
Limitation on Layering. The Company shall not Incur any Indebtedness if
such Indebtedness is subordinate or junior in right of payment to any Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
contractually subordinated in right of payment to Senior Subordinated
Indebtedness.
Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any of its Restricted Subsidiaries, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries)
except (A) dividends or distributions payable in its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to purchase such
Capital Stock (other than Disqualified Stock), and (B) dividends or
distributions payable to the Company or a Restricted Subsidiary of the Company
(and if such Restricted Subsidiary is not a Wholly-Owned Subsidiary, to its
other holders of Capital Stock on a pro rata basis), (ii) purchase, redeem,
retire or otherwise acquire for value any Capital Stock of the Company held by
Persons other than a Restricted Subsidiary of the Company or any Capital Stock
of a Restricted Subsidiary of the Company held by Persons other than the Company
or another Restricted Subsidiary of the Company (in either case, other than in
exchange for its Capital Stock (other than Disqualified Stock) or to the extent
that after giving effect to such purchase, redemption, retirement or
acquisition, such Restricted Subsidiary would become a Wholly Owned Subsidiary),
(iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment, any Subordinated Indebtedness (other than the purchase, repurchase
or other acquisition of Subordinated Indebtedness purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of purchase, repurchase or
acquisition) or (iv) make any Investment (other than a Permitted Investment) in
any Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment being herein referred to
in clauses (i) through (iv) as a "Restricted Payment"), if at the time the
Company or such Restricted Subsidiary makes such Restricted Payment: (1) a
Default shall have occurred and be continuing (or would result therefrom); or
(2) the Company is not able to incur an additional $1.00 of Indebtedness
pursuant to paragraph (a) under "Limitation on Indebtedness"; or (3) the
aggregate amount of such Restricted Payment and all other Restricted Payments
declared or made subsequent to the Issue Date would exceed the sum of: (A) 50%
of the Consolidated Net Income accrued during the period (treated as one
accounting period) from the Issue Date to the end of the most recent fiscal
quarter ending prior to the date of such Restricted Payment as to which
financial results are available (or, in case such Consolidated Net Income shall
be a deficit, minus 100% of such deficit); (B) the aggregate net
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proceeds received by the Company from the issue or sale of its Capital Stock
(other than Disqualified Stock) or other capital contributions subsequent to the
Issue Date (other than net proceeds received from an issuance or sale of such
Capital Stock to a Subsidiary of the Company or an employee stock ownership plan
or similar trust); provided, however, that the value of any non cash net
proceeds (which in each case shall be assets of the type used in a Related
Business or Capital Stock of a Person engaged in a Related Business) shall be as
determined by the Board of Directors in good faith, except that in the event the
value of any non cash net proceeds shall be $25 million or more, the value shall
be as determined in writing by an independent investment banking firm of
nationally recognized standing; (C) the aggregate Net Cash Proceeds received by
the Company from the issue or sale of its Capital Stock (other than Disqualified
Stock) to an employee stock ownership plan or similar trust subsequent to the
Issue Date; provided, however, that if such plan or trust Incurs any
Indebtedness to or Guaranteed by the Company or any of its Restricted
Subsidiaries to finance the acquisition of such Capital Stock, such aggregate
amount shall be limited to such Net Cash Proceeds less such Indebtedness
Incurred to or Guaranteed by the Company or any of its Restricted Subsidiaries
and any increase in the Consolidated Net Worth of the Company resulting from
principal repayments made by such plan or trust with respect to Indebtedness
Incurred by it to finance the purchase of such Capital Stock; (D) the amount by
which Indebtedness of the Company is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Restricted Subsidiary of the
Company) subsequent to the Issue Date of any Indebtedness of the Company for
Capital Stock (other than Disqualified Stock) of the Company (less the amount of
any cash, or other property, distributed by the Company upon such conversion or
exchange); (E) the amount equal to the net reduction in Investments (other than
Permitted Investments) made by the Company or any of its Restricted Subsidiaries
in any Person resulting from (i) repurchases or redemptions of such Investments
by such Person, proceeds realized upon the sale of such Investment to an
unaffiliated purchaser, and repayments of loans or advances or other transfers
of assets by such Person to the Company or any Restricted Subsidiary of the
Company or (ii) the redesignation of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of "Investment")
not to exceed, in the case of any Unrestricted Subsidiary, the amount of
Investments previously made by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary, which amount was included in the calculation of the
amount of Restricted Payments; provided, however, that no amount shall be
included under this clause (E) to the extent it is already included in
Consolidated Net Income; (F) the aggregate Net Cash Proceeds received by a
Person in consideration for the issuance of such Person's Capital Stock (other
than Disqualified Stock) which are held by such Person at the time such Person
is merged with and into the Company in accordance with the "Merger and
Consolidation" covenant subsequent to the Issue Date; provided, however, that
concurrently with or immediately following such merger the Company uses an
amount equal to such Net Cash Proceeds to redeem or repurchase the Company's
Capital Stock; and (G) $5 million.
(b) The provisions of paragraph (a) shall not prohibit: (i) any purchase or
redemption of Capital Stock or Subordinated Indebtedness of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan
or similar trust); provided, however, that (A) such purchase or redemption shall
be excluded in the calculation of the amount of Restricted Payments and (B) the
Net Cash Proceeds from such sale shall be excluded from clause (3) (B) of
paragraph (a); (ii) any purchase or redemption of Subordinated Indebtedness of
the Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Subordinated Indebtedness of the Company; provided, however,
that such purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments; (iii) any purchase or redemption of Subordinated
Indebtedness from Net Available Cash to the extent permitted under "Limitation
on Sales of Assets and Subsidiary Stock" below; provided, however, that such
purchase or redemption shall be excluded in the calculation of the amount of
Restricted Payments; (iv) dividends paid within 60 days after the date
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of declaration if at such date of declaration such dividend would have complied
with the requirements of paragraph (a) above; (v) payments of dividends on the
Company's common stock (or payments to Viasystems Group to pay dividends on its
common stock) after an initial public offering of common stock of the Company or
of Viasystems Group, as the case may be, in an annual amount not to exceed 6% of
the gross proceeds (before deducting underwriting discounts and commissions and
other fees and expenses of the offering) received by the Company from shares of
common stock sold for the account of the Company (and not for the account of any
stockholder) in such initial public offering or, in the case of an initial
public offering by Viasystems Group, 6% per annum of the amount contributed to
the common or non-redeemable preferred equity of the Company by Viasystems Group
from the Net Cash Proceeds of an initial public offering of common stock by
Viasystems Group; (vi) payments by the Company to repurchase (or to enable
Viasystems Group to repurchase) Capital Stock or other securities of the Company
or Viasystems Group from members of management of the Company in an aggregate
amount not to exceed $15 million; (vii) payments to enable the Company to redeem
or repurchase (or to enable Viasystems Group to redeem or repurchase) stock
purchase or similar rights granted by the Company or Viasystems Group with
respect to its Capital Stock in an aggregate amount not to exceed $1 million;
(viii) payments, not to exceed $200,000 in the aggregate, to enable the Company
or Viasystems Group to make cash payments to holders of its Capital Stock in
lieu of the issuance of fractional shares of its Capital Stock; (ix) payments
made pursuant to any merger, consolidation or sale of assets effected in
accordance with the "Merger and Consolidation" covenant; provided, however, that
no such payment may be made pursuant to this clause (ix) unless, after giving
effect to such transaction (and the incurrence of any Indebtedness in connection
therewith and the use of the proceeds thereof), the Company would be able to
Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Indebtedness" covenant such that, after
Incurring that $1.00 of additional Indebtedness, the Consolidated Coverage Ratio
would be greater than 3.5:1.00; and (x) payments by the Company to fund (A) out
of pocket expenses of Viasystems Group for administrative, legal and accounting
services provided by third parties, or to pay franchise fees and similar costs,
but not to exceed an aggregate amount of $1 million per annum, and (B) taxes of
Viasystems Group; provided, however, that in the case of clauses (v), (vi),
(vii), (viii) and (ix) no Default or Event of Default shall have occurred or be
continuing at the time of such payment or as a result thereof; provided further,
however, that for purposes of determining the aggregate amount expended for
Restricted Payments in accordance with clause (3) of the immediately preceding
paragraph (a), only the amounts expended under clauses (iv) through (ix) shall
be included.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company shall not, and shall not permit any of its Restricted Subsidiaries
to, create or permit to exist or become effective any consensual encumbrance or
restriction on the ability of any such Restricted Subsidiary to (i) pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness or other obligation owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company; except: (a) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date, including the Credit Agreement; (b)
any encumbrance or restriction with respect to such a Restricted Subsidiary
pursuant to an agreement relating to any Indebtedness or Preferred Stock issued
by such Restricted Subsidiary on or prior to the date on which such Restricted
Subsidiary was acquired by the Company and outstanding on such date (other than
Indebtedness or Preferred Stock issued as consideration in, or to provide all or
any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary of the Company or was acquired by the
Company); (c) any encumbrance or restriction with respect to such a Restricted
Subsidiary pursuant to an agreement evidencing Indebtedness Incurred without
violation of the Indenture or effecting a refinancing of Indebtedness issued
pursuant to an agreement referred to in clauses (a) or (b) or this clause (c) or
contained in any amendment to an agreement referred to in clauses (a) or (b) or
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this clause (c); provided, however, that the encumbrances and restrictions with
respect to such Restricted Subsidiary contained in any of such agreement,
refinancing agreement or amendment, taken as a whole, are not materially less
favorable to the holders, as determined in good faith by the senior management
of the Company or Board of Directors of the Company, than encumbrances and
restrictions with respect to such Restricted Subsidiary contained in agreements
in effect at, or entered into on, the Issue Date; (d) in the case of clause
(iii), any encumbrance or restriction (A) that restricts in a customary manner
the subletting, assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset, (B) by virtue of
any transfer of, agreement to transfer, option or right with respect to, or Lien
on, any property or assets of the Company or any Restricted Subsidiary not
otherwise prohibited by the Indenture, (C) that is included in a licensing
agreement to the extent such restrictions limit the transfer of the property
subject to such licensing agreement or (D) arising or agreed to in the ordinary
course of business and that does not, individually or in the aggregate, detract
from the value of property or assets of the Company or any of its Subsidiaries
in any manner material to the Company or any such Restricted Subsidiary as
determined in good faith by senior management of the Company; (e) in the case of
clause (iii) above, restrictions contained in security agreements, mortgages or
similar documents securing Indebtedness of a Restricted Subsidiary to the extent
such restrictions restrict the transfer of the property subject to such security
agreements; (f) any restriction with respect to such a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; (g) encumbrances or
restrictions with respect to Indebtedness of Foreign Subsidiaries; provided that
(i) such encumbrances or restrictions do not limit in any manner the ability of
the Restricted Subsidiaries of the Company in existence on the Issue Date from
performing any of the acts referred to in clauses (i) through (iii) of this
covenant and (ii) the aggregate principal amount of the Indebtedness of the
Foreign Subsidiaries of the Company which includes such an encumbrance or
restriction does not exceed $50.0 million; and (h) encumbrances or restrictions
arising or existing by reason of applicable law.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall
not, and shall not permit any of its Restricted Subsidiaries to, make any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value, as determined in good faith by the Company's senior management or
the Board of Directors (including as to the value of all non-cash
consideration), of the shares and assets subject to such Asset Disposition, (ii)
at least 75% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash or cash equivalents and (iii) an
amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by the Company (or such Restricted Subsidiary, as the case may be) (A)
first, to the extent the Company or any Restricted Subsidiary elects (or is
required by the terms of any Senior Indebtedness), to prepay, repay or purchase
(x) Senior Indebtedness or (y) Indebtedness (other than Preferred Stock) of a
Wholly-Owned Subsidiary (in each case other than Indebtedness owed to the
Company) within 180 days from the later of the date of such Asset Disposition or
the receipt of such Net Available Cash; (B) second, within one year from the
receipt of such Net Available Cash, to the extent of the balance of such Net
Available Cash after application in accordance with clause (A), at the Company's
election either (x) to the investment in or acquisition of Additional Assets or
(y) to prepay, repay or purchase (1) Senior Indebtedness or (2) Indebtedness
(other than Preferred Stock) of a Wholly-Owned Subsidiary (in each case other
than Indebtedness owed to the Company); and (C) third, within 45 days after the
later of the application of Net Available Cash in accordance with clauses (A)
and (B) and the date that is one year from the receipt of such Net Available
Cash, to the extent of the balance of such Net Available Cash after application
in accordance with clauses (A) and (B), to make an offer to purchase Notes and
other Senior Subordinated Indebtedness, to the extent required pursuant to the
terms thereof, pro rata at 100% of the tendered principal amount thereof (or
100% of the accreted value of such other Senior Subordinated Indebtedness so
tendered, if such Senior Subordinated Indebtedness was issued at a
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discount) plus accrued and unpaid interest, if any, thereon to the date of
purchase. The balance of such Net Available Cash after application in accordance
with clauses (A), (B) and (C) may be used by the Company in any manner not
otherwise prohibited under the Indenture. Notwithstanding anything herein to the
contrary, in connection with any prepayment, repayment or purchase of
Indebtedness pursuant to clause (A), (B) or (C) above, the Company or such
Restricted Subsidiary shall retire such Indebtedness and shall cause the related
loan commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing
provisions, the Company and its Restricted Subsidiaries shall not be required to
apply any Net Available Cash in accordance herewith except to the extent that
the aggregate Net Available Cash from all Asset Dispositions which are not
applied in accordance with this covenant at any time exceed $15 million. The
Company shall not be required to make an offer for Notes pursuant to this
covenant if the Net Available Cash available therefor (after application of the
proceeds as provided in clauses (A) and (B)) is less than $25 million for any
particular Asset Disposition (which lesser amounts shall be carried forward for
purposes of determining whether an offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition).
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption by the transferee of Senior Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary of the Company and the release of the
Company or such Restricted Subsidiary from all liability on such Senior
Indebtedness or Indebtedness in connection with such Asset Disposition (in which
case the Company shall, without further action, be deemed to have applied such
assumed Indebtedness in accordance with clause (A) of the preceding paragraph)
and (y) securities received by the Company or any Restricted Subsidiary of the
Company from the transferee that are promptly converted by the Company or such
Restricted Subsidiary into cash.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
will be permitted to consummate an Asset Swap if (i) immediately after giving
effect to such Asset Swap, no Default or Event of Default shall have occurred or
be continuing, (ii) in the event such Asset Swap involves an aggregate amount in
excess of $10 million, the terms of such Asset Swap have been approved by a
majority of the members of the Board of Directors of the Company, and (iii) in
the event such Asset Swap involves an aggregate amount in excess of $50 million,
the Company has received a written opinion from an independent investment
banking firm of nationally recognized standing that such Asset Swap is fair to
the Company or such Restricted Subsidiary, as the case may be, from a financial
point of view.
(b) In the event of an Asset Disposition that requires the purchase of
Notes pursuant to clause (a) (iii) (C), the Company will be required to purchase
Notes tendered pursuant to an offer by the Company for the Notes at a purchase
price of 100% of their principal amount plus accrued and unpaid interest, if
any, to the purchase date in accordance with the procedures (including prorating
in the event of oversubscription as well as proration required as a result of
tenders of other Senior Subordinated Indebtedness) set forth in the Indenture.
If the aggregate purchase price of the Notes tendered pursuant to the offer is
less than the Net Available Cash allotted to the purchase of the Notes, the
Company may use the remaining Net Available Cash for any purpose not prohibited
by the Indenture. Upon the consummation of the purchase of Notes properly
tendered in response to such offer to purchase, the amount of Net Available Cash
subject to future offers to purchase shall be deemed to be reset to zero.
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under the Indenture by virtue thereof.
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Limitation on Affiliate Transactions. (a) The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into or conduct any transaction (including the purchase, sale, lease or exchange
of any property or the rendering of any service) with any Affiliate of the
Company other than a Wholly-Owned Subsidiary (an "Affiliate Transaction")
unless: (i) the terms of such Affiliate Transaction are no less favorable to the
Company or such Restricted Subsidiary, as the case may be, than those that could
be obtained at the time of such transaction in arm's-length dealings with a
Person who is not such an Affiliate; (ii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $5 million, the terms of
such transaction have been approved by a majority of the members of the Board of
Directors of the Company and by a majority of the disinterested members of such
Board, if any (and such majority or majorities, as the case may be, determines
that such Affiliate Transaction satisfies the criteria in (i) above); and (iii)
in the event such Affiliate Transaction involves an aggregate amount in excess
of $15 million, the Company has received a written opinion from an independent
investment banking firm of nationally recognized standing that such Affiliate
Transaction is fair to the Company or such Restricted Subsidiary, as the case
may be, from a financial point of view.
(b) The foregoing paragraph (a) shall not apply to (i) any Restricted
Payment permitted to be made pursuant to the covenant described under
"Limitation on Restricted Payments," (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership plans
approved by the Board of Directors of the Company, (iii) loans or advances to
employees in the ordinary course of business of the Company or any of its
Restricted Subsidiaries, (iv) any transaction between Wholly-Owned Subsidiaries,
(v) indemnification agreements with, and the payment of fees and indemnities to,
directors, officers and employees of the Company and its Restricted
Subsidiaries, in each case in the ordinary course of business, (vi) transactions
pursuant to agreements as in existence on the Issue Date, (vii) any employment,
non-competition or confidentiality agreements entered into by the Company or any
of its Restricted Subsidiaries with its employees in the ordinary course of
business, (viii) payments made in connection with the Transactions as described
herein, including fees to Hicks Muse, (ix) the issuance of Capital Stock of the
Company (other than Disqualified Stock), (x) any obligations of the Company
pursuant to the Monitoring and Oversight Agreement and the Financial Advisory
Agreement, and (xi) transactions pursuant to supply or similar agreements
entered into in the ordinary course of business on customary terms that are not
less favorable to the Company than those that would have been obtained in a
comparable transaction with an unrelated Person, as determined in good faith by
senior management of the Company.
Limitation on Capital Stock of Restricted Subsidiaries. The Company will
not permit any of its Restricted Subsidiaries to issue any Capital Stock (other
than Preferred Stock) to any Person (other than to the Company or a Wholly-Owned
Subsidiary of the Company) or permit any Person (other than the Company or a
Wholly-Owned Subsidiary of the Company) to own any Capital Stock (other than
Preferred Stock) of a Restricted Subsidiary of the Company, if in either case as
a result thereof such Restricted Subsidiary would no longer be a Restricted
Subsidiary of the Company; provided, however, that this provision shall not
prohibit (x) the Company or any of its Restricted Subsidiaries from selling,
leasing or otherwise disposing of all of the Capital Stock of any Restricted
Subsidiary or (y) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary in compliance with the Indenture.
Reports. So long as any of the Notes are outstanding, the Company will
provide to the holders of Notes and file with the Commission, to the extent such
submissions are accepted for filing by the Commission, copies of the annual
reports and of the information, documents and other reports that the Company
would have been required to file with the Commission pursuant to Sections 13 or
15(d) of the Exchange Act regardless of whether the Company is then obligated to
file such reports.
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all its assets
to, any Person, unless: (i) the resulting,
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surviving or transferee Person (the "Successor Company") shall be a corporation,
partnership, trust or limited liability company organized and existing under the
laws of the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) shall expressly assume,
by supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the Notes
and the Indenture; (ii) immediately after giving effect to such transaction (and
treating any Indebtedness that becomes an obligation of the Successor Company or
any Subsidiary of the Successor Company as a result of such transaction as
having been incurred by the Successor Company or such Restricted Subsidiary at
the time of such transaction), no Default or Event of Default shall have
occurred and be continuing; (iii) immediately after giving effect to such
transaction, the Successor Company would be able to incur at least an additional
$1.00 of Indebtedness pursuant to paragraph (a) of "Limitation on Indebtedness";
and (iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with the
Indenture.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but, in the
case of a lease of all or substantially all its assets, the Company will not be
released from the obligation to pay the principal of and interest on the Notes.
Notwithstanding the foregoing clauses (ii) and (iii), (1) any Restricted
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company and (2) the Company may merge
with an Affiliate incorporated solely for the purpose of reincorporating the
Company in another jurisdiction to realize tax or other benefits.
EVENTS OF DEFAULT
Each of the following constitutes an Event of Default under the Indenture:
(i) a default in any payment of interest on any Note when due, continued for 30
days, whether or not such payment is prohibited by the provisions described
under "Ranking and Subordination" above, (ii) a default in the payment of
principal of any Note when due at its Stated Maturity, upon optional redemption,
upon required repurchase, upon declaration or otherwise, whether or not such
payment is prohibited by the provisions described under "Ranking and
Subordination" above, (iii) the failure by the Company to comply with its
obligations under "Certain Covenants -- Merger and Consolidation" above, (iv)
the failure by the Company to comply for 30 days after notice with any of its
obligations under the covenants described under "Change of Control" above or
under covenants described under "Certain Covenants" above (in each case, other
than a failure to purchase Notes which shall constitute an Event of Default
under clause (ii) above), other than "-- Merger and Consolidation," (v) the
failure by the Company to comply for 60 days after notice with its other
agreements contained in the Indenture, (vi) Indebtedness of the Company or any
Restricted Subsidiary is not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of a default and the
total amount of such Indebtedness unpaid or accelerated exceeds $20 million and
such default shall not have been cured, including by way of repayment, or such
acceleration rescinded after a 10 day period (the "cross acceleration
provision"), (vii) certain events of bankruptcy, insolvency or reorganization of
the Company or a Significant Subsidiary (the "bankruptcy provisions") or (viii)
any judgment or decree for the payment of money in excess of $20 million (to the
extent not covered by insurance) is rendered against the Company or a
Significant Subsidiary and such judgment or decree shall remain undischarged or
unstayed for a period of 60 days after such judgment becomes final and non-
appealable (the "judgment default provision"). However, a default under clauses
(iv) and (v) will not constitute an Event of Default until the Trustee or the
holders of 25% in principal amount of the outstanding Notes notify the Company
of the Default and the Company does not cure such Default within the time
specified in clauses (iv) and (v) hereof after receipt of such notice.
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If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued and unpaid interest, if any, on
all the Notes to be due and payable. Upon such a declaration, such principal and
accrued and unpaid interest shall be immediately due and payable. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company occurs and is continuing, the principal of and accrued and unpaid
interest on all the Notes will become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any holders. Under
certain circumstances, the holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, if an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders unless such holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction that, in the opinion of the Trustee, is
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the holders of a majority in principal amount of the outstanding
Notes are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other holder or that would
involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder notice of the Default
within 90 days after it occurs. However, except in the case of a Default in the
payment of principal of, premium (if any) or interest on any Note, the Trustee
may withhold notice if and so long as its board of directors, a committee of its
board of directors or a committee of its trust officers in good faith determines
that withholding notice is in the interests of the Noteholders. In addition, the
Company is required to deliver to the Trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether the signers thereof know of
any Default that occurred during the previous year. The Company also is required
to deliver to the Trustee, within 30 days after the occurrence thereof, written
notice of any events which would constitute certain Defaults.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may be waived
with the consent of the holders of a majority in principal amount of the Notes
then outstanding. However, without the consent of each holder of an outstanding
Note affected, no amendment may, among other things, (i) reduce the amount of
Notes whose holders must consent to an amendment, (ii) reduce the stated rate of
or extend the stated time for payment of interest on any Note, (iii) reduce the
principal of or extend the Stated Maturity of any Note, (iv) reduce the premium
payable upon the redemption or repurchase of any Note or change the time at
which any Note may be redeemed as described under "Optional Redemption" above,
(v) make any Note payable in money other than that stated in the Note, (vi)
impair the right of any
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holder to receive payment of principal of and interest on such holder's Notes on
or after the due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such holder's Notes or (vii) make any change in
the amendment provisions which require each holder's consent or in the waiver
provisions.
Without the consent of any holder, the Company and the Trustee may amend
the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation, partnership, trust or
limited liability company of the obligations of the Company under the Indenture,
to provide for uncertificated Notes in addition to or in place of certificated
Notes (provided that the uncertificated Notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to add
Guarantees with respect to the Notes, to secure the Notes, to add to the
covenants of the Company for the benefit of the holders or to surrender any
right or power conferred upon the Company, to make any other change that does
not adversely affect the rights of any holder or to comply with any requirement
of the Commission in connection with the qualification of the Indenture under
the Trust Indenture Act. However, no amendment may be made to the subordination
provisions of the Indenture that adversely affects the rights of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders, or any defect
therein, will not impair or affect the validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under substantially
all its covenants in the Indenture including those covenants described under
"Certain Covenants" (other than "Merger and Consolidation"), the operation of
the cross acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision described under
"Events of Default" above and the limitations contained in clauses (iii) and
(iv) under "Certain Covenants -- Merger and Consolidation" above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "Events of Default" above or because
of the failure of the Company to comply with clause (iii) or (iv) under "Certain
Covenants -- Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to maturity or any redemption date specified by the
Company, as the case may be, and must comply with certain other conditions,
including delivery to the Trustee of an Opinion of Counsel to the effect that
holders of the Notes will not recognize income, gain or loss for Federal income
tax purposes as a result of such deposit and defeasance and will be subject to
Federal income tax on the same amount and in the same manner
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and at the same times as would have been the case if such deposit and defeasance
had not occurred (and, in the case of legal defeasance only, such Opinion of
Counsel must be based on a ruling of the Internal Revenue Service or other
change in applicable Federal income tax law).
CONCERNING THE TRUSTEE
The Bank of New York is the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or a Restricted Subsidiary of the Company;
(iii) Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary of the Company; or (iv) Permitted Investments of
the type and in the amounts described in clause (viii) of the definition
thereof; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Related Business.
"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 the purposes of this definition,
"control," when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares), property or
other assets (each referred to for the purposes of this definition as a
"disposition") by the Company or any of its Restricted Subsidiaries (including
any disposition by means of a merger, consolidation or similar transaction)
other than (i) a disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Wholly-Owned Subsidiary, (ii) a
disposition of inventory in the ordinary course of business, (iii) a disposition
of obsolete or worn out equipment or equipment that is no longer useful in the
conduct of the business of the Company and its Restricted Subsidiaries and that
is disposed of in each case in the ordinary course of business, (iv)
dispositions of property for net proceeds which, when taken collectively with
the net proceeds of any other such dispositions under this clause (iv) that were
consummated since the beginning of the calendar year in which such disposition
is consummated, do not exceed 1.50% of the consolidated book value of the
Company's assets as of the most recent date prior to such disposition for which
a consolidated balance sheet of the Company has been regularly prepared, (v)
transactions permitted under "Certain Covenants -- Merger and Consolidation"
above, (vi) transactions permitted by the "Limitation on Restricted Payments"
covenant, and (vii) any transaction that constitutes a Change of Control.
"Asset Swap" means the execution of a definitive agreement, subject only to
customary closing conditions that the Company in good faith believes will be
satisfied, for a substantially concurrent purchase and sale, or exchange, of
Productive Assets between the Company or any of its Restricted Subsidiaries and
another Person or group of affiliated Persons; provided, however, that any
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amendment to or waiver of any closing condition that individually or in the
aggregate is material to the Asset Swap shall be deemed to be a new Asset Swap.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
indebtedness, the quotient obtained by dividing (i) the sum of the products of
the numbers of years from the date of determination to the dates of each
successive scheduled principal payment of such Indebtedness or redemption
multiplied by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts, whether outstanding on the
Issue Date or thereafter incurred, payable or guaranteed by the Company under or
in respect of the Credit Agreement or any Interest Rate Agreement or Currency
Agreement with a holder of Bank Indebtedness and any related notes, collateral
documents, letters of credit and guarantees, including principal, premium (if
any), interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not a claim for post filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees and all other amounts
payable thereunder or in respect thereof.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date such lease may be terminated without penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Consolidated Cash Flow" for any period means the Consolidated Net Income
for such period, plus, without duplication, the following to the extent deducted
in calculating such Consolidated Net Income: (i) income tax expense, (ii)
Consolidated Interest Expense, (iii) depreciation expense, (iv) amortization
expense, (v) exchange or translation losses on foreign currencies, and (vi) all
other non-cash items reducing Consolidated Net Income (excluding any non-cash
item to the extent it represents an accrual of or reserve for cash disbursements
for any subsequent period prior to the Stated Maturity of the Notes) and less,
to the extent added in calculating Consolidated Net Income, (x) exchange or
translation gains on foreign currencies and (y) non-cash items (excluding such
non-cash items to the extent they represent an accrual for cash receipts
reasonably expected to be received prior to the Stated Maturity of the Notes),
in each case for such period. Notwithstanding the foregoing, the income tax
expense, depreciation expense and amortization expense of a Subsidiary of the
Company shall be included in Consolidated Cash Flow only to the extent (and in
the same proportion) that the net income of such Subsidiary was included in
calculating Consolidated Net Income.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated Cash Flow for the period of
the most recent four consecutive fiscal quarters ending prior to the date of
such determination and as to which financial statements are available to (ii)
Consolidated Interest Expense for such four fiscal quarters: provided, however,
that (1) if the Company or any of its Restricted Subsidiaries has Incurred any
Indebtedness since the beginning of such period that remains outstanding or if
the transaction giving rise to the need to
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calculate Consolidated Coverage Ratio is an incurrence of Indebtedness, or both,
Consolidated Cash Flow and Consolidated Interest Expense for such period shall
be calculated after giving effect on a pro forma basis to (A) such Indebtedness
as if such Indebtedness had been Incurred on the first day of such period
(provided that if such Indebtedness is Incurred under a revolving credit
facility (or similar arrangement or under any predecessor revolving credit or
similar arrangement) only that portion of such Indebtedness that constitutes the
one year projected minimum balance of such Indebtedness (as determined in good
faith by senior management of the Company and assuming a constant level of
sales) shall be deemed outstanding for purposes of this calculation) and (B) the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period, (2) if since the beginning of such
period any Indebtedness of the Company or any of its Restricted Subsidiaries has
been repaid, repurchased, defeased or otherwise discharged (other than
Indebtedness under a revolving credit or similar arrangement unless such
revolving credit Indebtedness has been permanently repaid and has not been
replaced), Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Indebtedness had been repaid,
repurchased, defeased or otherwise discharged on the first day of such period,
(3) if since the beginning of such period the Company or any of its Restricted
Subsidiaries shall have made any Asset Disposition or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Asset
Disposition, Consolidated Cash Flow for such period shall be reduced by an
amount equal to the Consolidated Cash Flow (if positive) attributable to the
assets which are the subject of such Asset Disposition for such period or
increased by an amount equal to the Consolidated Cash Flow (if negative)
attributable thereto for such period, and Consolidated Interest Expense for such
period shall be (i) reduced by an amount equal to the Consolidated Interest
Expense attributable to any Indebtedness of the Company or any of its Restricted
Subsidiaries repaid, repurchased, defeased or otherwise discharged with respect
to the Company and its continuing Restricted Subsidiaries in connection with
such Asset Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary of the Company is sold, the Consolidated Interest Expense
for such period directly attributable to the Indebtedness of such Restricted
Subsidiary to the extent the Company and its continuing Restricted Subsidiaries
are no longer liable for such Indebtedness after such sale) and (ii) increased
by interest income attributable to the assets which are the subject of such
Asset Disposition for such period, (4) if since the beginning of such period the
Company or any of its Restricted Subsidiaries (by merger or otherwise) shall
have made an Investment in any Restricted Subsidiary of the Company (or any
Person which becomes a Restricted Subsidiary of the Company) or an acquisition
of assets, including any Investment in a Restricted Subsidiary of the Company or
any acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, or if the transaction giving rise to such
calculation is a transaction subject to the "Mergers and Consolidations"
covenant, Consolidated Cash Flow and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto (including the
incurrence of any Indebtedness and the use of the proceeds therefrom) as if such
Investment or acquisition occurred on the first day of such period and (5) if
since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary of the Company or was merged with or into the Company or
any Restricted Subsidiary of the Company since the beginning of such period)
shall have made any Asset Disposition, Investment or acquisition of assets that
would have required an adjustment pursuant to clause (3) or (4) above if made by
the Company or a Restricted Subsidiary of the Company during such period,
Consolidated Cash Flow and Consolidated Interest Expense for such period shall
be calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
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forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term in excess of 12 months). Notwithstanding anything herein to the contrary,
if at the time the calculation of the Consolidated Coverage Ratio is to be made,
the Company does not have available consolidated financial statements reflecting
the ownership by the Company of each of Circo Craft, Viasystems Technologies (or
the assets acquired by it in the Lucent Transaction), Forward Group and Chips
for a period of at least four full fiscal quarters, all calculations required by
the Consolidated Coverage Ratio shall be prepared on a pro forma basis, as
though each such transaction (to the extent not otherwise reflected in the
consolidated financial statements of the Company) had occurred on the first day
of the four fiscal quarter period for which such calculation is being made.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Restricted Subsidiaries, plus, to the extent not
included in such interest expense, (i) interest expense attributable to capital
leases, (ii) amortization of debt discount, (iii) capitalized interest, (iv)
non-cash interest expense, (v) commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing, (vi)
interest actually paid by the Company or any such Restricted Subsidiary under
any Guarantee of Indebtedness or other obligation of any other Person, (vii) net
payments (whether positive or negative) pursuant to Interest Rate Agreements,
(viii) the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to pay
interest or fees to any Person (other than the Company) in connection with
Indebtedness Incurred by such plan or trust and (ix) cash and Disqualified Stock
dividends in respect of all Preferred Stock of Restricted Subsidiaries and
Disqualified Stock of the Company held by Persons other than the Company or a
Wholly Owned Subsidiary and less (a) to the extent included in such interest
expense, the amortization of capitalized debt issuance costs and debt discount
solely to the extent relating to the issuance and sale of Indebtedness together
with any equity security as part of an investment unit and (b) interest income.
Notwithstanding the foregoing, the Consolidated Interest Expense with respect to
any Restricted Subsidiary of the Company, that was not a Wholly-Owned
Subsidiary, shall be included only to the extent (and in the same proportion)
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its consolidated Restricted Subsidiaries; provided, however,
that there shall not be included in such Consolidated Net Income: (i) any net
income (loss) of any person acquired by the Company or any of its Restricted
Subsidiaries in a pooling of interests transaction for any period prior to the
date of such acquisition, (ii) any net income of any Restricted Subsidiary of
the Company if such Restricted Subsidiary is subject to restrictions, directly
or indirectly, on the payment of dividends or the making of distributions by
such Restricted Subsidiary, directly or indirectly, to the Company (other than
restrictions in effect on the Issue Date with respect to a Restricted Subsidiary
of the Company and other than restrictions that are created or exist in
compliance with the "Limitation on Restrictions on Distributions from Restricted
Subsidiaries" covenant (excluding clause (g) thereof from the operation of this
parenthetical)), (iii) any gain or loss realized upon the sale or other
disposition of any assets of the Company or its consolidated Restricted
Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which are
not sold or otherwise disposed of in the ordinary course of business and any
gain or loss realized upon the sale or other disposition of any Capital Stock of
any Person, (iv) any extraordinary gain or loss, (v) the cumulative effect of a
change in accounting principles, (vi) restructuring charges or writeoffs
recorded within the one year period following the Issue Date in an aggregate
amount not to exceed $50 million, (vii) charges relating to the writeoff of
acquired in-process research and development expenses and other intangibles in
connection with the application of the purchase method of accounting to the net
assets of a Person acquired by the Company and its Restricted Subsidiaries and
charges relating to writeoff of intangible assets, (viii) the net income of any
Person, other than a Restricted Subsidiary, except to the extent of the
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lesser of (A) dividends or distributions paid to the Company or any of its
Restricted Subsidiaries by such Person and (B) the net income of such Person
(but in no event less than zero), and the net loss of such Person (other than an
Unrestricted Subsidiary) shall be included only to the extent of the aggregate
Investment of the Company or any of its Restricted Subsidiaries in such Person
and (ix) any non-cash expenses attributable to grants or exercises of employee
stock options. Notwithstanding the foregoing, for the purpose of the covenant
described under "Certain Covenants -- Limitation on Restricted Payments" only,
there shall be excluded from Consolidated Net Income any dividends, repayments
of loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Company or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under such covenant pursuant to clause (a)(3)(E) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company ending prior to the taking of any
action for the purpose of which the determination is being made and for which
financial statements are available (but in no event ending more than 180 days
prior to the taking of such action), as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) any amounts attributable
to Disqualified Stock.
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the Board of Directors of the Company on the date of the
Indenture, (ii) was nominated for election or elected to the Board of Directors
of the Company with the affirmative vote of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election, or (iii) is a representative of a Permitted Holder.
"Credit Agreement" means (i) the Second Amended and Restated Credit
Agreement, dated as of June 5, 1997, among Viasystems Group, as Guarantor, the
Company, as US Borrower, Circo Craft Co. Inc., PCB Investments PLC, Forward
Group PLC, Chips Limited, Chips and the other Foreign Subsidiary Borrowers from
time to time parties thereto, The Chase Manhattan Bank of Canada, Chase
Manhattan International Limited and the other Foreign Agents from time to time
appointed thereunder, The Chase Manhattan Bank, as Administrative Agent, and the
lender parties thereto from time to time, as the same may be amended,
supplemented or otherwise modified from time to time, including amendments,
supplements or modifications relating to the addition or elimination of
Subsidiaries of the Company as borrowers or other credit parties thereunder, and
(ii) any renewal, extension, refunding, restructuring, replacement or
refinancing thereof (whether with the original Administrative Agent, Foreign
Agent(s) and Issuing Lender, and lenders or another administrative agent or
agents or one or more other lenders and whether provided under the original
Credit Agreement or one or more other credit or other agreements or indentures).
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $25
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
of such Person which by its terms (or by the terms of any security into which it
is convertible or for which it is
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exchangeable) or upon the happening of any event (i) matures (other than as a
result of a Change of Control) or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock (excluding capital stock which is convertible
or exchangeable solely at the option of the Company or a Restricted Subsidiary)
or (iii) is redeemable at the option of the holder thereof (other than as a
result of a Change of Control), in whole or in part, in each case on or prior to
the Stated Maturity of the Notes, provided, that only the portion of Capital
Stock which so matures or is mandatorily redeemable, is so convertible or
exchangeable or is so redeemable at the option of the holder thereof prior to
such Stated Maturity shall be deemed to be Disqualified Stock.
"Equity Offering" means an offering for cash by the Company or Viasystems
Group of its common stock, or options, warrants or rights with respect to its
common stock.
"Financial Advisory Agreement" means the Financial Advisory Agreement
between Hicks Muse Partners and the Company as in effect on the Issue Date.
"Foreign Subsidiaries" means a Restricted Subsidiary not organized or
existing under the laws of the United States, any state thereof, the District of
Columbia, or any territory thereof.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of the Indenture, including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or the Commission or
in such other statements by such other entity as approved by a significant
segment of the accounting profession. All ratios and computations based on GAAP
contained in the Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be incurred
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto) (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (i), (ii) and (v)) entered into in the ordinary
course of business of such Person to the extent that such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed
no later than the third business day following receipt by such Person of a
demand for reimbursement following payment on the letter of credit), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services (except trade payables and accrued expenses incurred in the
ordinary course
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of business), which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such services, (v) all Capitalized Lease Obligations and all
Attributable Indebtedness of such Person, (vi) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person, (vii) all Indebtedness of other Persons to the extent
Guaranteed by such Person, (viii) the amount of all obligations of such Person
with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Restricted Subsidiary of the Company,
any Preferred Stock of such Restricted Subsidiary to the extent such obligation
arises on or before the Stated Maturity of the Notes (but excluding, in each
case, any accrued dividends) and (ix) to the extent not otherwise included in
this definition, obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date shall be the
outstanding principal amount of all unconditional obligations as described
above, as such amount would be reflected on a balance sheet prepared in
accordance with GAAP, and the maximum liability of such Person, upon the
occurrence of the contingency giving rise to the obligation, of any contingent
obligations described above at such date.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business) or other
extension of credit (including by way of Guarantee or similar arrangement, but
excluding any debt or extension of credit represented by a bank deposit other
than a time deposit) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. For purposes of
the "Limitation on Restricted Payments" covenant, (i) "Investment" shall include
the portion (proportionate to the Company's equity interest in a Restricted
Subsidiary to be designated as an Unrestricted Subsidiary) of the fair market
value of the net assets of such Restricted Subsidiary of the Company at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Unrestricted Subsidiary as
a Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive)
equal to (x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time that such Subsidiary is so re-designated a Restricted
Subsidiary; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors and
evidenced by a resolution of such Board of Directors certified in an Officers'
Certificate to the Trustee.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Monitoring and Oversight and Agreement" means the Monitoring and Oversight
Agreement between Hicks Muse Partners and the Company as in effect on the Issue
Date.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets subject to such Asset Disposition) therefrom, in
each case net of (i) all legal, title and recording tax expenses, commissions
and other fees and expenses incurred,
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and all Federal, state, foreign and local taxes required to be paid or accrued
as a liability under GAAP in connection with such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets subject to such
Asset Disposition, in accordance with the terms of any Lien upon such assets, or
which must by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments required to be made to
any Person owning a beneficial interest in assets subject to sale or minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition, (iv) the deduction of appropriate amounts to be provided by the
seller as a reserve, in accordance with GAAP, against any liabilities associated
with the assets disposed of in such Asset Disposition and retained by the
Company or any Restricted Subsidiary of the Company after such Asset Disposition
and (v) any portion of the purchase price from an Asset Disposition placed in
escrow (whether as a reserve for adjustment of the purchase price, for
satisfaction of indemnities in respect of such Asset Disposition or otherwise in
connection with such Asset Disposition); provided, however, that upon the
termination of such escrow, Net Available Cash shall be increased by any portion
of funds therein released to the Company or any Restricted Subsidiary.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any Restricted Subsidiary (a) provides any guarantee or credit support of
any kind (including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (b) is directly or indirectly
liable (as a guarantor or otherwise) 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
Restricted Subsidiary to declare a default under such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity.
"Permitted Indebtedness" means (i) Indebtedness of the Company owing to and
held by any Wholly-Owned Subsidiary or Indebtedness of a Restricted Subsidiary
owing to and held by the Company or any Wholly-Owned Subsidiary; provided,
however, that any subsequent issuance or transfer of any Capital Stock or any
other event which results in any such Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Company or a Wholly-Owned Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness by the issuer thereof;
(ii) Indebtedness represented by (x) the Notes, (y) any Indebtedness (other than
the Indebtedness described in clauses (i), (ii) and (iv) of paragraph (b) of the
covenant described under "Limitation on Indebtedness" and other than
Indebtedness Incurred pursuant to clause (i) above or clauses (iv), (v), (vi) or
(vii) below) outstanding on the Issue Date and (z) any Refinancing Indebtedness
Incurred in respect of any Indebtedness described in this clause (ii) or
Incurred pursuant to paragraph (a) of the covenant described under "Limitation
on Indebtedness"; (iii) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on the date on which such Restricted Subsidiary was acquired by the
Company or its Restricted Subsidiaries (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Subsidiary or
was otherwise acquired by the Company); provided, however, that at the time such
Restricted Subsidiary is acquired by the Company, the Company would have been
able to Incur $1.00 of additional Indebtedness pursuant to paragraph (a) of the
covenant described under "Limitation on Indebtedness" above after giving effect
to the Incurrence of such Indebtedness pursuant to this clause (iii) and (B)
Refinancing Indebtedness Incurred by the Company or a
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Restricted Subsidiary in respect of Indebtedness Incurred by such Restricted
Subsidiary pursuant to this clause (iii); (iv) Indebtedness (A) in respect of
performance bonds, bankers' acceptances and surety or appeal bonds provided by
the Company or any of its Restricted Subsidiaries to their customers in the
ordinary course of their business, (B) in respect of performance bonds or
similar obligations of the Company or any of its Restricted Subsidiaries for or
in connection with pledges, deposits or payments made or given in the ordinary
course of business in connection with or to secure statutory, regulatory or
similar obligations, including obligations under health, safety or environmental
obligations, (C) arising from Guarantees to suppliers, lessors, licensees,
contractors, franchisees or customers of obligations (other than Indebtedness)
incurred in the ordinary course of business and (D) under Currency Agreements
and Interest Rate Agreements; provided, however, that in the case of Currency
Agreements and Interest Rate Agreements, such Currency Agreements and Interest
Rate Agreements are entered into for bona fide hedging purposes of the Company
or its Restricted Subsidiaries (as determined in good faith by the Board of
Directors or senior management of the Company) and correspond in terms of
notional amount, duration, currencies and interest rates, as applicable, to
Indebtedness of the Company or its Restricted Subsidiaries Incurred without
violation of the Indenture or to business transactions of the Company or its
Restricted Subsidiaries on customary terms entered into in the ordinary course
of business; (v) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any of its Restricted Subsidiaries pursuant to
such agreements, in each case Incurred in connection with the disposition of any
business, assets or Restricted Subsidiary of the Company (other than Guarantees
of Indebtedness or other obligations Incurred by any Person acquiring all or any
portion of such business assets or Restricted Subsidiary of the Company for the
purpose of financing such acquisition) in a principal amount not to exceed the
gross proceeds actually received by the Company or any of its Restricted
Subsidiaries in connection with such disposition, provided, however, that the
principal amount of any Indebtedness Incurred pursuant to this clause (v), when
taken together with all Indebtedness Incurred pursuant to this clause (v) and
then outstanding, shall not exceed $20.0 million; (vi) Indebtedness consisting
of (A) Guarantees by the Company or a Restricted Subsidiary of Indebtedness
Incurred by a Wholly-Owned Subsidiary without violation of the Indenture and (B)
Guarantees by a Restricted Subsidiary of Senior Indebtedness Incurred by the
Company without violation of the Indenture (so long as such Restricted
Subsidiary could have Incurred such Indebtedness directly without violation of
the Indenture); (vii) Indebtedness arising from agreements with governmental
agencies of any foreign country, or political subdivision or agency thereof,
relating to the construction of plants and the purchase and installation
(including related training costs) of equipment to be used in a Related
Business; provided that such Indebtedness (i) has a maturity in excess of ten
years and 91 days and (ii) in the aggregate does not exceed $50.0 million; and
(viii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the ordinary course of business, provided that such Indebtedness is
extinguished promptly in accordance with customary practices.
"Permitted Investment" means an Investment by the Company or any of its
Restricted Subsidiaries in (i) a Wholly-Owned Subsidiary of the Company;
provided, however, that the primary business of such Wholly-Owned Subsidiary is
a Related Business; (ii) another Person if as a result of such Investment such
other Person becomes a Wholly-Owned Subsidiary of the Company or is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Wholly-Owned Subsidiary of the Company; provided,
however, that in each case such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
of its Restricted Subsidiaries, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
(v) payroll, travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (vi) loans or
advances to employees for purposes of purchasing the
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Company's common stock in an aggregate amount outstanding at any one time not to
exceed $10 million and other loans and advances to employees made in the
ordinary course of business consistent with past practices of the Company or
such Restricted Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any of its Restricted Subsidiaries or in satisfaction of judgments or
claims; (viii) a Person engaged in a Related Business or a loan or advance to
the Company the proceeds of which are used solely to make an investment in a
Person engaged in a Related Business or a Guarantee by the Company of
Indebtedness of any Person in which such Investment has been made; provided,
however, that no Permitted Investments may be made pursuant to this clause
(viii) to the extent the amount thereof would, when taken together with all
other Permitted Investments made pursuant to this clause (viii), exceed $50
million in the aggregate (plus, to the extent not previously reinvested, any
return of capital realized on Permitted Investments made pursuant to this clause
(viii), or any release or other cancellation of any Guarantee constituting such
Permitted Investment); (ix) Persons to the extent such Investment is received by
the Company or any Restricted Subsidiary as consideration for Asset Dispositions
effected in compliance with the covenant described under "Limitations on Sales
of Assets and Subsidiary Stock"; (x) prepayments and other credits to suppliers
made in the ordinary course of business consistent with the past practices of
the Company and its Restricted Subsidiaries; (xi) payments in respect of the
Chips Reimbursement Obligation as in effect on the Issue Date; and (xii)
Investments in connection with pledges, deposits, payments or performance bonds
made or given in the ordinary course of business in connection with or to secure
statutory, regulatory or similar obligations, including obligations under
health, safety or environmental obligations.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision hereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Productive Assets" means assets of a kind used or usable by the Company
and its Restricted Subsidiaries in the Company's business or any Related
Business.
A "Public Market" exists at any time with respect to the common stock of
the Company or Viasystems Group if (a) the common stock of the Company or
Viasystems Group, as the case may be, is then registered with the Securities and
Exchange Commission pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended, and traded either on a national securities
exchange or in the National Association of Securities Dealers Automated
Quotation System and (b) at least 15% of the total issued and outstanding common
stock of the Company or Viasystems Group, as the case may be, has been
distributed prior to such time by means of an effective registration statement
under the Securities Act of 1933, as amended.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinance") any Indebtedness existing on
the date of the Indenture or Incurred in compliance with the Indenture
(including Indebtedness of the Company that refinances Indebtedness of any
Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that
refinances Indebtedness of another Restricted Subsidiary) including Indebtedness
that refinances Refinancing Indebtedness, provided, however, that (i) the
Refinancing Indebtedness has a Stated Maturity no earlier than the earlier of
(A) the ninety-first day after the Stated Maturity of the Notes and (B) the
Stated Maturity of the Indebtedness being refinanced, (ii) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the lesser of (A) the Average Life of
the Notes and (B) the Average Life of the Indebtedness being
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refinanced, and (iii) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an aggregate issue
price) that is equal to (or 101% of, in the case of a refinancing of the Notes
in connection with a Change of Control) or less than the sum of the aggregate
principal amount (or if issued with original issue discount, the aggregate
accredited value) then outstanding of the Indebtedness being refinanced, plus
applicable premium and reasonable costs paid in connection with such
refinancing.
"Related Business" means any business which is the same as or related,
ancillary or complementary to any of the businesses of the Company and its
Restricted Subsidiaries on the date of the Indenture, as reasonably determined
by the Company's Board of Directors.
"Representative" means any trustee, agent or representative (if any) of an
issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Subsidiary leases it
from such Person.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"Subordinated Indebtedness" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
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 (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such
Person. Unless otherwise specified herein, each reference to a Subsidiary shall
refer to a Subsidiary of the Company.
"Temporary Cash Investments" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital, surplus and undivided profits
aggregating in excess of $250 million (or the foreign currency equivalent
thereof) and whose long-term debt, or whose parent holding company's long-term
debt, is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities
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Act), (iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered into
with a bank meeting the qualifications described in clause (ii) above, (iv)
Investments in commercial paper, maturing not more than 180 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard
and Poor's Ratings Group, (v) Investments in securities with maturities of six
months or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc. and
(vi) Investments in mutual funds whose investment guidelines restrict
substantially all of such funds' investments to those satisfying the provisions
of clauses (i) through (v) above.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any Restricted Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated; provided,
however, that either (A) the Subsidiary to be so designated has total
consolidated assets of $10,000 or less or (B) if such Subsidiary has
consolidated assets greater than $10,000, then such designation would be
permitted under "Limitation on Restricted Payments." The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that immediately after giving effect to such designation (x) the
Company could Incur $1.00 of additional Indebtedness under clause (a) of
"Limitation on Indebtedness" and (y) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the Company, at
least 99% of the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly-Owned Subsidiary; provided,
however, the Forward Group shall be deemed to be a Wholly-Owned Subsidiary of
the Company for all purposes of the Indenture unless the sale or issuance of
more than 1% of the Capital Stock thereof to a person other than another Wholly
Owned Subsidiary of the Company occurs.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the New 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 on the date of the closing of
the sale of the Notes (the "Closing Date") with, or on behalf of, the Depository
Trust Company (the "Depository") and registered in the name of Cede & Co., as
nominee of the Depository, or will remain in the custody of the Trustee pursuant
to the FAST Balance Certificate Agreement between DTC and the Trustee.
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The Depository 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. The Depository was
created to hold securities for its participants (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. The Depository's Participants include securities
brokers and dealers, banks and trust companies, clearing corporations and
certain other organizations. Access to the Depository'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.
The Company expects that pursuant to procedures established by the
Depository (i) upon deposit of the Global Notes, the Depository will credit, on
its internal system, the principal amount of New Notes to the respective
accounts of Participants with an interest in such Global Notes and (ii)
ownership of the New Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depository
(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 interests in negotiable instruments can only be perfected by delivery
of certificates representing the instruments. Consequently, the ability to
transfer New Notes or to pledge the New Notes as collateral will be limited to
such extent.
So long as the Depository or its nominee is the registered owner of the
Global Notes, the Depository or such nominee, as the case may be, will be
considered the sole owner or Holder of the New Notes represented by such Global
Notes for all purposes under the Indenture. Except as provided below, owners of
beneficial interests in a Global Note will not be entitled to have New Notes
represented by such Global Note registered in their names, will not receive or
be entitled to receive physical delivery of Certificated Securities (as defined
below), 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 New Notes represented by a Global Note to
pledge such interest to persons or entities that do not participate in the
Depository'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 of a beneficial interest in a Global Note must
rely on the procedures of the Depository 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
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 or an owner of a beneficial interest in a Global Note desires to take
any action that the Depository, as the Holder of such Global Note, is entitled
to take, the Depository would authorize the Participants to take such action and
the Participant would authorize such 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 New
Notes by the Depository, or for maintaining, supervising or reviewing any
records of the Depository relating to such Notes.
Payments with respect to the principal of, premium, if any, and interest on
any New Notes represented by a Global Note registered in the name of the
Depository or its nominee on the applicable record date will be payable by the
Trustee to or at the direction of the Depository or its nominee in its capacity
as the registered Holder of the Global Notes representing such New Notes under
the Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the
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persons in whose names the New 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 New Notes (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 Notes as shown on the
records of the Depository. Payments by the Participants and the Indirect
Participants to the beneficial owners of New Notes will be governed by standing
instructions and customary practice and will be the responsibility of the
Participants or the Indirect Participants.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that the Depository is
no longer willing or able to act as a depository 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 the Depository of its Global Notes,
securities in registered definitive form without coupons ("Certificated
Securities") will be issued to each person that the Depository identifies as the
beneficial owner of the Notes represented by the Global Notes. In addition,
subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the Trustee, exchange such beneficial interest
for Certificated Securities. 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 the
Depository 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 the Depository
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the New Notes to be issued).
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of Old Notes for New Notes, but does not
purport to be a complete analysis of all potential tax effects. The discussion
is based upon the Internal Revenue Code of 1986, as amended, Treasury
regulations, Internal Revenue Service rulings and pronouncements, and judicial
decisions now in effect, all of which are subject to change at any time by
legislative, judicial or administrative action. Any such changes may be applied
retroactively in a manner that could adversely affect a holder of the New Notes.
The description does not consider the effect of any applicable foreign, state,
local or other tax laws or estate or gift tax considerations.
EACH HOLDER SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF EXCHANGING OLD NOTES FOR NEW NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE OF OLD NOTES FOR NEW NOTES
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not constitute a significant modification of the terms of the Old Notes
and, therefore, such exchange should not constitute an exchange for federal
income tax purposes. Accordingly, such exchange should have no federal income
tax consequences to holders of Old Notes.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes pursuant to the Exchange Offer, 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. 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 90 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 1997, all dealers effecting transactions in the New
Notes may be required to deliver a Prospectus.
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 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.
For a period of 90 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Notes) other than commissions or concessions of any
broker-dealers and will indemnify holders of the Old Notes (including any
broker-dealers) against certain liabilities, including certain liabilities under
the Securities Act.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Weil, Gotshal & Manges LLP, Dallas, Texas and New York, New York.
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EXPERTS
The balance sheet of Viasystems, Inc. as of April 3, 1997, has been
included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent certified public accountants, St. Louis, Missouri, given on the
authority of that firm as experts in accounting and auditing. The consolidated
financial statements of Viasystems Group as of December 31, 1996, and for the
period from inception (August 28, 1996) to December 31, 1996, have been included
herein in reliance on the report of Coopers & Lybrand L.L.P., independent
certified public accountants, St. Louis, Missouri, given on the authority of
that firm as experts in accounting and auditing. The consolidated financial
statements of Circo Craft as of September 30, 1996, and for the nine month
period ended September 30, 1996, have been included herein in reliance on the
report of Coopers & Lybrand, chartered accountants, Montreal, Quebec, given on
the authority of that firm as experts in accounting and auditing. The
consolidated financial statements of Circo Craft as of December 31, 1995, and
for the years ended December 31, 1994 and 1995, have been included herein in
reliance on the report of Deloitte & Touche, chartered accountants, Montreal,
Quebec, given on the authority of that firm as experts in accounting and
auditing. The statements of net assets sold of Viasystems Technologies (formerly
the Microelectronics Group, Interconnection Technologies Unit of Lucent
Technologies Inc.) as of December 31, 1995 and November 30, 1996, and the
statements of operations for the periods ended December 31, 1994 and 1995 and
the 11-month period ended November 30, 1996 have been included herein in
reliance on the report of Coopers & Lybrand L.L.P., independent certified public
accountants, St. Louis, Missouri, given on the authority of that firm as experts
in accounting and auditing. The consolidated financial statements of Forward
Group as of January 31, 1996 and 1997, and for the three years in the period
ended January 31, 1997, have been included herein in reliance on the report of
KPMG Audit Plc, chartered accountants and registered auditor, Birmingham,
England, given on the authority of that firm as experts in accounting and
auditing. The consolidated financial statements of Chips as of March 29, 1996
and April 4, 1997, and for the years ended March 31, 1995, March 29, 1996, and
April 4, 1997, have been included herein in reliance on the report of Ernst &
Young, chartered accountants, independent auditors, Newcastle upon Tyne,
England, given on the authority of that firm as experts in accounting and
auditing.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Subsequent to the acquisition of each of Circo Craft, Viasystems
Technologies, Forward Group, and Chips, the Company has, for each entity,
dismissed the former accountant in favor of Coopers & Lybrand, L.L.P., the
accountant for Viasystems Group, Inc. and Viasystems, Inc. None of the former
accountants reports contained an adverse opinion or disclaimer of opinion or was
modified as to an uncertainty, audit scope, or accounting principles. Such
change to the accountants was approved by the Board of Directors of the Company.
There were no disagreements with the former accountants on any matter which, if
not resolved to the satisfaction of the former accountants, would have caused
the former accountants to make reference to the subject matter of the
disagreements in connection with their reports.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
VIASYSTEMS, INC.
Report of Independent Auditors.............................. F-2
Balance Sheet at April 3, 1997.............................. F-3
Notes to Financial Statement................................ F-4
VIASYSTEMS GROUP, INC.
Report of Independent Auditors.............................. F-6
Consolidated Balance Sheet at December 31, 1996 and March
31, 1997 (unaudited)...................................... F-7
Consolidated Statement of Operations from inception (August
28, 1996) to December 31, 1996 and for the three months
ended March 31, 1997 (unaudited).......................... F-8
Consolidated Statement of Stockholders' Equity from
inception (August 28, 1996) to December 31, 1996 and for
the three months ended March 31, 1997 (unaudited)......... F-9
Consolidated Statement of Cash Flows from inception (August
28, 1996) to December 31, 1996 and for the three months
ended March 31, 1997 (unaudited).......................... F-10
Notes to Consolidated Financial Statements.................. F-11
CIRCO CRAFT CO. INC.
Auditors' Report............................................ F-23
Auditors' Report............................................ F-24
Consolidated Balance Sheets at December 31, 1995 and
September 30, 1996........................................ F-25
Consolidated Statements of Retained Earnings for the years
ended December 31, 1994 and 1995 and the nine month period
ended September 30, 1996 and for the three month period
ended March 31, 1996 (unaudited).......................... F-26
Consolidated Statements of Earnings for the years ended
December 31, 1994 and 1995 and the nine month period ended
September 30, 1996 and for the three month period ended
March 31, 1996 (unaudited)................................ F-27
Consolidated Statements of Changes in Financial Position for
the years ended December 31, 1994 and 1995 and the nine
month period ended September 30, 1996 and for the three
month period ended March 31, 1996 (unaudited)............. F-28
Notes to Consolidated Financial Statements.................. F-29
VIASYSTEMS TECHNOLOGIES CORP. (FORMERLY MICROELECTRONICS
GROUP, INTERCONNECTION TECHNOLOGIES UNIT OF LUCENT
TECHNOLOGIES INC.)
Report of Independent Auditors.............................. F-40
Statements of Net Assets sold at December 31, 1995 and
November 30, 1996......................................... F-41
Statements of Operations for the years ended December 31,
1994 and 1995, the eleven month period ended November 30,
1996 and for the period from January 1, 1996 through March
31, 1996 (unaudited)...................................... F-42
Notes to Financial Statements............................... F-43
FORWARD GROUP PLC
Report of Independent Auditors.............................. F-48
Consolidated Profit and Loss Accounts for the years ended
January 31, 1995, 1996 and 1997 and the three months ended
March 31, 1996 and 1997 (unaudited)....................... F-49
Consolidated Statements of Total Recognized Gains and Losses
for the years ended January 31, 1995, 1996, and 1997 and
the three months ended March 31, 1996 and 1997
(unaudited)............................................... F-50
Consolidated Balance Sheets at January 31, 1996 and 1997 and
at March 31, 1997 (unaudited)............................. F-51
Consolidated Statements of Cash Flows for the years ended
January 31, 1995, 1996, and 1997 and the three months
ended March 31, 1996 and 1997 (unaudited)................. F-52
Notes to the Consolidated Financial Statements.............. F-53
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
Report of Independent Auditors.............................. F-77
Consolidated Profit and Loss Accounts for the years ended
March 31, 1995, March 29, 1996 and April 4, 1997, and the
three months ended March 29, 1996 and April 4, 1997
(unaudited)............................................... F-78
Consolidated Statements of Total Recognized Gains and Losses
for the years ended March 31, 1995, March 29, 1996 and
April 4, 1997, and the three months ended March 29, 1996
and April 4, 1997 (unaudited)............................. F-79
Consolidated Balance Sheets at March 29, 1996 and April 4,
1997...................................................... F-80
Consolidated Statements of Cash Flows for the years ended
March 31, 1995, March 29, 1996 and April 4, 1997, and the
three months ended March 29, 1996 and April 4, 1997
(unaudited)............................................... F-81
Notes to the Consolidated Financial Statements.............. F-82
</TABLE>
F-1
<PAGE> 114
REPORT OF INDEPENDENT AUDITORS
The Board of Directors of Viasystems, Inc.:
We have audited the accompanying balance sheet of Viasystems, Inc. (a
Delaware corporation) as of April 3, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion of this financial statement based on our audit.
We conducted our audit 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Viasystems, Inc. as of April 3,
1997, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
St. Louis, Missouri
June 18, 1997
F-2
<PAGE> 115
VIASYSTEMS, INC.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
APRIL 3,
1997
--------
<S> <C>
Total assets................................................ $ --
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
Total liabilities........................................... $ --
Stockholder's equity:
Common Stock, par value $.01 per share, 1,000 shares
authorized, issued and outstanding..................... 10
Paid in capital........................................... 990
Subscriptions receivable.................................. (1,000)
-------
Total stockholder's equity........................ --
-------
Total liabilities and stockholder's equity........ $ --
=======
</TABLE>
The accompanying notes are an integral part of the balance sheet.
F-3
<PAGE> 116
VIASYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. THE COMPANY
Viasystems, Inc. a Delaware corporation ("Viasystems"), was formed on April
2, 1997, as a subsidiary of Viasystems Group, Inc. On April 10, 1997, Viasystems
Group, Inc. contributed to Viasystems all of the capital of its then existing
subsidiaries -- Circo Craft Co. Inc., Viasystems Technologies Corp., and PCB
Acquisition Limited. Viasystems has no operations of its own. The balance sheet
sets forth the financial position of Viasystems before the contribution of the
capital of the subsidiaries of Viasystems Group, Inc. The fiscal year end of
Viasystems is December 31.
2. SUBSEQUENT EVENTS
On April 11, 1997, Viasystems acquired Forward Group PLC ("Forward
Acquisition"), a manufacturer of rigid printed circuit boards located in the
U.K. The purchase price of approximately $236,300 consisted of cash, notes
payable to certain of the Forward Group PLC stockholders, and assumed debt. The
Forward Acquisition and the related transaction fees and expenses were funded
with (i) $40,000 from the issuance of 1,600,000 shares of Series C Preferred
Stock of Viasystems Group, Inc. and (ii) $216,000 from a Subordinated Credit
Facility. The Subordinated Credit Facility was paid off with a subsequent debt
offering (see below). The Forward Acquisition will be accounted for using the
purchase method of accounting.
In connection with the Forward Acquisition, Viasystems entered into an
Amended and Restated Credit Agreement with terms substantially similar to the
Credit Agreements of Viasystems Group, Inc. The Amended and Restated Credit
Agreement provided for a U.K.L.32,000 (approximately US$51,500) Revolving
Facility to Forward Group PLC.
On April 11, 1997, Viasystems made an optional prepayment of $20,000 under
the Term A Loan outstanding under the Amended and Restated Credit Agreement.
In April 1997, Viasystems Group, Inc.'s stockholders and certain of its
affiliates formed Chips Holdings, Inc., to acquire Interconnection Systems
(Holdings) Limited ("ISL"), a manufacturer of rigid printed circuit boards
located in the U.K. On April 21, 1997, Chips Holdings, Inc. acquired ISL for
$437,500. The purchase price consisted entirely of notes payable to the former
stockholders of ISL. In connection with the transaction, these stockholders
invested $140,000 of equity capital in Chips Holdings, Inc. On June 6, 1997,
Chips Holdings, Inc. merged with Viasystems Group, Inc. and the subsidiaries of
Chips Holdings, Inc., including ISL, became subsidiaries of Viasystems and
certain of its subsidiaries in consideration for the issuance of 140,000,000
shares of Viasystems Group, Inc. common stock valued at $140,000 to Viasystems
Group, Inc.'s stockholders and certain of its affiliates. Viasystems Group, Inc.
assumed the $437,500 of notes payable which were incurred by Chips Holdings,
Inc. (the "Chips Loan Notes") to finance the ISL acquisition. The acquisition of
ISL by Chips Holdings, Inc. will be accounted for using the purchase method of
accounting. The merger of Chips Holdings, Inc. with Viasystems Group, Inc. will
be accounted for as a transfer of assets among companies under common control
and will be recorded at Chips Holdings, Inc.'s historical cost. Viasystems will
account for the acquisition of ISL as of the date of ISL's acquisition by Chips
Holdings, Inc.
The Chips Loan Notes mature on March 31, 2003 and bear interest, payable
quarterly, at approximately 6.22% per annum through April 1, 1998, with variable
rates thereafter discounted from the U.S. prime rate. The Chips Loan Notes may
be called by the holders on or after any interest payment date commencing April
1, 1998. The Chips Loan Notes are collateralized by letters of credit issued by
a bank. Such letters of credit are in turn collateralized in part by a fully
cash collateralized $118,300 reimbursement obligation of Bisto Funding, Inc., a
special purpose entity and sister Company of Viasystems, established as a
subsidiary of the Viasystems Group, Inc. in connection
F-4
<PAGE> 117
with the acquisition of ISL, with the remainder, including interest on the Chips
Loan Notes for one year, collateralized by a reimbursement obligation of
Viasystems.
On June 5, 1997 Viasystems Group, Inc. as guarantor, and Viasystems and
certain of its subsidiaries, as borrowers, entered into a Second Amended and
Restated Credit Agreement with terms substantially similar to the Credit
Agreements of Viasystems Group, Inc. The Second Amended and Restated Credit
Agreement provided for a U.K.L27,600 (approximately U.S.$44,400) Revolving
Facility and a $319,250 term loan facility to be drawn upon in the event the
Chips Loan Notes are called. On June 6, 1997, Viasystems completed an offering
of $400,000 of 9 3/4% Senior Subordinated Notes due 2007 (the "Offering").
Viasystems used the net proceeds of the Offering to repay amounts totaling
approximately $171,600 principal amount outstanding under the Second Amended and
Restated Credit Agreement, plus interest, and to repay the $216,000 principal
amount outstanding under the Subordinated Credit Facility, plus interest.
F-5
<PAGE> 118
REPORT OF INDEPENDENT AUDITORS
The Board of Directors of Viasystems Group, Inc.:
We have audited the accompanying consolidated balance sheet of Viasystems
Group, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the period from inception (August 28, 1996) to December 31, 1996.
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 audit.
We conducted our audit 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 audit provides 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 Viasystems
Group, Inc. and subsidiaries as of December 31, 1996 and the consolidated
results of their operations and their cash flows for period from inception
(August 28, 1996) to December 31, 1996, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
St. Louis, Missouri
February 28, 1997, except
for Note 18, for
which the date
is June 6, 1997
F-6
<PAGE> 119
VIASYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents............. $ 16,117 $ 3,556
Accounts receivable, less allowance
for doubtful accounts of $409 and
$448, respectively................. 37,149 60,131
Inventories........................... 43,123 39,789
Prepaid expenses and other............ 7,333 6,709
-------- --------
Total current assets.......... 103,722 110,185
Property, plant and equipment, net...... 208,748 211,596
Deferred financing costs, net........... 27,351 26,616
Intangible assets, net.................. 47,920 46,247
-------- --------
Total assets.................. $387,741 $394,644
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
obligations........................ $ 10,804 $ 10,691
Accounts payable...................... 5,185 18,871
Accrued and other liabilities......... 42,112 34,214
Income taxes payable.................. 683 1,246
-------- --------
Total current liabilities..... 58,784 65,022
Deferred taxes.......................... 3,785 4,035
Long-term obligations, less current
maturities............................ 254,816 252,885
Other noncurrent liabilities............ 15,383 15,055
-------- --------
Total liabilities............. 332,768 336,997
-------- --------
Stockholders' Equity:
Series A preferred stock, $.01 par
value, 1,800,000 shares issued and
outstanding, including liquidation
preference of $45,000.............. 18 18
Series B preferred stock, $.01 par
value, 1,200,000 shares issued and
outstanding, including liquidation
preference of $30,000.............. 12 12
Common Stock, par value $.01 per
share, 90,000,000 shares
authorized, 30,000,004 shares
issued and outstanding............. 300 300
Class A common stock, par value $.01
per share, 10,000,000 shares
authorized 4,098,333 shares issued
and outstanding.................... 41 41
Paid in capital....................... 103,423 103,423
Accumulated deficit................... (48,742) (46,071)
Cumulative translation adjustment..... (79) (76)
-------- --------
Total stockholders' equity....... 54,973 57,647
-------- --------
Total liabilities and
stockholders' equity........ $387,741 $394,644
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated balance sheet.
F-7
<PAGE> 120
VIASYSTEMS GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INCEPTION THREE MONTHS
(AUGUST 28, 1996) TO ENDED
DECEMBER 31, 1996 MARCH 31, 1997
-------------------- --------------
(UNAUDITED)
<S> <C> <C>
Net sales.................................................. $ 50,400 $119,884
Operating expenses:
Cost of goods sold....................................... 42,052 90,069
Selling, general and administrative...................... 3,844 11,155
Depreciation and amortization............................ 4,635 8,475
Write-off of acquired in-process research and
development........................................... 50,800 --
-------- --------
Operating income (loss).................................... (50,931) 10,185
Other expenses:
Interest expense......................................... 2,503 5,055
Amortization of deferred financing costs................. 470 937
Other expense (income)................................... 262 (52)
-------- --------
Income (loss) before income taxes.......................... (54,166) 4,245
Provision (benefit) for income taxes....................... (5,424) 1,574
-------- --------
Net income (loss).......................................... $(48,742) $ 2,671
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
<PAGE> 121
VIASYSTEMS GROUP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
PREFERRED COMMON PAID IN ACCUMULATED TRANSLATION
STOCK STOCK CAPITAL DEFICIT ADJUSTMENT TOTAL
--------- ------ -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at Inception (August 28,
1996)............................... $-- $ -- $ -- $ -- $ -- $ --
Issuance of 30,000,004 shares of
Common Stock...................... -- 300 29,700 -- -- 30,000
Issuance of 4,098,333 shares of
Class A Common Stock.............. -- 41 -- -- -- 41
Issuance of 1,800,000 shares of
Series A Preferred Stock.......... 18 -- 44,982 -- -- 45,000
Issuance of 1,200,000 shares of
Series B Preferred Stock.......... 12 -- 29,988 -- -- 30,000
Stock issuance costs................ -- -- (1,247) -- -- (1,247)
Net loss............................ -- -- -- (48,742) -- (48,742)
Cumulative translation adjustment... -- -- -- -- (79) (79)
--- ---- -------- -------- ---- --------
Balance at December 31, 1996.......... 30 341 103,423 (48,742) (79) 54,973
Net Income.......................... -- -- -- 2,671 3 2,674
--- ---- -------- -------- ---- --------
Balance at March 31, 1997
(unaudited)......................... $30 $341 $103,423 $(46,071) $(76) $ 57,647
=== ==== ======== ======== ==== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-9
<PAGE> 122
VIASYSTEMS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INCEPTION THREE MONTHS
(AUGUST 28, 1996) TO ENDED
DECEMBER 31, 1996 MARCH 31, 1997
-------------------- --------------
(UNAUDITED)
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss)......................................... $ (48,742) $ 2,671
Adjustments to reconcile net loss to net cash provided by
operating activities:
Write-off of acquired in-process research and
development.......................................... 50,800 --
Depreciation and amortization.......................... 4,635 8,475
Amortization of deferred financing costs............... 470 937
Deferred taxes......................................... (5,874) 228
Change in assets and liabilities, net of acquisitions:
Accounts receivable.................................. (15,469) (24,640)
Inventories.......................................... 2,655 3,397
Prepaid expenses and other........................... (927) 633
Accounts payable..................................... 976 13,673
Accrued and other liabilities........................ 13,899 (7,436)
Income taxes payable................................. (761) (341)
--------- --------
Net cash from operating activities.......................... 1,662 (2,403)
--------- --------
Cash flows provided by (used in) investing activities:
Acquisitions, net of cash acquired of $20,890............. (282,723) --
Capital expenditures...................................... (3,563) (8,712)
--------- --------
Net cash used in investing activities....................... (286,286) (8,712)
--------- --------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of long-term obligations........... 238,283 --
Repayment of long-term obligations........................ -- (2,463)
Equity proceeds........................................... 73,794 --
Financing fees and other.................................. (11,364) --
--------- --------
Net cash from financing activities.......................... 300,713 (2,463)
--------- --------
Effect of exchange rate changes on cash..................... 28 1,017
--------- --------
Net change in cash and cash equivalents..................... 16,117 (12,561)
Cash and cash equivalents at inception...................... -- 16,117
--------- --------
Cash and cash equivalents at end of period.................. $ 16,117 $ 3,556
========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for
Interest............................................... $ 323 $ 4,721
========= ========
Income taxes........................................... $ 1,184 $ 520
========= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-10
<PAGE> 123
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. THE COMPANY
Viasystems Group, Inc. a Delaware corporation ("Viasystems Group"), was
formed on August 28, 1996. Viasystems Group, together with its subsidiaries, is
herein referred to as the Company. The Company was formed to make strategic
acquisitions of printed circuit board manufacturers and backpanel assemblers and
integrate those acquisitions as a global enterprise that is the preferred
manufacturer and marketer of complex printed circuit boards ("PCBs") and
backpanels. In connection therewith, as of December 31, 1996, the Company had
acquired Circo Craft Co. Inc. and the Microelectronics Group, Interconnection
Technologies Unit of Lucent Technologies Inc. (together, the "Acquisitions") as
described below. Prior to the Acquisitions, Viasystems Group had no operations
of its own other than those incident to the Acquisitions.
On October 1, 1996, the Company acquired all of the outstanding stock of
Circo Craft Co. Inc., a Quebec corporation and a rigid printed circuit board
manufacturer, for aggregate cash consideration of $129,850 plus acquisition fees
and expenses of $885 (the "Circo Craft Acquisition"). The operating results of
Circo Craft Co. Inc. are included in the consolidated financial statements of
Viasystems Group since the date of the Circo Craft Acquisition.
The Circo Craft Acquisition has been accounted for using the purchase
method of accounting whereby the total purchase price has been preliminarily
allocated to the assets and liabilities based on their estimated respective fair
values. A significant portion of the purchase price, as described below, has
been identified in an independent appraisal as intangible assets using proven
valuation procedures and techniques, including approximately $39,200 of
in-process research and development ("in-process R&D"). The portion of the
purchase price allocated to in-process R&D projects that did not have a future
alternative use totaled $39,200 and was charged to expense as of the acquisition
date. The In-process R&D projects relate primarily to developing significant
enhancements to the current product offering, as well as introducing advanced
new products. The incomplete projects include new connector functionality, chip
packaging solutions, component miniaturization, specialty drilling and surface
finishes. Given the uniqueness of the tasks and the technologies involved,
alternative future uses for these projects, apart from the objectives and
economics of the projects for which they are intended, do not exist. The Company
believes that the efforts to complete the acquired in-process R&D projects will
consist of internally-staffed engineering costs over the next two to four years.
The costs to complete the in-process R&D projects and to procure, develop and
test the required capital assets are anticipated to be significant. The other
acquired intangibles include developed technology, assembled workforce, and
customer list. These intangibles are being amortized over their estimated useful
lives of 12 to 25 years.
The total purchase price including fees and expenses has been preliminarily
allocated to the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.......................... $ 52,846
Property, plant and equipment........... 50,710
Acquired intangibles.................... 22,000
In-process R&D.......................... 39,200
Goodwill................................ 7,857
Non-current assets...................... 2,500
Current liabilities..................... (28,951)
Non-current liabilities................. (15,427)
--------
Total......................... $130,735
========
</TABLE>
On December 1, 1996, the Company, through its newly formed subsidiary,
Viasystems Technologies Corp., acquired certain assets and assumed certain
liabilities of the Microelectronics Group, Interconnection Technologies Unit of
Lucent Technologies Inc., a rigid printed circuit board manu-
F-11
<PAGE> 124
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
facturer and backpanel assembler, (the "Lucent Division Acquisition") for an
aggregate cash consideration of $170,000 and 1,200,000 shares of preferred stock
valued at $30,000 plus acquisition fees and expenses of $1,969. The operating
results of Viasystems Technologies Corp. are included in the consolidated
financial statements since the date of the Lucent Division Acquisition.
The Lucent Division Acquisition was accounted for using the purchase method
of accounting whereby the total purchase price has been preliminarily allocated
to the assets and liabilities based on their estimated respective fair values. A
significant portion of the purchase price, as described below, has been
identified in an independent appraisal as intangible assets using proven
valuation procedures and techniques, including approximately $11,600 in-process
R&D. The portion of the purchase price allocated to in-process R&D projects that
did not have a future alternative use totaled $11,600 and was charged to expense
as of the acquisition date. The in-process R&D projects relate primarily to
developing significant enhancements to the current product offering as well as
introducing advanced new products. The incomplete projects include new connector
functionality, chip packaging solutions, component miniaturization, specialty
drilling and surface finishes. Given the uniqueness of the tasks and the
technologies involved, alternative future uses for these projects, apart from
the objectives and economics of the projects for which they are intended, do not
exist. The Company believes that the efforts to complete the acquired in-process
R&D projects will consist of internally-staffed engineering costs over the next
two to four years. The costs to complete the in-process R&D projects and to
procure, develop and test the required capital assets are anticipated to be
significant. The other acquired intangibles include developed technology,
assembled workforce, and customer list. These intangibles are being amortized
over their estimated useful lives of 12 to 25 years.
The total purchase price including fees and expenses has been preliminarily
allocated to the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.......................... $ 39,204
Property, plant and equipment........... 155,674
Acquired intangibles.................... 18,775
In-process R&D.......................... 11,600
Non-current assets...................... 13,080
Current liabilities..................... (8,849)
Non-current liabilities................. (27,515)
--------
Total......................... $201,969
========
</TABLE>
The Company will evaluate the capacities and production capabilities of all
acquired entities, including those acquired subsequent to yearend (see Note 17),
to assess potential cost savings from consolidating its facilities and optimize
its global plant utilization by shifting production between facilities to most
efficiently satisfy particular customer orders.
Included below is unaudited pro forma financial data setting forth
condensed results of operations of the Company for the year ended December 31,
1996, as though the Acquisitions and related financing had occurred at the
beginning of the year. In preparing this data, the financial data of Circo Craft
Co. Inc. for the period from January 1, 1996 to the date of the Circo Craft
Acquisition has been translated at an exchange rate of Cdn$1.36 = U.S.$1.00, the
exchange rate at September 30, 1996.
<TABLE>
<S> <C>
Net sales............................... $470,820
Net income.............................. (29,595)
</TABLE>
F-12
<PAGE> 125
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
The Company is primarily involved in manufacturing and distributing
advanced PCBs and assembling backpanels at various facilities located in the
United States, Canada and Puerto Rico. The Company's customers include a
diversified base of manufacturers in the telecommunications, computer and
automotive industries throughout North America.
Principles of Consolidation
The consolidated financial statements include the accounts of Viasystems
Group and its wholly-owned subsidiaries, Circo Craft Co. Inc. ("Circo Craft")
and Viasystems Technologies Corp. ("Viasystems Technologies"). All material
intercompany balances and transactions have been eliminated in consolidation.
Foreign Currency Translation
Local currencies have been designated as the functional currency for all
subsidiaries. Accordingly, assets and liabilities of foreign subsidiaries are
translated at the rates of exchange at the balance sheet date. Income and
expense items of these subsidiaries are translated at average monthly rates of
exchange. The resultant translation gains and losses are included as a component
of stockholders' equity on the consolidated balance sheet.
Inventories
Inventories are stated at the lower of cost (valued using the first-in,
first-out (FIFO) method) or market. Cost includes raw materials, labor and
manufacturing overhead.
Property, Plant, and Equipment
Property, plant, and equipment are recorded at cost. Repairs and
maintenance which do not extend the useful life of an asset are charged to
expense as incurred. The useful lives of leasehold improvements are the lesser
of the remaining lease term or the useful life of the improvement. Depreciation,
which amounted to $4,102 for the period from inception (August 28, 1996) to
December 31, 1996, is computed using the straight-line method over the estimated
useful lives of the related assets as follows:
<TABLE>
<S> <C>
Building.................................................... 40 years
Leasehold improvements...................................... 10-12 years
Machinery and equipment..................................... 3-8 years
</TABLE>
Deferred Financing Costs
Deferred financing costs, consisting of fees and other expenses associated
with debt financings are amortized over the term of the related debt using the
effective interest method.
F-13
<PAGE> 126
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Intangible Assets
Intangible assets consist primarily of identifiable intangibles acquired in
the Acquisitions and goodwill arising from the excess of cost over the fair
value of net assets acquired. The Company assesses the recoverability of its
intangible assets based on its current and anticipated future undiscounted cash
flows. At December 31, 1996 the Company does not believe there has been any
impairment of its intangible assets. Amortization of intangible assets is
computed using the straight-line method over the estimated useful lives of the
related assets as follows:
<TABLE>
<S> <C>
Developed technologies...................................... 15 years
Assembled workforce......................................... 12 years
Customer list............................................... 25 years
Goodwill.................................................... 40 years
</TABLE>
Research and Development
Expenditures for research and development activities relating to new
products and processes are charged to expense as incurred.
Revenue Recognition
Sales and related costs of goods sold are included in income when goods are
delivered to the customer in accordance with the delivery terms.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The fair market values of the financial instruments included in the
consolidated financial statements approximate the carrying values of those
instruments.
Statement of Cash Flows
For purposes of the Consolidated Statement of Cash Flows, the Company
considers investments purchased with an original maturity of three months or
less to be cash equivalents. In connection with the Viasystems Technologies
Acquisition, the Company issued $30,000 of Series B Preferred Stock as non-cash
consideration and received $2,802 of property, plant, and equipment paid for by
Lucent Technologies Inc.
F-14
<PAGE> 127
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Unaudited Interim Financial Statements Presentation
The unaudited interim financial statements reflect all adjustments
consisting only of normal recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of financial position and results
of operations. The results for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for a full fiscal
year.
3. INVENTORIES
Inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Raw materials........................... $12,829 $11,405
Work in progress........................ 16,796 20,088
Finished goods.......................... 13,498 8,296
------- -------
Total......................... $43,123 $39,789
======= =======
</TABLE>
4. DEFERRED FINANCING COSTS
In connection with the debt and equity financing used to fund the
Acquisitions, the Company incurred aggregate fees and expenses related to the
Term Notes and Revolver (see Note 9). Such costs are included in deferred
financing costs and are being amortized over the terms of the related
borrowings. Costs related to the issuance of common and preferred stock have
been deducted from the proceeds to reduce the carrying value of the common
stock.
5. INTANGIBLE ASSETS
Intangible assets are amortized on a straight-line basis over various
estimated useful lives. The composition of intangible assets at December 31,
1996 is as follows:
<TABLE>
<S> <C>
Developed technologies...................................... $21,185
Assembled workforce......................................... 10,980
Customer list............................................... 8,479
Goodwill.................................................... 7,809
-------
48,453
Less: Accumulated amortization.............................. (533)
-------
Total............................................. $47,920
=======
</TABLE>
Goodwill represents the purchase price in excess of net tangible and
identified intangible assets acquired in acquisitions.
F-15
<PAGE> 128
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. PROPERTY, PLANT AND EQUIPMENT
The composition of property, plant and equipment at December 31, 1996 is as
follows:
<TABLE>
<S> <C>
Land and buildings.......................................... $ 52,480
Machinery and equipment..................................... 144,455
Construction in progress.................................... 12,533
Leasehold improvements...................................... 3,368
--------
212,836
Less: Accumulated depreciation.............................. (4,088)
--------
Total............................................. $208,748
========
</TABLE>
7. ACCRUED AND OTHER LIABILITIES
The composition of accrued and other liabilities at December 31, 1996, is
as follows:
<TABLE>
<S> <C>
Accrued payroll and related costs........................... $12,069
Accrued consulting fees..................................... 3,777
Accrued lease termination costs............................. 2,848
Accrued and other liabilities............................... 23,418
-------
Total............................................. $42,112
=======
</TABLE>
8. COMMITMENTS
The Company leases certain building and transportation and other equipment
under capital and operating leases. Included in property, plant, and equipment
as of December 31, 1996, is $17,083 of cost basis and $380 of accumulated
depreciation related to equipment held under capital leases. Total rental
expense under operating leases was $255 for the period from inception (August
28, 1996) to December 31, 1996. Future minimum lease payments under capital
leases and operating leases that have initial or remaining noncancelable lease
terms in excess of one year are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, CAPITAL OPERATING
- ------------ ------- ---------
<S> <C> <C> <C>
1997........................................................... $ 6,384 $ 609
1998........................................................... 5,714 558
1999........................................................... 5,196 508
2000........................................................... 2,018 508
2001........................................................... -- 508
Thereafter..................................................... -- --
------- ------
Total................................................ 19,312 $2,691
======
Less: Amounts representing interest............................ 2,047
-------
Capital lease obligation (see Note 9)................ $17,265
=======
</TABLE>
In connection with the Lucent Division Acquisition, the Company entered
into a supply agreement with Lucent Technologies Inc. ("Lucent Technologies")
under which Lucent Technologies agreed to purchase certain increasing minimum
annual volumes from the Company at defined prices (see Note 12). Such agreement
also provides the Company with specified remedies against Lucent Technologies in
the event Lucent Technologies does not purchase the minimum annual volumes set
forth in the agreement.
F-16
<PAGE> 129
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109. The benefit for income taxes for the period from inception (August
28, 1996) to December 31, 1996 consisted of the following:
<TABLE>
<S> <C>
Current:
Federal............................... $ --
State................................. --
Foreign............................... 170
Deferred:
Federal............................... (5,698)
Foreign............................... 104
--------
$ (5,424)
========
</TABLE>
Reconciliation between the statutory income tax rate and effective tax rate
is summarized below:
<TABLE>
<S> <C>
U.S. Federal statutory rate............. $(18,416)
Permanent items......................... 15,680
State taxes............................. (3,250)
Foreign................................. 213
Other................................... 349
--------
$ (5,424)
========
</TABLE>
The tax effects of significant temporary differences representing deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DATES OF DECEMBER 31,
ACQUISITION 1996
----------- ------------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities not yet deductible.................... $ 10,112 $ 10,112
Net operating loss carryforwards.......................... 237 1,037
Other..................................................... 278 186
-------- --------
10,627 11,335
Valuation Allowance.................................... (237) (260)
-------- --------
10,390 11,075
-------- --------
Deferred tax liabilities:
Intangibles............................................... (10,112) (5,418)
Fixed Assets.............................................. (3,673) (3,505)
Other..................................................... (287) (239)
-------- --------
(14,072) (9,162)
-------- --------
Net deferred tax asset (liability).......................... $ (3,682) $ 1,913
======== ========
</TABLE>
Approximate domestic and foreign income before income tax provision for the
period from inception (August 28, 1996) to December 31, 1996, are as follows:
<TABLE>
<S> <C>
Domestic................................ $(14,426)
Foreign................................. (39,740)
</TABLE>
As of December 31, 1996, the Company has $1,942 of U.S. net operating loss
carryforwards which will expire in 2011, if not previously utilized, and $5,794
of Puerto Rican net operating loss carryforwards which will expire in 2001-2003,
if not previously utilized. At December 31, 1996, the
F-17
<PAGE> 130
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Company has included a net current deferred tax asset of $5,698 in prepaid
expenses and other assets.
10. LONG-TERM OBLIGATIONS
In connection with the Circo Craft Acquisition, the Company entered into a
credit agreement with a financial institution. This agreement was replaced when
Circo Craft and Viasystems Technologies entered into two credit agreements with
certain financial institutions dated as of November 26, 1996 (the "Circo Credit
Agreement" and the "Viasystems Technologies Credit Agreement", respectively, and
together, the "Credit Agreements"). Borrowings under the Credit Agreements are
collateralized by first priority mortgages and liens on substantially all of the
material assets of the Company and its subsidiaries.
The Circo Credit Agreement consists of a Cdn$86,750 (approximately
US$65,000) Canadian term loan (the "Canadian Term Loan") and a US$25,000 (or the
Canadian dollar equivalent) revolving credit facility (the "Circo Revolver").
The Viasystems Technologies Credit Agreement consists of a $65,000 term loan
(the "Term A Loan"), a $55,000 term loan (the "Term B Loan"), a $55,000 term
loan (the "Term C Loan"), and a $50,000 revolving credit facility (the
"Viasystems Technologies Revolver"). The Canadian Term Loan, the Term A Loan,
the Term B Loan, and the Term C Loan are together herein referred to as the Term
Facilities. The Circo Revolver and the Viasystems Technologies Revolver are
together herein referred to as the "Revolvers". The Revolvers provide that up to
$15,000 of such facilities may be used for the issuance of letters of credit. At
December 31, 1996, the Company had no outstanding letters of credit. At December
31, 1996, there was $73,765 of unused borrowing capacity under the Revolvers.
The Credit Agreements contain several financial covenants which, among other
things, require the Company to maintain certain financial ratios, restrict the
Company's ability to incur additional indebtedness, and limit the amount of
capital expenditures. A commitment fee of .5% on the unused portion of the
Revolvers is payable quarterly.
Mandatory principal payments of the Term Facilities are due in semi-annual
installments. The final installments on the Term A Loan and Canadian Term Loan
are due on December 31, 2002 at which time the Revolvers are also due. The final
installment on the Term B Loan is due on June 30, 2004. The final installment on
the Term C Loan is due on June 30, 2005. Beginning in fiscal year 1997, the
Credit Agreements require annual prepayments of the Term Facilities based on
"Excess Cash Flow" (as defined).
Borrowings under the Term A Loan, the Canadian Term Loan, and United States
dollar borrowings under the Revolvers bear interest, at the option of the
Company, at a rate per annum equal to (a) the Alternate Base Rate (as defined in
the Credit Agreements) plus 1.5% or (b) the Eurodollar Rate (as defined in the
Credit Agreements) plus 2.5%. Canadian dollar borrowings under the Revolver bear
interest, at the option of the Company, at a rate per annum equal to (a) the
Alternate Base Rate plus 1.0% or (b) the Eurodollar Rate plus 2.0%. Borrowings
under the Term B Loan bear interest, at the option of the Company, at a rate per
annum equal to (a) the Alternate Base Rate plus 2.0% or (b) the Eurodollar Rate
plus 3.0%. Borrowings under the Term C Loan bear interest , at the option of the
Company, at a rate per annum equal to (a) the Alternate Base Rate plus 2.5% or
(b) the Eurodollar Rate plus 3.5%. The Alternate Base Rate and Eurodollar Rate
margins are established quarterly based on formulas as defined in the Credit
Agreements. Interest payment dates vary depending on the interest rate option to
which the Term Facilities and the Revolvers are tied, but generally interest is
payable quarterly. At December 31, 1996 the weighted average interest rate on
outstanding borrowings is 7.68%.
F-18
<PAGE> 131
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The composition of long-term obligations at December 31, 1996 is as
follows:
<TABLE>
<S> <C>
Credit Agreements:
Term Facilities........................................... $238,345
Revolvers................................................. 1,235
Capital lease obligations (see Note 7)...................... 17,265
Other....................................................... 8,775
--------
265,620
Less current maturities........................... (10,804)
--------
$254,816
========
</TABLE>
The schedule of principal payments for long-term obligations at December
31, 1996 is as follows:
<TABLE>
<S> <C>
1997........................................................ $ 10,804
1998........................................................ 16,568
1999........................................................ 24,182
2000........................................................ 25,866
2001........................................................ 33,187
Thereafter.................................................. 155,013
--------
$265,620
========
</TABLE>
11. CONTINGENCIES
The Company is subject to various lawsuits and claims with respect to such
matters as patents, product development and other actions arising in the normal
course of business. In the opinion of the Company's management, the ultimate
liabilities resulting from such lawsuits and claims will not have a material
adverse effect on the Company's financial condition and results of operations.
The Company believes it is in material compliance with applicable
environmental laws and regulations and that its environmental controls are
adequate to address existing regulatory requirements.
12. STOCKHOLDERS' EQUITY
The authorized capital stock of Viasystems Group consists of 90 million
shares of common stock, 10 million shares of Class A common stock and 30 million
shares of preferred stock, of which 8,000,000 shares are designated as Series A
Preferred Stock and 6,000,000 shares are designated as Series B Preferred Stock.
All authorized capital stock has a par value of $.01.
On October 1 and November 26, 1996, Viasystems Group issued an aggregate of
67,949,754 shares of common stock for total proceeds of $67,950 and issued an
aggregate of 4,098,333 shares of Class A common stock for total proceeds of $41.
On November 26, 1996, holders of 37,949,750 shares of common stock exchanged
such shares for 1,517,990 shares of Series A Preferred Stock ("Series A
Preferred"), and Viasystems Group issued an additional 282,010 shares of Series
A Preferred for total proceeds of $7,050. On December 1, 1996, and in connection
with the Lucent Division Acquisition, Viasystems Group issued 1,200,000 shares
of Series B Preferred Stock ("Series B Preferred") to Lucent for total
consideration of $30,000 (see Note 1).
F-19
<PAGE> 132
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The Class A common stock may be converted into shares of common stock at
the option of the holder at any time. In addition, the Class A common stock may
be converted into common stock at the option of the Company upon the occurrence
of a Triggering Event (as defined) or automatically on September 30, 2006. Such
conversion is based on a formula set forth in Viasystems Group's Certificate of
Incorporation.
Dividends are payable to holders of the common stock and the Class A common
stock in amounts as and when declared by Viasystems Group's board of directors,
subject to legally available funds and certain agreements. The common stock and
Class A common stock are entitled to one vote per share on all matters submitted
to a vote of stockholders.
Dividends on the Series A Preferred are cumulative and are payable at an
annual rate of $2.00 per share per annum prior to November 30, 2004, $2.50 per
share per annum from November 30, 2004 to November 30, 2005, $3.00 per share per
annum from November 30, 2005 to November 30, 2006, and $3.50 per share per annum
on and after November 30, 2006. Dividends are payable quarterly on February 28,
May 31, August 31 and November 30 in each year, commencing on February 28, 1997.
The Company may, at its option, pay quarterly dividends on the Series A
Preferred, if the Credit Agreement prohibits the payment of cash dividends,
until but excluding November 30, 2001, by issuing additional shares of Series A
Preferred. Series A Preferred has no provision for mandatory redemption. At the
Company's option, the Series A Preferred is redeemable on or any time after
November 30, 2001, at specified redemption values which reduce over time
together with accrued and unpaid dividends to the date of redemption.
Dividends on the Series B Preferred are cumulative and are payable at an
annual rate of $2.00 per share per annum prior to November 30, 2004, $2.50 per
share per annum from November 30, 2004 to November 30, 2005, $3.00 per share per
annum from November 30, 2005 to November 30, 2006, and $3.50 per share per annum
on and after November 30, 2006. Dividends are payable quarterly on February 28,
May 31, August 31 and November 30 in each year, commencing on February 28, 1997.
The Company may, at its option, pay quarterly dividends on the Series B
Preferred, if the Credit Agreement prohibits the payment of cash dividends, by
issuing additional shares of Series B Preferred. Except in the case of a Change
in Control (as defined), the Series B Preferred have no provisions for mandatory
redemption. At the Company's option, the Series B Preferred is redeemable at any
time, at $25 per share, together with accrued and unpaid dividends to the date
of redemption.
13. CONCENTRATION OF BUSINESS
During the period from inception (August 28, 1996) to December 31, 1996,
three customers accounted for 27%, 18%, and 11% of the Company's revenues,
respectively.
14. RELATED PARTY TRANSACTIONS
In connection with the Acquisitions and the related financing, the Company
entered into a Monitoring and Oversight Agreement ("Agreement") with Hicks, Muse
& Co. Partners L.P. ("Hicks, Muse") (a shareholder and affiliate of the Company)
pursuant to which the Company paid Hicks, Muse a cash fee of $5,013 as
compensation for financial advisory services. The fees have been allocated to
acquisition costs and the debt and equity securities issued in connection with
the Acquisition as deferred financing costs. The Agreement further provides that
the Company shall pay Hicks, Muse an annual fee of $750 for ten years of
monitoring and oversight services adjusted annually at the end of each fiscal
year to an amount equal to .2% of the budgeted consolidated net sales of the
Company, but in no event less than $750 annually. The obligation under the
Agreement
F-20
<PAGE> 133
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
and the related deferred financing costs have been recorded in the consolidated
balance sheet and will be amortized over the life of the agreement.
The Company purchased $1,307 of connectors from Berg Electronics Corp. (an
affiliate of the Company).
15. STOCK OPTION PLANS
On February 4, 1997, the Company adopted the Viasystems Group, Inc. 1997
Stock Option Plan (the "Plan"), pursuant to which incentive and non-qualified
stock options, stock appreciation rights, stock awards, performance awards, and
stock units (vesting stock awards) may be issued. The aggregate number of shares
of common stock that may be subject to options grants or other awards under the
Plan is 989,386. As of December 31, 1996, no shares of common stock are reserved
for issuance and no options or other awards have been granted.
The Company has also granted performance options ("the Performance
Options") to certain key executives. The Performance Options are exercisable
only on the occurrence of certain events. The exercise price for the Performance
Options is initially equal to $1.00 per share and, effective each anniversary of
the grant date, the per share exercise price for the Performance Options is
equal to the per share exercise price for the prior year multiplied by 1.08. The
Performance Options terminate on the tenth anniversary date of the date of
grant. In accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," the Company calculated the amount of
compensation cost of the Performance Options and found such amount to be
immaterial.
16. RETIREMENT PLAN
The Company has a defined contribution retirement savings plan (the "Plan")
covering substantially all domestic employees who meet certain eligibility
requirements as to age and length of service. The Plan incorporates the salary
deferral provision of Section 401 (k) of the Internal Revenue Code and employees
may defer up to 15% of compensation or the annual maximum limit prescribed by
the Internal Revenue Code. The Company contributes 1% of employees salaries to
the Plan and matches a percentage of the employees' deferrals. The Company may
also elect to contribute an additional profit-sharing contribution to the Plan
at the end of each year. The Company's contributions to the Plan were $0 for the
period from inception (August 28, 1996) to December 31, 1996.
17. POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS
The Company does not offer any postemployment or postretirement benefits.
18. SUBSEQUENT EVENTS
On April 2, 1997, Viasystems Group formed a new wholly-owned subsidiary,
Viasystems, Inc., to which it contributed all assets and liabilities.
On April 11, 1997, the Company, through Viasystems, Inc., acquired Forward
Group PLC ("Forward Acquisition"), a manufacturer of rigid printed circuit
boards located in the U.K. The purchase price of approximately $236,300
consisted of cash, notes payable to certain of the Forward Group PLC
stockholders, and assumed debt. The Forward Acquisition and the related
transaction fees and expenses were funded with (i) $40,000 from the issuance of
1,600,000 shares of Series C Preferred Stock of the Company and (ii) $216,000
from a Subordinated Credit Facility. The Subordinated Credit Facility was repaid
with a subsequent debt offering (see below).
F-21
<PAGE> 134
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
In connection with the Forward Acquisition, Viasystems, Inc. entered into
an Amended and Restated Credit Agreement with terms substantially similar to the
Credit Agreements. The Amended and Restated Credit Agreement provided for a
U.K.L.32,000 (approximately US$51,500) Revolving Facility to Forward Group PLC.
On April 11, 1997, the Company made an optional prepayment of $20,000 under
its Term A Loan.
In April 1997, the Company's stockholders and certain of its affiliates
formed Chips Holdings, Inc., to acquire Interconnection Systems (Holdings)
Limited ("ISL"), a manufacturer of rigid printed circuit boards located in the
U.K. In connection with the transaction, the Company's stockholders invested
$140,000 of equity capital in Chips Holdings, Inc. On June 6, 1997, Chips
Holdings, Inc. became subsidiaries of Viasystems Group and the subsidiaries of
Chips Holdings, Inc., including ISL, merged into Viasystems, Inc. and certain of
its subsidiaries in consideration for the issuance of $140,000 of Company common
stock to the Company's stockholders and certain of its affiliates. Concurrently,
the Company's Series A and Series C preferred stockholders received 85 million
shares of the Company's common stock in exchange for preferred stock owned by
them. The Company assumed approximately $437,500 of notes payable which were
incurred by Chips Holdings, Inc. (the "Chips Loan Notes") to finance the ISL
acquisition.
The Chips Loan Notes mature on March 31, 2003 and bear interest, payable
quarterly, at approximately 6.22% per annum through April 1, 1998, with variable
rates thereafter discounted from the U.S. prime rate. The Chips Loan Notes may
be called by the holders on or after any interest payment date commencing April
1, 1998. The Chips Loan Notes are collateralized by letters of credit issued by
a bank. Such letters of credit are in turn collateralized in part by a fully
cash collateralized $118,300 reimbursement obligation of Bisto Funding, Inc., a
special purpose entity established as a subsidiary of the Viasystems Group in
connection with the acquisition of ISL, with the remainder, including interest
on the Chips Loan Notes for one year, collateralized by a reimbursement
obligation of Viasystems, Inc.
On June 5, 1997, Viasystems Group, as guarantor, and Viasystems, Inc. and
certain of its subsidiaries, as borrowers, entered into a Second Amended and
Restated Credit Agreement with terms substantially similar to the Credit
Agreements. The Second Amended and Restated Credit Agreement provided for a
U.K.L27,600 (approximately U.S.$44,400) Revolving Facility and a $319,250 term
loan facility to be drawn upon in the event the Chips Loan Notes are called. On
June 6, 1997, Viasystems, Inc. completed an offering of $400,000 of 9 3/4%
Senior Subordinated Notes due 2007 (the "Offering"). Viasystems, Inc. used the
net proceeds of the Offering to repay amounts totaling approximately $171,600
principal amount outstanding under the Second Amended and Restated Credit
Agreement, plus interest, and to repay the $216,000 principal amount outstanding
under the Subordinated Credit Facility, plus interest.
In June 1997, the authorized common stock of the Company increased to 423
million shares of common stock and 47 million shares of Class A common stock.
Additionally, 8 million shares of preferred stock were designated as Series C
Preferred Stock.
F-22
<PAGE> 135
AUDITORS' REPORT
To The Directors of Circo Craft Co. Inc.
We have audited the consolidated balance sheet of Circo Craft Co. Inc. as
at September 30, 1996 and the consolidated statements of earnings, retained
earnings and changes in financial position for the nine-month period then ended.
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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at September 30,
1996 and the results of its operations and the changes in its financial position
for the nine-month period then ended in accordance with generally accepted
accounting principles in Canada.
Coopers & Lybrand
General Partnership
Chartered Accountants
Montreal, Quebec
December 20, 1996
F-23
<PAGE> 136
AUDITORS' REPORT
To the Directors of Circo Craft Co. Inc.
We have audited the consolidated balance sheet of Circo Craft Co. Inc. as at
December 31, 1995, and the consolidated statements of earnings, retained
earnings and changes in financial position for each of the years in the two-year
period ended December 31, 1995. 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 an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 1995
and the results of its operations and the changes in its financial position for
each of the years in the two-year period ended December 31, 1995, in accordance
with generally accepted accounting principles in Canada.
Deloitte & Touche
Chartered Accountants
Montreal, Quebec
February 1, 1996
F-24
<PAGE> 137
CIRCO CRAFT CO. INC.
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN CANADIAN DOLLARS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Current assets
Cash and short-term deposits.............................. 19,231 28,438
Accounts receivable....................................... 33,992 26,406
Inventories (note 2)...................................... 16,202 15,802
Prepaid expenses.......................................... 665 973
------- -------
Total current assets.............................. 70,090 71,619
Fixed assets (note 3)....................................... 58,874 63,106
------- -------
Total assets...................................... 128,964 134,725
======= =======
LIABILITIES
Current liabilities
Bank indebtedness (note 4(d) and (e))..................... 1,501 2,173
Accounts payable and accrued liabilities.................. 21,540 22,343
Income taxes.............................................. 3,369 1,977
Current portion of long-term debt (note 4)................ 3,623 3,217
------- -------
Total current liabilities......................... 30,033 29,710
Long-term debt (note 4)..................................... 10,874 12,173
Deferred income taxes....................................... 4,086 5,136
Non-controlling interest (notes 5 and 6(d))................. 2,286 --
------- -------
Total liabilities................................. 47,279 47,019
------- -------
SHAREHOLDERS' EQUITY
Capital stock (note 6)...................................... 37,776 41,823
Retained earnings........................................... 43,909 45,883
------- -------
Total shareholders' equity........................ 81,685 87,706
------- -------
Total liabilities and shareholders' equity........ 128,964 134,725
======= =======
</TABLE>
F-25
<PAGE> 138
CIRCO CRAFT CO. INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(EXPRESSED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTH THREE MONTH
DECEMBER 31, PERIOD ENDED PERIOD ENDED
--------------- SEPTEMBER 30, MARCH 31,
1994 1995 1996 1996
------ ------ ------------- ------------
(THOUSANDS OF DOLLARS) (UNAUDITED)
<S> <C> <C> <C> <C>
Balance -- Beginning of period.................. 25,832 32,216 43,909 43,909
Net earnings for the period................... 6,384 11,693 1,974 1,409
------ ------ ------ ------
Balance -- End of period........................ 32,216 43,909 45,883 45,318
====== ====== ====== ======
</TABLE>
F-26
<PAGE> 139
CIRCO CRAFT CO. INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(EXPRESSED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTH THREE MONTH
DECEMBER 31, PERIOD ENDED PERIOD ENDED
----------------- SEPTEMBER 30, MARCH 31,
1994 1995 1996 1996
------- ------- ------------- ------------
(THOUSANDS OF DOLLARS) (UNAUDITED)
<S> <C> <C> <C> <C>
Sales......................................... 151,825 185,156 129,633 41,357
Cost of sales including amortization of
deferred
start-up costs (1994 -- $2,416; 1995 and
1996 -- nil)............................. 124,929 148,788 101,532 33,611
------- ------- ------- ------
Operating margin.............................. 26,896 36,368 28,101 7,746
------- ------- ------- ------
Selling, general and administrative
expenses.................................... 10,079 11,087 7,969 2,445
------- ------- ------- ------
Other expenses (income)
Depreciation of fixed assets................ 7,160 7,931 8,456 2,509
Interest on long-term debt.................. 515 852 646 228
Interest income............................. (195) (915) (880) (284)
Expenses related to sale (note 14).......... -- -- 5,907 --
------- ------- ------- ------
7,480 7,868 14,129 2,453
------- ------- ------- ------
Earnings before income taxes and non-
controlling interest........................ 9,337 17,413 6,003 2,848
Provision for income taxes (note 8)........... 2,719 5,564 3,847 1,362
------- ------- ------- ------
Earnings before non-controlling interest...... 6,618 11,849 2,156 1,486
Non-controlling interest...................... 234 156 182 77
------- ------- ------- ------
Net earnings for the period................... 6,384 11,693 1,974 1,409
======= ======= ======= ======
</TABLE>
F-27
<PAGE> 140
CIRCO CRAFT CO. INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(EXPRESSED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTH THREE MONTH
DECEMBER 31, PERIOD ENDED PERIOD ENDED
----------------- SEPTEMBER 30, MARCH 31,
1994 1995 1996 1996
------- ------- ------------- ------------
(THOUSANDS OF DOLLARS) (UNAUDITED)
<S> <C> <C> <C> <C>
Operating activities
Net earnings for the period................. 6,384 11,693 1,974 1,409
Non-cash items --
Depreciation of fixed assets........... 7,160 7,931 8,456 2,509
Amortization of deferred start-up
costs............................... 2,416 -- -- --
Deferred income taxes.................. (450) 800 1,050 --
Gain on sale of fixed assets........... (87) (397) (716) (554)
Non-controlling interest............... 234 156 182 77
------- ------- ------- ------
15,657 20,183 10,946 3,441
Cash provided by (used for) non-
cash operating working capital items..... (9,866) 3,964 7,191 2,463
------- ------- ------- ------
5,791 24,147 18,137 5,904
------- ------- ------- ------
Financing activities
Increase in long-term debt.................. 11,126 3,537 4,186 133
Repayment of long-term debt................. (2,523) (2,624) (3,187) (1,432)
Decrease in non-controlling interest........ (81) -- (2,608) --
Issue of common shares...................... 1 8,827 4,047 --
------- ------- ------- ------
8,523 9,740 2,438 (1,299)
------- ------- ------- ------
Investing activities
Acquisition of fixed assets................. (6,679) (23,764) (13,058) (4,461)
Proceeds from sale of fixed assets.......... 573 922 1,018 753
------- ------- ------- ------
(6,106) (22,842) (12,040) (3,708)
------- ------- ------- ------
Increase in cash.............................. 8,208 11,045 8,535 897
Cash -- beginning of period................... (1,523) 6,685 17,730 17,730
------- ------- ------- ------
Cash -- end of period......................... 6,685 17,730 26,265 18,627
======= ======= ======= ======
Represented by --
Cash and short-term deposits........... 7,202 19,231 28,438 19,586
Bank indebtedness...................... (517) (1,501) (2,173) (959)
------- ------- ------- ------
6,685 17,730 26,265 18,627
======= ======= ======= ======
</TABLE>
F-28
<PAGE> 141
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN CANADIAN DOLLARS)
1. ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada and include the following
significant accounting policies:
Principles of Consolidation
The consolidated financial statements include the accounts of the company
and its wholly-owned subsidiary, Circo Caribe Corporation ("Circo Caribe"). All
significant intercompany balances and transactions have been eliminated on
consolidation.
Inventories
Inventories are valued at the lower of cost and market. Cost is determined
using the first-in, first-out method for raw materials. The cost of work in
process inventories and finished goods includes the cost of raw materials,
direct labour and applicable manufacturing overhead, excluding depreciation.
Market is defined as replacement cost for raw materials, and as net realizable
value for work in process and finished goods.
Fixed Assets and Depreciation
Fixed assets are recorded at cost less applicable investment tax credits,
government grants and accumulated depreciation. Assets acquired under capital
leases are included in fixed assets. Depreciation is computed using the
straight-line method at the following annual rates:
<TABLE>
<S> <C>
Buildings................................................... 2 1/2%
Machinery and equipment..................................... 15% -- 33 1/3%
Leasehold improvements...................................... 10%
</TABLE>
Deferred Start-Up Costs
In conjunction with the out-of-court settlement described in note 7,
deferred start-up costs were fully amortized in 1994.
Foreign Currency
Foreign currency transactions and balances including those of Circo Caribe,
an integrated foreign subsidiary, are translated using the temporal method.
Under this method, monetary assets and liabilities are translated into Canadian
dollars at exchange rates in effect as at the balance sheet date and
non-monetary assets and liabilities at the exchange rates prevailing when the
assets were acquired and liabilities incurred. Sales and expenses, with the
exception of depreciation and amortization, are translated at average monthly
rates. Depreciation and amortization are translated at the rates used in the
translation of the relevant asset accounts. Translation gains and losses are
included in determining net earnings in the period in which the exchange rate
changes except for gains and losses on long-term debt, which are deferred and
amortized over the remaining life of the debt.
Income Taxes
The company follows the tax allocation method in providing for income
taxes. Deferred income taxes result primarily from the difference between
capital cost allowance claimed for income tax purposes and depreciation recorded
for accounting purposes.
F-29
<PAGE> 142
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
Interim Financial Presentation
The unaudited condensed consolidated statements of earnings, retained
earnings, and changes in financial position for the three months ended March 31,
1996, do not include all of the information required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included.
2. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials............................................... 7,467 7,164
Work in process............................................. 6,830 5,681
Finished goods.............................................. 1,905 2,957
------ ------
16,202 15,802
====== ======
</TABLE>
3. FIXED ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------
ACCUMULATED
COST DEPRECIATION NET
------- ------------ ------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Land........................................................ 1,127 -- 1,127
Buildings................................................... 24,562 6,534 18,028
Machinery and equipment..................................... 91,265 52,630 38,635
Leasehold improvements...................................... 637 120 517
Deposits on machinery and equipment......................... 567 -- 567
------- ------ ------
118,158 59,284 58,874
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------------
ACCUMULATED
COST DEPRECIATION NET
------- ------------ ------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Land........................................................ 1,127 -- 1,127
Buildings................................................... 26,685 7,513 19,172
Machinery and equipment..................................... 99,408 57,884 41,524
Leasehold improvements...................................... 853 179 674
Deposits on machinery and equipment......................... 609 -- 609
------- ------ ------
128,682 65,576 63,106
======= ====== ======
</TABLE>
Machinery and equipment under capital leases had a cost of $8,664,000 and
accumulated depreciation of $1,532,000 as at September 30, 1996 (December 31,
1995 -- $8,000,000 and $1,762,000 respectively).
F-30
<PAGE> 143
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
4. LONG-TERM DEBT
(a) Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
CANADA
Term loan under the Canada-Quebec
Subsidiary Agreement on Industrial
Development, non-interest bearing,
repayable in five annual
installments beginning in December
2000............................... 2,962 4,068
Obligations under capital leases
bearing interest at rates varying
from 7.4% to 8.5% repayable in
monthly installments to November
2000............................... 1,789 2,674
Other................................. 675 1,307
PUERTO RICO
Term loan of U.S. $2,400,000 payable
in remaining quarterly installments
of U.S. $200,000, bearing interest
at 1 1/4% over the bank's cost of
"936" funds (8.25% as at September
30, 1996), as defined, through July
1999, collateralized by specific
fixed assets for an amount of Cdn.
$5,400,000......................... 4,095 3,272
Term loan of U.S. $1,646,000 payable
in fifty-nine monthly installments
of U.S. $21,000 plus interest at a
variable rate tied to LIBOR, as
defined (7.75% as at September 30,
1996), plus a balloon payment of
U.S. $771,000, due on April 2000,
collateralized by machinery and
equipment of the subsidiary........ 2,503 2,244
Obligations under capital leases of
U.S. $1,339,000, bearing interest
at rates varying from 7.70% to
7.98%, repayable in monthly
installments to September 1999..... 2,197 1,825
Other................................. 276 --
------ ------
14,497 15,390
Less: Current portion......... 3,623 3,217
------ ------
10,874 12,173
====== ======
</TABLE>
(b) The estimated fair value of the long-term debt, including the
obligations under capital leases, approximates $13,600,000 as at September 30,
1996, based on discounted cash flows using interest rates available to the
company for debts with similar terms and maturities.
F-31
<PAGE> 144
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
(c) Principal repayments over the next five twelve-month periods ending
September 30 are as follows:
<TABLE>
<CAPTION>
OBLIGATIONS
UNDER TERM LOAN
CAPITAL LEASES AND OTHER
-------------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
1997....................................................... 2,002 1,721
1998....................................................... 1,086 1,892
1999....................................................... 1,213 1,813
2000....................................................... 538 1,396
2001....................................................... 357 814
-----
Minimum lease payments..................................... 5,196
Less: Amount representing interest....................... 697
-----
4,499
Less: Current portion.................................... 1,496
-----
3,003
=====
</TABLE>
(d) Pursuant to an agreement with a chartered bank, the company has credit
facilities available up to $22,500,000. Under this agreement, the $7,500,000
operating loan which forms part of the credit facilities bears interest at the
prime rate. Also, a revolving term loan of $15,000,000 is for a two-year period
extendible annually for up to two additional one-year periods to be followed by
a reducing loan with a term of up to three years. The interest rate on the
revolving term loan is prime plus 1/4%. As at September 30, 1996, the company
has drawn $307,000 on the operating loan facility. Accounts receivable and
inventories have been pledged as collateral for these borrowings.
(e) Circo Caribe entered into a line of credit agreement with a financial
institution which provides borrowings up to a maximum of U.S. $2,000,000. The
interest rate is prime plus 1%. As at September 30, 1996, Circo Caribe has used
$1,369,000 of the line of credit. Accounts receivable and inventories of Circo
Caribe have been pledged as collateral for these borrowings.
5. NON-CONTROLLING INTEREST
The Economic Development Bank for Puerto Rico (EDB) subscribed to 150,000
Class A Preferred shares of Circo Caribe (EDB shares) for a total amount of U.S.
$1,500,000. The EDB shares have a par value of U.S. $10 per share and carry a
cumulative preferential annual dividend of 7.5% on the par value thereof,
payable on a semi-annual basis. EDB shares carry no voting rights.
6. CAPITAL STOCK
(a) As at September 30, 1996 and December 31, 1995, the authorized capital
stock consists of the following in an unlimited number:
First Preferred shares, without nominal or par value, issuable in series
Second Preferred shares, without nominal or par value, issuable in
series
Common shares, without nominal or par value
The directors are responsible for defining the rights, privileges,
restrictions and conditions attached to each series of the First and Second
Preferred shares upon their issuance.
F-32
<PAGE> 145
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
(b) The issued and paid capital stock consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
16,069,300 (December 31, 1995 -- 15,435,200) common
shares................................................ 37,776 41,823
1,200,000 Second Preferred shares, Series A (note
6(c))................................................. -- --
156,000 Second Preferred shares, Series B (note 6(c))... -- --
2,556,000 Second Preferred shares, Series C (note
6(c))................................................. -- --
------ ------
37,776 41,823
====== ======
</TABLE>
(c) The company issued Second Preferred shares, Series A, B and C in
connection with the financial assistance amounting to $1,200,000 in 1986,
$78,000 in 1988, $78,000 in 1990, $852,000 in 1991, $852,000 in 1992 and
$852,000 in 1993, received from the Government of Quebec for costs incurred in
the installation of facilities. Such shares are non-voting and are entitled to
receive, as and when declared, an aggregate non-cumulative preferential dividend
of $1 and upon liquidation, to receive an aggregate amount of $1. The company
issued such shares for the purposes of such financial assistance and will
repurchase such shares at their issue price of $1 per share upon request of the
holder thereof if the majority of the common shares or more than half of the
assets of the company are transferred, within five years following the granting
of such financial assistance, to an enterprise whose head office is not located
in the Province of Quebec or to an individual who does not reside therein unless
prior approval is obtained from the holder of such Preferred shares. The
proceeds from these issues were deducted from the cost of certain fixed assets.
Subsequent to September 30, 1996, pursuant to an agreement with the
Government of Quebec, the company repurchased and cancelled all of the issued
Second Preferred shares, Series A, B and C for a total cash consideration of
$752,400. As at September 30, 1996, the company recorded a provision for the
share repurchase as an increase to the cost of certain fixed assets, which had
been previously reduced upon receiving the Government of Quebec grant.
(d) On September 28, 1996, the company issued 317,100 common shares to the
Economic Development Bank for Puerto Rico in exchange for the 150,000 Class A
Preferred shares it previously held in Circo Caribe. The value attributed to the
common shares issued corresponds to the redemption price of the shares of Circo
Caribe received, which was $2,044,950 (U.S. $1,500,000).
(e) In 1995, the company established a Key Employee Stock Option Plan (the
"Plan"). The maximum number of common shares that may be issued under the Plan
shall not exceed 1,250,000 common shares. In 1996, the company issued 317,000
common shares for a total cash consideration of $2,002,225 upon exercise of
options granted in 1995 and 1996 under this Plan. There were no outstanding
options as at September 30, 1996.
(f) In 1995, the company issued 1,349,799 common shares (201 in 1994) at a
price of $6.50 per share for the exercise of warrants.
(g) In 1994, under the terms of specific employment contracts, the company
granted options to two officers to purchase from treasury a maximum of 150,000
common shares. During 1995, 12,500
F-33
<PAGE> 146
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
options were exercised at a price of $4.24 per share. Following the resignation
of these officers in 1995, the balance of unvested options expired.
7. SALES
In January 1995, the company reached an out-of-court settlement with a
competitor for an amount of $10,528,000. This amount was received in January
1995 and was presented as other receivable as at December 31, 1994. Sales of
Circo Caribe in 1994 include an amount of $5,614,000 net of related expenses of
$4,914,000 in connection with the settlement.
8. INCOME TAXES
(a) The company's provision for income taxes includes the following:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTH
DECEMBER 31, PERIOD ENDED
-------------- SEPTEMBER 30,
1994 1995 1996
----- ----- -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Current..................................................... 3,169 4,764 2,797
Deferred.................................................... (450) 800 1,050
----- ----- -----
2,719 5,564 3,847
===== ===== =====
</TABLE>
(b) The company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
% % %
----- ----- -----
<S> <C> <C> <C>
Combined basic federal and provincial income tax rate....... 45.09 45.09 45.09
Increase (decrease) in income tax rate resulting from:
Active business income deduction.......................... (7.35) (7.35) (7.35)
Manufacturing and processing deduction.................... (7.00) (7.00) (7.00)
Non-deductible expenses................................... -- -- 12.82
Surtax.................................................... 0.84 1.07 1.12
Other..................................................... (1.58) 1.19 2.07
----- ----- -----
Combined Canadian rates..................................... 30.00 33.00 46.75
Unrecognized (recognized) income tax benefits of Circo
Caribe.................................................... (0.90) (1.05) 17.33
----- ----- -----
29.10 31.95 64.08
===== ===== =====
</TABLE>
(c) Circo Caribe obtained a fifteen-year tax exemption grant under the 1987
Puerto Rico Tax Incentives Act. The grant expires in December 2011 and provides
a 90% exemption on industrial development income and property taxes.
9. MAJOR CUSTOMERS
Approximately 26%, 19%, and 10%, respectively (1995 -- 19%, 15%, 14%, and
11%; 1994 -- 25%, 21%, and 13%) of the company's sales were to three unrelated
multinational corporations (four in 1995) which have multiple divisions
responsible for their own purchasing decisions.
F-34
<PAGE> 147
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
10. COMMITMENTS
Capital expenditures committed as at September 30, 1996 amount to
approximately $1,135,000 (December 31, 1995 -- $3,602,000; December 31,
1994 -- $2,012,000).
Circo Caribe leases its manufacturing facilities in Puerto Rico under an
operating lease with the Puerto Rico Industrial Development Corporation which
expires on December 31, 2002. Future lease payments will aggregate U.S.
$3,048,000, including the following amounts, over the next five years:
<TABLE>
<CAPTION>
(THOUSANDS OF
U.S. DOLLARS)
-------------
<S> <C>
1997.................................... 508
1998.................................... 508
1999.................................... 508
2000.................................... 508
2001.................................... 508
</TABLE>
11. BUSINESS AND GEOGRAPHIC SEGMENT
The company's operations are concentrated in the manufacturing of printed
circuits, with facilities located in Canada and Puerto Rico selling to a
diversified base of manufacturers in the telecommunications, computer,
automotive, and industrial electronics markets throughout North America.
Information concerning the company's business by geographic segment is as
follows:
<TABLE>
<CAPTION>
CANADA PUERTO RICO CONSOLIDATED
--------------------------------- ---------------------------------- ---------------------------------
YEAR ENDED NINE MONTH YEAR ENDED NINE MONTH YEAR ENDED NINE MONTH
DECEMBER 31, PERIOD ENDED DECEMBER 31, PERIOD ENDED DECEMBER 31, PERIOD ENDED
----------------- SEPTEMBER 30, ------------------ SEPTEMBER 30, ----------------- SEPTEMBER 30,
1994 1995 1996 1994 1995 1996 1994 1995 1996
------- ------- ------------- ------- ------- ------------- ------- ------- -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales to external
customers........... 127,497 155,326 109,756 24,328(1) 29,830 19,877 151,825 185,156 129,633
======= ======= ======= ====== ====== ======= ======= ======= =======
Inter-segment sales.. -- -- 678 2,619 7,211 775 -- -- --
======= ======= ======= ====== ====== ======= ======= ======= =======
Earnings (loss)
before income taxes
and non-controlling
interest............ 9,032 16,859 8,228 305(2) 554 (2,225) 9,337 17,413 6,003
======= ======= ======= ====== ====== ======= ======= ======= =======
Identifiable
assets............ 74,613 109,623 116,735 26,700 19,341 17,990 101,313 128,964 134,725
======= ======= ======= ====== ====== ======= ======= ======= =======
</TABLE>
- ---------------
(1) Sales of 1994 include a net amount of $5,614,000 in connection with an
out-of-court settlement.
(2) In conjunction with the out-of-court settlement described in note 7,
deferred start-up costs were fully amortized in 1994. Amortization in 1994
amounted to $2,416,000.
Export sales amounted to approximately 66% (1995 and 1994 -- 73%) of the
company's total sales to external customers.
12. UNITED STATES ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Canadian GAAP"). In certain
respects, Canadian GAAP differs from accounting principles generally accepted in
the United States ("U.S. GAAP").
F-35
<PAGE> 148
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
Net Earnings and Shareholders' Equity
(a) The following summary sets out the material adjustments to the
company's reported net earnings and shareholders' equity which would be made in
order to conform to U.S. GAAP:
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
----------------- -------------
1994 1995 1996
------- ------- -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Net earnings for the period under Canadian GAAP..... 6,384 11,693 1,974
U.S. GAAP adjustments:
Contingent gain (note 12(b))...................... (8,984) 8,984 --
Start-up costs (note 12(c))....................... 2,416 -- --
Translation gains and losses (note 12(d))......... (138) 241 (103)
Income taxes (note 12(e))......................... (104) (515) 167
------- ------- ------
Net earnings (loss) for the period under U.S.
GAAP.............................................. (426) 20,403 2,038
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
--------------- --------------- ---------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Shareholders' equity under Canadian
GAAP................................. 61,165 81,685 87,706
U.S. GAAP adjustments:
Contingent gain (note 12(b))......... (8,984) -- --
Translation gains and losses (note
12(d))............................ (138) 103 --
Income taxes (note 12(e))............ 61 (454) (287)
------- ------- ------
Shareholders' equity under U.S. GAAP... 52,104 81,334 87,419
======= ======= ======
</TABLE>
(b) Under Canadian GAAP in effect before April 1, 1996, contingent gains,
when confirmed, were treated as prior period adjustments and the effect of the
change was applied retroactively to the years to which they relate. Under U.S.
GAAP, contingent gains are recorded in the year the uncertainty as to the
likelihood or amount is resolved. Accordingly, the out-of-court settlement of
$10,528,000 described in note 7 would have been recorded in earnings in 1995
under U.S. GAAP net of related expenses of $1,544,000.
(c) Under Canadian GAAP, start-up costs can be deferred and amortized over
a reasonable period of time. Under U.S. GAAP, no start-up costs would have been
deferred and the $2,416,000 amortized in 1994 would have been expensed when
incurred, in 1993.
(d) Under Canadian GAAP, translation gains and losses arising on the
translation, at exchange rates prevailing at the balance sheet date, of
long-term debt denominated in foreign currency are deferred and amortized over
the remaining life of the related debt. Under U.S. GAAP, such gains and losses
are included in the statement of earnings in the period in which the exchange
rate changes.
(e) Under Canadian GAAP, the company follows the tax allocation method in
providing for income taxes while under U.S. GAAP the liability method would be
used. Under this method, deferred income taxes are calculated on the difference
between accounting and tax values of the assets and liabilities. The current tax
rate is used to calculate deferred income taxes at the balance sheet date.
Deferred tax assets arising from losses and temporary differences are subject to
a valuation allowance whenever it is more likely that the assets will not be
realized.
F-36
<PAGE> 149
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
(f) Under Canadian GAAP, share issue costs can be shown as a reduction of
retained earnings. Under U.S. GAAP, these costs must be shown as a reduction of
the capital stock. Accordingly, issue costs amounting to $772,000 incurred in
prior years would have been shown as a reduction of the capital stock under U.S.
GAAP.
(g) Under Canadian GAAP, costs of providing life insurance and health care
benefits to employees after retirement are recognized as incurred while under
U.S. GAAP these costs are accrued during the employees' years of active service.
This difference in GAAP would not result in a material change to the company's
consolidated financial statements.
Cash flows
(h) Under U.S. GAAP, the following amounts would be reported:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTH THREE MONTH
DECEMBER 31, PERIOD ENDED PERIOD ENDED
----------------- SEPTEMBER 30, MARCH 31,
1994 1995 1996 1996
------ ------- ------------- ------------
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Net cash provided by operating
activities........................ 5,653 24,388 18,034 5,896
Net cash provided by financing
activities........................ 5,737 9,300 1,222 (237)
Net cash used in investing
activities........................ (7,392) (21,790) (14,444) (14,661)
------ ------- ------- -------
Net increase in cash................ 3,998 11,898 4,812 (9,002)
------ ------- ------- -------
Cash at the end of the period....... 4,702 16,600 21,412 7,598
====== ======= ======= =======
</TABLE>
(i) Canadian GAAP allows the disclosure of a subtotal of the amount of cash
provided by operating activities before cash provided by non-cash operating
working capital items. U.S. GAAP requires a statement of cash flows without
subtotal.
(j) Under U.S. GAAP, the definition of cash in the statement of cash flows
would exclude short-term deposits with original maturities of three months or
more and bank indebtedness which amounted to $8,000,000 and $3,147,000,
respectively as at September 30, 1996 (December 31, 1995 $3,500,000 and
$2,370,000, respectively; December 31, 1994 $2,500,000 and $517,000,
respectively). Under U.S. GAAP, changes in short-term deposits with original
maturities of three months or more would be disclosed as an investing activity
and changes in bank indebtedness would be disclosed as a financing activity.
(k) Machinery and equipment financed through capital leases are included as
financing and investing activities in the consolidated statement of changes in
financial position under Canadian GAAP but would be excluded from a statement of
cash flows under U.S. GAAP. New capital leases amounted to $2,096,000,
$2,052,000 and $1,214,000 for the nine-month period ended September 30, 1996 and
for the years ended December 31, 1995 and 1994 respectively.
F-37
<PAGE> 150
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
Other disclosure
(l) The disclosure of the following amounts is required under U.S. GAAP:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTH
DECEMBER 31, PERIOD ENDED
-------------- SEPTEMBER 30,
1994 1995 1996
----- ----- -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Research and development expenses.................... 3,325 4,159 3,495
Payments under operating leases...................... 717 795 799
Payments under capital leases........................ 636 975 1,713
Interest paid........................................ 730 1,025 631
Income taxes paid.................................... 3,614 4,115 3,931
</TABLE>
(m) The company maintains defined contribution pension plans for certain
key employees. The plan allows for employee contributions for a maximum of
$11,500, subject to certain legal limitations, of which the company contributes
100%. Under both U.S. GAAP and Canadian GAAP, company contributions are expensed
when incurred. The company's contributions for the nine-month period ended
September 30, 1996 were $105,000 (years ended December 31, 1995 and 1994 $88,000
and $44,000 respectively).
(n) As at September 30, 1996, accounts receivable included short-term loans
to certain key employees of the company for the exercise of stock options
amounting to $1,987,000 which were entirely repaid in the following days.
(o) The company does not maintain a significant allowance for doubtful
accounts receivable because most of its accounts receivable are covered by an
insurance policy.
(p) As at September 30, 1996, Circo Caribe had net operating loss
carryforwards of approximately U.S. $5,400,000 which expire from 2000 to 2003.
Deferred income tax assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Tax benefit of net operating loss carryforwards......... 137 331
Less: Valuation allowance............................... (137) (331)
---- ----
-- --
==== ====
</TABLE>
13. CONVERSION OF CANADIAN GAAP AMOUNTS TO U.S. GAAP AMOUNTS IN U.S. DOLLARS
(UNAUDITED)
The following table sets forth in Canadian dollars the historical statement
of earnings of the company for the nine-month period ended September 30, 1996,
on a historical basis and adjusts the amounts to U.S. GAAP in Canadian dollars.
The Canadian dollar amounts are then translated to U.S. dollars based on a
translation rate of Canadian $1.36 = U.S.$1.00. Such amounts are shown
translated to U.S. dollars for convenience purposes only.
F-38
<PAGE> 151
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
Consolidated Statement of Earnings (unaudited)
<TABLE>
<CAPTION>
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------------------
CANADIAN U.S. GAAP TRANSLATION U.S. GAAP
GAAP ADJUSTMENTS U.S. GAAP RATE U.S. $
---------- ---------------- ------------ ----------- ---------
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales................................... 129,633 -- 129,633 1.36 95,318
Cost of sales........................... 101,532 -- 101,532 1.36 74,656
------- ------- ------- -------
Operating margin........................ 28,101 -- 28,101 1.36 20,662
------- ------- ------- -------
Selling, general and administrative
expenses.............................. 7,969 103 8,072 1.36 5,935
------- ------- ------- -------
Other expenses (income)
Depreciation of fixed assets.......... 8,456 -- 8,456 1.36 6,218
Interest on long-term debt............ 646 -- 646 1.36 475
Interest income....................... (880) -- (880) 1.36 (647)
Expenses related to sale.............. 5,907 -- 5,907 1.36 4,343
------- ------- ------- -------
14,129 -- 14,129 1.36 10,389
------- ------- ------- -------
Earnings before income taxes and
non-controlling interest.............. 6,003 (103) 5,900 1.36 4,338
Provision for income taxes.............. 3,847 (167) 3,680 1.36 2,706
------- ------- ------- -------
Earnings before non-controlling
interest.............................. 2,156 64 2,220 1.36 1,632
Non-controlling interest................ 182 -- 182 1.36 134
------- ------- ------- -------
Net earnings for the period............. 1,974 64 2,038 1.36 1,498
======= ======= ======= =======
</TABLE>
14. SUBSEQUENT EVENT
On October 1, 1996, the company was acquired and, effective November 8,
1996, was amalgamated with its new parent company, HMTF Canada Acquisition Inc.
under the provisions of Part IA of the Companies Act (Quebec). Combined
operations have continued under the name of Circo Craft Co. Inc.
F-39
<PAGE> 152
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Lucent Technologies, Inc.
Berkeley Heights, New Jersey
and
The Board of Directors
Viasystems Group, Inc.
St. Louis, Missouri:
We have audited the accompanying statements of net assets sold to
Viasystems Technologies Corp. ("Viasystems Technologies") of the Interconnection
Business (the "Business") of the Microelectronics Group, Interconnection
Technologies Unit of Lucent Technologies Inc. ("Lucent") as of December 31, 1995
and November 30, 1996 and the statements of operations for each of the two years
ended December 31, 1995 and for the period January 1, 1996 through November 30,
1996. These statements are the responsibility of Lucent'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 statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statements. We
believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements were prepared to present the net
assets of the Business sold to Viasystems Technologies and the results of
operations of the Business pursuant to the acquisition agreement described in
Note 1, and are not intended to be a complete presentation of the Business'
financial position or cash flows.
In our opinion, the accompanying financial statements referred to above
present fairly, in all material respects, the net assets of the Business sold to
Viasystems Technologies as of December 31, 1995 and November 30, 1996 and the
statements of operations of the Business for each of the two years ended
December 31, 1995, and for the period January 1, 1996 through November 30, 1996,
sold pursuant to the acquisition agreement referred to in Note 1, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
St. Louis, Missouri
February 21, 1997
F-40
<PAGE> 153
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
STATEMENTS OF NET ASSETS SOLD
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Inventories................................................. $ 37,172 $ 42,039
Property and equipment, net of accumulated depreciation and
amortization.............................................. 86,403 97,684
-------- --------
Total assets sold................................. 123,575 139,723
-------- --------
LIABILITIES
Current portion of capital lease obligations................ 3,523 4,200
Capital lease obligations................................... 8,075 10,235
-------- --------
Total liabilities assumed............................ 11,598 14,435
-------- --------
Net assets sold................................... $111,977 $125,288
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-41
<PAGE> 154
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
YEAR ENDED JANUARY 1, 1996 JANUARY 1, 1996
DECEMBER 31, THROUGH THROUGH
------------------- NOVEMBER 30, MARCH 31,
1994 1995 1996 1996
-------- -------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales................................ $310,559 $325,047 $325,102 $92,551
Operating expenses:
Cost of goods sold..................... 238,623 274,824 244,313 71,430
Selling, general and administrative.... 30,399 35,246 27,567 8,441
Research and development............... 12,531 7,199 7,225 2,038
Depreciation and amortization.......... 16,111 16,378 18,317 5,547
-------- -------- -------- -------
Operating income (loss)........ 12,895 (8,600) 27,680 5,095
-------- -------- -------- -------
Other income (expenses):
Other income........................... 75 94 228 114
Interest expense....................... (5) (204) (917) (28)
-------- -------- -------- -------
Income (loss) before income
taxes........................ 12,965 (8,710) 26,991 5,181
Provision (benefit) for income taxes..... 4,927 (3,310) 10,257 2,072
-------- -------- -------- -------
Net income (loss).............. $ 8,038 $ (5,400) $ 16,734 $ 3,109
======== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-42
<PAGE> 155
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BACKGROUND AND BASIS OF PRESENTATION:
Pursuant to an Acquisition Agreement (the "Agreement") dated November 26,
1996, between Viasystems Technologies Corp. ("Viasystems Technologies"), a
wholly owned subsidiary of Viasystems Group, Inc., and Lucent Technologies, Inc.
("Lucent"), Viasystems Technologies agreed to acquire certain assets and assume
certain liabilities from the Microelectronics Group, Interconnection
Technologies Unit (the "Business") of Lucent in exchange for consideration
totaling $200,000. The Business designs, manufactures and markets printed
circuit boards, backpanels and related products and components for the
telecommunications and computer-related markets. The effective date of the
Agreement is December 1, 1996.
The Business' financial statements are derived from the historical books
and records of the Microelectronics Group, Interconnection Technologies Unit of
Lucent and present assets sold and liabilities assumed and the results of
operations of the Business related to the acquisition by Viasystems
Technologies. The historical operating results may not be indicative of the
results after the acquisition by Viasystems Technologies. No statement of cash
flows has been presented since any computation of historical cash flow data for
the Business would be based on arbitrary assumptions of the financial
information necessary to prepare such data and, in the opinion of management,
would not be meaningful.
The Business' financial statements include allocations of certain expenses
that have historically been accounted for by Lucent based on allocation methods
that depend on the nature of the account. For those costs that are labor
intensive, such as research and development, allocations are made based on
forecasted head count percentages. Most other costs are allocated based on
forecasted sales. Many of the marketing and sales costs are negotiated each year
between the department providing the service and the individual business unit.
The percentage of the negotiated cost of the business unit to the total
negotiated cost for that service is applied to the actual cost each month and
allocated to the individual business units. A portion of the operating expenses
are incurred at the Richmond Works location, particularly product management,
transportation and local research and development. These expenses are allocated
to the Business using estimates calculated by the department's manager. Some
transportation expense is based on specific service contracts when they can be
identified.
Allocated expenses include certain direct and indirect selling, marketing,
and research and development costs from the Microelectronics Group and services
from Lucent. Services from Lucent represent the allocated costs for services
such as employee benefits, human resources, labor relations, corporate tax and
business planning and overhead expenses, public relations, legal services,
environmental management, data processing and training.
Lucent's management believes that these allocations are based on
assumptions that are reasonable under the circumstances. However, these
allocations are not necessarily indicative of the costs and expenses that would
have resulted if the Business had been operated as a separate entity.
F-43
<PAGE> 156
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The allocations and other components of cost of sales and selling, general
and administrative expenses are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
PERIOD FROM JANUARY 1,
YEAR ENDED JANUARY 1, 1996 1996
DECEMBER 31, THROUGH THROUGH
------------------- NOVEMBER 30, MARCH 31,
1994 1995 1996 1996
-------- -------- --------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Allocated cost of sales...................... $ 8,019 $ 8,878 $ 6,004 $ 2,189
Other cost of sales.......................... 230,604 265,946 238,309 69,241
-------- -------- -------- -------
$238,623 $274,824 $244,313 71,430
======== ======== ======== =======
Allocated selling expense.................... $ 4,477 $ 6,226 $ 3,494 $ 1,077
Other selling expense........................ 3,312 3,823 2,472 844
Allocated general and administrative......... 12,373 14,187 8,706 2,759
Other general and administrative............. 10,237 11,010 12,895 3,761
-------- -------- -------- -------
$ 30,399 $ 35,246 $ 27,567 8,441
======== ======== ======== =======
Allocated research and development........... $ 2,176 $ -- $ -- $ --
Other research and development............... 10,355 7,199 7,225 2,038
-------- -------- -------- -------
$ 12,531 $ 7,199 $ 7,225 $ 2,038
======== ======== ======== =======
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. 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 amount of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the report period. Actual results could differ from those estimates.
B. REVENUE RECOGNITION: Sales and related costs of goods sold are included
in income when goods are shipped to the customer.
C. INVENTORIES: Inventories are stated at the lower of cost or market. Cost
is determined on a first-in, first-out method (FIFO).
D. PROPERTY AND EQUIPMENT: The Business' investment in property and
equipment is stated at cost. Depreciation is calculated on a double-declining
method over the estimated useful lives of the assets. Property and equipment are
written off of the books and records when fully depreciated. Maintenance and
repair expenditures are charged to operations and cost of major renewals and
improvements are capitalized. Gains or losses on sales and retirements are
reflected in income.
E. INCOME TAXES: The Business is not a separate taxable entity for federal,
state, or local income tax purposes. The Business' operations are included in
the consolidated Lucent tax returns. Lucent has historically allocated income
taxes to the Business using an assumed statutory tax rate in effect without
consideration to segregating current and deferred income taxes. In addition, the
statutory tax rate has not been reduced for research and development or other
tax credits, if any, as these amounts cannot be separately determined for the
Business. Accordingly, the provision for income taxes is based on an assumed
combined federal and state statutory rate of 38% for each year presented, but
current and deferred portions of the provision have not been determined.
F-44
<PAGE> 157
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
F. RESEARCH AND DEVELOPMENT COSTS: Research and development costs are
charged to expense when incurred.
G. INTERIM FINANCIAL PRESENTATION: The unaudited condensed statements of
net assets sold and operations as of and for the three months ended March 31,
1996, do not include all of the information required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included.
3. INVENTORIES:
The components of inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Finished goods.............................................. $14,890 $19,020
Work-in-process and raw materials........................... 22,282 23,019
------- -------
$37,172 $42,039
======= =======
</TABLE>
4. PROPERTY AND EQUIPMENT:
The major classes of property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Land and improvements....................................... $ 4,219 $ 4,219
Buildings and improvements.................................. 40,247 40,429
Equipment................................................... 155,960 159,776
Tools, furniture and fixtures............................... 9,248 9,308
Leased equipment............................................ 12,366 18,390
-------- --------
222,040 232,122
Less accumulated depreciation and amortization.............. 147,331 147,408
-------- --------
74,709 84,714
Construction in progress.................................... 11,694 12,970
-------- --------
$ 86,403 $ 97,684
======== ========
</TABLE>
F-45
<PAGE> 158
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
5. CAPITAL LEASE OBLIGATION:
The Business entered into various equipment leases under an arrangement
which is accounted for as a capital lease. At December 31, 1995 and November 30
1996, the Business recorded equipment totaling $12,366 and $18,390,
respectively, acquired under capital leases. Accumulated amortization on such
equipment at December 31, 1995 and November 30, 1996 totaled $882 and $3,660,
respectively. Minimum future rental payments under all capital leases as of
December 1, 1996, are as follows:
<TABLE>
<S> <C>
1996 (one month)............................................ $ 423
1997........................................................ 5,077
1998........................................................ 4,917
1999........................................................ 4,314
2000........................................................ 1,479
-------
Total minimum lease payments...................... 16,210
Less -- Imputed interest.................................... (1,775)
-------
Present value of minimum lease payments............ 14,435
Current portion of obligations under capital leases......... 4,200
-------
$10,235
=======
</TABLE>
6. TRANSACTIONS WITH AFFILIATES:
The Business through the normal course of business, conducts transactions
with Lucent and its affiliates. In addition to the various allocated costs and
expenses described in Note 1, the majority of the Business' net sales is with
Lucent affiliated entities.
The Business' sales to Lucent and its affiliates were $277,288, $282,971
and $295,189 for the years ended December 31, 1994 and 1995, and for the period
January 1, 1996 through November 30, 1996, respectively.
The cost of sales related to the sales to Lucent and its affiliates were
$213,397, $239,624 and $232,276 for the years ended 1994 and 1995, and for the
period January 1, 1996 through November 30, 1996, respectively.
The Business purchases electric and electronic converters from Lucent's
affiliated entity, which was sold to Berg Electronics Corp. on May 22, 1994. The
Business's purchases were $9,713 for the period January 1, 1994 through May 22,
1994.
Receipts, disbursements and the net cash position of the Business have been
managed by the Microelectronics Group through a centralized treasury system.
Accordingly, both cash generated by and cash requirements of the Business flow
through the Microelectronics Group. There is no direct interest cost allocation
to the Business with respect to borrowings, if any, and, accordingly, the
Statements of Operations do not include any financing costs.
7. EMPLOYEE BENEFIT PLANS:
A. PENSION PLANS: The Business participates in noncontributory defined
benefit plans sponsored by Lucent covering substantially all employees. Benefits
for management employees are principally based on career average pay. Benefits
for occupational employees are not directly pay-
F-46
<PAGE> 159
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
related. Information required pursuant to SFAS No. 87, Employer's Accounting for
Pensions, including the funded status of the plans is not available for the
Business as a separate entity.
Pension contributions are principally determined using the aggregate cost
method and are primarily made to trust funds held for the sole benefit of plan
participants. Pension cost is computed using the projected unit credit method
and an assumed long-term rate of return on plan assets of 9% in 1994, 1995 and
1996, respectively.
Based on the latest actuarial valuations of the Lucent plans, the fair
value of the net assets available for plan benefits exceeds the projected
benefit obligation at December 31, 1995. The projected benefit obligation was
determined using weighted average discount rates of 7% for December 31, 1995,
and an assumed rate of increase in future compensation levels of 5%. Plan assets
consist primarily of listed stocks (including Lucent common stock), corporate
and governmental debt, real estate investments, and cash and cash equivalents.
B. SAVINGS PLANS: The Business participates in savings plans sponsored by
Lucent covering the majority of employees. The plans allow employees to
contribute a portion of their pre-tax and/or after-tax income in accordance with
specified guidelines. Lucent matches a percentage of the employee contributions
up to certain limits.
C. POSTRETIREMENT BENEFIT PLANS: The Business participates in benefit plans
for retirees, which include health care benefits, life insurance coverage and
telephone concessions sponsored by Lucent. Lucent adopted SFAS No. 106,
Employers' Accounting for Postretirement Benefits Other than Pensions, effective
January 1, 1993. This Standard requires that estimated future retiree benefits
be accrued for during the years the employees are working and accumulating these
benefits. Information required pursuant to SFAS No. 106, including the net
periodic postretirement benefit cost and information on the funded status of the
plan, is not available for the Business as a separate entity.
At December 31, 1995 the accumulated postretirement benefit obligation,
exceeded the plan assets at fair value. The postretirement benefit obligation
was determined using a weighted average discount rate of 7.0%, an expected
long-term rate of return on plan assets of 9.0% and assumed a rate of increase
in the per capita cost of covered healthcare benefits of 6.1%.
Plan assets consist primarily of listed stocks, corporate and governmental
debt, cash and cash equivalents and life insurance contracts.
The costs of these plans were allocated to the Business on the basis of
salaries, the majority of which are included in cost of sales. Benefit costs
included in cost of sales were approximately $6,600, $7,300 and $6,200 for the
years ended December 31, 1994 and 1995, and for the period January 1, 1996
through November 30, 1996, respectively.
8. COMMITMENTS:
In conjunction with the Agreement, Lucent and Viasystems Technologies have
entered into certain contractual arrangements whereby Lucent has agreed to
provide to Viasystems Technologies manufacturing, labor and support services.
Lucent and Viasystems Technologies have also entered into a supply agreement
effective through December 31, 2001, which shall extend through December 31,
2003 in the event Viasystems Technologies has in all material respects satisfied
the Performance Metrics (as defined) of the supply agreement. Such agreement
shall continue thereafter until terminated by either party upon eighteen months
prior written notice.
F-47
<PAGE> 160
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of Forward Group PLC
We have audited the accompanying consolidated balance sheets of Forward
Group PLC and its subsidiaries at 31 January 1996 and 1997 and the related
consolidated profit and loss accounts and cash flow statements for each of the
years in the three-year period ended 31 January 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom and the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes assessing the 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 aforementioned consolidated financial statements
present fairly, in all material respects, the financial position of Forward
Group PLC and its subsidiaries at 31 January 1996 and 1997 and the results of
their operations and their cash flows for each of the years in the three-year
period ended 31 January 1997 in conformity with generally accepted accounting
principles in the United Kingdom.
Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States of America. Application of generally accepted accounting
principles in the United States of America would have affected the profit for
the financial year for each of the years in the three-year period ended 31
January 1997 and equity shareholders' funds at 31 January 1996 and 1997 to the
extent summarised in Note 25 to the consolidated financial statements.
KPMG Audit Plc
Chartered Accountants
Birmingham, England
7 April 1997
F-48
<PAGE> 161
FORWARD GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED 31 JANUARY ENDED 31 MARCH
------------------------- ---------------
1995 1996 1997 1996 1997
NOTE (L000) (L000) (L000) (L000) (L000)
---- ------ ------ ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Turnover
Continuing operations................................. 2 21,471 66,839 97,001 25,907 25,287
Acquisitions.......................................... 2 -- -- 8,028 -- --
Discontinued operations............................... 2 2,348 -- -- -- --
------ ------ ------- ------ ------
23,819 66,839 105,029 25,907 25,287
------ ------ ------- ------ ------
Operating profit
Continuing operations................................. 3 2,154 7,976 8,079 4,027 2,853
Acquisitions.......................................... 3 -- -- 1,022 -- --
Discontinued operations............................... 3 291 -- -- -- --
------ ------ ------- ------ ------
2,445 7,976 9,101 4,027 2,853
Profit on disposal of discontinued operations......... 11 1,503 -- -- -- --
Expenses related to sale.............................. -- -- -- -- (1,318)
Net interest payable.................................. 5 (228) (412) (996) (159) (381)
------ ------ ------- ------ ------
Profit on ordinary activities before taxation........... 6 3,720 7,564 8,105 3,868 1,154
Tax on profit on ordinary activities.................... 8 (744) (2,641) (2,707) (1,276) (833)
------ ------ ------- ------ ------
Profit for the financial period......................... 2,976 4,923 5,398 2,592 321
Dividends............................................... 9 (494) (1,089) (552) -- --
------ ------ ------- ------ ------
Retained profit for the financial period................ 18 2,482 3,834 4,846 2,592 321
====== ====== ======= ====== ======
</TABLE>
The results on a historical cost basis are not materially different to
those reported above.
A reconciliation of the movement in shareholders' funds is shown in note
19.
F-49
<PAGE> 162
FORWARD GROUP PLC
CONSOLIDATED STATEMENTS OF TOTAL RECOGNIZED GAINS AND LOSSES
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED 31 JANUARY ENDED 31 MARCH
------------------------ ---------------
1995 1996 1997 1996 1997
(L000) (L000) (L000) (L000) (L000)
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Profit for the financial year....................... 2,976 4,923 5,398 2,592 321
Currency translation adjustment..................... -- -- (22) -- 5
----- ----- ----- ----- ---
2,976 4,923 5,376 2,592 326
===== ===== ===== ===== ===
</TABLE>
F-50
<PAGE> 163
FORWARD GROUP PLC
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
31 JANUARY
------------------ 31 MARCH
1996 1997 1997
NOTE (L000) (L000) (L000)
---- ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Fixed assets
Tangible assets................................. 10 27,028 36,407 36,707
Current assets
Stocks.......................................... 12 5,476 6,586 7,285
Debtors......................................... 13 17,831 17,289 19,729
Cash at bank and in hand........................ 789 -- --
------- ------- -------
24,096 23,875 27,014
Creditors: amounts falling due within one year.... 14 (22,198) (26,949) (30,624)
------- ------- -------
Net current assets/(liabilities).................. 1,898 (3,074) (3,610)
------- ------- -------
Total assets less current liabilities............. 28,926 33,333 33,097
Creditors: amounts falling due after more than one
year............................................ 15 (5,698) (6,574) (6,417)
Provisions for liabilities and charges............ 16 (2,723) (2,616) (2,616)
------- ------- -------
Net assets........................................ 20,505 24,143 24,064
======= ======= =======
Capital and reserves
Called up share capital......................... 17 679 2,754 2,762
Shares to be issued............................. 17 3 -- --
Share premium account........................... 18 8,840 6,837 6,908
Merger reserve.................................. 18 65 -- --
Revaluation reserve............................. 18 578 566 564
Profit and loss account......................... 18 10,340 13,986 13,830
------- ------- -------
Equity shareholders' funds........................ 20,505 24,143 24,064
======= ======= =======
</TABLE>
F-51
<PAGE> 164
FORWARD GROUP PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED 31 JANUARY 31 MARCH
---------------------------- ------------------
1995 1996 1997 1996 1997
NOTE (L000) (L000) (L000) (L000) (L000)
---- ------ ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net cash inflow from operating
activities..................... 20a 2,722 10,667 18,561 3,402 3,173
Returns on investments and
servicing of finance
Interest received.............. 4 61 85 20 8
Interest paid.................. (257) (464) (1,018) (167) (332)
Dividends paid................. (453) (722) (1,207) (435) (552)
------ ------- ------- ------- -------
Net cash outflow from returns on
investments and servicing of
finance........................ (706) (1,125) (2,140) (582) (876)
UK tax paid...................... (568) (1,670) (3,633) -- (162)
Investing activities
Purchase of tangible fixed
assets...................... 20f (2,120) (4,153) (7,624) (2,280) (488)
Acquisition of businesses (net
of cash and cash equivalents
acquired)................... 20d -- (8,191) (9,184) (2,757) --
Sale of tangible fixed
assets...................... 151 299 435 -- --
Disposal of business (net of
cash and cash equivalents
disposed of)................ 20e 2,490 -- -- -- --
------ ------- ------- ------- -------
Net cash inflow/(outflow) from
investing activities........... 521 (12,045) (16,373) (5,037) (488)
------ ------- ------- ------- -------
Net cash inflow/(outflow) before
financing...................... 1,969 (4,173) (3,585) (2,217) 1,647
Financing
Issue of Ordinary share
capital..................... 10 7,550 92 -- 78
Capitalisation issue
expenses.................... -- -- (24) -- --
Repayment of bank loan......... -- (790) (720) (180) (180)
Capital element of hire
purchase and finance lease
payments.................... (669) (1,170) (2,393) (431) (734)
Payment of contingent
consideration............... (220) -- -- -- --
------ ------- ------- ------- -------
Net cash (outflow)/inflow from
financing...................... 20b (879) 5,590 (3,045) (611) (836)
------ ------- ------- ------- -------
Net increase/(decrease) in cash
and cash equivalents........... 20c 1,090 1,417 (6,630) (2,828) 811
====== ======= ======= ======= =======
</TABLE>
F-52
<PAGE> 165
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN BRITISH POUNDS STERLING)
1. GENERAL
As used in the consolidated financial statements and related notes, the
term "Company" refers to Forward Group PLC and the term "Group" refers to
Forward Group PLC and its subsidiary undertakings as set out in note 24.
PRINCIPAL ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing
with items which are considered material in relation to the consolidated
financial statements of Forward Group PLC:
Basis of preparation
The consolidated financial statements have been prepared under the
historical cost convention, modified to include the revaluation of certain
freehold property, and in accordance with applicable Accounting Standards.
Basis of consolidation
The consolidated financial statements incorporate the financial statements
of Forward Group PLC and all of its subsidiary undertakings made up to 31
January 1997. The results of companies or businesses acquired or disposed of
during the year are included from the date of acquisition or up to the date of
disposal. Internal sales and profits are eliminated on consolidation. Goodwill
arising on acquisitions is written off directly against reserves on acquisition.
Goodwill previously written off to reserves in respect of businesses disposed of
during the year is included in the calculation of any profit or loss on sale.
Government revenue grants
Government revenue grants are recognised in the profit and loss account in
the period during which the expenditure to which they relate is incurred.
Stocks and work in progress
Stocks and work in progress are valued on a first in, first out basis at
the lower of cost and net realisable value. Cost comprises materials, labour and
an appropriate proportion of production overheads.
Depreciation
Depreciation is provided so as to write off the cost or valuation,
including commissioning costs, of tangible fixed assets to their estimated
residual value on a straight line basis, at the following annual rates:
<TABLE>
<S> <C>
Freehold buildings.......................................... 2.5%
Plant and machinery......................................... 10% -- 20%
Fixtures, fittings, tools and equipment..................... 10% -- 25%
Motor vehicles.............................................. 25%
</TABLE>
Freehold land is not depreciated.
F-53
<PAGE> 166
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Research and development
Expenditure on research and development is expensed in the year in which it
is incurred.
Deferred taxation
Deferred taxation is provided using the liability method in respect of the
taxation effect of all timing differences to the extent that it is probable that
liabilities will crystallise or assets be realised in the foreseeable future.
Hire purchase and leased assets
Assets held under hire purchase or finance lease contracts are capitalised
and included in tangible fixed assets at their fair value. Each asset is
depreciated over the shorter of the contract term or its estimated useful life.
Obligations relating to such contracts, net of finance charges in respect of
future periods, are included as appropriate under creditors. Finance charges are
allocated to accounting periods over the period of the lease to produce a
constant rate of return on the outstanding balance. Rentals under operating
leases are charged to the profit and loss account on a straight-line basis over
the life of the lease.
Pensions
The Group operates both a defined contribution pension scheme and a defined
benefit pension scheme. The Group's contributions to the defined contribution
scheme are charged against profits on an accruals basis in the year to which
they relate. Contributions to the defined benefit scheme are charged against
profits so as to spread the cost of pensions over employees' working lives. The
funds of both schemes are administered by trustees and are independent of the
Group's finances.
Foreign exchange
Transactions denominated in foreign currencies are translated at the rate
of exchange ruling on the day the transaction occurs or at the contracted rate
if the transaction is covered by a forward exchange contract.
Foreign currency monetary assets and liabilities in the balance sheet are
translated into sterling at the rates of exchange ruling at the end of the year
or, if appropriate, at the forward contract rate. Any resulting exchange gains
or losses are taken to the profit and loss account.
The assets and liabilities of overseas subsidiary undertakings are
translated at the closing exchange rate. The profit and loss accounts of those
undertakings are translated using the average rate of exchange during the year.
Net exchange differences arising on translation are taken to reserves.
F-54
<PAGE> 167
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
2. SEGMENTAL ANALYSIS
Turnover is analysed by geographical destination as follows:
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ -------
<S> <C> <C> <C>
United Kingdom........................................ 22,569 40,263 55,848
Rest of Europe........................................ 1,250 25,200 42,364
Rest of the world..................................... -- 1,376 6,817
------ ------ -------
23,819 66,839 105,029
====== ====== =======
</TABLE>
The Group's turnover, profit before taxation and net assets now relate to
only one business segment. In 1995 the amounts shown in the consolidated profit
and loss account as discontinued operations for turnover and operating profit
related to a former specialist chemicals division.
In the opinion of the Directors an analysis of turnover, profit before
taxation and net assets by geographical area of operation would be seriously
prejudicial to the interests of the Group and therefore as permitted under
SSAP25 no disclosure is made.
3. OPERATING PROFIT
<TABLE>
<CAPTION>
CONTINUING DISCONTINUED
OPERATIONS OPERATIONS TOTAL
1995 (L000) (L000) (L000)
---- ---------- ------------ -------
<S> <C> <C> <C>
Turnover.......................................... 21,471 2,348 23,819
Cost of sales..................................... (16,907) (1,112) (18,019)
------- ------ -------
Gross profit...................................... 4,564 1,236 5,800
Selling, general and administrative expenses...... (2,462) (945) (3,407)
Other income...................................... 52 -- 52
------- ------ -------
Operating profit.................................. 2,154 291 2,445
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
CONTINUING
OPERATIONS
1996 (L000)
---- ----------
<S> <C>
Turnover.................................................... 66,839
Cost of sales............................................... (52,251)
-------
Gross profit................................................ 14,588
Selling, general and administrative expenses................ (6,725)
Other income................................................ 113
-------
Operating profit............................................ 7,976
=======
</TABLE>
<TABLE>
<CAPTION>
CONTINUING
OPERATIONS ACQUISITIONS TOTAL
1997 (L000) (L000) (L000)
---- ---------- ------------ -------
<S> <C> <C> <C>
Turnover......................................... 97,001 8,028 105,029
Cost of sales.................................... (78,339) (5,916) (84,255)
------- ------ -------
Gross profit..................................... 18,662 2,112 20,774
Selling, general and administrative expenses..... (10,780) (1,122) (11,902)
Other income..................................... 197 32 229
------- ------ -------
Operating profit................................. 8,079 1,022 9,101
======= ====== =======
</TABLE>
F-55
<PAGE> 168
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Included in the above for 1997 are the following exceptional charges
relating to the restructuring of continuing operations and acquired businesses:
<TABLE>
<CAPTION>
CONTINUING
OPERATIONS ACQUISITIONS TOTAL
(L000) (L000) (L000)
---------- ------------ ------
<S> <C> <C> <C>
Cost of sales........................................ 546 433 979
Selling, general and administrative expenses......... 168 97 265
--- --- -----
714 530 1,244
=== === =====
</TABLE>
Acquisitions in 1997 comprise the former GEC-Marconi hybrid business,
Manchester Circuits Limited and TI Technologies (Pty) Limited.
Discontinued operations comprise the specialist chemicals business disposed
of on 16 December 1994.
4. STAFF NUMBERS AND COSTS
The average number of persons employed by the Group (including executive
Directors) during the year, analysed by category, was as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ----- -----
<S> <C> <C> <C>
Sales....................................................... 22 32 51
Administration.............................................. 38 49 80
Production.................................................. 398 933 1,642
--- ----- -----
458 1,014 1,773
=== ===== =====
Employees at end of year.................................... 435 1,454 1,874
--- ----- -----
</TABLE>
The aggregate payroll costs of these persons were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
Wages and salaries....................................... 6,647 18,215 30,503
Social security costs.................................... 662 1,755 2,916
Other pension costs...................................... 212 745 1,239
----- ------ ------
7,521 20,715 34,658
===== ====== ======
</TABLE>
5. NET INTEREST PAYABLE
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
Bank loan and overdrafts................................... 152 216 609
Hire purchase and finance lease contracts.................. 80 257 472
--- --- -----
Interest payable and similar charges....................... 232 473 1,081
Interest receivable and similar income..................... (4) (61) (85)
--- --- -----
228 412 996
=== === =====
</TABLE>
F-56
<PAGE> 169
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
6. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Profit on ordinary activities before taxation is stated after
charging/(crediting):
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
Directors' emoluments (see note 7):
As Directors............................................. 35 33 86
Remuneration as executives............................... 222 333 333
--- --- ---
257 366 419
Compensation for loss of office.......................... -- 81 --
Grants receivable.......................................... (15) (21) (19)
Property rental income..................................... (37) (88) (87)
Auditors' remuneration..................................... 40 75 84
Research and development expenditure....................... 245 507 764
Payments under operating leases:
Plant and equipment...................................... 22 113 245
Other assets............................................. 210 187 324
=== === ===
</TABLE>
In addition, KPMG Audit Plc and its associates received L97,000 (1996:
L91,000; 1995: L22,000) in respect of other services provided during the year.
7. DIRECTORS' EMOLUMENTS
(a) Remuneration
The emoluments of the Chairman, excluding pension contributions, were
L97,000 (1996: L95,000; 1995: L74,000). The emoluments of the highest paid
Director, excluding pension contributions, were L136,000. In 1995 and 1996 the
Chairman was also the highest paid director.
The emoluments of the Directors, excluding pension contributions, were
within the following ranges:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
L5,001 - L10,000.................................. -- 1 --
L10,001 - L15,000.................................. -- 2 --
L15,001 - L20,000.................................. 2 -- 1
L20,001 - L25,000.................................. -- -- 1
L25,001 - L30,000.................................. -- 2 --
L40,001 - L45,000.................................. -- -- 1
L55,001 - L60,000.................................. 1 -- --
L60,001 - L65,000.................................. 1 -- --
L70,001 - L75,000.................................. 1 1 --
L75,001 - L80,000.................................. -- 1 --
L95,001 - L100,000................................. -- 1 1
L100,001 - L105,000................................. -- -- 1
L135,001 - L140,000................................. -- -- 1
== == ==
</TABLE>
F-57
<PAGE> 170
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
(b) Share options over Ordinary shares
<TABLE>
<CAPTION>
AT NUMBER OF OPTIONS AT
1 FEBRUARY -------------------- 31 JANUARY EXERCISE NORMAL
1996 GRANTED EXERCISED 1997 PRICE EXERCISE PERIOD
----------- ------- --------- ----------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C>
DA Bumpsteed......... 100,000 -- -- 100,000 88.75p 06.07.98 - 05.07.05
=======
MJ Glanfield......... 80,000 -- (80,000) -- 56.25p 31.05.96 - 30.05.03
20,000 -- -- 20,000 61.75p 24.02.98 - 23.02.05
-- 20,000 -- 20,000 180p 13.02.99 - 12.02.06
-------
40,000
=======
</TABLE>
The figures shown as at 1 February 1996 have been restated to reflect the 3
for 1 capitalisation issue.
The closing price of the Company's Ordinary shares on the London Stock
Exchange on 31 January 1997 was 171.5p. The range during the period was 103.5p
to 289.5p.
8. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
The charge for taxation all arises in
the UK and comprises:
Corporation tax on profit for the year
at 33% (1996: 33%; 1995: 33%)......... 603 2,486 2,556
Deferred taxation....................... 141 202 439
Prior year adjustments in respect of:
Corporation tax....................... -- (111) (281)
Deferred taxation..................... -- 64 (7)
--- ------ ------
744 2,641 2,707
=== ====== ======
</TABLE>
The 1997 current year charge includes the effect of tax losses which have
not been relieved.
In 1995 no tax charge arose on the sale of the specialist chemicals
business.
9. DIVIDENDS
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
Interim dividend paid................... 206 434 552
Proposed final dividend................. 288 655 --
--- ------ ---
494 1,089 552
=== ====== ===
</TABLE>
F-58
<PAGE> 171
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
10. TANGIBLE ASSETS
<TABLE>
<CAPTION>
FREEHOLD LAND AND
BUILDINGS FIXTURES,
------------------ PLANT FITTINGS,
AT AT AND TOOLS AND MOTOR
VALUATION COST MACHINERY EQUIPMENT VEHICLES TOTAL
(L000) (L000) (L000) (L000) (L000) (L000)
--------- ------ --------- --------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Cost or valuation
At beginning of year.................. 1,400 5,277 26,594 1,347 717 35,335
Additions............................. -- 890 9,430 1,130 391 11,841
Transfers............................. -- -- 295 (315) 20 --
Acquisitions of businesses............ -- 710 1,644 84 85 2,523
Disposals............................. -- (4) (279) (108) (322) (713)
Translation adjustment................ -- -- (18) (1) -- (19)
----- ------ ------ ----- ---- ------
At end of year........................ 1,400 6,873 37,666 2,137 891 48,967
===== ====== ====== ===== ==== ======
Depreciation
At beginning of year.................. 195 247 7,073 540 252 8,307
Charged in year....................... 32 128 4,086 237 211 4,694
Transfers............................. -- -- 68 (68) -- --
Disposals............................. -- (1) (238) (25) (183) (447)
Translation adjustment................ -- -- 5 1 -- 6
----- ------ ------ ----- ---- ------
At end of year........................ 227 374 10,994 685 280 12,560
----- ------ ------ ----- ---- ------
Net book value
At end of year........................ 1,173 6,499 26,672 1,452 611 36,407
===== ====== ====== ===== ==== ======
At beginning of year.................. 1,205 5,030 19,521 807 465 27,028
===== ====== ====== ===== ==== ======
</TABLE>
On 25 January 1990 the freehold property then owned at Tamworth was valued
at open market value on the basis of existing use at L1,400,000. The historical
cost of tangible fixed assets included at a valuation at the end of the year was
L874,000 (1996: L874,000). Accumulated historical cost depreciation was L258,000
(1996: L246,000).
The net book value of Group tangible fixed assets includes L10,412,000
(1996: L7,302,000) in respect of assets held under hire purchase or finance
lease contracts, after charging depreciation for the year of L1,286,000 (1996:
L538,000) and L1,439,000 (1996: L1,439,000) of freehold land which is not
depreciated.
Plant and machinery includes L1,143,000 (1996: L992,000) of assets which
are under the course of construction.
11. INVESTMENTS
(a) Sale of business -- year ended 31 January 1995
On 16 December 1994 the Group sold the business, assets and certain
liabilities of Chemical Express Limited and its subsidiary undertakings for a
wholly cash consideration of L2,962,000.
F-59
<PAGE> 172
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
The following table sets out the effect of the sale on the Group's
consolidated balance sheet:
<TABLE>
<CAPTION>
1995
(L000)
------
<S> <C>
Tangible fixed assets................... (100)
Stocks.................................. (230)
Debtors................................. (567)
Cash.................................... (214)
Creditors............................... 482
------
Net assets sold......................... (629)
Goodwill reinstated on sale of business
previously written off to reserves.... (572)
Associated costs of sale................ (258)
Cash consideration...................... 2,962
------
Profit on sale.......................... 1,503
======
</TABLE>
(b) Acquisition of businesses -- year ended 31 January 1996
On 13 March 1995, Technograph Microcircuits Limited purchased the former
Ferranti International plc Hybrids Manufacturing and Test Division for a cash
consideration of L10,000. Goodwill arising on this acquisition of L67,000 has
been written off against merger reserve.
On 21 June 1995 the Group acquired the entire issued share capital of
Exacta Circuits Limited for a total consideration of up to L16,000,000, together
with acquisition costs of L766,000.
<TABLE>
<CAPTION>
BOOK ACQUISITION FAIR
VALUE ADJUSTMENTS VALUE
(L000) (L000) (L000)
------- ----------- -------
<S> <C> <C> <C>
Assets
Tangible fixed assets........................... 16,673 -- 16,673
Stocks.......................................... 2,211 -- 2,211
Debtors......................................... 11,867 (92) 11,775
Cash............................................ 8 -- 8
------- ------ -------
30,759 (92) 30,667
======= ====== =======
Liabilities
Bank overdraft.................................. (285) -- (285)
Bank loan....................................... (4,030) -- (4,030)
Taxation........................................ (2,665) -- (2,665)
Finance lease contracts......................... (4,016) -- (4,016)
Other creditors................................. (6,590) -- (6,590)
Provisions...................................... (655) (1,445) (2,100)
------- ------ -------
(18,241) (1,445) (19,686)
======= ====== =======
Net assets acquired............................. 12,518 (1,537) 10,981
======= ======
Goodwill written off against merger reserve..... 5,785
-------
16,766
=======
</TABLE>
F-60
<PAGE> 173
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
The acquisition adjustments reflect an assessment of the fair value of
debtors compared to book value together with recognition of the proceeds
receivable in respect of Exacta Circuits Limited's unexercised share options
(see below) and an adjustment to align Exacta Circuits Limited's accounting
policy on deferred taxation with that of the Group.
<TABLE>
<CAPTION>
(L000)
------
<S> <C>
The consideration was satisfied by:
Shares issued and to be issued for
non-cash consideration:
Nominal value......................... 122
Fair value in excess of nominal
value.............................. 5,917
------
6,039
Cash element of consideration including
costs of acquisition.................. 7,904
Deferred consideration:
Share options......................... 323
Contingent............................ 2,500
------
16,766
======
</TABLE>
On 27 February 1996, 30,966 Ordinary shares in Exacta Circuits Limited were
issued under that company's share option scheme, which was then wound up. These
shares were immediately acquired by the Company under the terms of the June 1995
Sale and Purchase Agreement. Included in the above consideration are 63,593
Ordinary shares in the Company issued for a non-cash consideration of L157,000
together with cash of L323,000.
The payment of L2,500,000 deferred consideration was made on 21 June 1996
to the vendors of Exacta Circuits Limited. It was contingent on a target profit
before taxation of L5,500,000 being achieved for the calendar year 1995. This
target was achieved.
(c) Acquisition of businesses -- year ended 31 January 1997
On 26 March 1996 Technograph Microcircuits Limited acquired GEC-Marconi's
hybrid business for a total cash consideration of L2,726,000.
On 7 May 1996 the Company acquired the entire issued share capital of
Manchester Circuits Limited for a total consideration of L830,000.
On 27 June 1996 the Company acquired the entire issued share capital of TI
Technologies (Pty) Limited (based in South Africa) for an initial consideration
of L510,000. Further consideration, which has not been provided for, of up to
L501,000 may become payable upon certain profit targets being achieved in the 22
months ending on 31 January 1998.
F-61
<PAGE> 174
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
The fair values of the assets and liabilities acquired as a result of the
above are as follows:
<TABLE>
<CAPTION>
GEC- TI
MARCONI MANCHESTER TECHNOLOGIES
HYBRID CIRCUITS (PTY)
BUSINESS LIMITED LIMITED TOTAL
(L000) (L000) (L000) (L000)
----------- ---------- ------------ ------
<S> <C> <C> <C> <C>
Fixed assets............................ 123 2,098 302 2,523
Stocks.................................. 1,525 387 652 2,564
Debtors................................. 463 955 873 2,291
Cash in hand............................ -- -- 15 15
Creditors............................... (431) (960) (1,190) (2,581)
Bank loans and overdrafts............... -- (1,645) (698) (2,343)
Taxation................................ 113 (11) -- 102
Hire purchase obligations............... -- (424) -- (424)
Deferred tax............................ 83 (35) -- 48
----- ------ ------ ------
Fair value of net assets acquired....... 1,876 365 (46) 2,195
===== ====== ====== ======
</TABLE>
Fair values are after taking account of adjustments of L755,000 to reflect
an assessment of the differences between the book values and fair values of
assets acquired, L97,000 of alignments to accord with group accounting policies
and the recognition of unprovided liabilities of L265,000 at the relevant dates
of acquisition.
Following the triennial valuation of the Exacta Circuits Pension Plan on 5
April 1996 the provision at 31 January 1996 has been released resulting in an
adjustment to the provisional assessment of fair values made at the date of
acquisition.
Goodwill written off in the year comprises:
<TABLE>
<CAPTION>
(L000)
------
<S> <C>
Fair value of net assets acquired........................... 2,195
Consideration............................................... 4,225
-----
Goodwill arising on current year acquisitions............... 2,030
Revision to provisional fair value assessment made in
respect of the acquisition of Exacta Circuits Limited..... (584)
-----
1,446
=====
The consideration was satisfied by:
Shares issued for non-cash consideration:
Nominal value............................................. 1
Fair value in excess of nominal value..................... 191
-----
192
Cash consideration.......................................... 3,874
Costs of acquisition........................................ 159
-----
4,225
=====
</TABLE>
F-62
<PAGE> 175
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
12. STOCKS
<TABLE>
<CAPTION>
31 MARCH
1996 1997 1997
(L000) (L000) (L000)
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials and consumables........... 1,689 3,233 3,120
Work in progress........................ 2,611 2,465 3,519
Finished goods and goods for resale..... 1,176 888 646
----- ----- -----
5,476 6,586 7,285
===== ===== =====
</TABLE>
13. DEBTORS
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Trade debtors........................... 16,267 16,368
Other debtors........................... 1,144 454
Prepayments and accrued income.......... 420 467
------ ------
17,831 17,289
====== ======
</TABLE>
14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Bank overdrafts......................... -- 5,841
Bank loan............................... 720 720
Obligations under hire purchase and
finance lease contracts............... 1,461 2,400
Payments on account..................... 112 --
Trade creditors......................... 8,832 10,884
Deferred consideration.................. 2,823 --
Corporation tax and Advance Corporation
Tax payable........................... 4,164 2,540
Other taxes and social security......... 1,222 1,448
Other creditors......................... 142 278
Accruals and deferred income............ 2,067 2,838
Dividends............................... 655 --
------ ------
22,198 26,949
====== ======
</TABLE>
The bank overdrafts and loan are secured by charges over the Group's
assets.
15. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Bank loan................................................... 2,520 1,800
Obligations under hire purchase and finance lease
contracts................................................. 3,178 4,774
----- -----
5,698 6,574
===== =====
Bank loan and overdrafts are repayable as follows:
Within one year............................................. 720 6,561
Between one and two years................................... 720 720
Between two and five years.................................. 1,800 1,080
----- -----
3,240 8,361
===== =====
</TABLE>
F-63
<PAGE> 176
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Obligations under hire purchase and finance lease contracts are payable as
follows:
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Within one year............................................. 1,461 2,400
Between one and two years................................... 1,377 4,498
Between two and five years.................................. 1,801 276
----- -----
4,639 7,174
===== =====
</TABLE>
16. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Deferred taxation........................................... 2,068 2,616
Pension provision........................................... 655 --
----- -----
2,723 2,616
===== =====
</TABLE>
(a) Deferred taxation
Deferred taxation is provided using the liability method at a rate of 33%
(1996: 33%) as follows:
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Accelerated capital allowances.............................. 1,996 2,413
Short term timing differences............................... 236 203
----- -----
2,232 2,616
Less: ACT recoverable....................................... (164) --
----- -----
2,068 2,616
===== =====
</TABLE>
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
At beginning of year........................................ 449 2,068
Charged to profit and loss account.......................... 266 432
Arising on purchase of businesses........................... 1,445 (48)
Movement in Advance Corporation Tax......................... (92) 164
----- -----
At end of year.............................................. 2,068 2,616
===== =====
</TABLE>
F-64
<PAGE> 177
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Unprovided deferred taxation in respect of deferred capital gains amounted
to L744,000 (1996: L744,000).
(b) Pension provision
The pension provision arose during the year ended 31 January 1996 as a
result of the acquisition of Exacta Circuits Limited. This was subsequently
released during the year ended 31 January 1997 as a result of the reassessment
of provisional fair values referred to in notes 11 and 22.
17. SHARE CAPITAL
<TABLE>
<CAPTION>
1996 1997
--------------- ----------------
(L000) (L000) (L000) (L000)
------ ------ ------ ------
<S> <C> <C> <C> <C>
Authorised:
Ordinary shares of 5p each....................... 19,000 950 72,900 3,645
====== === ====== =====
Allotted, called up and fully paid:
Ordinary shares of 5p each....................... 13,577 679 55,088 2,754
====== === ====== =====
Shares to be issued:
Ordinary shares of 5p each....................... 64 3 -- --
====== === ====== =====
</TABLE>
On 19 June 1995 the Company's authorised share capital was increased by the
creation of an additional 8,000,000 Ordinary shares of 5p each.
On 21 June 1995 2,785,961 Ordinary shares with a nominal value of L139,298
were issued for a cash consideration of L2.70 per share pursuant to a placing
and open offer, raising L7,522,000.
On the same date the Company issued 2,381,662 Ordinary shares with a
nominal value of L119,083 as part consideration for the 839,506 ordinary L1
shares representing the whole of the issued share capital of Exacta Circuits
Limited.
On 13 March 1996 the Company issued 63,593 Ordinary shares for a non-cash
consideration of L157,000 as part of the arrangements regarding the purchase of
the remaining shares under option in Exacta Circuits Limited.
On 20 May 1996 the Company issued 17,597 Ordinary shares in connection with
the acquisition of Manchester Circuits Limited for a non-cash consideration of
L134,000.
On 27 June 1996 the Company issued 5,658 Ordinary shares in connection with
the acquisition of TI Technologies (Pty) Limited for a non-cash consideration of
L59,000.
On 28 June 1996 the Company's authorised share capital was increased by the
creation of an additional 53,900,000 Ordinary shares of 5p each.
On 28 June 1996 the Company authorised a 3 for 1 capitalisation issue
resulting in 40,991,664 new shares being allotted and distributed.
During the year ended 31 January 1997, and following the capitalisation
issue, the Company issued 432,400 Ordinary shares with an aggregate nominal
value of L21,620 under the terms of the Forward Group Share Option Scheme for a
total cash consideration of L92,000.
F-65
<PAGE> 178
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
At the end of the year options over 810,000 Ordinary shares have been
granted and remain outstanding. These options, which also reflect the
capitalisation issue referred to above, are exercisable as follows:
<TABLE>
<CAPTION>
NUMBER
OF SHARES EXERCISE PRICE EXERCISE PERIOD
- --------- -------------- ---------------
<C> <C> <C>
140,000 51.5p 1996/2003
40,000 47p 1997/2004
280,000 61.75p 1998/2005
260,000 88.75p 1998/2005
20,000 180p 1999/2006
70,000 107p 1999/2006
-------
810,000
=======
</TABLE>
18. RESERVES
<TABLE>
<CAPTION>
SHARE PROFIT
PREMIUM MERGER REVALUATION AND LOSS
ACCOUNT RESERVE RESERVE ACCOUNT TOTAL
(L000) (L000) (L000) (L000) (L000)
------- ------- ----------- -------- ------
<S> <C> <C> <C> <C> <C>
At 1 February 1995................. 1,438 -- 591 6,493 8,522
Retained profit for the financial
year............................. -- -- -- 3,834 3,834
Issue of shares (net of
expenses)........................ 7,402 5,917 -- -- 13,319
Goodwill written off on acquisition
of businesses (note 11).......... -- (5,852) -- -- (5,852)
Transfer........................... -- -- (13) 13 --
------ ------ --- ------ ------
At 31 January 1996................. 8,840 65 578 10,340 19,823
Retained profit for the financial
year............................. -- -- -- 4,846 4,846
Capitalisation issue (including
expenses of L24,000)............. (2,073) -- -- -- (2,073)
Issue of shares.................... 70 191 -- -- 261
Goodwill written off on acquisition
of businesses (note 11).......... -- (256) -- (1,190) (1,446)
Currency translation adjustment.... -- -- -- (22) (22)
Transfer........................... -- -- (12) 12 --
------ ------ --- ------ ------
At 31 January 1997................. 6,837 -- 566 13,986 21,389
====== ====== === ====== ======
</TABLE>
At the end of the year cumulative goodwill written off against reserves in
respect of the acquisition of businesses amounted to L7,447,000 (1996:
L6,001,000).
F-66
<PAGE> 179
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
19. RECONCILIATION OF MOVEMENT IN CONSOLIDATED EQUITY SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
Profit for the financial year........................... 2,976 4,923 5,398
Dividends............................................... (494) (1,089) (552)
----- ------ ------
2,482 3,834 4,846
Issue of shares......................................... 10 13,432 284
Shares to be issued..................................... -- 157 --
Expenses of capitalisation issue........................ -- -- (24)
Goodwill written off.................................... -- (5,852) (1,446)
Goodwill reinstated on sale of business................. 572 -- --
Currency translation adjustment......................... -- -- (22)
----- ------ ------
Net increase in equity shareholders' funds.............. 3,064 11,571 3,638
At beginning of year.................................... 5,870 8,934 20,505
----- ------ ------
At end of year.......................................... 8,934 20,505 24,143
===== ====== ======
</TABLE>
20. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
(a) Reconciliation of operating profit to net cash inflow from operating
activities
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
Operating profit....................................... 2,445 7,976 9,101
Depreciation........................................... 1,215 2,701 4,694
Profit on sale of tangible fixed assets................ (55) (15) (169)
------ ------ ------
3,605 10,662 13,626
Movements in working capital:
(Increase)/decrease in stocks.......................... (266) (1,552) 1,454
(Increase)/decrease in debtors......................... (840) (778) 2,837
Increase in creditors.................................. 223 2,335 644
------ ------ ------
(883) 5 4,935
------ ------ ------
Net cash inflow from operating activities.............. 2,722 10,667 18,561
====== ====== ======
</TABLE>
(b) Analysis of changes in financing during the year
<TABLE>
<CAPTION>
SHARE HIRE
CAPITAL AND PURCHASE CONTINGENT
PREMIUM OBLIGATIONS CONSIDERATION
(L000) (L000) (L000)
----------- ----------- -------------
<S> <C> <C> <C>
1995
At beginning of year............................. 1,840 1,150 220
Net cash flows on financing...................... 10 (669) (220)
Inception of hire purchase contracts............. -- 594 --
Currency adjustment.............................. -- 40 --
----- ------ -----
1,850 1,115 --
===== ====== =====
</TABLE>
F-67
<PAGE> 180
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
SHARE HIRE
CAPITAL AND PURCHASE BANK
PREMIUM OBLIGATIONS LOAN
(L000) (L000) (L000)
----------- ----------- -------------
<S> <C> <C> <C>
1996
At beginning of year............................. 1,850 1,115 --
Acquisition of businesses........................ -- 4,016 4,030
Net cash flows on financing...................... 7,550 (1,170) (790)
Issues of shares for non-cash consideration...... 119 -- --
Shares to be issued.............................. 3 -- --
Inception of hire purchase contracts............. -- 658 --
Currency adjustment.............................. -- 20 --
----- ------ -----
9,522 4,639 3,240
===== ====== =====
</TABLE>
<TABLE>
<CAPTION>
SHARE HIRE
CAPITAL AND PURCHASE BANK
PREMIUM OBLIGATIONS LOAN
(L000) (L000) (L000)
----------- ----------- ------
<S> <C> <C> <C>
1997
At beginning of year.................................. 9,522 4,639 3,240
Acquisition of businesses............................. -- 424 --
Net cash flows on financing........................... 68 (2,393) (720)
Issues of shares for non-cash consideration........... 1 -- --
Inception of hire purchase contracts.................. -- 4,548 --
Currency adjustment................................... -- (44) --
----- ------ -----
9,591 7,174 2,520
===== ====== =====
</TABLE>
(c) Analysis of cash and cash equivalents
<TABLE>
<CAPTION>
CHANGE CHANGE CHANGE
1994 IN YEAR 1995 IN YEAR 1996 IN YEAR 1997
(L000) (L000) (L000) (L000) (L000) (L000) (L000)
------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash at bank and in hand.............. 4 (1) 3 786 789 (789) --
Bank overdrafts....................... (1,722) 1,091 (631) 631 -- (5,841) (5,841)
------ ------ ---- ----- ---- ------ ------
(1,718) 1,090 (628) 1,417 789 (6,630) (5,841)
====== ====== ==== ===== ==== ====== ======
</TABLE>
F-68
<PAGE> 181
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
(d) Acquisition of businesses
The investing cash flows arising in respect of acquisitions during the year
ended 31 January 1996 were as follows:
<TABLE>
<CAPTION>
1996
(L000)
------
<S> <C>
Ferranti International plc Hybrids Manufacturing and Test
Division
Cash consideration........................................ 10
Exacta Circuits Limited
Cash consideration including costs of acquisition......... 7,904
Overdraft................................................. 285
Cash balances............................................. (8)
-----
8,191
=====
</TABLE>
The investing cash flows arising in respect of acquisitions during the year
ended 31 January 1997 were as follows:
<TABLE>
<CAPTION>
1997
(L000)
------
<S> <C>
Exacta Circuits Limited
Deferred cash consideration............................... 2,823
GEC-Marconi's hybrid business
Cash consideration including costs of acquisition......... 2,756
Manchester Circuits Limited
Cash consideration including costs of acquisition......... 759
Overdraft................................................. 1,645
TI Technologies (Pty) Limited
Cash consideration including costs of acquisition......... 518
Overdraft................................................. 698
Cash balances............................................. (15)
-----
9,184
=====
</TABLE>
Further information on the acquisitions is given in note 11.
(e) Disposal of business
The divesting cash flows arising in respect of the disposal of the
specialist chemicals business in the year ended 31 January 1995 were as follows:
<TABLE>
<CAPTION>
1995
(L000)
------
<S> <C>
Cash consideration.......................................... 2,962
Cash and bank balances...................................... (214)
Associated costs of sale.................................... (258)
-----
2,490
=====
</TABLE>
(f) Major non-cash transactions
Fixed asset additions of L4,548,000 (1996: L658,000; 1995: L594,000) were
financed by hire purchase borrowings.
F-69
<PAGE> 182
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
21. COMMITMENTS
Capital commitments for which no provision has been made in these financial
statements, are as follows:
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Contracted but not provided for............................. 2,596 830
===== ===
</TABLE>
Annual commitments under operating leases are as follows:
<TABLE>
<CAPTION>
LAND AND BUILDINGS OTHER
------------------ ----------------
1996 1997 1996 1997
(L000) (L000) (L000) (L000)
------- ------- ------ ------
<S> <C> <C> <C> <C>
Expiring within one year........................ -- 8 25 61
Expiring between two and five years............. 7 30 252 180
Expiring in more than five years................ 206 344 -- --
</TABLE>
22. PENSIONS
Exacta Circuits Limited operates a funded defined benefit pension scheme
covering substantially all of its employees. Employer contributions are
determined by a qualified actuary on the basis of triennial valuations using the
projected unit method.
The most recent full valuation by William M Mercer Limited was as at 5
April 1996. The assumptions which have the most significant effect on the result
of the valuation are those relating to the rate of return on investments and the
rates of increase in salaries and pensions. It was assumed that the investment
returns would be 9% per annum, that salary increases would average 7% per annum,
that present and future pensions would increase at rates of between 3% and 4.5%
per annum and that equity dividend growth would average 5% per annum. The
valuation showed that the market value of the scheme's assets at that date was
L17,593,000 and that the actuarial value of assets represented 110% of the
benefits that has accrued to members, after allowing for expected future
increases in earnings. Group contributions to the scheme in the year were
L955,000 (1996: L492,000).
As part of its provisional review of the fair value of the net assets of
Exacta Circuits Limited the Group took actuarial advice regarding the current
position of the pension scheme. This highlighted uncertainty concerning the
impact of equalisation of retirement ages. In view of this uncertainty, the
SSAP24 provision of Exacta Circuits Limited of L655,000 at the date of
acquisition was replaced by a provision of the same amount. Following the
valuation as at 5 April 1996 the provision was released.
In addition, the Group made contributions of L284,000 (1996: L253,000)
during the year to several defined contribution schemes.
23. POST BALANCE SHEET EVENT
On 26 March 1997 the Recommended Cash Offer for Forward Group PLC by Hicks,
Muse, Tate and Furst Equity Fund III, L.P. was declared unconditional in all
respects and, in due course, the Company will become a wholly owned subsidiary
of PCB Investments plc.
F-70
<PAGE> 183
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
24. SUBSIDIARY UNDERTAKINGS
The Company has the following trading subsidiary undertakings:
<TABLE>
<CAPTION>
COUNTRY OF
PRINCIPAL CLASS OF
COMPANY OPERATION SHARE HOLDING PRINCIPAL ACTIVITY
------- ---------- -------- ------- ------------------
<S> <C> <C> <C> <C>
Forward Circuits Limited England L1 100% Manufacture of printed circuit
Ordinary boards
Exacta Circuits Limited Scotland L1 100% Manufacture of printed circuit
Ordinary boards
Technograph Microcircuits England L1 100% Manufacture of ceramic based
Limited Ordinary microcircuits
Forward Circuits England L1 100% International trading in
International Limited Ordinary printed circuit boards
Manchester Circuits Limited England L1 100% Manufacture of printed circuit
Ordinary boards
L1 100%
Preferred
Ordinary
L1 100%
Cumulative
redeemable
preference
TI Technologies (Pty) Limited South Africa R1 100% Manufacture of printed circuit
Ordinary boards
Swift International (Pty) South Africa R1 100% Manufacture of printed circuit
Limited Ordinary boards
Exacta Circuits (France) SARL France FF 100 100% Sale of printed circuit boards
Ordinary in France
</TABLE>
25. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
OF AMERICA GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The Group's consolidated financial statements are prepared in conformity
with generally accepted accounting principles applicable in the United Kingdom
(UK GAAP), which differ in certain significant respects from those applicable in
the United States of America (US GAAP). These differences, together with the
approximate effects of the adjustments on net profit and equity shareholders'
funds, relate principally to the items set out below:
(a) Goodwill: Under UK GAAP, goodwill arising from acquisitions is
written off against equity shareholders' funds. Upon the subsequent
disposal of the business, goodwill previously written off is reinstated and
considered in the calculation of the gain or loss on disposal. Under US
GAAP, goodwill is capitalised and amortised over its estimated useful life.
For the purpose of calculating the amortisation of goodwill a life of 40
years has been assumed. Upon the subsequent disposal of the business,
unamortised goodwill is considered in the calculation of the gain or loss
on disposal.
(b) Dividends: Under UK GAAP, proposed dividends on ordinary shares,
as recommended by the Directors, are deducted from equity shareholders'
funds and shown as a liability in the
F-71
<PAGE> 184
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
balance sheet at the end of the period to which they relate. Under US GAAP,
such dividends are deducted from equity shareholders' funds at the date of
declaration of the dividend.
(c) Deferred taxation: UK GAAP requires that no provision for deferred
taxation should be made if there is reasonable evidence that such taxation
will not be payable in the foreseeable future. Under US GAAP, deferred
taxation is recognised under the full liability method which permits
deferred tax assets to be recognised if their realisation is considered
more likely than not.
Deferred taxation also arises in relation to the tax effect of other US
GAAP differences.
(d) Revaluation of properties: UK GAAP allows periodic revaluations of
freehold land and buildings and the related depreciation is calculated on
the revalued amounts. The surplus on revaluation of property is credited
directly to equity shareholders' funds. Under US GAAP, such revaluations
are not permitted and depreciation is provided on the original cost.
(e) Pension costs: Under UK GAAP, the expected cost of pensions is
charged to the profit and loss account so as to spread the cost of pensions
over the expected service lives of employees. Surpluses arising from the
actuarial valuation are similarly spread. Under US GAAP, costs and
surpluses are also spread over the expected service lives but based on
prescribed actuarial assumptions, allocation of costs and valuation
methods, which differ from those used for UK GAAP.
(f) Cash flows: The principal difference between UK GAAP and US GAAP
is in respect of classification. Under UK GAAP, the Group presents its cash
flows for operating activities, returns on investments and servicing of
finance, taxation, investing activities, and financing activities. US GAAP
requires only three categories of cash flow activities which are operating,
investing and financing.
Cash flows arising from taxation and returns on investments and
servicing of finance under UK GAAP would, with the exception of dividends
paid, be included as operating activities under US GAAP; dividend payments
would be included as a financing activity under US GAAP. In addition, under
UK GAAP, cash and cash equivalents include short term borrowings which
under US GAAP would be presented as financing activities.
F-72
<PAGE> 185
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Under US GAAP, the following amounts would be reported:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED 31 JANUARY ENDED 31 MARCH
-------------------------- -------------------
1995 1996 1997 1996 1997
(L000) (L000) (L000) (L000) (L000)
------ ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by operating
activities............................ 1,901 8,594 13,995 3,255 2,687
Net cash provided by/(used in) investing
activities............................ 301 (12,045) (16,373) (5,037) (488)
Net cash (used in)/provided by financing
activities............................ (2,203) 4,237 1,589 680 (2,199)
------ ------- ------- -------- --------
Net (decrease)/increase in cash and cash
equivalents........................... (1) 786 (789) (1,102) --
====== ======= ======= ======== ========
Cash and cash equivalents under US
GAAP.................................. 3 789 -- -- --
====== ======= ======= ======== ========
</TABLE>
(g) Current assets and liabilities: Current assets and liabilities
under UK GAAP include amounts which fall due after more than one year.
Under US GAAP such assets would be classified as non-current assets.
Provisions for liabilities and other charges under UK GAAP include amounts
due within one year which would be classified as current liabilities under
US GAAP.
Approximate effects on net profit of differences between UK and US GAAP:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED 31 JANUARY 31 MARCH
-------------------------- ------------------
1995 1996 1997 1996 1997
(L000) (L000) (L000) (L000) (L000)
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net profit in conformity with UK GAAP... 2,976 4,923 5,398 2,592 321
Adjustments:
Goodwill.............................. (17) (99) (188) (39) (51)
Profit on disposal of businesses...... 20 -- -- -- --
Revaluation of properties............. 13 13 12 3 3
Pension cost.......................... -- 35 160 30 40
Tax effect of US GAAP adjustments..... (744) (11) (53) (10) (13)
----- ----- ----- ----- ---
Net profit in conformity with US GAAP... 2,248 4,861 5,329 2,576 300
===== ===== ===== ===== ===
</TABLE>
F-73
<PAGE> 186
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Approximate effects on equity shareholders' funds of differences between UK
and US GAAP:
<TABLE>
<CAPTION>
AT 31 JANUARY
---------------- AT 31 MARCH
1996 1997 1997
(L000) (L000) (L000)
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Equity shareholders' funds in conformity with UK
GAAP.............................................. 20,505 24,143 24,064
Adjustments:
Goodwill.......................................... 5,993 7,690 7,656
Dividends......................................... 655 -- --
Deferred taxation................................. (744) (744) (744)
Revaluation of properties......................... (578) (566) (564)
Pension cost...................................... (120) (615) (588)
Tax effect of US GAAP adjustments................. 40 203 194
------ ------ ------
Equity shareholders' funds in conformity with US
GAAP.............................................. 25,751 30,111 30,018
====== ====== ======
</TABLE>
26. CONVERSION OF U.K. GAAP AMOUNTS TO U.S. GAAP AMOUNTS IN U.S. DOLLARS
(UNAUDITED)
The following tables set forth in U.K.L the balance sheet and profit and
loss account of the Group as of and for the year ended January 31, 1997 and as
of and for the three months ended March 31, 1997, on a historical basis and
adjusts the amounts to U.S. GAAP in U.K.L. based solely on those adjustments
shown in Note 25. The U.K.L amounts are then translated to U.S.$ based on a
translation rate of U.K.L.62=U.S.$1.00 at January 31, 1997 and
U.K.L =U.S.$1.00 at March 31, 1997. Such amounts are shown translated to
U.S.$ for convenience purposes only. The U.S. GAAP amounts do not constitute
financial information presented in conformity with U.S. GAAP as differences in
presentation and classification exist. Furthermore, disclosures required under
U.S. GAAP have not been provided.
Consolidated profit and loss account (unaudited)
<TABLE>
<CAPTION>
YEAR ENDED 31 JANUARY 1997
--------------------------------------------------------------
U.S. GAAP
U.K. GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
--------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Turnover
Continuing operations................. 97,001 -- 97,001 .62 156,453
Acquisitions.......................... 8,028 -- 8,028 .62 12,949
------- --- ------- -------
105,029 -- 105,029 .62 169,402
------- --- ------- -------
Operating profit........................
Continuing operations................. 8,079 (16) 8,063 .62 13,005
Acquisitions.......................... 1,022 -- 1,022 .62 1,648
------- --- ------- -------
9,101 (16) 9,085 .62 14,653
Net interest payable.................. (996) -- (996) .62 (1,606)
------- --- ------- -------
Profit on ordinary activities before
taxation.............................. 8,105 (16) 8,089 .62 13,047
Tax on profit on ordinary activities.... (2,707) (53) (2,760) .62 (4,452)
------- --- ------- -------
Profit for the financial year........... 5,398 (69) 5,329 .62 8,595
======= === ======= =======
</TABLE>
F-74
<PAGE> 187
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
THREE MONTHS ENDED 31 MARCH 1997
--------------------------------------------------------------
U.S. GAAP
U.K. GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
--------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Turnover
Continuing operations................. 25,287 -- 25,287 .61 41,454
Acquisitions.......................... -- -- -- .61 --
------- --- ------- -------
25,287 -- 25,287 .61 41,454
------- --- ------- -------
Operating profit........................
Continuing operations................. 2,853 (8) 2,845 .61 4,665
Acquisitions.......................... -- -- -- .61 --
------- --- ------- -------
2,853 (8) 2,845 .61 4,665
Expenses related to sale.............. (1,318) -- (1,318) .61 (2,161)
Net interest payable.................. (381) -- (381) .61 (625)
------- --- ------- -------
Profit on ordinary activities before
taxation.............................. 1,154 (8) 1,146 .61 1,879
Tax on profit on ordinary activities.... (833) (13) (846) .61 (1,387)
------- --- ------- -------
Profit for the financial period......... 321 (21) 300 .61 492
======= === ======= =======
</TABLE>
Consolidated balance sheet (unaudited)
<TABLE>
<CAPTION>
31 JANUARY 1997
--------------------------------------------------------------
U.S. GAAP
U.K. GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
--------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Fixed assets
Intangible assets..................... -- 7,690 7,690 .62 12,403
Tangible assets....................... 36,407 (566) 35,841 .62 57,808
------- ------- ------- -------
36,407 7,124 43,531 .62 70,211
------- ------- ------- -------
Current assets
Stocks................................ 6,586 -- 6,586 .62 10,623
Debtors............................... 17,289 -- 17,289 .62 27,885
------- ------- ------- -------
23,875 -- 23,875 .62 38,508
Creditors: amounts falling due within
one year.............................. (26,949) -- (26,949) .62 (43,466)
------- ------- ------- -------
Net current liabilities................. (3,074) -- (3,074) .62 (4,958)
------- ------- ------- -------
Total assets less current liabilities... 33,333 7,124 40,457 .62 65,253
Creditors: amounts falling due after
more than one year.................... (6,574) -- (6,574) .62 (10,603)
Provisions for liabilities and
charges............................... (2,616) (1,156) (3,772) .62 (6,084)
------- ------- ------- -------
Net assets.............................. 24,143 5,968 30,111 .62 48,566
======= ======= ======= =======
Capital and reserves
Called up share capital............... 2,754 -- 2,754 .62 4,442
Share premium account................. 6,837 -- 6,837 .62 11,027
Revaluation reserve................... 566 (566) -- .62 --
Profit and loss account............... 13,986 6,534 20,520 .62 33,097
------- ------- ------- -------
Equity shareholders' funds.............. 24,143 5,968 30,111 .62 48,566
======= ======= ======= =======
</TABLE>
F-75
<PAGE> 188
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
31 MARCH 1997
--------------------------------------------------------------
U.S. GAAP
U.K. GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
--------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Fixed assets
Intangible assets.................... -- 7,656 7,656 .61 12,551
Tangible assets...................... 36,707 (564) 36,143 .61 59,251
------- ------ ------- -------
36,707 7,092 43,799 .61 71,802
------- ------ ------- -------
Current assets
Stocks............................... 7,285 -- 7,285 .61 11,943
Debtors.............................. 19,729 -- 19,729 .61 32,343
------- ------ ------- -------
27,014 -- 27,014 .61 44,286
Creditors: amounts falling due within
one year............................. (30,624) -- (30,624) .61 (50,203)
------- ------ ------- -------
Net current liabilities................ (3,610) -- (3,610) .61 (5,917)
------- ------ ------- -------
Total assets less current
liabilities.......................... 33,097 7,092 40,189 .61 65,885
Creditors: amounts falling due after
more than one year................... (6,417) -- (6,417) .61 (10,520)
Provisions for liabilities and
charges.............................. (2,616) (1,138) (3,754) .61 (6,154)
------- ------ ------- -------
Net assets............................. 24,064 5,954 30,018 .61 49,211
======= ====== ======= =======
Capital and reserves
Called up share capital.............. 2,762 -- 2,762 .61 4,528
Share premium account................ 6,908 -- 6,908 .61 11,325
Revaluation reserve.................. 564 (564) -- .61 --
Profit and loss account.............. 13,830 6,518 20,348 .61 33,358
------- ------ ------- -------
Equity shareholders' funds............. 24,064 5,954 30,018 .61 49,211
======= ====== ======= =======
</TABLE>
27. COMPANIES ACT 1985
These consolidated financial statements do not comprise the Company's
statutory accounts within the meaning of Section 240 of the Companies Act 1985
of Great Britain. Statutory accounts have been prepared for each of the years
ended 31 January 1997, 1996 and 1995, on which the auditors' reports were
unqualified. The statutory accounts for the years ended 31 January 1996 and 1995
have been delivered to the Registrar of Companies for England and Wales. Those
for the year ended 31 January 1997 have not yet been so delivered.
F-76
<PAGE> 189
REPORT OF INDEPENDENT AUDITORS
To: The Directors
Interconnection Systems (Holdings) Limited
We have audited the consolidated balance sheets of Interconnection Systems
(Holdings) Limited as at March 29, 1996 and April 4, 1997 and the related
consolidated profit and loss accounts and statements of total recognized gains
and losses and cash flows for the years ended March 31, 1995, March 29, 1996 and
April 4, 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 United Kingdom auditing
standards which do not differ in any significant respect from United States
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
Interconnection Systems (Holdings) Limited as at March 29, 1996 and April 4,
1997, and the consolidated results of its operations and its consolidated cash
flows for the years ended March 31, 1995, March 29, 1996 and April 4, 1997 in
conformity with accounting principles generally accepted in the United Kingdom
which differ in certain respects from those followed in the United States (see
Note 25 of the Notes to the Consolidated Financial Statements).
Ernst & Young
Chartered Accountants
Newcastle upon Tyne, England
May 27, 1997
F-77
<PAGE> 190
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
-------------------------------- --------------------
MARCH 31, MARCH 29, APRIL 4, MARCH 29, APRIL 4,
1995 1996 1997 1996 1997
NOTES (L000) (L000) (L000) (L000) (L000)
----- --------- --------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Turnover................................ 2 70,805 104,611 141,643 30,231 38,266
Cost of sales......................... 59,433 90,170 112,980 24,262 33,711
------ ------- ------- ------ ------
Gross profit.......................... 11,372 14,441 28,663 5,969 4,555
Distribution costs.................... 1,042 1,148 1,632 343 525
Administrative expenses............... 5,738 6,913 9,491 1,678 1,557
------ ------- ------- ------ ------
4,592 6,380 17,540 3,948 2,473
Other operating income................ 109 -- 44 -- 44
------ ------- ------- ------ ------
Operating profit........................ 3 4,701 6,380 17,584 3,948 2,517
Interest receivable................... 6 -- -- 414 -- 48
Interest payable...................... 7 (921) (807) (1,232) (262) (308)
------ ------- ------- ------ ------
Profit on ordinary activities before
taxation.............................. 3,780 5,573 16,766 3,686 2,257
Tax on profit on ordinary
activities......................... 8 2,539 4,422 6,874 2,015 668
------ ------- ------- ------ ------
Profit for the year after taxation*..... 1,241 1,151 9,892 1,671 1,589
Dividends............................. 9 94 500 450 200 150
------ ------- ------- ------ ------
Retained profit for the period.......... 20 1,147 651 9,442 1,471 1,439
====== ======= ======= ====== ======
</TABLE>
* A summary of the significant adjustments to profit for the years that
would be required if United States generally accepted accounting principles had
been applied instead of those generally accepted in the United Kingdom is set
forth in Note 25 of the Notes to the Consolidated Financial Statements.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
-------------------------------- --------------------
MARCH 31, MARCH 29, APRIL 4, MARCH 29, APRIL 4,
1995 1996 1997 1996 1997
(L000) (L000) (L000) (L000) (L000)
--------- --------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Note of historical cost profits
Reported profit on ordinary activities before
taxation.................................. 3,780 5,573 16,766 3,686 2,257
Depreciation charged during the period in
respect of the excess of valuation over
historical cost of revalued assets........ 1,581 1,449 1,500 362 375
------ ------- ------ ------ ------
Historical cost profit on ordinary activities
before taxation........................... 5,361 7,022 18,266 4,048 2,632
====== ======= ====== ====== ======
Historical cost profit on ordinary activities
after taxation and dividends.............. 2,728 2,100 10,942 1,833 1,814
====== ======= ====== ====== ======
</TABLE>
The Notes to the Consolidated Financial Statements are an integral part of
these Financial Statements.
F-78
<PAGE> 191
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONSOLIDATED STATEMENTS OF TOTAL RECOGNIZED GAINS AND LOSSES
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
-------------------------------- --------------------
MARCH 31, MARCH 29, APRIL 4, MARCH 29, APRIL 4,
1995 1996 1997 1996 1997
NOTES (L000) (L000) (L000) (L000) (L000)
----- --------- --------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Profit on ordinary activities after
taxation.............................. 1,241 1,151 9,892 1,671 1,589
Unrealized surplus on revaluation of
freehold land and buildings........... 10 315 -- (1,564) -- (1,564)
Unrealized surplus on revaluation of
plant and machinery................... 10 5,727 -- 23,743 -- 23,743
----- ----- ------ ----- ------
Total recognized gains and losses
relating to the period................ 7,283 1,151 32,071 1,671 23,768
===== ===== ====== ===== ======
</TABLE>
The Notes to the Consolidated Financial Statements are an integral part of these
Financial Statements.
F-79
<PAGE> 192
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
NOTES (L000) (L000)
----- --------- --------
<S> <C> <C> <C>
Fixed assets
Tangible assets........................................... 10 39,895 70,542
------- -------
Current assets
Stocks.................................................... 11 7,447 9,132
Debtors................................................... 12 17,371 24,003
Cash at bank and in hand.................................. 13 2,636 26,244
------- -------
27,454 59,379
Creditors: amounts falling due within one year.............. 14 (33,305) (47,863)
------- -------
Net current (liabilities)/assets............................ (5,851) 11,516
------- -------
Total assets less current liabilities....................... 34,044 82,058
Creditors: amounts falling due after more than one year
Loans..................................................... 16 9,430 27,336
Obligations under finance leases.......................... 15 4,116 3,203
Accruals and deferred income
Deferred Government grants................................ 18 600 --
------- -------
19,898 51,519
======= =======
Capital and reserves*
Called up share capital................................... 19 -- --
Share premium account..................................... 20 4,650 4,650
Revaluation reserve....................................... 20 5,685 26,364
Other reserves............................................ 20 216 216
Profit and loss account................................... 20 9,347 20,289
------- -------
19,898 51,519
======= =======
</TABLE>
*A summary of the significant adjustments to capital and reserves that
would be required if United States generally accepted accounting principles had
been applied instead of those generally accepted in the United Kingdom is set
forth in Note 25 of the Notes to the Consolidated Financial Statements.
The Notes to the Consolidated Financial Statements are an integral part of these
Financial Statements.
F-80
<PAGE> 193
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN THOUSANDS OF BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
-------------------------------- --------------------
MARCH 31, MARCH 29, APRIL 4, MARCH 29, APRIL 4,
1995 1996 1997 1996 1997
NOTES (L000) (L000) (L000) (L000) (L000)
----- --------- --------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net cash inflow from operating
activities.......................... 3(b) 13,784 22,757 33,842 10,615 12,430
------- ------- ------- ------- -------
Returns on investments and servicing
of finance
Interest paid....................... (875) (776) (1,077) (202) (13)
Interest received................... -- -- 414 -- 48
Dividends paid to parent company
shareholders..................... (94) (500) (450) (200) (150)
------- ------- ------- ------- -------
Net cash outflow from returns on
investments and servicing of
finance............................. (969) (1,276) (1,113) (402) (115)
------- ------- ------- ------- -------
Taxation
Corporation tax paid................ (658) (2,811) (4,903) (953) (4,072)
------- ------- ------- ------- -------
Tax paid.............................. (658) (2,811) (4,903) (953) (4,072)
------- ------- ------- ------- -------
Management of liquid resources
Investment in term deposit.......... -- -- (16,000) -- --
------- ------- ------- ------- -------
Net cash outflow from management of
liquid resources.................... -- -- (16,000) -- --
------- ------- ------- ------- -------
Investing activities
Payments to acquire tangible fixed
assets........................... (12,659) (16,816) (24,119) (3,632) (9,490)
Purchase of shares in
Interconnection Systems
Limited.......................... (11) -- -- -- --
------- ------- ------- ------- -------
Net cash outflow from investing
activities.......................... (12,670) (16,816) (24,119) (3,632) (9,490)
------- ------- ------- ------- -------
Net cash inflow/(outflow) before
financing........................... (513) 1,854 (12,293) 5,628 (1,247)
======= ======= ======= ======= =======
Financing
New loans........................... 16 (5,000) -- (22,089) -- (6,089)
Repayment of loans.................. 16 2,283 682 1,183 14 529
Repayment of finance leases......... 15 -- 623 1,005 1,541 331
Receipt of government grants........ 18 (1,250) -- -- -- --
------- ------- ------- ------- -------
Net cash outflow/(inflow) from
financing........................... (3,967) 1,305 (19,901) 1,555 (5,229)
Increase in cash and cash
equivalents......................... 13 3,454 549 7,608 4,073 3,982
------- ------- ------- ------- -------
(513) 1,854 (12,293) 5,628 (1,247)
======= ======= ======= ======= =======
</TABLE>
The significant differences between the cash flow statement presented above
and that required under United States generally accepted accounting principles
are described in Note 25 of the Notes to the Consolidated Financial Statements.
The Notes to the Consolidated Financial Statements are an integral part of these
Financial Statements.
F-81
<PAGE> 194
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN BRITISH POUNDS STERLING)
1. ACCOUNTING POLICIES
Accounting convention
The financial statements are prepared under the historical cost convention
modified to include the revaluation of certain tangible fixed assets.
The financial statements are prepared in accordance with applicable United
Kingdom accounting standards.
Basis of consolidation
The consolidated financial statements consolidate the accounts of
Interconnection Systems (Holdings) Limited (the "Company") and its subsidiary
undertaking Interconnection Systems Limited (together the "Group"). They do not
include the financial statements of Interconnection Systems Sales Limited as, in
the opinion of the directors, it would be of no real value to the Company's
members in view of the insignificant amounts involved. Interconnection Systems
Sales Limited has not traded since incorporation. The accounting period for both
companies comprises 52 weeks ending on the Friday nearest to March 31.
Periodically a 53 week period will be necessary to realign the accounting period
with the calendar.
Goodwill
Goodwill, both positive and negative, arising on the acquisition of
Interconnection Systems Limited has been taken directly to reserves under "Other
reserves".
Depreciation
Depreciation is provided on all tangible fixed assets, at rates calculated
to write off the cost or valuation of each asset evenly over its expected useful
life, as follows:
<TABLE>
<S> <C>
Freehold buildings -- over 40 years
Plant and machinery -- over 2 to 10 years
Fixtures and fittings -- over 3 to 10 years
</TABLE>
The part of the annual depreciation charge on revalued assets which relates
to the surplus over cost is transferred from the revaluation reserve to retained
profits.
Stocks
Stocks are stated at the lower of cost and net realizable value as follows:
Costs incurred in bringing each product to its present location and
condition:
<TABLE>
<S> <C>
Raw materials -- purchase cost on a first-in, first-out
basis
Work in progress and finished goods -- cost of direct materials and labor plus
attributable overheads based on a normal
level of activity
</TABLE>
Net realizable value is based on estimated selling price less further costs
expected to be incurred to completion and disposal.
F-82
<PAGE> 195
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Finance leases
Assets held under finance leases are capitalized in the balance sheet and
are depreciated over their useful lives. The interest element of rental
obligations is charged to the profit and loss account over the period of the
lease in accordance with Statement of Standard Accounting Practice 21.
Research and development
Research and development expenditure is written off as incurred.
Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the rate of exchange ruling at the balance sheet
date. All differences are taken to the profit and loss account.
Deferred taxation
Deferred taxation is provided using the liability method on all timing
differences to the extent that they are expected to reverse in the future
without being replaced, calculated at the rate at which it is estimated that
taxation will be payable.
Pensions
Interconnection Systems Limited operates a defined benefit pension scheme
which is funded by the payment of contributions to a separately administered
fund.
Contributions to the fund are charged to the profit and loss account so as
to spread the cost of pensions over the employees' working lives.
Future variations in pension cost, which are identified as a result of an
actuarial valuation, will be amortised over the expected remaining lives of
current employees in the scheme. Differences between the amounts funded and the
amounts charged to the profit and loss account will be treated as either
provisions or prepayments in the balance sheet.
Condensed Consolidated Financial Data
The condensed consolidated profit and loss account and statements of total
recognized gains and losses and cash flows for the three month periods ended
March 29, 1996 and April 4, 1997 are unaudited. However, in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation of the financial position and
results of operations have been included.
2. TURNOVER
Turnover represents the net invoiced sales, excluding value added tax, of
goods sold during the period.
The turnover and pre-tax profit is attributable to one continuing activity,
the manufacture of printed circuit boards.
F-83
<PAGE> 196
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
An analysis of turnover by geographical market is given below:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
United Kingdom......................................... 42,525 55,236 61,209
Continental Europe..................................... 28,280 49,375 80,434
------ ------- -------
70,805 104,611 141,643
====== ======= =======
</TABLE>
3. OPERATING PROFIT
(a) This is stated after charging/(crediting):
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Directors' remuneration (see note 4)................. 24 42 192
Auditors' remuneration for audit services............ 27 31 35
Auditors' remuneration for non audit services........ 23 63 75
Depreciation of tangible fixed assets................ 10,822 17,302 19,123
Exceptional depreciation charge...................... -- -- --
Exchange gains....................................... 451 41 (431)
Hire of plant and machinery.......................... 42 18
Regional Selective Assistance........................ (600) (600) (600)
====== ====== ======
</TABLE>
(b) Reconciliation of operating profit to net cash inflow from operating
activities
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Operating profit..................................... 4,701 6,380 17,584
Depreciation......................................... 10,822 17,302 19,123
Loss on disposal of tangible fixed assets............ -- -- --
Government grants released........................... (600) (600) (600)
Increase in debtors.................................. (3,754) (2,691) (6,632)
Increase in stocks................................... (1,037) (3,301) (1,685)
Increase in creditors................................ 3,652 5,667 6,052
------ ------ ------
Net cash inflow from operating activities............ 13,784 22,757 33,842
====== ====== ======
</TABLE>
F-84
<PAGE> 197
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
4. DIRECTORS' REMUNERATION
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Fees................................................. -- -- --
Other emoluments (including pension contributions)... 24 42 192
------ ------ -------
24 42 192
====== ====== =======
Emoluments of the chairman (excluding pension
contributions) were:............................... 23,814 23,547 9,078
====== ====== =======
Emoluments of the highest paid director (excluding
pension contributions) were:....................... 23,814 23,547 181,413
====== ====== =======
</TABLE>
Directors emoluments (excluding pension contributions) fell within the
following ranges:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
APRIL 4,
MARCH 31, MARCH 29, 1997
1995 1996 (L000)
--------- --------- --------
<S> <C> <C> <C>
LNil -- L5,000 1 1 --
L5,001 -- L10,000 -- -- 1
L15,001 -- L20,000 -- 1 --
L20,001 -- L25,000 1 1 --
L180,001 -- L185,000 -- -- 1
</TABLE>
5. STAFF COSTS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Wages and salaries....................................... 14,121 19,320 26,429
Social security costs.................................... 1,284 1,706 2,185
Other pension costs...................................... 183 232 212
------ ------ ------
15,588 21,258 28,826
====== ====== ======
</TABLE>
The average weekly number of employees during the period was made up as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
APRIL 4,
MARCH 31, MARCH 29, 1997
1995 1996 (L000)
--------- --------- --------
<S> <C> <C> <C>
Sales and administration................................. 67 78 67
Manufacturing............................................ 789 1,050 1,332
------ ------ -----
856 1,128 1,399
====== ====== =====
</TABLE>
F-85
<PAGE> 198
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
6. INTEREST RECEIVABLE
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Bank deposit interest.................................. -- -- 414
===== ===== =====
</TABLE>
7. INTEREST PAYABLE
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Bank overdraft........................................... 171 141 10
Other loans wholly repayable within five years (net of
rebate)................................................ 476 389 478
Other loans not wholly repayable within five years....... 72 77 544
Loan stock............................................... 200 200 200
Other interest........................................... 2 -- --
------ ------ ------
921 807 1,232
====== ====== ======
</TABLE>
8. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
The taxation charge is made up as follows:
Based on the profit for the period
Corporation tax at 33%................................. 2,613 4,422 6,463
Deferred taxation...................................... (93) -- --
----- ----- -----
2,520 4,422 6,463
Corporation tax under/(over) provided in previous
periods.............................................. 19 -- 411
----- ----- -----
2,539 4,422 6,874
===== ===== =====
</TABLE>
If full recognition had been made in respect of deferred taxation for the
period in respect of capital allowances in advance of depreciation and other
timing differences the taxation charge would have decreased by L2,252,930 (1996:
decreased by L1,466,000; 1995: increased by L392,000).
9. DIVIDENDS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Ordinary-- interim paid................................ 94 500 450
-- final proposed............................. -- -- --
----- ----- -----
94 500 450
===== ===== =====
</TABLE>
F-86
<PAGE> 199
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
10. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
PLANT AND
MACHINERY
FREEHOLD LAND AND FIXTURES
AND BUILDINGS AND FITTINGS TOTAL
(L000) (L000) (L000)
------------- ------------ -------
<S> <C> <C> <C>
Cost or valuation:
At April 2, 1994................................ 3,804 33,511 37,315
Additions....................................... 1,771 12,706 14,477
Revaluation..................................... 136 -- 136
------ ------- -------
At March 31, 1995............................... 5,711 46,217 51,928
Additions....................................... 2,710 22,834 25,544
------ ------- -------
At March 29, 1996............................... 8,421 69,051 77,472
Additions....................................... 8,605 18,986 27,591
Revaluation..................................... (1,957) -- (1,957)
Reclassification................................ (960) 960 --
------ ------- -------
At April 4, 1997................................ 14,109 88,997 103,106
------ ------- -------
Depreciation:
At April 2, 1994................................ 120 15,240 15,360
Provided during the period...................... 113 10,709 10,822
Revaluation..................................... (179) (5,728) (5,907)
------ ------- -------
At March 31, 1995............................... 54 20,221 20,275
Provided during the period...................... 947 16,355 17,302
------ ------- -------
At March 29, 1996............................... 1,001 36,576 37,577
Provided during the period...................... 352 18,771 19,123
Revaluation..................................... (393) (23,743) (24,136)
Reclassification................................ (960) 960 --
------ ------- -------
At April 4, 1997................................ -- 32,564 32,564
------ ------- -------
Net book value
At March 31, 1995............................... 5,657 25,996 31,653
====== ======= =======
At March 29, 1996............................... 7,420 32,475 39,895
====== ======= =======
At April 4, 1997................................ 14,109 56,433 70,542
====== ======= =======
</TABLE>
F-87
<PAGE> 200
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
The historical cost of assets included at valuation is as follows:
<TABLE>
<CAPTION>
PLANT AND
MACHINERY
FREEHOLD LAND AND FIXTURES
AND BUILDINGS AND FITTINGS TOTAL
(L000) (L000) (L000)
------------- ------------ ------
<S> <C> <C> <C>
Historical cost:
At April 1, 1994................................ 1,914 1,141 3,055
Historical cost of assets revalued in period.... 1,771 38,284 40,055
----- ------ ------
At March 31, 1995 and March 29, 1996............ 3,685 39,425 43,110
Historical cost of additions revalued in
period........................................ 2,796 40,684 43,480
----- ------ ------
At April 4, 1997................................ 6,481 80,109 86,590
===== ====== ======
Depreciation based on cost:
At April 1, 1994................................ 90 152 242
Provided during period.......................... 70 9,171 9,241
Depreciation on prior year asset additions
revalued in period............................ -- 9,108 9,108
----- ------ ------
At March 31, 1995............................... 160 18,431 18,591
Provided during the period...................... 83 6,504 6,587
----- ------ ------
At March 29, 1996............................... 243 24,935 25,178
Provided during the period...................... 131 17,474 17,605
Depreciation on prior year asset additions
revalued in period............................ 48 8,258 8,306
----- ------ ------
At April 4, 1997................................ 422 50,667 51,089
===== ====== ======
</TABLE>
Included in the valuation of freehold land and buildings is land valued at
L670,000 which is not depreciated.
The net book value within plant and machinery and fixtures and fittings in
respect of assets held under finance leases and hire purchase contracts is as
follows:
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Plant and machinery......................................... 4,230 2,936
===== =====
Fixtures and fittings....................................... -- --
===== =====
</TABLE>
The freehold land and buildings and all of the plant and machinery and
fixtures and fittings were revalued for existing use at depreciated replacement
cost on November 1, 1994 by Weatherall, Green & Smith (Chartered Surveyors). The
freehold land and buildings valuation of L5,600,000 resulted in a valuation
surplus of L315,000. The plant and machinery and fixtures and fittings valuation
of L28,271,000 resulted in a valuation surplus of L5,727,000.
The freehold land and buildings and all of the plant and machinery and
fixtures and fittings at the South Shields plant excluding computer software
were revalued for existing use at depreciated replacement cost on April 1, 1997
by Weatherall, Green & Smith (Chartered Surveyors). The South Shields freehold
land and buildings valuation of L6,550,000 resulted in a valuation deficit of
L1,564,000. The South Shields plant and machinery and fixtures and fittings
valuation of
F-88
<PAGE> 201
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
L53,685,975 resulted in a valuation surplus of L23,743,000. If the revalued
assets were sold at their valuation a taxation liability of L8,720,000 would
arise.
11. STOCKS
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Raw materials and consumables............................... 3,966 5,401
Work in progress............................................ 1,842 2,492
Finished goods for resale................................... 1,639 1,239
------ ------
7,447 9,132
====== ======
</TABLE>
12. DEBTORS
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Trade debtors............................................... 17,109 20,910
Other debtors............................................... 57 2,499
Prepayments and accrued income.............................. 205 594
------ ------
17,371 24,003
====== ======
</TABLE>
13. CASH AND CASH EQUIVALENTS
Analysis of balances as shown in the consolidated balance sheet and changes
during the periods:
<TABLE>
<CAPTION>
CHANGE
1994 1995 IN PERIOD
YEAR ENDED MARCH 31, 1995 (L000) (L000) (L000)
------------------------- ------ ------ ---------
<S> <C> <C> <C>
Cash at bank and in hand................................. 27 2,087 2,060
Bank overdraft........................................... (1,394) -- 1,394
------ ------ -----
(1,367) 2,087 3,454
====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
CHANGE
1995 1996 IN PERIOD
YEAR ENDED MARCH 29, 1996 (L000) (L000) (L000)
------------------------- ------ ------ ---------
<S> <C> <C> <C>
Cash at bank and in hand................................. 2,087 2,636 549
====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
CHANGE
1996 1997 IN PERIOD
YEAR ENDED APRIL 4, 1997 (L000) (L000) (L000)
------------------------ ------ ------ ---------
<S> <C> <C> <C>
Cash at bank and in hand.................................. 2,636 10,244 7,608
Short-term deposits....................................... -- 16,000 16,000
----- ------ ------
2,636 26,244 23,608
===== ====== ======
</TABLE>
Included within liquid resources are term deposits of less than one year.
F-89
<PAGE> 202
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Current installment due on loan (note 16)................... 1,183 4,183
Trade creditors............................................. 15,179 21,021
Amounts under finance leases (note 15)...................... 970 1,032
Current corporation tax..................................... 5,262 7,233
Other taxes and social security costs....................... 578 702
Other creditors............................................. 453 361
Accruals.................................................... 9,680 13,331
------ ------
33,305 47,863
====== ======
</TABLE>
15. OBLIGATIONS UNDER FINANCE LEASES AND HIRE PURCHASE CONTRACTS
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Amounts payable:
Within one year........................................... 1,254 1,371
In two to five years...................................... 4,804 3,654
------ ------
6,058 5,025
Less: finance charges allocated to future periods........... 972 790
------ ------
5,086 4,235
====== ======
Finance leases and hire purchase contracts are analyzed as
follows:
Current obligations (note 14)............................. 970 1,032
Noncurrent obligations.................................... 4,116 3,203
------ ------
5,086 4,235
====== ======
</TABLE>
Analysis of changes in finance leases and hire purchase contracts:
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Opening balance............................................. -- 5,086
Inception of finance lease contracts........................ 5,709 154
Capital element on finance lease rental payments............ (623) (1,005)
----- ------
Closing balance............................................. 5,086 4,235
===== ======
</TABLE>
F-90
<PAGE> 203
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
16. LOANS
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
GROUP (L000) (L000)
----- --------- --------
<S> <C> <C>
Wholly repayable within five years:
Bank loan Bank of Scotland(1)............................. 4,500 3,500
Loan stock................................................ 2,000 2,000
European Coal and Steel Community (ECSC) loan(1).......... 250 125
European Coal and Steel Community (ECSC) loan(2).......... 3,000 3,000
European Coal and Steel Community (ECSC) loan(3).......... -- 6,000
Not wholly repayable within five years:
Medium term loan at 1.75% over Libor per annum repayable
in 80 quarterly installments of L14,375 from June 28,
1991................................................... 863 805
Bank loan Barclays repayable in 10 six monthly
installments of L450,000 commencing July 31, 1999...... -- 6,500
Bank loan Bank of Scotland(2) repayable in 10 six monthly
installments of L450,000 commencing July 31, 1999...... -- 6,500
DTI loan at variable interest rates repayable in one
installment on April 15, 2016.......................... -- 2,431
English Partnerships loan at variable interest rates
repayable in one installment on September 30, 2016..... -- 658
------ ------
10,613 31,519
Less: included in current liabilities (see note 14)......... (1,183) (4,183)
------ ------
9,430 27,336
====== ======
For loans not wholly repayable within five years the amounts
repayable by installments are:
Within five years......................................... 288 8,090
After five years.......................................... 575 8,804
------ ------
863 16,894
====== ======
</TABLE>
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Loans are repayable as follows:
Amounts falling due: --
Within one year........................................... 1,183 4,183
Between one and two years................................. 6,183 3,058
Between two and five years................................ 2,672 15,474
In five years or more..................................... 575 8,804
------ ------
10,613 31,519
====== ======
</TABLE>
The first ECSC loan is secured by a first fixed charge over Interconnection
Systems Limited's tangible fixed assets and book debts and a floating charge
over its other assets.
The second ECSC loan is secured by chattel mortgages over Interconnection
Systems Limited's plant and machinery, assignment of the book debts insurance
policy and assignment of key persons' life policies.
The first Bank of Scotland loan is secured by a fixed and floating charge
over all of Interconnection Systems Limited's assets.
F-91
<PAGE> 204
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
The medium term loan is secured by a fixed charge over Interconnection
Systems Limited's freehold land and buildings.
The second Bank of Scotland loan, the Barclays loan and the third ECSC loan
are secured by a first charge over the assets of Interconnection Systems Limited
excluding the property at Balliol Business Park and excluding assets acquired
under finance leases, and a second charge over the property at Balliol Business
Park.
The DTI loan and the English Partnerships' loan are secured by a first
charge over the property at Balliol Business Park.
The loan stock is unsecured. The loan stock holders have indicated that
redemption will not be sought before April 5, 1998.
An analysis of changes in loan financing is as follows:
<TABLE>
<CAPTION>
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Opening balance...................................... 8,578 11,295 10,613
New loans raised..................................... 5,000 -- 22,089
Repayment of loans................................... (2,283) (682) (1,183)
------ ------ ------
Closing balance...................................... 11,295 10,613 31,519
====== ====== ======
</TABLE>
17. DEFERRED TAXATION
Deferred taxation provided in the financial statements and the amounts not
provided are as follows:
<TABLE>
<CAPTION>
PROVIDED NOT PROVIDED
-------------------- --------------------
MARCH 29, APRIL 4, MARCH 29, APRIL 4,
1996 1997 1996 1997
(L000) (L000) (L000) (L000)
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Capital allowances in advance of depreciation......... -- -- (837) 725
Other timing differences.............................. -- -- (629) (2,978)
Taxation on valuation surplus......................... -- -- 2,137 8,720
----- ----- ----- ------
-- -- 671 6,467
===== ===== ===== ======
</TABLE>
The directors consider that the valuation surplus will not be realized in
the foreseeable future and therefore no provision for deferred tax on the
valuation surplus has been made.
18. DEFERRED GOVERNMENT GRANTS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Opening balance.......................................... 550 1,200 600
Received in the period................................... 1,250 -- --
Released during the period............................... (600) (600) (600)
----- ----- ----
Closing balance.......................................... 1,200 600 --
===== ===== ====
</TABLE>
F-92
<PAGE> 205
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
19. SHARE CAPITAL
The authorised and allotted, called up and fully paid share capital at
April 1, 1994, March 31, 1995, March 29, 1996 and April 4, 1997 was L200,
consisting of 200 ordinary shares of L1 each.
20. RECONCILIATION OF SHAREHOLDERS' FUNDS AND MOVEMENTS ON RESERVES
<TABLE>
<CAPTION>
SHARE PROFIT AND
SHARE PREMIUM REVALUATION OTHER LOSS
CAPITAL ACCOUNT RESERVE RESERVE ACCOUNT TOTAL
(L000) (L000) (L000) (L000) (L000) (L000)
------- ------- ----------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
At April 2, 1994........................ -- 4,650 2,673 227 4,519 12,069
Revaluation during the period........... -- -- 6,042 -- -- 6,042
Transfer to retained profits............ -- -- (1,581) -- 1,581 --
Retained profit for the period.......... -- -- -- -- 1,147 1,147
Arising on acquisition.................. -- -- -- (11) -- (11)
----- ----- ------ ----- ------ ------
At March 31, 1995....................... -- 4,650 7,134 216 7,247 19,247
Transfer to retained profits............ -- -- (1,449) -- 1,449 --
Retained profit for the period.......... -- -- -- -- 651 651
----- ----- ------ ----- ------ ------
At March 29, 1996....................... -- 4,650 5,685 216 9,347 19,898
Revaluation during the period........... -- -- 22,179 -- -- 22,179
Transfer to retained profits............ -- -- (1,500) -- 1,500 --
Retained profit for the period.......... -- -- -- -- 9,442 9,442
----- ----- ------ ----- ------ ------
At April 4, 1997........................ -- 4,650 26,364 216 20,289 51,519
===== ===== ====== ===== ====== ======
</TABLE>
21. CAPITAL COMMITMENTS
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Contracted for but not provided......... -- --
===== ======
Authorized but not contracted for....... 7,069 32,429
===== ======
</TABLE>
22. PENSION COMMITMENTS
Interconnection Systems Limited operates a defined benefit pension scheme
which is funded by the payment of contributions to a separately administered
fund.
The contributions to the scheme are determined on behalf of the company
with the advice of an independent qualified actuary on the basis of a triennial
valuation using the Projected Unit Method. The most recent valuation was carried
out as at January 1, 1996. The actuary's valuation used the following main
assumptions:
<TABLE>
<S> <C>
Long term investment return................................. 8.5% per annum
Increase in pensionable salaries............................ 6.5% per annum
Increase in pensions in payment............................. 3.0% per annum
</TABLE>
This valuation showed that the market value of the Scheme's assets at
January 1, 1996 amounted to L5,660,314 and the actuarial value was sufficient to
cover 103% of the benefits that had accrued to members after projecting
pensionable salaries to the assumed date of retirement or death.
F-93
<PAGE> 206
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Included within accruals under "Creditors -- amounts falling due within one
year" is a pension scheme accrual of L515,877 (1996 -- L402,327).
23. DIRECTORS' INTERESTS
I H Bradbury has an interest in payments of L389,933 (1996 -- L383,640;
1995 -- L382,800) made by Interconnection Systems Limited to Interconnection
Systems (Holdings) Limited in the period ended 4 April 1997 in respect of
consultancy services provided to Interconnection Systems Limited by I H
Bradbury.
In addition, the company purchased a property during the year at its market
value of L145,000 from T P Robinson, a director of Interconnection Systems
Limited and Interconnection Systems (Holdings) Limited.
24. COMPANIES ACT 1985
These financial statements do not comprise the Company's statutory accounts
within the meaning of section 240 of the Companies Act 1985 of Great Britain.
Statutory accounts for the years ended March 29, 1996 and March 31, 1995, have
been, and for the year ended April 4, 1997, will be, delivered to the Registrar
of Companies for England and Wales. The auditors' reports on these accounts were
unqualified.
25. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The Group's consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United Kingdom ("UK GAAP")
which differ from United States generally accepted accounting principles ("US
GAAP"). The significant differences as they apply to the Group are summarized
below.
Pension costs
The Group provides for the cost of retirement benefits based upon
consistent percentages of employees' pensionable pay as recommended by
independent qualified actuaries. US GAAP require that the projected benefit
obligation (pension liability) be matched against the fair value of the plan's
assets and be adjusted to reflect any unrecognized obligations or assets in
determining the pension cost or credit for the year. For the purposes of the
reconciliations below, US GAAP have been adopted as of April 1, 1994. The
Company has not implemented FAS 87 as of the effective date specified in the
standard for a foreign plan (fiscal years beginning after December 15, 1988) due
to the unavailability of actuarial data. A portion of the transition liability
at April 1, 1994 has been allocated to shareholders' funds based on a ratio of
5/15, being the number of years elapsed between the effective date of FAS 87 and
April 1, 1994 over the 15 year period being used to amortize the transition
liability.
Summary of principal assumptions made by the actuary:
<TABLE>
<CAPTION>
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
% % %
--------- --------- --------
<S> <C> <C> <C>
Discount rate.................................... 8.0% 9.0% 8.5%
Salary growth.................................... 6.0 7.0 6.5
Long-term return on assets....................... 9.0 9.0 9.0
Pension increases................................ 3.0 3.0 3.0
</TABLE>
F-94
<PAGE> 207
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Goodwill and negative goodwill
Under UK GAAP, goodwill and negative goodwill arising on acquisitions is
set off against or credited to shareholders' funds in the year of acquisition.
Under US GAAP, such goodwill would be capitalized and amortized over its
estimated useful life which in the case of the acquisition of Interconnection
Systems Limited is estimated to be 10 years. Under US GAAP, negative goodwill
would be eliminated by reducing the value of the interest in the noncurrent
assets acquired.
Accordingly, under US GAAP the carrying value of the additional 20%
interest in the tangible fixed assets of Interconnection Systems Limited
acquired in 1994 would have been reduced by L1,067,000 and subsequent
depreciation would have been reduced by L201,000 per annum.
Revaluation of fixed assets
Under UK GAAP, the Group's tangible fixed assets are carried at valuations
and depreciation is computed based on the revalued amounts. Under US GAAP, such
revaluations are not permitted and all tangible assets would be carried at cost
subject to any impairment write down and the depreciation charge would be based
on such carrying amount. The gain or loss arising on the disposal of tangible
assets under US GAAP would differ from that arising under UK GAAP by the amount
of the revaluation gain thus realized, which in the years ended March 31, 1995,
March 29, 1996 and April 4, 1997 is not material.
Deferred taxation
Under UK GAAP, deferred taxation is provided using the liability method on
all timing differences to the extent that they are expected to reverse in the
future without being replaced, calculated at the rate at which it is estimated
that taxation will be payable. Under US GAAP, deferred taxation would be
computed on all temporary differences between the tax and book bases of assets
and liabilities which will result in taxable or tax deductible amounts in future
years. Deferred taxation assets would be recognized to the extent that it is
more likely than not that they will be realized.
Deferred taxation also arises in relation to the tax effect of other UK
GAAP to US GAAP adjustments.
Approximate effects on net income of differences between UK GAAP and US
GAAP:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
-------------------------------- --------------------
MARCH 31, MARCH 29, APRIL 4 MARCH 29, APRIL 4,
1995 1996 1997 1996 1997
(L000) (L000) (L000) (L000) (L000)
--------- --------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Profit for the year as reported in the consolidated
profit and loss account............................... 1,241 1,151 9,892 1,671 1,589
Pension costs........................................... 130 58 77 14 19
Amortization of Goodwill................................ (84) (84) (84) (21) (21)
Depreciation of tangible fixed assets................... 1,782 1,634 1,685 408 421
Deferred taxation -- methodology........................ 501 1,858 787 464 322
-- on adjustments.................... (42) (20) (25) (5) (6)
------ ------ ------ ------ ------
Net income for the year as adjusted to accord with US
GAAP.................................................. 3,528 4,597 12,332 2,531 2,324
====== ====== ====== ====== ======
</TABLE>
F-95
<PAGE> 208
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Approximate effects on shareholders' funds of differences between UK GAAP
and US GAAP:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Shareholders' funds as reported in the consolidated
balance sheet........................................ 19,247 19,898 51,519
Intangible fixed assets -- goodwill:
Cost................................................. 840 840 840
Amortization......................................... (388) (472) (556)
Tangible fixed assets:
Cost................................................. (3,875) (4,076) (2,304)
Amortization......................................... (4,125) (2,491) (24,942)
Current assets/liabilities:
Pension costs........................................ 621 679 756
Deferred taxation -- methodology..................... -- 1,466 2,253
-- on adjustments............... -- (224) (249)
Provisions for liabilities and charges:
Deferred taxation -- methodology..................... (392) -- --
-- on adjustments............... (204) -- --
------ ------ -------
Shareholders' equity as adjusted to accord with US
GAAP................................................. 11,724 15,620 27,317
====== ====== =======
</TABLE>
Consolidated statement of cash flows
The consolidated statement of cash flows prepared under UK GAAP presents
substantially the same information as that required under US GAAP. The
statements differ however with regard to the classification of items within the
statements and as regards the definition of cash and cash equivalents.
Under US GAAP, cash and cash equivalents would not include bank overdrafts.
Under UK GAAP, cash flows are presented separately for operating activities,
returns on investments and servicing of finance, taxation, investing activities
and financing. US GAAP require only three categories of cash flow activity to be
reported; operating, investing and financing. Cash flows from taxation and
returns on investments and servicing of finance shown under UK GAAP would be
included as operating activities under US GAAP.
F-96
<PAGE> 209
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
The categories of cash flow activity under US GAAP can be summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
-------------------------------- --------------------
MARCH 31, MARCH 29, APRIL 4, MARCH 29, APRIL 4,
1995 1996 1997 1996 1997
(L000) (L000) (L000) (L000) (L000)
--------- --------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash inflow from operating
activities..................... 10,763 18,670 27,826 7,823 8,243
Cash outflow on investing
activities..................... (12,670) (16,816) (24,119) (3,632) (9,490)
Cash (outflow)/inflow from
financing activities........... 3,967 (1,305) 19,901 (1,555) 5,229
------- ------- ------- ------ -------
Increase in cash and cash
equivalents.................... 2,060 549 23,608 2,636 3,982
Cash and cash equivalents:
Opening balance................ 27 2,087 2,636 -- 22,262
------- ------- ------- ------ -------
Closing balance................ 2,087 2,636 26,244 2,636 26,244
======= ======= ======= ====== =======
</TABLE>
26. CONVERSION OF UK GAAP AMOUNTS TO US GAAP AMOUNTS IN US DOLLARS (UNAUDITED)
The following tables set forth in UKL the historical balance sheet and
profit and loss accounts of the Company as of and for the year ended April 4,
1997, on a historical basis and adjusts the amounts to US GAAP in UKL. The UKL
amounts are the translated to US$ based on a translation rate of UKL.61 =
US$1.00. Such amounts are shown translated to U.S.$ for convenience purposes
only.
Consolidated profit and loss account (unaudited)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 4, 1997
----------------------------------------------------------------
U.K. U.S. GAAP
GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Turnover.................................... 141,643 -- 141,643 .61 232,202
Cost of sales............................. 112,980 (1,685) 111,295 .61 182,451
------- ------ ------- -------
Gross profit.............................. 28,663 1,685 30,348 .61 49,751
Distribution costs........................ 1,632 7 1,639 .61 2,687
Administrative expenses................... 9,491 -- 9,491 .61 15,559
Other operating income.................... (44) -- (44) .61 (72)
------- ------ ------- -------
Operating profit............................ 17,584 1,678 19,262 .61 31,577
Interest receivable....................... 414 -- 414 .61 679
Interest payable.......................... (1,232) -- (1,232) .61 (2,020)
------- ------ ------- -------
Profit on ordinary activities before
taxation.................................. 16,766 1,678 18,444 .61 30,236
Tax on profit on ordinary activities...... 6,874 (762) 6,112 .61 10,020
------- ------ ------- -------
Profit on ordinary activities after
taxation.................................. 9,892 2,440 12,332 .61 20,216
======= ====== ======= =======
</TABLE>
F-97
<PAGE> 210
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 4, 1997 (UNAUDITED)
----------------------------------------------------------------
U.K. U.S. GAAP
GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Turnover.................................... 38,266 -- 38,266 0.61 62,731
Cost of sales............................. 33,711 (408) 33,303 0.61 54,595
------- ----- ------- -------
Gross profit.............................. 4,555 408 4,963 0.61 8,136
Distribution costs........................ 525 -- 525 0.61 862
Administrative expenses................... 1,557 (11) 1,546 0.61 2,535
Other operating income.................... (44) -- (44) 0.61 (72)
------- ----- ------- -------
Operating profit............................ 2,517 419 2,936 0.61 4,811
Interest receivable....................... 48 -- 48 0.61 79
Interest payable.......................... (308) -- (308) 0.61 (505)
------- ----- ------- -------
Profit on ordinary activities before
taxation.................................. 2,257 419 2,676 0.61 4,385
Tax on profit on ordinary activities...... 668 (316) 352 0.61 576
------- ----- ------- -------
Profit on ordinary activities after
taxation.................................. 1,589 735 2,324 0.61 3,809
======= ===== ======= =======
</TABLE>
Consolidated balance sheet (unaudited)
<TABLE>
<CAPTION>
APRIL 4, 1997
----------------------------------------------------------------
U.K. U.S. GAAP
GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Fixed assets
Intangible assets......................... -- 284 284 .61 466
Tangible assets........................... 70,542 (27,246) 43,296 .61 70,977
------ ------- ------ -------
70,542 (26,962) 43,580 .61 71,443
Current assets
Stocks.................................... 9,132 -- 9,132 .61 14,970
Debtors................................... 24,003 2,493 26,496 .61 43,436
Cash at bank and in hand.................. 26,244 -- 26,244 .61 43,023
------ ------- ------ -------
59,379 2,493 61,872 .61 101,429
Creditors: amounts falling due within one
year...................................... 47,863 (267) 47,596 .61 78,026
------ ------- ------ -------
Net current assets.......................... 11,516 2,760 14,276 .61 23,403
------ ------- ------ -------
Total assets less current liabilities....... 82,058 (24,202) 57,856 .61 94,846
Creditors: amounts falling due after more
than one year
Loans..................................... 27,336 -- 27,336 .61 44,813
Obligations under finance leases.......... 3,203 -- 3,203 .61 5,251
Accruals and deferred income
Deferred Government grants................ -- -- -- .61 --
------ ------- ------ -------
51,519 (24,202) 27,317 .61 44,782
====== ======= ====== =======
Capital and reserves*
Called up share capital................... -- -- -- .61 --
Share premium account..................... 4,650 -- 4,650 .61 7,623
Revaluation reserve....................... 26,364 (26,364) -- .61 --
Other reserves............................ 216 (216) -- .61 --
Profit and loss account................... 20,289 2,378 22,667 .61 37,159
------ ------- ------ -------
51,519 (24,202) 27,317 .61 44,782
====== ======= ====== =======
</TABLE>
F-98
<PAGE> 211
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE NEW NOTES OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE NEW NOTES BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF THE NEW NOTES
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS NOT
BEEN A CHANGE IN FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
- ------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information.......................... i
Certain Definitions, Industry Data and
Financial Information........................ ii
Exchange Rates................................. iii
Summary........................................ 1
Risk Factors................................... 10
Use of Proceeds................................ 20
Selected Financial Data........................ 21
Unaudited Pro Forma Financial Information...... 29
Management's Discussion and Analysis of Results
of Operations and Financial Condition........ 41
Business....................................... 48
Management..................................... 54
Security Ownership of Certain Beneficial
Owners....................................... 60
Certain Transactions........................... 62
Description of Senior Credit Facilities........ 65
The Exchange Offer............................. 67
Description of New Notes....................... 75
Certain Federal Income Tax Considerations...... 104
Plan of Distribution........................... 105
Legal Matters.................................. 105
Experts........................................ 106
Index to Financial Statements.................. F-1
</TABLE>
- ------------------------------------------------------------
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW
NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS 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.
OFFER TO EXCHANGE ALL OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES
DUE 2007 FOR
9 3/4% SENIOR SUBORDINATED NOTES
DUE 2007
[VIASYSTEMS, INC. LOGO]
------------------------
PROSPECTUS
------------------------
, 1997
<PAGE> 212
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the issuance and distribution of the securities
being registered are estimated (other than with respect to the SEC registration
fee) to be as follows:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $121,212.12
Printing and Engraving Expenses............................. *
Accounting Fees and Expenses................................ *
Legal Fees and Expenses..................................... *
Miscellaneous............................................... *
-----------
Total............................................. *
===========
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation of Viasystems, Inc. ("the Registrant")
provides for the mandatory indemnification of the directors and officers to the
fullest extent permitted by the General Corporation Law of the State of Delaware
(the "Delaware Code"). Pursuant to Section 145 of the Delaware Code, the
Registrant has the discretionary power to indemnify its present and former
directors and officers against expenses actually and reasonably incurred by them
in connection with any suit (other than an action by or in the right of the
Registrant) to which such directors and officers were, are, or are threatened to
be made, a party by reason of their serving in such positions, so long as they
acted in good faith and in a manner they reasonably believed to be in, or not
opposed to, the best interest of the corporation for which they served in such
positions, and with respect to any criminal action, they had no reasonable cause
to believe their conduct was unlawful.
Under the Delaware Code, a corporation may also indemnify any person who
was or is a party to an action brought by or in the right of the Registrant, but
only for actual or reasonable defense and settlement expenses and not for any
satisfaction of a judgment or settlement of the claim itself, and with the
further limitation that in such actions no indemnification shall be made in the
event of any adjudication that such director or officer is liable to the
corporation unless the court, upon application, finds that in light of all the
circumstances such person is fairly and reasonably entitled to indemnity for
such expenses. The Delaware Code further provides that the indemnification
authorized thereby shall not be deemed exclusive of any other rights to which
any such officer or director may be entitled under any bylaws, agreements, vote
of stockholders or disinterested directors, or otherwise.
The above discussion of the Certificate of Incorporation of the Registrant
and of Section 145 of the Delaware Code is not intended to be exhaustive and is
qualified in its entirety by such Certificate of Incorporation and the Delaware
Code.
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 provisions referred to in this Item 14, 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 of
II-1
<PAGE> 213
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.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On April 11, 1997, the Registrant issued 1,000 shares of its common stock,
par value $.01 per share, to Viasystems Group, Inc. in a private transaction for
a cash purchase price of $1,000 in reliance on the exemption, set forth in
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
from the registration requirement set forth in Section 5 of the Securities Act.
On June 6, 1997, the Registrant sold $400,000,000 aggregate principal
amount of its 9 3/4% Senior Subordinated Notes due 2007 (the "Old Notes") in a
private placement in reliance on Section 4(2) under the Securities Act, at a
price equal to 100% of the stated principal amount of such Old Notes.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
2.1 -- Securities Purchase Agreement dated as of October 1,
1996, among Circo Craft Holding Company and certain
Purchasers (defined therein)(1)
2.2 -- Acquisition Agreement, dated November 26, 1996, among
Lucent Technologies Inc., Circo Technologies Group, Inc.
and Circo Craft Technologies, Inc.(1)
2.3 -- Agreement and Plan of Merger dated as of April 11, 1997,
by and among Viasystems Group, Inc., HMTF Acquisition,
L.P., HMTF U.K. Acquisition Company, Hicks, Muse, Tate &
Furst Equity Fund III, and HM3 Coinvesters, L.P.(1)
2.4 -- Agreement and Plan of Merger dated as of June 6, 1997, by
and between Viasystems Group, Inc. and Chips Holdings,
Inc.(1)
2.5 -- Agreement and Plan of Merger dated as of June 6, 1997, by
and between Viasystems, Inc. and Chips Acquisition,
Inc.(1)
3.1 -- Certificate of Incorporation of Viasystems, Inc.(1)
3.2 -- Bylaws of Viasystems, Inc.(1)
4.1 -- Indenture, dated as of June 6, 1997, by and between
Viasystems, Inc. and The Bank of New York, as Trustee.(1)
4.2 -- Form of the Old Note (included in Exhibit 4.1, Exhibit
A)(1)
4.3 -- Form of the New Note (included in Exhibit 4.1, Exhibit
B)(1)
4.4 -- Second Amended and Restated Credit Agreement dated as of
June 5, 1997 among Viasystems Group, Inc., Viasystems,
Inc., Circo Craft Co. Inc., PCB Investments PLC, Forward
Group PLC, Chips Acquisition Limited and Interconnection
Systems (Holdings) Limited; and The Chase Manhattan Bank
of Canada, and Chase Manhattan International Limited and
The Chase Manhattan Bank.(1)
4.5 -- Amended and Restated Guarantee and Collateral Agreement
dated as of April 11, 1997(1)
4.6 -- Supplement to Guarantee and Collateral Agreement dated as
of June 5, 1997(1)
5.1 -- Opinion of Legality of Weil, Gotshal & Manges LLP+
10.1 -- Supply Agreement dated as of November 26, 1996, by and
between Lucent Technologies Inc. and Circo Craft
Technologies, Inc. (confidential treatment will be sought
with respect to certain portions of this exhibit)+
</TABLE>
II-2
<PAGE> 214
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
10.2 -- General Purchase Agreement dated as of November 26, 1996
between Lucent Technologies, Inc. and Circo Craft
Technologies, Inc. (confidential treatment will be sought
with respect to certain portions of this exhibit)+
10.3 -- Amended and Restated Viasystems Group, Inc. 1997 Stock
Option Plan(1)
10.4 -- Amended and Restated Stock Option Agreement dated as of
November 26, 1996 between Circo Technologies Group, Inc.,
formerly Circo Craft Holding Company and James N. Mills*
10.5 -- Amended and Restated Stock Option Agreement dated as of
November 26, 1996 between Circo Technologies Group, Inc.,
formerly Circo Craft Holding Company and David M.
Sindelar*
10.6 -- Amended and Restated Stock Option Agreement dated as of
November 26, 1996 between Circo Technologies Group, Inc.,
formerly Circo Craft Holding Company and Larry S. Bacon*
10.7 -- Amended and Restated Stock Option Agreement dated as of
November 26, 1996 between Circo Technologies Group, Inc.,
formerly Circo Craft Holding Company and W. Thomas
McGhee*
10.8 -- Stock Option Agreement dated as of June 6, 1997 between
Viasystems Group, Inc. and James N. Mills*
10.9 -- Stock Option Agreement dated as of June 6, 1997 between
Viasystems Group, Inc. and David M. Sindelar*
10.10 -- Stock Option Agreement dated as of June 6, 1997 between
Viasystems Group, Inc. and Larry S. Bacon*
10.11 -- Stock Option Agreement dated as of June 6 1997 between
Viasystems Group, Inc. and W. Thomas McGhee*
10.12 -- Viasystems Group, Inc. Stock Option Agreement dated as of
February 4, 1997, with Richard W. Vieser*
10.13 -- Viasystems Group, Inc. Stock Option Agreement dated as of
February 4, 1997, with Kenneth F. Yontz*
10.14 -- Third Amended and Restated Monitoring and Oversight
Agreement, dated June 6, 1997, among Viasystems Group,
Inc., Viasystems, Inc., Viasystems Technologies Corp.,
Circo Craft Co. Inc., Viasystems International, Inc., PCB
Acquisition Limited, PCB Investments plc, Chips
Acquisition Limited and Hicks, Muse & Co. Partners, L.P.*
10.15 -- Third Amended and Restated Financial Advisory Agreement,
dated June 6, 1997, among Viasystems Group, Inc.,
Viasystems, Inc., Viasystems Technologies Corp., Circo
Craft Co. Inc., Viasystems International, Inc., PCB
Acquisition Limited, PCB Investments plc, Chips
Acquisition Limited and Hicks, Muse & Co. Partners, L.P.
*
10.16 -- Purchase Agreement, dated as of June 2, 1997, by and
among Viasystems, Inc. and Chase Securities Inc., NatWest
Capital Markets Limited and Schroder Wertheim & Co.
Incorporated(1)
10.17 -- Exchange and Registration Rights Agreements, dated as of
June 6, 1997, by and among Viasystems, Inc. and Chase
Securities, Inc., NatWest Capital Markets Limited and
Schroder Wertheim & Co. Incorporated(1)
10.18 -- Executive Employment Agreement dated as of January 1,
1997, by and among Circo Technologies Group, Inc., Circo
Craft Technologies, Inc. and James N. Mills*
10.19 -- Executive Employment Agreement dated as of January 1,
1997, by and among Circo Technologies Group, Inc., Circo
Craft Technologies, Inc. and David M. Sindelar*
</TABLE>
II-3
<PAGE> 215
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
10.20 -- Executive Employment Agreement dated as of January 1,
1997, by and among Circo Technologies Group, Inc., Circo
Craft Technologies, Inc. and Robert N. Mills*
10.21 -- Executive Employment Agreement dated as of January 1,
1997, by and among Circo Technologies Group, Inc., Circo
Craft Technologies, Inc. and Larry S. Bacon*
10.22 -- Executive Employment Agreement dated as of January 1,
1997, by and among Circo Technologies Group, Inc., Circo
Craft Technologies, Inc. and W. Thomas McGhee*
10.23 -- Executive Employment Agreement dated as of January 1,
1997, by and among Circo Technologies Group, Inc., Circo
Craft Technologies, Inc. and Gerald C. Nelson*
10.24 -- Agreement dated as of December 30, 1996, between Circo
Craft Technologies, Inc. and the Communication Workers of
America*
10.25 -- Environmental, Health and Safety Agreement, dated as of
November 26, 1996, between Lucent Technologies and Circo
Craft Technologies, Inc.(1)
12.1 -- Computation of Ratio of Earnings to Fixed Charges of
Viasystems Group, Inc.(1)
21.1 -- Subsidiaries of Viasystems, Inc.(1)
23.1 -- Consent of Weil, Gotshal & Manges LLP (included in the
opinion filed as Exhibit 5.1 to this Registration
Statement)+
23.2 -- Consent of Coopers & Lybrand L.L.P., independent
accountants*
23.3 -- Consent of Coopers & Lybrand L.L.P., independent
accountants*
23.4 -- Consent of Coopers & Lybrand, chartered accountants*
23.5 -- Consent of Deloitte & Touche, chartered accountants*
23.6 -- Consent of Coopers & Lybrand L.L.P., independent
accountants*
23.7 -- Consent of KPMG Audit Plc, independent auditors*
23.8 -- Consent of Ernst & Young, independent auditors*
24.1 -- Powers of Attorney (see pages II-4 of this Registration
Statement)
25.1 -- Statement of Eligibility and Qualification of The Bank of
New York, as Trustee under the Indenture filed as Exhibit
4.1 on Form T-1(1)
27.1 -- Financial Data Schedule(1)
99.1 -- Form of Letter of Transmittal(1)
99.2 -- Form of Notice of Guaranteed Delivery(1)
</TABLE>
- ---------------
(1) Previously filed.
* Filed herewith.
+ To be filed by amendment.
(b) Financial Statement Schedules:
The following financial statement schedule is included in this Registration
Statement:
S-1 Report of Independent Public Accountants on Financial Statement
Schedule
S-2 Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted since the required information is not
present or is not present in the amounts sufficient to require submission of the
schedules, or because the information required is included in the financial
statements and notes thereto.
II-4
<PAGE> 216
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act, 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 the time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(h) See Item 14.
II-5
<PAGE> 217
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 5 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of St.
Louis, State of Missouri, on July 31, 1997.
VIASYSTEMS, INC.
By: /s/ JAMES N. MILLS
----------------------------------
James N. Mills
Chairman of the Board of Directors
and Chief Executive Officer
Each person whose signature to this Registration Statement appears below
hereby appoints James N. Mills and David M. Sindelar, and each of them
individually, any one of whom may act without the joinder of the other, as his
agent and attorney-in-fact to sign on his behalf individually and in the
capacity stated below and to file all pre- and post-effective amendments to this
Registration Statement, which may make such changes and additions to this
Registration Statement as such agent and attorney-in-fact may deem necessary or
appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES N. MILLS Chairman of the Board of June 19, 1997
- ----------------------------------------------------- Directors and Chief Executive
James N. Mills Officer (Principal Executive
Officer)
* Chief Financial Officer June 19, 1997
- ----------------------------------------------------- (Principal Accounting and
David M. Sindelar Financial Officer)
* President, Chief Operating June 19, 1997
- ----------------------------------------------------- Officer and Director
Robert N. Mills
* Director June 19, 1997
- -----------------------------------------------------
Thomas O. Hicks
* Director June 19, 1997
- -----------------------------------------------------
Jack D. Furst
* Director June 19, 1997
- -----------------------------------------------------
Richard W. Vieser
* Director June 19, 1997
- -----------------------------------------------------
Kenneth F. Yontz
*By: /s/ JAMES N. MILLS
------------------------------------------------
James N. Mills
Attorney-In-Fact
</TABLE>
II-6
<PAGE> 218
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Viasystems Group, Inc.:
In connection with our audit of the consolidated financial statements of
Viasystems Group, Inc. and subsidiaries as of December 31, 1996, and for the
period from inception (August 28, 1996) to December 31, 1996, which financial
statements are included in the Registration Statement on Form S-1, we have also
audited the financial statement schedule included herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information required to be included herein.
Coopers & Lybrand L.L.P.
St. Louis, Missouri
February 28, 1997
S-1
<PAGE> 219
VIASYSTEM GROUP, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts... -- 17 392(a) --(b) 409
Reserve for excess and obsolete
inventory....................... -- 0 3,620(a) (363)(b) 3,257
</TABLE>
- ---------------
(a) Allowance of acquired company at acquisition date.
(b) Write-offs, net of recoveries.
S-2
<PAGE> 1
EXHIBIT 10.4
CIRCO TECHNOLOGIES GROUP, INC.
f/k/a Circo Craft Holding Company
101 South Hanley Road
St. Louis, Missouri 63105
November 26, 1996
Mr. James N. Mills
c/o Mills & Partners, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Re: Amended and Restated Grant of "IRR" Stock Options
Mr. Mills:
This letter (i) amends and restates that certain letter dated
October 1, 1996 between James N. Mills and Circo Technologies Group, Inc., a
Delaware corporation formerly known as Circo Craft Holding Company (the
"Company"), and (ii) sets forth the terms of the grant to James N. Mills (the
"Grantee") of options to purchase shares of Common Stock, $0.01 par value per
share (the "Stock"), of the Company.
1. Grant of Performance Options
The Company hereby grants to the Grantee, as a matter of
separate inducement and not in lieu of any salary or other compensation for
services, the right and option to purchase (the "Option"), in accordance with
the terms and conditions set forth in this agreement, an aggregate of 336,408
shares of the Stock (the "Option Shares") initially at the price of $1.00 per
share in cash (the "Exercise Price"), all subject to the adjustment provisions
and limitations set forth herein.
The Option is not intended to be an incentive stock option
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended (the
<PAGE> 2
"Code"). The Company shall at all times have reserved for issuance a
sufficient number of shares of the Stock to permit the Grantee to acquire the
Option Shares on the terms and conditions provided herein.
2. Exercise
(a) The Option Shares shall become exercisable (i)
immediately prior to the consummation of a Liquidity Event (as hereinafter
defined), (ii) concurrently with the consummation of a Qualified IPO (as
hereinafter defined) or (iii) on September 30, 2006 (any of such dates being
referred to herein as an "Exercise Date"); provided that on the Exercise Date
HM Fund III (as hereinafter defined) has realized an overall internal rate of
return on all equity funds invested by it in the Company and its subsidiaries
of at least 35% per annum, compounded annually, as to such investments on an
aggregate basis (the "IRR Target"), as determined in good faith by the board of
directors of the Company based upon the Fair Market Value (as hereinafter
defined) of the Stock held by HM Fund III immediately following such event and
the fair value of all cash or non-cash consideration distributed to HM Fund III
in connection with such event and at any time prior thereto (the return on such
equity funds to be determined on a fully-diluted basis, including giving effect
to conversion of the Company's Class A Common Stock, par value $.01 per share,
but excluding the exercise of the Option Shares).
(b) Subject to the relevant provisions and limitations
contained herein, the Grantee may exercise the Option to purchase all or a
portion of the applicable number of Option Shares at any time on or after the
Exercise Date and prior to the termination of the Option pursuant to this
agreement. Each Option will automatically terminate and become null and void
upon the expiration of a period of ten years commencing on the date of this
agreement.
(c) Any exercise by the Grantee of the Option shall be in
writing addressed to the corporate secretary of the Company at its principal
place of business and shall (i) state the number of shares of the Stock being
purchased pursuant to such exercise and (ii) be accompanied by payment of the
full amount of the aggregate Exercise Price of the shares so purchased.
2
<PAGE> 3
3. Transferability
The Option is not transferable by the Grantee otherwise than
by will or the laws of descent and distribution, and is exercisable, during the
Grantee's lifetime, only by the Grantee. The Option may not be assigned,
transferred (except by will or the laws of descent and distribution), pledged,
or hypothecated in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment, or similar proceeding. Any attempted
assignment, transfer, pledge, hypothecation, or other disposition of the
Option, contrary to the provisions hereof, and the levy of any attachment or
similar proceeding upon the Option, shall be null and void and without effect.
4. Registration
Unless there is in effect a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
issuance of the Option Shares (and, if required, there is available for
delivery a prospectus meeting the requirements of Section 10(a)(3) of the
Securities Act), the Grantee will, upon the exercise of the Option in
accordance with the terms and conditions hereof, deliver to the Company a
certificate pursuant to which the Grantee (a) represents and warrants to the
Company that the Optionee is an "accredited investor" within the meaning of the
rules and regulations under the Securities Act and that the Option Shares then
being purchased by the Grantee pursuant to the Option are not being acquired
with a view to the distribution thereof in violation of the Securities Act; (b)
acknowledges and confirms that the Option Shares purchased may not be sold
unless registered for sale under the Securities Act or pursuant to an exemption
from such registration (in which case an opinion of counsel satisfactory to the
Company shall be supplied to the Company by the Grantee prior to the
consummation of such sale to the effect that such sale is exempt from
registration under the Securities Act); and (c) agrees that the certificates
evidencing such Option Shares shall bear a legend to the effect of the
foregoing.
5. Withholding Taxes
By acceptance hereof, the Grantee hereby (a) agrees to
reimburse the Company or any subsidiary corporation by which any Grantee is
employed for any federal, state, or local taxes required by any government to
be withheld or otherwise deducted by such corporation in respect of the
Grantee's exercise of all or a portion of the Option; (b) authorizes the
Company or any subsidiary corporation by which the
3
<PAGE> 4
Grantee is employed to withhold from any cash compensation paid to the Grantee
or on the Grantee's behalf, an amount sufficient to discharge any federal,
state, and local taxes imposed on the Company, or any subsidiary corporation by
which the Grantee is employed, and which otherwise has not been reimbursed by
the Grantee, in respect of the Grantee's exercise of all or a portion of the
Option; and (c) agrees that the Company or any subsidiary corporation by which
the Grantee is employed, may, in its discretion, hold the stock certificate to
which Grantee is entitled upon exercise of the Option as security for the
payment of the aforementioned withholding tax liability, until cash sufficient
to pay that liability has been accumulated, and may, in its discretion, effect
such withholding by retaining shares issuable upon the exercise of the Option
having a Fair Market Value on the date of exercise which is equal (in the
judgment of such corporation) to the amount to be withheld.
6. Adjustments
(a) In the event of any change in the outstanding shares
of the Stock through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split off, spin-off, combination of
shares, exchange of shares, or other like change in capital structure of the
Company, the Board of Directors of the Company shall cause an appropriate
adjustment to be made to each outstanding Option Share, and if appropriate, the
Exercise Price, such that the Option shall thereafter be exercisable for such
securities, cash, and/or other property as would have been received in respect
of the Option Shares subject to the Option had the Option been exercised in
full immediately prior to such change, and such an adjustment shall be made
successively each time any such change shall occur. The term "Option Shares"
after any such change shall refer to the securities, cash, and/or property then
receivable upon exercise of the Option.
(b) Notwithstanding anything herein to the contrary, on
each September 30, commencing September 30, 1997, the Exercise Price then in
effect with respect to the Option Shares shall be increased to a price
calculated by multiplying the then effective Exercise Price by 1.08.
4
<PAGE> 5
7. Distribution of Assets or Securities
In case the Company shall fix a record date for the making of
a distribution to all holders of shares of the Stock of any asset or security
other than those referred to in Section 6 and other than in connection with the
total liquidation, dissolution or winding-up of the Company, then and in each
such case, the Company shall deposit in trust, the amount of such assets or
securities to which the Grantee would have been entitled to receive as a holder
of Stock if the Grantee had exercised his Option immediately prior to the
record date for such distribution. Upon the exercise of the Option, the
Grantee shall be entitled to receive in addition to the Option Shares (a) the
amount of assets or securities to which the Grantee would have been entitled to
receive as a holder of Stock if such holder had exercised his Option
immediately prior to the record date for such distribution, and (b) any income
earned on such assets or securities from the distribution date to the date of
exercise. In the event that the IRR Target is not achieved on the Exercise
Date or the Option is otherwise terminated or expires unexercised, the assets
and securities held in trust, and all income earned thereon, shall be returned
to the Company or its successor in interest.
8. Entire Agreement
This agreement supersedes any other agreement, whether written
or oral, that may have been made or entered into by any party relating to the
matters contemplated hereby including that certain letter dated October 1, 1996
between James N. Mills and Circo Craft Holding Company. This agreement
constitutes the entire agreement by and between the parties hereto and there
are no agreements or commitments by or between such parties except as expressly
set forth herein.
9. Miscellaneous
This agreement shall be governed by the laws of the State of
Delaware (without giving effect to principles of conflicts of laws).
10. Definitions
In addition to the terms specifically defined elsewhere in
this agreement, as used in this agreement, the following terms shall have the
respective meanings indicated:
5
<PAGE> 6
(a) "Affiliate" shall mean, as to any Person, a Person
that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
Person.
(b) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(c) "Fair Market Value" shall, as it relates to the
Stock, mean the average of the high and low prices of the Stock as
reported on the principal national securities exchange on which shares
of the Stock are then listed on the date specified herein, or if there
were no sales on such date, on the next preceding day on which there
were sales, or if the Stock is not listed on a national securities
exchange, the last reported bid price in the over-the-counter market,
or if the Stock is not traded in the over-the-counter market, the per
share cash price for which all of the outstanding Stock could be sold
to a willing purchaser in an arms length transaction (without regard
to minority discount, absence of liquidity, or transfer restrictions
imposed by any applicable law or agreement) at the date of the event
giving rise to a need for a determination. Except as may be otherwise
expressly provided in a particular Option, Fair Market Value shall be
determined in good faith by the Board of Directors of the Company.
(d) "HM Fund III" shall mean Hicks, Muse, Tate & Furst
Equity Fund III, L.P. and any successor.
(e) "Liquidity Event" shall mean (i) one or more sales,
transfers, redemptions or other dispositions of the Stock owned by HM
Fund III if, after any such sales, transfers, redemptions or other
dispositions, the Stock owned by HM Fund III represents less than 50%
of the Stock owned by HM Fund III on the date hereof, (ii) any merger,
consolidation or other business combination of the Company with any
other person pursuant to which any Person or group (as determined in
accordance with Rule 13d-3 under the Exchange Act) acquires a majority
of the common stock of the surviving entity and cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock, or (iii) any sale of all or substantially all of
the assets of the Company in connection with which cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock.
6
<PAGE> 7
(f) "Person" shall mean any person or entity of any
nature whatsoever, specifically including an individual, a firm, a
company, a corporation, a partnership, a trust, or other entity.
(g) "Qualified IPO" means the Company's first firm
commitment underwritten public offering involving the sale of Common
Stock of the Company for an aggregate purchase price of at least $50
million (before the payment of underwriting discounts and
commissions), pursuant to an effective registration statement under
the Securities Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE> 8
Please indicate your acceptance of all the terms and
conditions of this agreement by signing and returning a copy of this letter.
This agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement. This agreement shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Very truly yours,
CIRCO TECHNOLOGIES GROUP, INC.
By: /s/
-----------------------------------
Name: David M. Sindelar
Title: Executive Vice President and
Chief Financial Officer
ACCEPTED AND AGREED TO as of
the date first above written.
_____________________________
JAMES N. MILLS
<PAGE> 1
EXHIBIT 10.5
CIRCO TECHNOLOGIES GROUP, INC.
f/k/a Circo Craft Holding Company
101 South Hanley Road
St. Louis, Missouri 63105
November 26, 1996
Mr. David M. Sindelar
c/o Mills & Partners, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Re: Amended and Restated Grant of "IRR" Stock Options
Mr. Sindelar:
This letter (i) amends and restates that certain letter dated
October 1, 1996 between David M. Sindelar and Circo Technologies Group, Inc., a
Delaware corporation formerly known as Circo Craft Holding Company (the
"Company"), and (ii) sets forth the terms of the grant to David M. Sindelar
(the "Grantee") of options to purchase shares of Common Stock, $0.01 par value
per share (the "Stock"), of the Company.
1. Grant of Performance Options
The Company hereby grants to the Grantee, as a matter of
separate inducement and not in lieu of any salary or other compensation for
services, the right and option to purchase (the "Option"), in accordance with
the terms and conditions set forth in this agreement, an aggregate of 227,889
shares of the Stock (the "Option Shares") initially at the price of $1.00 per
share in cash (the "Exercise Price"), all subject to the adjustment provisions
and limitations set forth herein.
The Option is not intended to be an incentive stock option
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"). The Company shall at all times have reserved for
issuance a sufficient
<PAGE> 2
number of shares of the Stock to permit the Grantee to acquire the Option
Shares on the terms and conditions provided herein.
2. Exercise
(a) The Option Shares shall become exercisable (i)
immediately prior to the consummation of a Liquidity Event (as hereinafter
defined), (ii) concurrently with the consummation of a Qualified IPO (as
hereinafter defined) or (iii) on September 30, 2006 (any of such dates being
referred to herein as an "Exercise Date"); provided that on the Exercise Date
HM Fund III (as hereinafter defined) has realized an overall internal rate of
return on all equity funds invested by it in the Company and its subsidiaries
of at least 35% per annum, compounded annually, as to such investments on an
aggregate basis (the "IRR Target"), as determined in good faith by the board of
directors of the Company based upon the Fair Market Value (as hereinafter
defined) of the Stock held by HM Fund III immediately following such event and
the fair value of all cash or non-cash consideration distributed to HM Fund III
in connection with such event and at any time prior thereto (the return on such
equity funds to be determined on a fully-diluted basis, including giving effect
to conversion of the Company's Class A Common Stock, par value $.01 per share,
but excluding the exercise of the Option Shares).
(b) Subject to the relevant provisions and limitations
contained herein, the Grantee may exercise the Option to purchase all or a
portion of the applicable number of Option Shares at any time on or after the
Exercise Date and prior to the termination of the Option pursuant to this
agreement. Each Option will automatically terminate and become null and void
upon the expiration of a period of ten years commencing on the date of this
agreement.
(c) Any exercise by the Grantee of the Option shall be in
writing addressed to the corporate secretary of the Company at its principal
place of business and shall (i) state the number of shares of the Stock being
purchased pursuant to such exercise and (ii) be accompanied by payment of the
full amount of the aggregate Exercise Price of the shares so purchased.
2
<PAGE> 3
3. Transferability
The Option is not transferable by the Grantee otherwise than
by will or the laws of descent and distribution, and is exercisable, during the
Grantee's lifetime, only by the Grantee. The Option may not be assigned,
transferred (except by will or the laws of descent and distribution), pledged,
or hypothecated in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment, or similar proceeding. Any attempted
assignment, transfer, pledge, hypothecation, or other disposition of the
Option, contrary to the provisions hereof, and the levy of any attachment or
similar proceeding upon the Option, shall be null and void and without effect.
4. Registration
Unless there is in effect a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
issuance of the Option Shares (and, if required, there is available for
delivery a prospectus meeting the requirements of Section 10(a)(3) of the
Securities Act), the Grantee will, upon the exercise of the Option in
accordance with the terms and conditions hereof, deliver to the Company a
certificate pursuant to which the Grantee (a) represents and warrants to the
Company that the Optionee is an "accredited investor" within the meaning of the
rules and regulations under the Securities Act and that the Option Shares then
being purchased by the Grantee pursuant to the Option are not being acquired
with a view to the distribution thereof in violation of the Securities Act; (b)
acknowledges and confirms that the Option Shares purchased may not be sold
unless registered for sale under the Securities Act or pursuant to an exemption
from such registration (in which case an opinion of counsel satisfactory to the
Company shall be supplied to the Company by the Grantee prior to the
consummation of such sale to the effect that such sale is exempt from
registration under the Securities Act); and (c) agrees that the certificates
evidencing such Option Shares shall bear a legend to the effect of the
foregoing.
5. Withholding Taxes
By acceptance hereof, the Grantee hereby (a) agrees to
reimburse the Company or any subsidiary corporation by which any Grantee is
employed for any federal, state, or local taxes required by any government to
be withheld or otherwise deducted by such corporation in respect of the
Grantee's exercise of all or a portion of the Option; (b) authorizes the
Company or any subsidiary corporation by which the
3
<PAGE> 4
Grantee is employed to withhold from any cash compensation paid to the Grantee
or on the Grantee's behalf, an amount sufficient to discharge any federal,
state, and local taxes imposed on the Company, or any subsidiary corporation by
which the Grantee is employed, and which otherwise has not been reimbursed by
the Grantee, in respect of the Grantee's exercise of all or a portion of the
Option; and (c) agrees that the Company or any subsidiary corporation by which
the Grantee is employed, may, in its discretion, hold the stock certificate to
which Grantee is entitled upon exercise of the Option as security for the
payment of the aforementioned withholding tax liability, until cash sufficient
to pay that liability has been accumulated, and may, in its discretion, effect
such withholding by retaining shares issuable upon the exercise of the Option
having a Fair Market Value on the date of exercise which is equal (in the
judgment of such corporation) to the amount to be withheld.
6. Adjustments
(a) In the event of any change in the outstanding shares
of the Stock through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split off, spin-off, combination of
shares, exchange of shares, or other like change in capital structure of the
Company, the Board of Directors of the Company shall cause an appropriate
adjustment to be made to each outstanding Option Share, and if appropriate, the
Exercise Price, such that the Option shall thereafter be exercisable for such
securities, cash, and/or other property as would have been received in respect
of the Option Shares subject to the Option had the Option been exercised in
full immediately prior to such change, and such an adjustment shall be made
successively each time any such change shall occur. The term "Option Shares"
after any such change shall refer to the securities, cash, and/or property then
receivable upon exercise of the Option.
(b) Notwithstanding anything herein to the contrary, on
each September 30, commencing September 30, 1997, the Exercise Price then in
effect with respect to the Option Shares shall be increased to a price
calculated by multiplying the then effective Exercise Price by 1.08.
4
<PAGE> 5
7. Distribution of Assets or Securities
In case the Company shall fix a record date for the making of
a distribution to all holders of shares of the Stock of any asset or security
other than those referred to in Section 6 and other than in connection with the
total liquidation, dissolution or winding-up of the Company, then and in each
such case, the Company shall deposit in trust, the amount of such assets or
securities to which the Grantee would have been entitled to receive as a holder
of Stock if the Grantee had exercised his Option immediately prior to the
record date for such distribution. Upon the exercise of the Option, the
Grantee shall be entitled to receive in addition to the Option Shares (a) the
amount of assets or securities to which the Grantee would have been entitled to
receive as a holder of Stock if such holder had exercised his Option
immediately prior to the record date for such distribution, and (b) any income
earned on such assets or securities from the distribution date to the date of
exercise. In the event that the IRR Target is not achieved on the Exercise
Date or the Option is otherwise terminated or expires unexercised, the assets
and securities held in trust, and all income earned thereon, shall be returned
to the Company or its successor in interest.
8. Entire Agreement
This agreement supersedes any other agreement, whether written
or oral, that may have been made or entered into by any party relating to the
matters contemplated hereby including that certain letter dated October 1, 1996
between David M. Sindelar and Circo Craft Holding Company. This agreement
constitutes the entire agreement by and between the parties hereto and there
are no agreements or commitments by or between such parties except as expressly
set forth herein.
9. Miscellaneous
This agreement shall be governed by the laws of the State of
Delaware (without giving effect to principles of conflicts of laws).
10. Definitions
In addition to the terms specifically defined elsewhere in
this agreement, as used in this agreement, the following terms shall have the
respective meanings indicated:
5
<PAGE> 6
(a) "Affiliate" shall mean, as to any Person, a Person
that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
Person.
(b) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(c) "Fair Market Value" shall, as it relates to the
Stock, mean the average of the high and low prices of the Stock as
reported on the principal national securities exchange on which shares
of the Stock are then listed on the date specified herein, or if there
were no sales on such date, on the next preceding day on which there
were sales, or if the Stock is not listed on a national securities
exchange, the last reported bid price in the over-the-counter market,
or if the Stock is not traded in the over-the-counter market, the per
share cash price for which all of the outstanding Stock could be sold
to a willing purchaser in an arms length transaction (without regard
to minority discount, absence of liquidity, or transfer restrictions
imposed by any applicable law or agreement) at the date of the event
giving rise to a need for a determination. Except as may be otherwise
expressly provided in a particular Option, Fair Market Value shall be
determined in good faith by the Board of Directors of the Company.
(d) "HM Fund III" shall mean Hicks, Muse, Tate & Furst
Equity Fund III, L.P. and any successor.
(e) "Liquidity Event" shall mean (i) one or more sales,
transfers, redemptions or other dispositions of the Stock owned by HM
Fund III if, after any such sales, transfers, redemptions or other
dispositions, the Stock owned by HM Fund III represents less than 50%
of the Stock owned by HM Fund III on the date hereof, (ii) any merger,
consolidation or other business combination of the Company with any
other person pursuant to which any Person or group (as determined in
accordance with Rule 13d-3 under the Exchange Act) acquires a majority
of the common stock of the surviving entity and cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock, or (iii) any sale of all or substantially all of
the assets of the Company in connection with which cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock.
6
<PAGE> 7
(f) "Person" shall mean any person or entity of any
nature whatsoever, specifically including an individual, a firm, a
company, a corporation, a partnership, a trust, or other entity.
(g) "Qualified IPO" means the Company's first firm
commitment underwritten public offering involving the sale of Common
Stock of the Company for an aggregate purchase price of at least $50
million (before the payment of underwriting discounts and
commissions), pursuant to an effective registration statement under
the Securities Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE> 8
Please indicate your acceptance of all the terms and
conditions of this agreement by signing and returning a copy of this letter.
This agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement. This agreement shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Very truly yours,
CIRCO TECHNOLOGIES GROUP, INC.
By: /s/
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
ACCEPTED AND AGREED TO as of
the date first above written.
- -----------------------------
DAVID M. SINDELAR
<PAGE> 1
EXHIBIT 10.6
CIRCO TECHNOLOGIES GROUP, INC.
f/k/a Circo Craft Holding Company
101 South Hanley Road
St. Louis, Missouri 63105
November 26, 1996
Mr. Larry S. Bacon
c/o Mills & Partners, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Re: Amended and Restated Grant of "IRR" Stock Options
Mr. Bacon:
This letter (i) amends and restates that certain letter dated
October 1, 1996 between Larry S. Bacon and Circo Technologies Group, Inc., a
Delaware corporation formerly known as Circo Craft Holding Company (the
"Company"), and (ii) sets forth the terms of the grant to Larry S. Bacon (the
"Grantee") of options to purchase shares of Common Stock, $0.01 par value per
share (the "Stock"), of the Company.
1. Grant of Performance Options
The Company hereby grants to the Grantee, as a matter of
separate inducement and not in lieu of any salary or other compensation for
services, the right and option to purchase (the "Option"), in accordance with
the terms and conditions set forth in this agreement, an aggregate of 217,037
shares of the Stock (the "Option Shares") initially at the price of $1.00 per
share in cash (the "Exercise Price"), all subject to the adjustment provisions
and limitations set forth herein.
The Option is not intended to be an incentive stock option
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"). The Company shall at all times have reserved for
issuance a sufficient
<PAGE> 2
number of shares of the Stock to permit the Grantee to acquire the Option
Shares on the terms and conditions provided herein.
2. Exercise
(a) The Option Shares shall become exercisable (i)
immediately prior to the consummation of a Liquidity Event (as hereinafter
defined), (ii) concurrently with the consummation of a Qualified IPO (as
hereinafter defined) or (iii) on September 30, 2006 (any of such dates being
referred to herein as an "Exercise Date"); provided that on the Exercise Date
HM Fund III (as hereinafter defined) has realized an overall internal rate of
return on all equity funds invested by it in the Company and its subsidiaries
of at least 35% per annum, compounded annually, as to such investments on an
aggregate basis (the "IRR Target"), as determined in good faith by the board of
directors of the Company based upon the Fair Market Value (as hereinafter
defined) of the Stock held by HM Fund III immediately following such event and
the fair value of all cash or non-cash consideration distributed to HM Fund III
in connection with such event and at any time prior thereto (the return on such
equity funds to be determined on a fully-diluted basis, including giving effect
to conversion of the Company's Class A Common Stock, par value $.01 per share,
but excluding the exercise of the Option Shares).
(b) Subject to the relevant provisions and limitations
contained herein, the Grantee may exercise the Option to purchase all or a
portion of the applicable number of Option Shares at any time on or after the
Exercise Date and prior to the termination of the Option pursuant to this
agreement. Each Option will automatically terminate and become null and void
upon the expiration of a period of ten years commencing on the date of this
agreement.
(c) Any exercise by the Grantee of the Option shall be in
writing addressed to the corporate secretary of the Company at its principal
place of business and shall (i) state the number of shares of the Stock being
purchased pursuant to such exercise and (ii) be accompanied by payment of the
full amount of the aggregate Exercise Price of the shares so purchased.
2
<PAGE> 3
3. Transferability
The Option is not transferable by the Grantee otherwise than
by will or the laws of descent and distribution, and is exercisable, during the
Grantee's lifetime, only by the Grantee. The Option may not be assigned,
transferred (except by will or the laws of descent and distribution), pledged,
or hypothecated in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment, or similar proceeding. Any attempted
assignment, transfer, pledge, hypothecation, or other disposition of the
Option, contrary to the provisions hereof, and the levy of any attachment or
similar proceeding upon the Option, shall be null and void and without effect.
4. Registration
Unless there is in effect a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
issuance of the Option Shares (and, if required, there is available for
delivery a prospectus meeting the requirements of Section 10(a)(3) of the
Securities Act), the Grantee will, upon the exercise of the Option in
accordance with the terms and conditions hereof, deliver to the Company a
certificate pursuant to which the Grantee (a) represents and warrants to the
Company that the Optionee is an "accredited investor" within the meaning of the
rules and regulations under the Securities Act and that the Option Shares then
being purchased by the Grantee pursuant to the Option are not being acquired
with a view to the distribution thereof in violation of the Securities Act; (b)
acknowledges and confirms that the Option Shares purchased may not be sold
unless registered for sale under the Securities Act or pursuant to an exemption
from such registration (in which case an opinion of counsel satisfactory to the
Company shall be supplied to the Company by the Grantee prior to the
consummation of such sale to the effect that such sale is exempt from
registration under the Securities Act); and (c) agrees that the certificates
evidencing such Option Shares shall bear a legend to the effect of the
foregoing.
5. Withholding Taxes
By acceptance hereof, the Grantee hereby (a) agrees to
reimburse the Company or any subsidiary corporation by which any Grantee is
employed for any federal, state, or local taxes required by any government to
be withheld or otherwise deducted by such corporation in respect of the
Grantee's exercise of all or a portion of the Option; (b) authorizes the
Company or any subsidiary corporation by which the
3
<PAGE> 4
Grantee is employed to withhold from any cash compensation paid to the Grantee
or on the Grantee's behalf, an amount sufficient to discharge any federal,
state, and local taxes imposed on the Company, or any subsidiary corporation by
which the Grantee is employed, and which otherwise has not been reimbursed by
the Grantee, in respect of the Grantee's exercise of all or a portion of the
Option; and (c) agrees that the Company or any subsidiary corporation by which
the Grantee is employed, may, in its discretion, hold the stock certificate to
which Grantee is entitled upon exercise of the Option as security for the
payment of the aforementioned withholding tax liability, until cash sufficient
to pay that liability has been accumulated, and may, in its discretion, effect
such withholding by retaining shares issuable upon the exercise of the Option
having a Fair Market Value on the date of exercise which is equal (in the
judgment of such corporation) to the amount to be withheld.
6. Adjustments
(a) In the event of any change in the outstanding shares
of the Stock through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split off, spin-off, combination of
shares, exchange of shares, or other like change in capital structure of the
Company, the Board of Directors of the Company shall cause an appropriate
adjustment to be made to each outstanding Option Share, and if appropriate, the
Exercise Price, such that the Option shall thereafter be exercisable for such
securities, cash, and/or other property as would have been received in respect
of the Option Shares subject to the Option had the Option been exercised in
full immediately prior to such change, and such an adjustment shall be made
successively each time any such change shall occur. The term "Option Shares"
after any such change shall refer to the securities, cash, and/or property then
receivable upon exercise of the Option.
(b) Notwithstanding anything herein to the contrary, on
each September 30, commencing September 30, 1997, the Exercise Price then in
effect with respect to the Option Shares shall be increased to a price
calculated by multiplying the then effective Exercise Price by 1.08.
4
<PAGE> 5
7. Distribution of Assets or Securities
In case the Company shall fix a record date for the making of
a distribution to all holders of shares of the Stock of any asset or security
other than those referred to in Section 6 and other than in connection with the
total liquidation, dissolution or winding-up of the Company, then and in each
such case, the Company shall deposit in trust, the amount of such assets or
securities to which the Grantee would have been entitled to receive as a holder
of Stock if the Grantee had exercised his Option immediately prior to the
record date for such distribution. Upon the exercise of the Option, the
Grantee shall be entitled to receive in addition to the Option Shares (a) the
amount of assets or securities to which the Grantee would have been entitled to
receive as a holder of Stock if such holder had exercised his Option
immediately prior to the record date for such distribution, and (b) any income
earned on such assets or securities from the distribution date to the date of
exercise. In the event that the IRR Target is not achieved on the Exercise
Date or the Option is otherwise terminated or expires unexercised, the assets
and securities held in trust, and all income earned thereon, shall be returned
to the Company or its successor in interest.
8. Entire Agreement
This agreement supersedes any other agreement, whether written
or oral, that may have been made or entered into by any party relating to the
matters contemplated hereby including that certain letter dated October 1, 1996
between Larry S. Bacon and Circo Craft Holding Company. This agreement
constitutes the entire agreement by and between the parties hereto and there
are no agreements or commitments by or between such parties except as expressly
set forth herein.
9. Miscellaneous
This agreement shall be governed by the laws of the State of
Delaware (without giving effect to principles of conflicts of laws).
10. Definitions
In addition to the terms specifically defined elsewhere in
this agreement, as used in this agreement, the following terms shall have the
respective meanings indicated:
5
<PAGE> 6
(a) "Affiliate" shall mean, as to any Person, a Person
that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
Person.
(b) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(c) "Fair Market Value" shall, as it relates to the
Stock, mean the average of the high and low prices of the Stock as
reported on the principal national securities exchange on which shares
of the Stock are then listed on the date specified herein, or if there
were no sales on such date, on the next preceding day on which there
were sales, or if the Stock is not listed on a national securities
exchange, the last reported bid price in the over-the-counter market,
or if the Stock is not traded in the over-the-counter market, the per
share cash price for which all of the outstanding Stock could be sold
to a willing purchaser in an arms length transaction (without regard
to minority discount, absence of liquidity, or transfer restrictions
imposed by any applicable law or agreement) at the date of the event
giving rise to a need for a determination. Except as may be otherwise
expressly provided in a particular Option, Fair Market Value shall be
determined in good faith by the Board of Directors of the Company.
(d) "HM Fund III" shall mean Hicks, Muse, Tate & Furst
Equity Fund III, L.P. and any successor.
(e) "Liquidity Event" shall mean (i) one or more sales,
transfers, redemptions or other dispositions of the Stock owned by HM
Fund III if, after any such sales, transfers, redemptions or other
dispositions, the Stock owned by HM Fund III represents less than 50%
of the Stock owned by HM Fund III on the date hereof, (ii) any merger,
consolidation or other business combination of the Company with any
other person pursuant to which any Person or group (as determined in
accordance with Rule 13d-3 under the Exchange Act) acquires a majority
of the common stock of the surviving entity and cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock, or (iii) any sale of all or substantially all of
the assets of the Company in connection with which cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock.
6
<PAGE> 7
(f) "Person" shall mean any person or entity of any
nature whatsoever, specifically including an individual, a firm, a
company, a corporation, a partnership, a trust, or other entity.
(g) "Qualified IPO" means the Company's first firm
commitment underwritten public offering involving the sale of Common
Stock of the Company for an aggregate purchase price of at least $50
million (before the payment of underwriting discounts and
commissions), pursuant to an effective registration statement under
the Securities Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE> 8
Please indicate your acceptance of all the terms and
conditions of this agreement by signing and returning a copy of this letter.
This agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement. This agreement shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Very truly yours,
CIRCO TECHNOLOGIES GROUP, INC.
By: /s/
------------------------------------
Name: David M. Sindelar
Title: Executive Vice President and
Chief Financial Officer
ACCEPTED AND AGREED TO as of
the date first above written.
- -----------------------------
LARRY S. BACON
<PAGE> 1
EXHIBIT 10.7
CIRCO TECHNOLOGIES GROUP, INC.
f/k/a Circo Craft Holding Company
101 South Hanley Road
St. Louis, Missouri 63105
November 26, 1996
Mr. W. Thomas McGhee
c/o Mills & Partners, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Re: Amended and Restated Grant of "IRR" Stock Options
Mr. McGhee:
This letter (i) amends and restates that certain letter dated
October 1, 1996 between W. Thomas McGhee and Circo Technologies Group, Inc., a
Delaware corporation formerly known as Circo Craft Holding Company (the
"Company"), and (ii) sets forth the terms of the grant to W. Thomas McGhee (the
"Grantee") of options to purchase shares of Common Stock, $0.01 par value per
share (the "Stock"), of the Company.
1. Grant of Performance Options
The Company hereby grants to the Grantee, as a matter of
separate inducement and not in lieu of any salary or other compensation for
services, the right and option to purchase (the "Option"), in accordance with
the terms and conditions set forth in this agreement, an aggregate of 217,037
shares of the Stock (the "Option Shares") initially at the price of $1.00 per
share in cash (the "Exercise Price"), all subject to the adjustment provisions
and limitations set forth herein.
The Option is not intended to be an incentive stock option
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"). The Company shall at all times have reserved for
issuance a sufficient
<PAGE> 2
number of shares of the Stock to permit the Grantee to acquire the Option
Shares on the terms and conditions provided herein.
2. Exercise
(a) The Option Shares shall become exercisable (i)
immediately prior to the consummation of a Liquidity Event (as hereinafter
defined), (ii) concurrently with the consummation of a Qualified IPO (as
hereinafter defined) or (iii) on September 30, 2006 (any of such dates being
referred to herein as an "Exercise Date"); provided that on the Exercise Date
HM Fund III (as hereinafter defined) has realized an overall internal rate of
return on all equity funds invested by it in the Company and its subsidiaries
of at least 35% per annum, compounded annually, as to such investments on an
aggregate basis (the "IRR Target"), as determined in good faith by the board of
directors of the Company based upon the Fair Market Value (as hereinafter
defined) of the Stock held by HM Fund III immediately following such event and
the fair value of all cash or non-cash consideration distributed to HM Fund III
in connection with such event and at any time prior thereto (the return on such
equity funds to be determined on a fully-diluted basis, including giving effect
to conversion of the Company's Class A Common Stock, par value $.01 per share,
but excluding the exercise of the Option Shares).
(b) Subject to the relevant provisions and limitations
contained herein, the Grantee may exercise the Option to purchase all or a
portion of the applicable number of Option Shares at any time on or after the
Exercise Date and prior to the termination of the Option pursuant to this
agreement. Each Option will automatically terminate and become null and void
upon the expiration of a period of ten years commencing on the date of this
agreement.
(c) Any exercise by the Grantee of the Option shall be in
writing addressed to the corporate secretary of the Company at its principal
place of business and shall (i) state the number of shares of the Stock being
purchased pursuant to such exercise and (ii) be accompanied by payment of the
full amount of the aggregate Exercise Price of the shares so purchased.
2
<PAGE> 3
3. Transferability
The Option is not transferable by the Grantee otherwise than
by will or the laws of descent and distribution, and is exercisable, during the
Grantee's lifetime, only by the Grantee. The Option may not be assigned,
transferred (except by will or the laws of descent and distribution), pledged,
or hypothecated in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment, or similar proceeding. Any attempted
assignment, transfer, pledge, hypothecation, or other disposition of the
Option, contrary to the provisions hereof, and the levy of any attachment or
similar proceeding upon the Option, shall be null and void and without effect.
4. Registration
Unless there is in effect a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
issuance of the Option Shares (and, if required, there is available for
delivery a prospectus meeting the requirements of Section 10(a)(3) of the
Securities Act), the Grantee will, upon the exercise of the Option in
accordance with the terms and conditions hereof, deliver to the Company a
certificate pursuant to which the Grantee (a) represents and warrants to the
Company that the Optionee is an "accredited investor" within the meaning of the
rules and regulations under the Securities Act and that the Option Shares then
being purchased by the Grantee pursuant to the Option are not being acquired
with a view to the distribution thereof in violation of the Securities Act; (b)
acknowledges and confirms that the Option Shares purchased may not be sold
unless registered for sale under the Securities Act or pursuant to an exemption
from such registration (in which case an opinion of counsel satisfactory to the
Company shall be supplied to the Company by the Grantee prior to the
consummation of such sale to the effect that such sale is exempt from
registration under the Securities Act); and (c) agrees that the certificates
evidencing such Option Shares shall bear a legend to the effect of the
foregoing.
5. Withholding Taxes
By acceptance hereof, the Grantee hereby (a) agrees to
reimburse the Company or any subsidiary corporation by which any Grantee is
employed for any federal, state, or local taxes required by any government to
be withheld or otherwise deducted by such corporation in respect of the
Grantee's exercise of all or a portion of the Option; (b) authorizes the
Company or any subsidiary corporation by which the
3
<PAGE> 4
Grantee is employed to withhold from any cash compensation paid to the Grantee
or on the Grantee's behalf, an amount sufficient to discharge any federal,
state, and local taxes imposed on the Company, or any subsidiary corporation by
which the Grantee is employed, and which otherwise has not been reimbursed by
the Grantee, in respect of the Grantee's exercise of all or a portion of the
Option; and (c) agrees that the Company or any subsidiary corporation by which
the Grantee is employed, may, in its discretion, hold the stock certificate to
which Grantee is entitled upon exercise of the Option as security for the
payment of the aforementioned withholding tax liability, until cash sufficient
to pay that liability has been accumulated, and may, in its discretion, effect
such withholding by retaining shares issuable upon the exercise of the Option
having a Fair Market Value on the date of exercise which is equal (in the
judgment of such corporation) to the amount to be withheld.
6. Adjustments
(a) In the event of any change in the outstanding shares
of the Stock through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split off, spin-off, combination of
shares, exchange of shares, or other like change in capital structure of the
Company, the Board of Directors of the Company shall cause an appropriate
adjustment to be made to each outstanding Option Share, and if appropriate, the
Exercise Price, such that the Option shall thereafter be exercisable for such
securities, cash, and/or other property as would have been received in respect
of the Option Shares subject to the Option had the Option been exercised in
full immediately prior to such change, and such an adjustment shall be made
successively each time any such change shall occur. The term "Option Shares"
after any such change shall refer to the securities, cash, and/or property then
receivable upon exercise of the Option.
(b) Notwithstanding anything herein to the contrary, on
each September 30, commencing September 30, 1997, the Exercise Price then in
effect with respect to the Option Shares shall be increased to a price
calculated by multiplying the then effective Exercise Price by 1.08.
4
<PAGE> 5
7. Distribution of Assets or Securities
In case the Company shall fix a record date for the making of
a distribution to all holders of shares of the Stock of any asset or security
other than those referred to in Section 6 and other than in connection with the
total liquidation, dissolution or winding-up of the Company, then and in each
such case, the Company shall deposit in trust, the amount of such assets or
securities to which the Grantee would have been entitled to receive as a holder
of Stock if the Grantee had exercised his Option immediately prior to the
record date for such distribution. Upon the exercise of the Option, the
Grantee shall be entitled to receive in addition to the Option Shares (a) the
amount of assets or securities to which the Grantee would have been entitled to
receive as a holder of Stock if such holder had exercised his Option
immediately prior to the record date for such distribution, and (b) any income
earned on such assets or securities from the distribution date to the date of
exercise. In the event that the IRR Target is not achieved on the Exercise
Date or the Option is otherwise terminated or expires unexercised, the assets
and securities held in trust, and all income earned thereon, shall be returned
to the Company or its successor in interest.
8. Entire Agreement
This agreement supersedes any other agreement, whether written
or oral, that may have been made or entered into by any party relating to the
matters contemplated hereby including that certain letter dated October 1, 1996
between W. Thomas McGhee and Circo Craft Holding Company. This agreement
constitutes the entire agreement by and between the parties hereto and there
are no agreements or commitments by or between such parties except as expressly
set forth herein.
9. Miscellaneous
This agreement shall be governed by the laws of the State of
Delaware (without giving effect to principles of conflicts of laws).
10. Definitions
In addition to the terms specifically defined elsewhere in
this agreement, as used in this agreement, the following terms shall have the
respective meanings indicated:
5
<PAGE> 6
(a) "Affiliate" shall mean, as to any Person, a Person
that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
Person.
(b) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(c) "Fair Market Value" shall, as it relates to the
Stock, mean the average of the high and low prices of the Stock as
reported on the principal national securities exchange on which shares
of the Stock are then listed on the date specified herein, or if there
were no sales on such date, on the next preceding day on which there
were sales, or if the Stock is not listed on a national securities
exchange, the last reported bid price in the over-the-counter market,
or if the Stock is not traded in the over-the-counter market, the per
share cash price for which all of the outstanding Stock could be sold
to a willing purchaser in an arms length transaction (without regard
to minority discount, absence of liquidity, or transfer restrictions
imposed by any applicable law or agreement) at the date of the event
giving rise to a need for a determination. Except as may be otherwise
expressly provided in a particular Option, Fair Market Value shall be
determined in good faith by the Board of Directors of the Company.
(d) "HM Fund III" shall mean Hicks, Muse, Tate & Furst
Equity Fund III, L.P. and any successor.
(e) "Liquidity Event" shall mean (i) one or more sales,
transfers, redemptions or other dispositions of the Stock owned by HM
Fund III if, after any such sales, transfers, redemptions or other
dispositions, the Stock owned by HM Fund III represents less than 50%
of the Stock owned by HM Fund III on the date hereof, (ii) any merger,
consolidation or other business combination of the Company with any
other person pursuant to which any Person or group (as determined in
accordance with Rule 13d-3 under the Exchange Act) acquires a majority
of the common stock of the surviving entity and cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock, or (iii) any sale of all or substantially all of
the assets of the Company in connection with which cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock.
6
<PAGE> 7
(f) "Person" shall mean any person or entity of any
nature whatsoever, specifically including an individual, a firm, a
company, a corporation, a partnership, a trust, or other entity.
(g) "Qualified IPO" means the Company's first firm
commitment underwritten public offering involving the sale of Common
Stock of the Company for an aggregate purchase price of at least $50
million (before the payment of underwriting discounts and
commissions), pursuant to an effective registration statement under
the Securities Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE> 8
Please indicate your acceptance of all the terms and
conditions of this agreement by signing and returning a copy of this letter.
This agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement. This agreement shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Very truly yours,
CIRCO TECHNOLOGIES GROUP, INC.
By: /s/
------------------------------------
Name: David M. Sindelar
Title: Executive Vice President and
Chief Financial Officer
ACCEPTED AND AGREED TO as of
the date first above written.
- -----------------------------
W. THOMAS MCGHEE
<PAGE> 1
EXHIBIT 10.8
VIASYSTEMS GROUP, INC.
101 South Hanley Road
St. Louis, Missouri 63105
June 6, 1997
Mr. James N. Mills
c/o Mills & Partners, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Re: Grant of "IRR" Stock Options
Mr. Mills:
This letter sets forth the terms of the grant to James N.
Mills (the "Grantee") of options to purchase shares of Common Stock, $0.01 par
value per share (the "Stock"), of the Company.
1. Grant of Performance Options
The Company hereby grants to the Grantee, as a matter of
separate inducement and not in lieu of any salary or other compensation for
services, the right and option to purchase (the "Option"), in accordance with
the terms and conditions set forth in this agreement, an aggregate of 2,132,392
shares of the Stock (the "Option Shares") initially at the price of $1.00 per
share in cash (the "Exercise Price"), all subject to the adjustment provisions
and limitations set forth herein.
The Option is not intended to be an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). The Company shall at all times have reserved for issuance
a sufficient number of shares of the Stock to permit the Grantee to acquire the
Option Shares on the terms and conditions provided herein.
<PAGE> 2
2. Exercise
(a) The Option Shares shall become exercisable (i)
immediately prior to the consummation of a Liquidity Event (as hereinafter
defined), (ii) concurrently with the consummation of a Qualified IPO (as
hereinafter defined) or (iii) on June 6, 2007 (any of such dates being referred
to herein as an "Exercise Date"), whichever of the foregoing occurs first;
provided that on the Exercise Date HM Fund III (as hereinafter defined) has
realized an overall internal rate of return on all equity funds invested by it
in the Company and its subsidiaries of at least 35% per annum, compounded
annually, as to such investments on an aggregate basis (the "IRR Target"), as
determined in good faith by the board of directors of the Company based upon
the Fair Market Value (as hereinafter defined) of the Stock held by HM Fund III
immediately following such event and the fair value of all cash or non-cash
consideration distributed to HM Fund III in connection with such event and at
any time prior thereto (the return on such equity funds to be determined on a
fully-diluted basis, including giving effect to conversion of the Company's
Class A Common Stock, par value $.01 per share, but excluding the exercise of
the Option Shares).
(b) Subject to the relevant provisions and limitations
contained herein, the Grantee may exercise the Option to purchase all or a
portion of the applicable number of Option Shares at any time on or after the
Exercise Date and prior to the termination of the Option pursuant to this
agreement. Each Option will automatically terminate and become null and void
upon the expiration of a period of ten years commencing on the date of this
agreement.
(c) Any exercise by the Grantee of the Option shall be
in writing addressed to the corporate secretary of the Company at its principal
place of business and shall (i) state the number of shares of the Stock being
purchased pursuant to such exercise and (ii) be accompanied by payment of the
full amount of the aggregate Exercise Price of the shares so purchased.
3. Transferability
The Option is not transferable by the Grantee otherwise than
by will or the laws of descent and distribution, and is exercisable, during the
Grantee's lifetime, only by the Grantee. The Option may not be assigned,
transferred (except by will or the laws of descent and distribution), pledged,
or hypothecated in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment, or similar proceeding. Any attempted
assignment, transfer, pledge, hypothecation, or
2
<PAGE> 3
other disposition of the Option, contrary to the provisions hereof,
and the levy of any attachment or similar proceeding upon the Option, shall be
null and void and without effect.
4. Registration
Unless there is in effect a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
issuance of the Option Shares (and, if required, there is available for
delivery a prospectus meeting the requirements of Section 10(a)(3) of the
Securities Act), the Grantee will, upon the exercise of the Option in
accordance with the terms and conditions hereof, deliver to the Company a
certificate pursuant to which the Grantee (a) represents and warrants to the
Company that the Optionee is an "accredited investor" within the meaning of the
rules and regulations under the Securities Act and that the Option Shares then
being purchased by the Grantee pursuant to the Option are not being acquired
with a view to the distribution thereof in violation of the Securities Act; (b)
acknowledges and confirms that the Option Shares purchased may not be sold
unless registered for sale under the Securities Act or pursuant to an exemption
from such registration (in which case an opinion of counsel satisfactory to the
Company shall be supplied to the Company by the Grantee prior to the
consummation of such sale to the effect that such sale is exempt from
registration under the Securities Act); and (c) agrees that the certificates
evidencing such Option Shares shall bear a legend to the effect of the
foregoing.
5. Withholding Taxes
By acceptance hereof, the Grantee hereby (a) agrees to
reimburse the Company or any subsidiary corporation by which any Grantee is
employed for any federal, state, or local taxes required by any government to
be withheld or otherwise deducted by such corporation in respect of the
Grantee's exercise of all or a portion of the Option; (b) authorizes the
Company or any subsidiary corporation by which the Grantee is employed to
withhold from any cash compensation paid to the Grantee or on the Grantee's
behalf, an amount sufficient to discharge any federal, state, and local taxes
imposed on the Company, or any subsidiary corporation by which the Grantee is
employed, and which otherwise has not been reimbursed by the Grantee, in
respect of the Grantee's exercise of all or a portion of the Option; and (c)
agrees that the Company or any subsidiary corporation by which the Grantee is
employed, may, in its discretion, hold the stock certificate to which Grantee
is entitled upon exercise of the Option as security for the payment of the
aforementioned withholding tax liability,
3
<PAGE> 4
until cash sufficient to pay that liability has been accumulated, and may, in
its discretion, effect such withholding by retaining shares issuable upon the
exercise of the Option having a Fair Market Value on the date of exercise which
is equal (in the judgment of such corporation) to the amount to be withheld.
6. Adjustments
(a) In the event of any change in the outstanding
shares of the Stock through merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, split-up, split off, spin-off,
combination of shares, exchange of shares, or other like change in capital
structure of the Company, the Board of Directors of the Company shall cause an
appropriate adjustment to be made to each outstanding Option Share, and if
appropriate, the Exercise Price, such that the Option shall thereafter be
exercisable for such securities, cash, and/or other property as would have been
received in respect of the Option Shares subject to the Option had the Option
been exercised in full immediately prior to such change, and such an adjustment
shall be made successively each time any such change shall occur. The term
"Option Shares" after any such change shall refer to the securities, cash,
and/or property then receivable upon exercise of the Option.
(b) Notwithstanding anything herein to the contrary,
on each June 6, commencing June 6, 1998, the Exercise Price then in effect with
respect to the Option Shares shall be increased to a price calculated by
multiplying the then effective Exercise Price by 1.08.
7. Distribution of Assets or Securities
In case the Company shall fix a record date for the making of
a distribution to all holders of shares of the Stock of any asset or security
other than those referred to in Section 6 and other than in connection with the
total liquidation, dissolution or winding-up of the Company, then and in each
such case, the Company shall deposit in trust, the amount of such assets or
securities to which the Grantee would have been entitled to receive as a holder
of Stock if the Grantee had exercised his Option immediately prior to the
record date for such distribution. Upon the exercise of the Option, the Grantee
shall be entitled to receive in addition to the Option Shares (a) the amount of
assets or securities to which the Grantee would have been entitled to receive
as a holder of Stock if such holder had exercised his Option immediately prior
to the record date for such distribution, and (b) any income earned on such
assets or securities from the distribution date to the date of exercise. In the
4
<PAGE> 5
event that the IRR Target is not achieved on the Exercise Date or the Option is
otherwise terminated or expires unexercised, the assets and securities held in
trust, and all income earned thereon, shall be returned to the Company or its
successor in interest.
8. Entire Agreement
This agreement supersedes any other agreement, whether
written or oral, that may have been made or entered into by any party relating
to the matters contemplated hereby including that certain letter dated October
1, 1996 between James N. Mills and Circo Craft Holding Company. This agreement
constitutes the entire agreement by and between the parties hereto and there
are no agreements or commitments by or between such parties except as expressly
set forth herein.
9. Miscellaneous
This agreement shall be governed by the laws of the State of
Delaware (without giving effect to principles of conflicts of laws).
10. Definitions
In addition to the terms specifically defined elsewhere in
this agreement, as used in this agreement, the following terms shall have the
respective meanings indicated:
(a) "Affiliate" shall mean, as to any Person, a Person
that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
Person.
(b) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(c) "Fair Market Value" shall, as it relates to the
Stock, mean the average of the high and low prices of the Stock as
reported on the principal national securities exchange on which shares
of the Stock are then listed on the date specified herein, or if there
were no sales on such date, on the next preceding day on which there
were sales, or if the Stock is not listed on a national securities
exchange, the last reported bid price in the over-the-counter market,
or if the Stock is not traded in the over-the-counter market, the per
5
<PAGE> 6
share cash price for which all of the outstanding Stock could be sold
to a willing purchaser in an arms length transaction (without regard
to minority discount, absence of liquidity, or transfer restrictions
imposed by any applicable law or agreement) at the date of the event
giving rise to a need for a determination. Except as may be otherwise
expressly provided in a particular Option, Fair Market Value shall be
determined in good faith by the Board of Directors of the Company.
(d) "HM Fund III" shall mean Hicks, Muse, Tate & Furst
Equity Fund III, L.P. and any successor.
(e) "Liquidity Event" shall mean (i) one or more sales,
transfers, redemptions or other dispositions of the Stock owned by HM
Fund III if, after any such sales, transfers, redemptions or other
dispositions, the Stock owned, beneficially or of record, by HM Fund
III represents less than 50% of the Stock owned, beneficially or of
record, by HM Fund III on the date hereof, (ii) any merger,
consolidation or other business combination of the Company with any
other person pursuant to which any Person or group (as determined in
accordance with Rule 13d-3 under the Exchange Act) acquires a majority
of the common stock of the surviving entity and cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock, or (iii) any sale of all or substantially all of
the assets of the Company in connection with which cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock.
(f) "Person" shall mean any person or entity of any
nature whatsoever, specifically including an individual, a firm, a
company, a corporation, a partnership, a trust, or other entity.
(g) "Qualified IPO" means the Company's first firm
commitment underwritten public offering involving the sale of Common
Stock of the Company for an aggregate purchase price of at least $50
million (before the payment of underwriting discounts and
commissions), pursuant to an effective registration statement under
the Securities Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE> 7
Please indicate your acceptance of all the terms and
conditions of this agreement by signing and returning a copy of this letter.
This agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement. This agreement shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other parties.
Very truly yours,
VIASYSTEMS GROUP, INC.
By: /s/ ELLEN L. LIPSITZ
------------------------------------
Name: Ellen L. Lipsitz
Title: Vice President
ACCEPTED AND AGREED TO as of
the date first above written.
/s/ JAMES N. MILLS
- -----------------------------
JAMES N. MILLS
<PAGE> 1
EXHIBIT 10.9
VIASYSTEMS GROUP, INC.
101 South Hanley Road
St. Louis, Missouri 63105
June 6, 1997
Mr. David M. Sindelar
c/o Mills & Partners, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Re: Grant of "IRR" Stock Options
Mr. Sindelar:
This letter sets forth the terms of the grant to David M.
Sindelar (the "Grantee") of options to purchase shares of Common Stock, $0.01
par value per share (the "Stock"), of the Company.
1. Grant of Performance Options
The Company hereby grants to the Grantee, as a matter of
separate inducement and not in lieu of any salary or other compensation for
services, the right and option to purchase (the "Option"), in accordance with
the terms and conditions set forth in this agreement, an aggregate of 1,318,501
shares of the Stock (the "Option Shares") initially at the price of $1.00 per
share in cash (the "Exercise Price"), all subject to the adjustment provisions
and limitations set forth herein.
The Option is not intended to be an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). The Company shall at all times have reserved for
issuance a sufficient number of shares of the Stock to permit the Grantee to
acquire the Option Shares on the terms and conditions provided herein.
<PAGE> 2
2. Exercise
(a) The Option Shares shall become exercisable (i)
immediately prior to the consummation of a Liquidity Event (as hereinafter
defined), (ii) concurrently with the consummation of a Qualified IPO (as
hereinafter defined) or (iii) on June 6, 2007 (any of such dates being referred
to herein as an "Exercise Date"), whichever of the foregoing occurs first;
provided that on the Exercise Date HM Fund III (as hereinafter defined) has
realized an overall internal rate of return on all equity funds invested by it
in the Company and its subsidiaries of at least 35% per annum, compounded
annually, as to such investments on an aggregate basis (the "IRR Target"), as
determined in good faith by the board of directors of the Company based upon
the Fair Market Value (as hereinafter defined) of the Stock held by HM Fund III
immediately following such event and the fair value of all cash or non-cash
consideration distributed to HM Fund III in connection with such event and at
any time prior thereto (the return on such equity funds to be determined on a
fully-diluted basis, including giving effect to conversion of the Company's
Class A Common Stock, par value $.01 per share, but excluding the exercise of
the Option Shares).
(b) Subject to the relevant provisions and limitations
contained herein, the Grantee may exercise the Option to purchase all or a
portion of the applicable number of Option Shares at any time on or after the
Exercise Date and prior to the termination of the Option pursuant to this
agreement. Each Option will automatically terminate and become null and void
upon the expiration of a period of ten years commencing on the date of this
agreement.
(c) Any exercise by the Grantee of the Option shall be in
writing addressed to the corporate secretary of the Company at its principal
place of business and shall (i) state the number of shares of the Stock being
purchased pursuant to such exercise and (ii) be accompanied by payment of the
full amount of the aggregate Exercise Price of the shares so purchased.
3. Transferability
The Option is not transferable by the Grantee otherwise than
by will or the laws of descent and distribution, and is exercisable, during the
Grantee's lifetime, only by the Grantee. The Option may not be assigned,
transferred (except by will or the laws of descent and distribution), pledged,
or hypothecated in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment, or similar proceeding. Any attempted
assignment, transfer, pledge, hypothecation, or
2
<PAGE> 3
other disposition of the Option, contrary to the provisions hereof, and the
levy of any attachment or similar proceeding upon the Option, shall be null and
void and without effect.
4. Registration
Unless there is in effect a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
issuance of the Option Shares (and, if required, there is available for
delivery a prospectus meeting the requirements of Section 10(a)(3) of the
Securities Act), the Grantee will, upon the exercise of the Option in
accordance with the terms and conditions hereof, deliver to the Company a
certificate pursuant to which the Grantee (a) represents and warrants to the
Company that the Optionee is an "accredited investor" within the meaning of the
rules and regulations under the Securities Act and that the Option Shares then
being purchased by the Grantee pursuant to the Option are not being acquired
with a view to the distribution thereof in violation of the Securities Act; (b)
acknowledges and confirms that the Option Shares purchased may not be sold
unless registered for sale under the Securities Act or pursuant to an exemption
from such registration (in which case an opinion of counsel satisfactory to the
Company shall be supplied to the Company by the Grantee prior to the
consummation of such sale to the effect that such sale is exempt from
registration under the Securities Act); and (c) agrees that the certificates
evidencing such Option Shares shall bear a legend to the effect of the
foregoing.
5. Withholding Taxes
By acceptance hereof, the Grantee hereby (a) agrees to
reimburse the Company or any subsidiary corporation by which any Grantee is
employed for any federal, state, or local taxes required by any government to
be withheld or otherwise deducted by such corporation in respect of the
Grantee's exercise of all or a portion of the Option; (b) authorizes the
Company or any subsidiary corporation by which the Grantee is employed to
withhold from any cash compensation paid to the Grantee or on the Grantee's
behalf, an amount sufficient to discharge any federal, state, and local taxes
imposed on the Company, or any subsidiary corporation by which the Grantee is
employed, and which otherwise has not been reimbursed by the Grantee, in
respect of the Grantee's exercise of all or a portion of the Option; and (c)
agrees that the Company or any subsidiary corporation by which the Grantee is
employed, may, in its discretion, hold the stock certificate to which Grantee
is entitled upon exercise of the Option as security for the payment of the
aforementioned withholding tax liability,
3
<PAGE> 4
until cash sufficient to pay that liability has been accumulated, and may, in
its discretion, effect such withholding by retaining shares issuable upon the
exercise of the Option having a Fair Market Value on the date of exercise which
is equal (in the judgment of such corporation) to the amount to be withheld.
6. Adjustments
(a) In the event of any change in the outstanding shares
of the Stock through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split off, spin-off, combination of
shares, exchange of shares, or other like change in capital structure of the
Company, the Board of Directors of the Company shall cause an appropriate
adjustment to be made to each outstanding Option Share, and if appropriate, the
Exercise Price, such that the Option shall thereafter be exercisable for such
securities, cash, and/or other property as would have been received in respect
of the Option Shares subject to the Option had the Option been exercised in
full immediately prior to such change, and such an adjustment shall be made
successively each time any such change shall occur. The term "Option Shares"
after any such change shall refer to the securities, cash, and/or property then
receivable upon exercise of the Option.
(b) Notwithstanding anything herein to the contrary, on
each June 6, commencing June 6, 1998, the Exercise Price then in effect with
respect to the Option Shares shall be increased to a price calculated by
multiplying the then effective Exercise Price by 1.08.
7. Distribution of Assets or Securities
In case the Company shall fix a record date for the making of
a distribution to all holders of shares of the Stock of any asset or security
other than those referred to in Section 6 and other than in connection with the
total liquidation, dissolution or winding-up of the Company, then and in each
such case, the Company shall deposit in trust, the amount of such assets or
securities to which the Grantee would have been entitled to receive as a holder
of Stock if the Grantee had exercised his Option immediately prior to the
record date for such distribution. Upon the exercise of the Option, the
Grantee shall be entitled to receive in addition to the Option Shares (a) the
amount of assets or securities to which the Grantee would have been entitled to
receive as a holder of Stock if such holder had exercised his Option
immediately prior to the record date for such distribution, and (b) any income
earned on such assets or securities from the distribution date to the date of
exercise. In the
4
<PAGE> 5
event that the IRR Target is not achieved on the Exercise Date or the Option is
otherwise terminated or expires unexercised, the assets and securities held in
trust, and all income earned thereon, shall be returned to the Company or its
successor in interest.
8. Entire Agreement
This agreement supersedes any other agreement, whether written
or oral, that may have been made or entered into by any party relating to the
matters contemplated hereby including that certain letter dated October 1, 1996
between James N. Mills and Circo Craft Holding Company. This agreement
constitutes the entire agreement by and between the parties hereto and there
are no agreements or commitments by or between such parties except as expressly
set forth herein.
9. Miscellaneous
This agreement shall be governed by the laws of the State of
Delaware (without giving effect to principles of conflicts of laws).
10. Definitions
In addition to the terms specifically defined elsewhere in
this agreement, as used in this agreement, the following terms shall have the
respective meanings indicated:
(a) "Affiliate" shall mean, as to any Person, a Person
that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
Person.
(b) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(c) "Fair Market Value" shall, as it relates to the
Stock, mean the average of the high and low prices of the Stock as
reported on the principal national securities exchange on which shares
of the Stock are then listed on the date specified herein, or if there
were no sales on such date, on the next preceding day on which there
were sales, or if the Stock is not listed on a national securities
exchange, the last reported bid price in the over-the-counter market,
or if the Stock is not traded in the over-the-counter market, the per
5
<PAGE> 6
share cash price for which all of the outstanding Stock could be sold
to a willing purchaser in an arms length transaction (without regard
to minority discount, absence of liquidity, or transfer restrictions
imposed by any applicable law or agreement) at the date of the event
giving rise to a need for a determination. Except as may be otherwise
expressly provided in a particular Option, Fair Market Value shall be
determined in good faith by the Board of Directors of the Company.
(d) "HM Fund III" shall mean Hicks, Muse, Tate & Furst
Equity Fund III, L.P. and any successor.
(e) "Liquidity Event" shall mean (i) one or more sales,
transfers, redemptions or other dispositions of the Stock owned by HM
Fund III if, after any such sales, transfers, redemptions or other
dispositions, the Stock owned, beneficially or of record, by HM Fund
III represents less than 50% of the Stock owned by, beneficially or of
record, HM Fund III on the date hereof, (ii) any merger, consolidation
or other business combination of the Company with any other person
pursuant to which any Person or group (as determined in accordance
with Rule 13d-3 under the Exchange Act) acquires a majority of the
common stock of the surviving entity and cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock, or (iii) any sale of all or substantially all of
the assets of the Company in connection with which cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock.
(f) "Person" shall mean any person or entity of any
nature whatsoever, specifically including an individual, a firm, a
company, a corporation, a partnership, a trust, or other entity.
(g) "Qualified IPO" means the Company's first firm
commitment underwritten public offering involving the sale of Common
Stock of the Company for an aggregate purchase price of at least $50
million (before the payment of underwriting discounts and
commissions), pursuant to an effective registration statement under
the Securities Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE> 7
Please indicate your acceptance of all the terms and
conditions of this agreement by signing and returning a copy of this letter.
This agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement. This agreement shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Very truly yours,
VIASYSTEMS GROUP, INC.
By:/s/ ELLEN L. LIPSITZ
------------------------------------
Name: Ellen L. Lipsitz
Title: Vice President
ACCEPTED AND AGREED TO as of
the date first above written.
/s/ DAVID M. SINDELAR
- -------------------------------
DAVID M. SINDELAR
<PAGE> 1
EXHIBIT 10.10
VIASYSTEMS GROUP, INC.
101 South Hanley Road
St. Louis, Missouri 63105
June 6, 1997
Mr. Larry S. Bacon
c/o Mills & Partners, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Re: Grant of "IRR" Stock Options
Mr. Bacon:
This letter sets forth the terms of the grant to Larry S.
Bacon (the "Grantee") of options to purchase shares of Common Stock, $0.01 par
value per share (the "Stock"), of the Company.
1. Grant of Performance Options
The Company hereby grants to the Grantee, as a matter of
separate inducement and not in lieu of any salary or other compensation for
services, the right and option to purchase (the "Option"), in accordance with
the terms and conditions set forth in this agreement, an aggregate of 1,237,112
shares of the Stock (the "Option Shares") initially at the price of $1.00 per
share in cash (the "Exercise Price"), all subject to the adjustment provisions
and limitations set forth herein.
The Option is not intended to be an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). The Company shall at all times have reserved for
issuance a sufficient number of shares of the Stock to permit the Grantee to
acquire the Option Shares on the terms and conditions provided herein.
<PAGE> 2
2. Exercise
(a) The Option Shares shall become exercisable (i)
immediately prior to the consummation of a Liquidity Event (as hereinafter
defined), (ii) concurrently with the consummation of a Qualified IPO (as
hereinafter defined) or (iii) on June 6, 2007 (any of such dates being referred
to herein as an "Exercise Date"), whichever of the foregoing occurs first;
provided that on the Exercise Date HM Fund III (as hereinafter defined) has
realized an overall internal rate of return on all equity funds invested by it
in the Company and its subsidiaries of at least 35% per annum, compounded
annually, as to such investments on an aggregate basis (the "IRR Target"), as
determined in good faith by the board of directors of the Company based upon
the Fair Market Value (as hereinafter defined) of the Stock held by HM Fund III
immediately following such event and the fair value of all cash or non-cash
consideration distributed to HM Fund III in connection with such event and at
any time prior thereto (the return on such equity funds to be determined on a
fully-diluted basis, including giving effect to conversion of the Company's
Class A Common Stock, par value $.01 per share, but excluding the exercise of
the Option Shares).
(b) Subject to the relevant provisions and limitations
contained herein, the Grantee may exercise the Option to purchase all or a
portion of the applicable number of Option Shares at any time on or after the
Exercise Date and prior to the termination of the Option pursuant to this
agreement. Each Option will automatically terminate and become null and void
upon the expiration of a period of ten years commencing on the date of this
agreement.
(c) Any exercise by the Grantee of the Option shall be in
writing addressed to the corporate secretary of the Company at its principal
place of business and shall (i) state the number of shares of the Stock being
purchased pursuant to such exercise and (ii) be accompanied by payment of the
full amount of the aggregate Exercise Price of the shares so purchased.
3. Transferability
The Option is not transferable by the Grantee otherwise than
by will or the laws of descent and distribution, and is exercisable, during the
Grantee's lifetime, only by the Grantee. The Option may not be assigned,
transferred (except by will or the laws of descent and distribution), pledged,
or hypothecated in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment, or similar proceeding. Any attempted
assignment, transfer, pledge, hypothecation, or
2
<PAGE> 3
other disposition of the Option, contrary to the provisions hereof, and the
levy of any attachment or similar proceeding upon the Option, shall be null and
void and without effect.
4. Registration
Unless there is in effect a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
issuance of the Option Shares (and, if required, there is available for
delivery a prospectus meeting the requirements of Section 10(a)(3) of the
Securities Act), the Grantee will, upon the exercise of the Option in
accordance with the terms and conditions hereof, deliver to the Company a
certificate pursuant to which the Grantee (a) represents and warrants to the
Company that the Optionee is an "accredited investor" within the meaning of the
rules and regulations under the Securities Act and that the Option Shares then
being purchased by the Grantee pursuant to the Option are not being acquired
with a view to the distribution thereof in violation of the Securities Act; (b)
acknowledges and confirms that the Option Shares purchased may not be sold
unless registered for sale under the Securities Act or pursuant to an exemption
from such registration (in which case an opinion of counsel satisfactory to the
Company shall be supplied to the Company by the Grantee prior to the
consummation of such sale to the effect that such sale is exempt from
registration under the Securities Act); and (c) agrees that the certificates
evidencing such Option Shares shall bear a legend to the effect of the
foregoing.
5. Withholding Taxes
By acceptance hereof, the Grantee hereby (a) agrees to
reimburse the Company or any subsidiary corporation by which any Grantee is
employed for any federal, state, or local taxes required by any government to
be withheld or otherwise deducted by such corporation in respect of the
Grantee's exercise of all or a portion of the Option; (b) authorizes the
Company or any subsidiary corporation by which the Grantee is employed to
withhold from any cash compensation paid to the Grantee or on the Grantee's
behalf, an amount sufficient to discharge any federal, state, and local taxes
imposed on the Company, or any subsidiary corporation by which the Grantee is
employed, and which otherwise has not been reimbursed by the Grantee, in
respect of the Grantee's exercise of all or a portion of the Option; and (c)
agrees that the Company or any subsidiary corporation by which the Grantee is
employed, may, in its discretion, hold the stock certificate to which Grantee
is entitled upon exercise of the Option as security for the payment of the
aforementioned withholding tax liability,
3
<PAGE> 4
until cash sufficient to pay that liability has been accumulated, and may, in
its discretion, effect such withholding by retaining shares issuable upon the
exercise of the Option having a Fair Market Value on the date of exercise which
is equal (in the judgment of such corporation) to the amount to be withheld.
6. Adjustments
(a) In the event of any change in the outstanding shares
of the Stock through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split off, spin-off, combination of
shares, exchange of shares, or other like change in capital structure of the
Company, the Board of Directors of the Company shall cause an appropriate
adjustment to be made to each outstanding Option Share, and if appropriate, the
Exercise Price, such that the Option shall thereafter be exercisable for such
securities, cash, and/or other property as would have been received in respect
of the Option Shares subject to the Option had the Option been exercised in
full immediately prior to such change, and such an adjustment shall be made
successively each time any such change shall occur. The term "Option Shares"
after any such change shall refer to the securities, cash, and/or property then
receivable upon exercise of the Option.
(b) Notwithstanding anything herein to the contrary, on
each June 6, commencing June 6, 1998, the Exercise Price then in effect with
respect to the Option Shares shall be increased to a price calculated by
multiplying the then effective Exercise Price by 1.08.
7. Distribution of Assets or Securities
In case the Company shall fix a record date for the making of
a distribution to all holders of shares of the Stock of any asset or security
other than those referred to in Section 6 and other than in connection with the
total liquidation, dissolution or winding-up of the Company, then and in each
such case, the Company shall deposit in trust, the amount of such assets or
securities to which the Grantee would have been entitled to receive as a holder
of Stock if the Grantee had exercised his Option immediately prior to the
record date for such distribution. Upon the exercise of the Option, the
Grantee shall be entitled to receive in addition to the Option Shares (a) the
amount of assets or securities to which the Grantee would have been entitled to
receive as a holder of Stock if such holder had exercised his Option
immediately prior to the record date for such distribution, and (b) any income
earned on such assets or securities from the distribution date to the date of
exercise. In the
4
<PAGE> 5
event that the IRR Target is not achieved on the Exercise Date or the Option is
otherwise terminated or expires unexercised, the assets and securities held in
trust, and all income earned thereon, shall be returned to the Company or its
successor in interest.
8. Entire Agreement
This agreement supersedes any other agreement, whether written
or oral, that may have been made or entered into by any party relating to the
matters contemplated hereby including that certain letter dated October 1, 1996
between James N. Mills and Circo Craft Holding Company. This agreement
constitutes the entire agreement by and between the parties hereto and there
are no agreements or commitments by or between such parties except as expressly
set forth herein.
9. Miscellaneous
This agreement shall be governed by the laws of the State of
Delaware (without giving effect to principles of conflicts of laws).
10. Definitions
In addition to the terms specifically defined elsewhere in
this agreement, as used in this agreement, the following terms shall have the
respective meanings indicated:
(a) "Affiliate" shall mean, as to any Person, a Person
that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
Person.
(b) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(c) "Fair Market Value" shall, as it relates to the
Stock, mean the average of the high and low prices of the Stock as
reported on the principal national securities exchange on which shares
of the Stock are then listed on the date specified herein, or if there
were no sales on such date, on the next preceding day on which there
were sales, or if the Stock is not listed on a national securities
exchange, the last reported bid price in the over-the-counter market,
or if the Stock is not traded in the over-the-counter market, the per
5
<PAGE> 6
share cash price for which all of the outstanding Stock could be sold
to a willing purchaser in an arms length transaction (without regard
to minority discount, absence of liquidity, or transfer restrictions
imposed by any applicable law or agreement) at the date of the event
giving rise to a need for a determination. Except as may be otherwise
expressly provided in a particular Option, Fair Market Value shall be
determined in good faith by the Board of Directors of the Company.
(d) "HM Fund III" shall mean Hicks, Muse, Tate & Furst
Equity Fund III, L.P. and any successor.
(e) "Liquidity Event" shall mean (i) one or more sales,
transfers, redemptions or other dispositions of the Stock owned by HM
Fund III if, after any such sales, transfers, redemptions or other
dispositions, the Stock owned, beneficially or of record, by HM Fund
III represents less than 50% of the Stock owned, beneficially or of
record, by HM Fund III on the date hereof, (ii) any merger,
consolidation or other business combination of the Company with any
other person pursuant to which any Person or group (as determined in
accordance with Rule 13d-3 under the Exchange Act) acquires a majority
of the common stock of the surviving entity and cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock, or (iii) any sale of all or substantially all of
the assets of the Company in connection with which cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock.
(f) "Person" shall mean any person or entity of any
nature whatsoever, specifically including an individual, a firm, a
company, a corporation, a partnership, a trust, or other entity.
(g) "Qualified IPO" means the Company's first firm
commitment underwritten public offering involving the sale of Common
Stock of the Company for an aggregate purchase price of at least $50
million (before the payment of underwriting discounts and
commissions), pursuant to an effective registration statement under
the Securities Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 7
Please indicate your acceptance of all the terms and
conditions of this agreement by signing and returning a copy of this letter.
This agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement. This agreement shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Very truly yours,
VIASYSTEMS GROUP, INC.
By: /s/ ELLEN L. LIPSITZ
-------------------------
Name: Ellen L. Lipsitz
Title: Vice President
ACCEPTED AND AGREED TO as of
the date first above written.
/s/ LARRY S. BACON
- -------------------------------
LARRY S. BACON
<PAGE> 1
EXHIBIT 10.11
VIASYSTEMS GROUP, INC.
101 South Hanley Road
St. Louis, Missouri 63105
June 6, 1997
Mr. W. Thomas McGhee
c/o Mills & Partners, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Re: Grant of "IRR" Stock Options
Mr. McGhee:
This letter sets forth the terms of the grant to W. Thomas
McGhee (the "Grantee") of options to purchase shares of Common Stock, $0.01 par
value per share (the "Stock"), of the Company.
1. Grant of Performance Options
The Company hereby grants to the Grantee, as a matter of
separate inducement and not in lieu of any salary or other compensation for
services, the right and option to purchase (the "Option"), in accordance with
the terms and conditions set forth in this agreement, an aggregate of 1,237,112
shares of the Stock (the "Option Shares") initially at the price of $1.00 per
share in cash (the "Exercise Price"), all subject to the adjustment provisions
and limitations set forth herein.
The Option is not intended to be an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). The Company shall at all times have reserved for
issuance a sufficient number of shares of the Stock to permit the Grantee to
acquire the Option Shares on the terms and conditions provided herein.
<PAGE> 2
2. Exercise
(a) The Option Shares shall become exercisable (i)
immediately prior to the consummation of a Liquidity Event (as hereinafter
defined), (ii) concurrently with the consummation of a Qualified IPO (as
hereinafter defined) or (iii) on June 6, 2007 (any of such dates being referred
to herein as an "Exercise Date"), whichever of the foregoing occurs first;
provided that on the Exercise Date HM Fund III (as hereinafter defined) has
realized an overall internal rate of return on all equity funds invested by it
in the Company and its subsidiaries of at least 35% per annum, compounded
annually, as to such investments on an aggregate basis (the "IRR Target"), as
determined in good faith by the board of directors of the Company based upon
the Fair Market Value (as hereinafter defined) of the Stock held by HM Fund III
immediately following such event and the fair value of all cash or non-cash
consideration distributed to HM Fund III in connection with such event and at
any time prior thereto (the return on such equity funds to be determined on a
fully-diluted basis, including giving effect to conversion of the Company's
Class A Common Stock, par value $.01 per share, but excluding the exercise of
the Option Shares).
(b) Subject to the relevant provisions and limitations
contained herein, the Grantee may exercise the Option to purchase all or a
portion of the applicable number of Option Shares at any time on or after the
Exercise Date and prior to the termination of the Option pursuant to this
agreement. Each Option will automatically terminate and become null and void
upon the expiration of a period of ten years commencing on the date of this
agreement.
(c) Any exercise by the Grantee of the Option shall be in
writing addressed to the corporate secretary of the Company at its principal
place of business and shall (i) state the number of shares of the Stock being
purchased pursuant to such exercise and (ii) be accompanied by payment of the
full amount of the aggregate Exercise Price of the shares so purchased.
3. Transferability
The Option is not transferable by the Grantee otherwise than
by will or the laws of descent and distribution, and is exercisable, during the
Grantee's lifetime, only by the Grantee. The Option may not be assigned,
transferred (except by will or the laws of descent and distribution), pledged,
or hypothecated in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment, or similar proceeding. Any attempted
assignment, transfer, pledge, hypothecation, or
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<PAGE> 3
other disposition of the Option, contrary to the provisions hereof, and the
levy of any attachment or similar proceeding upon the Option, shall be null and
void and without effect.
4. Registration
Unless there is in effect a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
issuance of the Option Shares (and, if required, there is available for
delivery a prospectus meeting the requirements of Section 10(a)(3) of the
Securities Act), the Grantee will, upon the exercise of the Option in
accordance with the terms and conditions hereof, deliver to the Company a
certificate pursuant to which the Grantee (a) represents and warrants to the
Company that the Optionee is an "accredited investor" within the meaning of the
rules and regulations under the Securities Act and that the Option Shares then
being purchased by the Grantee pursuant to the Option are not being acquired
with a view to the distribution thereof in violation of the Securities Act; (b)
acknowledges and confirms that the Option Shares purchased may not be sold
unless registered for sale under the Securities Act or pursuant to an exemption
from such registration (in which case an opinion of counsel satisfactory to the
Company shall be supplied to the Company by the Grantee prior to the
consummation of such sale to the effect that such sale is exempt from
registration under the Securities Act); and (c) agrees that the certificates
evidencing such Option Shares shall bear a legend to the effect of the
foregoing.
5. Withholding Taxes
By acceptance hereof, the Grantee hereby (a) agrees to
reimburse the Company or any subsidiary corporation by which any Grantee is
employed for any federal, state, or local taxes required by any government to
be withheld or otherwise deducted by such corporation in respect of the
Grantee's exercise of all or a portion of the Option; (b) authorizes the
Company or any subsidiary corporation by which the Grantee is employed to
withhold from any cash compensation paid to the Grantee or on the Grantee's
behalf, an amount sufficient to discharge any federal, state, and local taxes
imposed on the Company, or any subsidiary corporation by which the Grantee is
employed, and which otherwise has not been reimbursed by the Grantee, in
respect of the Grantee's exercise of all or a portion of the Option; and (c)
agrees that the Company or any subsidiary corporation by which the Grantee is
employed, may, in its discretion, hold the stock certificate to which Grantee
is entitled upon exercise of the Option as security for the payment of the
aforementioned withholding tax liability,
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<PAGE> 4
until cash sufficient to pay that liability has been accumulated, and may, in
its discretion, effect such withholding by retaining shares issuable upon the
exercise of the Option having a Fair Market Value on the date of exercise which
is equal (in the judgment of such corporation) to the amount to be withheld.
6. Adjustments
(a) In the event of any change in the outstanding shares
of the Stock through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split off, spin-off, combination of
shares, exchange of shares, or other like change in capital structure of the
Company, the Board of Directors of the Company shall cause an appropriate
adjustment to be made to each outstanding Option Share, and if appropriate, the
Exercise Price, such that the Option shall thereafter be exercisable for such
securities, cash, and/or other property as would have been received in respect
of the Option Shares subject to the Option had the Option been exercised in
full immediately prior to such change, and such an adjustment shall be made
successively each time any such change shall occur. The term "Option Shares"
after any such change shall refer to the securities, cash, and/or property then
receivable upon exercise of the Option.
(b) Notwithstanding anything herein to the contrary, on
each June 6, commencing June 6, 1998, the Exercise Price then in effect with
respect to the Option Shares shall be increased to a price calculated by
multiplying the then effective Exercise Price by 1.08.
7. Distribution of Assets or Securities
In case the Company shall fix a record date for the making of
a distribution to all holders of shares of the Stock of any asset or security
other than those referred to in Section 6 and other than in connection with the
total liquidation, dissolution or winding-up of the Company, then and in each
such case, the Company shall deposit in trust, the amount of such assets or
securities to which the Grantee would have been entitled to receive as a holder
of Stock if the Grantee had exercised his Option immediately prior to the
record date for such distribution. Upon the exercise of the Option, the
Grantee shall be entitled to receive in addition to the Option Shares (a) the
amount of assets or securities to which the Grantee would have been entitled to
receive as a holder of Stock if such holder had exercised his Option
immediately prior to the record date for such distribution, and (b) any income
earned on such assets or securities from the distribution date to the date of
exercise. In the
4
<PAGE> 5
event that the IRR Target is not achieved on the Exercise Date or the Option is
otherwise terminated or expires unexercised, the assets and securities held in
trust, and all income earned thereon, shall be returned to the Company or its
successor in interest.
8. Entire Agreement
This agreement supersedes any other agreement, whether written
or oral, that may have been made or entered into by any party relating to the
matters contemplated hereby including that certain letter dated October 1, 1996
between James N. Mills and Circo Craft Holding Company. This agreement
constitutes the entire agreement by and between the parties hereto and there
are no agreements or commitments by or between such parties except as expressly
set forth herein.
9. Miscellaneous
This agreement shall be governed by the laws of the State of
Delaware (without giving effect to principles of conflicts of laws).
10. Definitions
In addition to the terms specifically defined elsewhere in
this agreement, as used in this agreement, the following terms shall have the
respective meanings indicated:
(a) "Affiliate" shall mean, as to any Person, a Person
that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
Person.
(b) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(c) "Fair Market Value" shall, as it relates to the
Stock, mean the average of the high and low prices of the Stock as
reported on the principal national securities exchange on which shares
of the Stock are then listed on the date specified herein, or if there
were no sales on such date, on the next preceding day on which there
were sales, or if the Stock is not listed on a national securities
exchange, the last reported bid price in the over-the-counter market,
or if the Stock is not traded in the over-the-counter market, the per
5
<PAGE> 6
share cash price for which all of the outstanding Stock could be sold
to a willing purchaser in an arms length transaction (without regard
to minority discount, absence of liquidity, or transfer restrictions
imposed by any applicable law or agreement) at the date of the event
giving rise to a need for a determination. Except as may be otherwise
expressly provided in a particular Option, Fair Market Value shall be
determined in good faith by the Board of Directors of the Company.
(d) "HM Fund III" shall mean Hicks, Muse, Tate & Furst
Equity Fund III, L.P. and any successor.
(e) "Liquidity Event" shall mean (i) one or more sales,
transfers, redemptions or other dispositions of the Stock owned by HM
Fund III if, after any such sales, transfers, redemptions or other
dispositions, the Stock owned, beneficially or of record, by HM Fund
III represents less than 50% of the Stock owned, beneficially or of
record, by HM Fund III on the date hereof, (ii) any merger,
consolidation or other business combination of the Company with any
other person pursuant to which any Person or group (as determined in
accordance with Rule 13d-3 under the Exchange Act) acquires a majority
of the common stock of the surviving entity and cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock, or (iii) any sale of all or substantially all of
the assets of the Company in connection with which cash or non-cash
consideration (including marketable securities) is distributed to the
holders of the Stock.
(f) "Person" shall mean any person or entity of any
nature whatsoever, specifically including an individual, a firm, a
company, a corporation, a partnership, a trust, or other entity.
(g) "Qualified IPO" means the Company's first firm
commitment underwritten public offering involving the sale of Common
Stock of the Company for an aggregate purchase price of at least $50
million (before the payment of underwriting discounts and
commissions), pursuant to an effective registration statement under
the Securities Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE> 7
Please indicate your acceptance of all the terms and
conditions of this agreement by signing and returning a copy of this letter.
This agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement. This agreement shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Very truly yours,
VIASYSTEMS GROUP, INC.
By: /s/ ELLEN L. LIPSITZ
------------------------------------
Name: Ellen L. Lipsitz
Title: Vice President
ACCEPTED AND AGREED TO as of
the date first above written.
/s/ W. THOMAS McGHEE
- -----------------------------------
W. THOMAS McGHEE
<PAGE> 1
EXHIBIT 10.12
VIASYSTEMS GROUP, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into between
Viasystems Group, Inc., a Delaware corporation ("Corporation"), and the
undersigned (the "Holder") in connection with the grant of an Option
(hereinafter defined).
W I T N E S S E T H:
WHEREAS, the Holder is a director of the Corporation and the
Corporation desires to grant the Holder an Option to purchase shares of Stock
of the Corporation as consideration of Holder serving as director and Holder
desires to accept the Option based upon all of the terms, conditions and
covenants, including but not limited to, Holder agreeing to confidentiality,
non-competition and non-solicitation of employees of the Corporation.
NOW, THEREFORE, in consideration of these premises, the parties agree
that the following shall constitute the agreement between the Corporation and
the Holder:
1. DEFINITIONS. For purpose of this Agreement, the following
terms shall have the meanings specified below:
1.1 "Board of Directors" shall mean the board of directors of the
Corporation.
1.2 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.3 "Confidential Information" shall mean information disclosed to
or known by the Holder as a direct or indirect consequence of or through the
employment about the Corporation or its respective businesses, products and
practices. However, Confidential Information shall not include under any
circumstances any information with respect to the foregoing matters which is
(i) available to the public from a source other than Holder, (ii) released in
writing by the Corporation to the public or intentionally to persons who are
not under a similar obligation of confidentiality to the Corporation and who
are not parties to this Agreement or a similar agreement, (iii) obtained by
Holder from a third party not under a similar obligation of confidentiality to
the Corporation, (iv) required to be disclosed by any court process or any
government or agency or department of any government, or (v) the subject of a
written waiver executed by the Corporation for the benefit of Holder.
1.4 "Director" shall mean being an elected and duly qualified
member of the Board of Directors.
1.5 "Disability" shall be construed under the appropriate
provisions of the long-term disability plan maintained for the benefit of
employees of the Corporation who are regularly employed on a salaried basis.
The determination of a Holder's Disability, and the date of its commencement,
shall be determined in good faith solely by the Committee.
<PAGE> 2
1.6 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
1.7 "Fair Market Value" shall mean, if the Stock is traded on one
or more established markets or exchanges, the mean of the opening and closing
prices of the Stock in the primary market or exchange on which the Stock is
traded, and if the Stock is not so traded or the Stock does not trade on the
relevant date, the value determined in good faith by the Board of Directors.
1.8 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.9 "Stock" shall mean the Corporation's authorized par value
$0.01 per share Common Stock together with any other securities with respect to
which Options granted hereunder may become exercisable.
2. GRANT OF OPTION. Subject to the terms and conditions set
forth herein, the Corporation grants to the Holder an Option (the "Option") to
purchase from the Corporation at a price per share (the "Exercise Price") for
the number of shares of Stock (the "Option Shares") as both are set out on the
final page hereof subject to adjustments as provided in Paragraph 9 hereof.
3. NOTICE OF EXERCISE. This Option may be exercised in
accordance with Paragraph 8, to purchase all or a portion of the applicable
number of Option Shares exercisable by written notice to the Corporation as
provided in Paragraph 11, which notice shall:
(a) specify the number of shares of Stock to be purchased at the
Exercise Price;
(b) if the person exercising this Option is not the named Holder,
contain or be accompanied by evidence satisfactory to the Committee of such
person's right to exercise this Option; and
(c) be accompanied by (i) payment in full of the Exercise Price
in the form of a certified or cashier's check payable to the order of the
Corporation, (ii) with the Board of Director's approval, a promissory note for
the full Exercise Price, (iii) with the Board of Director's approval, payment
in the form of shares of Stock owned by the Holder which are of at least equal
value to the aggregate exercise price payable in connection with such exercise,
(iv) with the Board of Director's approval, a share or shares of Stock owned
by the Holder and/or surrendered for actual or deemed multiple exchanges of
shares of Option Shares, or (v) with the Board of Director's approval, a
combination of any of (i) - (iv). The Committee may grant or withhold its
approval under any or all of the foregoing in its sole and absolute discretion.
4. INVESTMENT LETTER. Unless there is in effect a registration
statement under the Securities Act, with respect to the issuance of the Option
Shares (and, if required, there is available for delivery of a prospectus
meeting the requirements of Section 10(a)(3) of the Securities Act), the Holder
(or, in the event of his death, the person exercising the Option) shall, as a
condition to his right to exercise the Option, deliver to the Corporation an
agreement or certificate containing such representations, warranties, and
covenants as the Corporation may deem necessary or appropriate to ensure that
the issuance of shares of Stock pursuant to such exercise is not required to be
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<PAGE> 3
registered under the Securities Act or any applicable state securities law. It
is understood and agreed that under no circumstance shall the Corporation be
obligated to file any registration statement under the Securities Act or any
applicable state securities law to permit exercise of the Option or to issue
any Stock in violation of the Securities Act or any applicable state securities
law.
5. TRANSFER AND EXERCISE OF OPTION EXCEPT AS PERMITTED BY SECTION
17. The Option is not transferable by the Holder otherwise than by will or the
laws of descent and distribution, and is exercisable, during the Holder's
lifetime, only by the Holder. The Option may not be assigned, transferred
(except by will or the laws of descent and distribution and as provided by
Section 17), pledged, or hypothecated in any way (whether by operation of law
or otherwise) and shall not be subject to execution, attachment, or similar
proceeding. Any attempted assignment, transfer, pledge, hypothecation, or
other disposition of the Option, contrary to the provisions hereof, and the
levy of any attachment or similar proceeding upon the Option, shall be null and
void and without effect.
6. STATUS OF HOLDER. The Holder shall not be deemed a
stockholder of the Corporation with respect to any of the shares of Stock
subject to this Option, except to the extent that such shares shall have been
purchased and issued. The Corporation shall not be required to issue or
transfer any certificates for shares of Stock purchased upon exercise of this
Option until there is compliance with all applicable requirements of law and
this Agreement. This Agreement is not a contract of employment and the terms
of the Holder's employment shall not be affected hereby or by any agreement
referred to herein except to the extent specifically so provided herein or
therein. Nothing herein shall be construed to impose any obligation on the
Corporation to continue the Holder's employment.
7. NO EFFECT ON CAPITAL STRUCTURE. This Option shall not affect
the right of the Corporation to reclassify, recapitalize or otherwise change
its capital or debt structure or to merge, consolidate, convey any or all of
its assets, dissolve, liquidate, windup, or otherwise reorganize and, by
acceptance of this Agreement, Holder agrees that Holder has no standing before
any court to object to or contest any such action.
8. CONDITIONS AND SCHEDULE FOR EXERCISE. Except as otherwise
provided herein, all options shall expire no later than nine (9) years from the
date of this Agreement. Subject to the provisions of Paragraph 9, Holder shall
be entitled to exercise the options granted herein at any time hereafter.
All other provisions of this Agreement to the contrary
notwithstanding, in the event of the termination of Holder as a director of the
Corporation (other than as a result of Holder's death or Disability, or in the
event of termination of Holder's employment without good cause (as defined in
the Plan) or upon retirement (with the Corporation's prior written consent)),
all rights under this Agreement and the Option shall terminate and shall
thereupon be null and void effective upon such termination; provided however,
any shares of Stock obtained through exercise prior to such effective date in
accordance with the terms of this Agreement shall remain the sole and absolute
property of the Holder.
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<PAGE> 4
In the event of the termination of Holder's position as a director
with the Corporation as a result of Holder's death or Disability, or in the
event of the termination of Holder's position as a Director without good cause
or upon retirement (with the Corporation's prior written consent), all rights
under this Agreement and the Option shall terminate and shall be null and void
effective thirty (30) days after such termination (during such thirty (30) day
period, Holder shall have the right to exercise Holder's Option with respect to
all or any part of the shares of Stock which such Holder was entitled to
purchase immediately prior to the time of such termination); provided however
any shares of Stock obtained through exercise prior to such effective date in
accordance with the terms of this Agreement shall remain the sole and absolute
property of the Holder.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER, ETC. AND
ACCELERATION OF EXERCISABILITY. In the event that, by reason of any merger,
consolidation, combination, liquidation, reorganization, recapitalization,
stock divided, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in capital structure of the
Corporation (collectively, a "Reorganization"), the Stock is substituted,
combined, or changed into any cash, property, or other securities, or the
shares of Stock are changed into a greater or lesser number of shares of Stock,
the number and/or kind of shares and/or, interests subject to an Option and the
Exercise Price or value thereof shall be appropriately adjusted by the
Committee to give appropriate effect to such Reorganization. Any fractional
shares or interests resulting from such adjustment shall be eliminated.
All of the provisions of this paragraph to the contrary not
withstanding, the Corporation shall have the right to grant stock appreciation
right agreements to others and/or issue additional stock options, if such
options are to others out of authorized but unissued shares, even though the
result of such stock appreciation right agreements and/or stock options dilute
either the percentage of ownership of the Holder or the value per share of any
stock or Option herein granted and, in any such event, Holder's rights
hereunder shall not be increased in any way.
10. INTERPRETATION AUTHORITY. Any question concerning the
interpretation of this Agreement, any adjustments required to be made under
Paragraph 9 of this Agreement, and any controversy which may arise under this
Agreement and/or any paragraph thereof shall be finally determined by the Board
of Directors in its sole and absolute discretion.
11. NOTICE. Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered, sent by
mail or sent by overnight courier. Any notice required or permitted to be
delivered hereunder shall be deemed to be delivered on the date which it is
personally delivered, or, whether actually received or not, on the third
business day after it is deposited in the United States mail, certified or
registered, postage prepaid or next business day after it is sent by overnight
courier in each case, addressed to the person who is to receive it at the
address which such person has theretofore specified by written notice delivered
in accordance herewith. The Corporation or Holder may change, at any time and
from time to time, by written notice to the other, the address previously
specified for receiving notices. Until changed in accordance herewith, the
Corporation and the Holder specify their respective addresses as set forth
below the signature lines on the last page hereof.
-4-
<PAGE> 5
12. TAX WITHHOLDING. By acceptance hereof, Holder hereby (i)
agrees to reimburse the Corporation by which Holder is employed for any
federal, state, or local taxes required by any government to be withheld or
otherwise deducted by such Corporation in respect of Holder's exercise of all
or a portion of the Option; (ii) authorizes the Corporation by which the Holder
is employed to withhold from any cash compensation paid to the Holder or in the
Holder's behalf, an amount sufficient to discharge any federal, state, and
local taxes imposed on the Corporation by which the Holder is employed, in
respect of the Holder's exercise of all or a portion of the Option; and (iii)
agrees that the Corporation may, in its discretion, hold the stock certificate
to which the Corporation is entitled upon exercise of the Option as security
for the payment of the aforementioned withholding tax liability, until cash
sufficient to pay that liability has been accumulated, and may, in its
discretion, effect such withholding by retaining shares issuable upon the
exercise of the Option having a fair market value on the date of exercise which
is equal (in the judgment of such corporation) to the amount to be withheld.
13. CONFIDENTIAL INFORMATION. As partial consideration of the
granting of this Option, the Holder agrees that during Holder's employment with
the Corporation or at any time thereafter, irrespective of the time, manner or
cause of the termination of this Agreement, Holder will not directly or
indirectly reveal, divulge, disclose or communicate to any person or entity,
other than authorized officers, directors and employees of the Corporation, in
any manner whatsoever, any Confidential Information of the Corporation or any
direct or indirect subsidiary or parent of the Corporation without the prior
written consent of the Chairman of the Board of the Corporation.
14. AGREEMENT NOT TO SOLICIT EMPLOYEES. Holder agrees that, for a
period of two (2) years following the termination of Holder's employment by the
Corporation, Holder shall not, for Holder or on behalf of any business engaged
in a business competitive with the Corporation, solicit or induce, or in any
manner attempt to solicit or induce, any person employed by, or any agent of
the Corporation to terminate employment or agency, as the case may be, with the
Corporation.
15. SUCCESSORS. Except as otherwise provided herein, this
Agreement is binding on and enforceable by the heirs, successors, and assigns
of the parties.
16. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Delaware, except to the extent that Delaware Law is preempted
by Federal Law.
17. LIMITATION ON ASSIGNMENT. The rights granted hereunder are
personal to the Holder and are not assignable, except that for the limited
purpose of estate planning, the options granted hereunder may be assigned by
the Holder to his spouse or to any living lineal descendants, either directly
or through a trust and any such permitted assignment shall be subject to all
limitations, terms and conditions hereof as if such assignment had not been
made. Other than such an assignment, no assignment of the Options by Holder is
permitted and any other attempted assignment shall be of no force and effect.
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<PAGE> 6
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed and the Holder has hereunto set Holder's hand as of the 4th day of
February, 1997.
HOLDINGS: VIASYSTEMS GROUP, INC.
By:
-------------------------------------
James N. Mills
Chairman and Chief Executive Officer
101 South Hanley
St. Louis, Missouri 63105
HOLDER:
-----------------------------------------
Richard W. Vieser
41 School Street
Keene, New Hampshire 03431
Number of Option Shares subject to the grant in Paragraph 2 hereof is one
hundred thousand (100,000) the Exercise Price is One Dollar and 00/100 ($1.00)
per share.
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<PAGE> 1
EXHIBIT 10.13
VIASYSTEMS GROUP, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into between
Viasystems Group, Inc., a Delaware corporation ("Corporation"), and the
undersigned (the "Holder") in connection with the grant of an Option
(hereinafter defined).
W I T N E S S E T H:
WHEREAS, the Holder is a director of the Corporation and the Corporation
desires to grant the Holder an Option to purchase shares of Stock of the
Corporation as consideration of Holder serving as director and Holder desires
to accept the Option based upon all of the terms, conditions and covenants,
including but not limited to, Holder agreeing to confidentiality, non-
competition and non-solicitation of employees of the Corporation.
NOW, THEREFORE, in consideration of these premises, the parties agree
that the following shall constitute the agreement between the Corporation and
the Holder:
1. DEFINITIONS. For purpose of this Agreement, the following terms
shall have the meanings specified below:
1.1 "Board of Directors" shall mean the board of directors of the
Corporation.
1.2 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.3 "Confidential Information" shall mean information disclosed to or
known by the Holder as a direct or indirect consequence of or through the
employment about the Corporation or its respective businesses, products and
practices. However, Confidential Information shall not include under any
circumstances any information with respect to the foregoing matters which is
(i) available to the public from a source other than Holder, (ii) released in
writing by the Corporation to the public or intentionally to persons who are
not under a similar obligation of confidentiality to the Corporation and who
are not parties to this Agreement or a similar agreement, (iii) obtained by
Holder from a third party not under a similar obligation of confidentiality to
the Corporation, (iv) required to be disclosed by any court process or any
government or agency or department of any government, or (v) the subject of a
written waiver executed by the Corporation for the benefit of Holder.
1.4 "Director" shall mean being an elected and duly qualified member
of the Board of Directors.
1.5 "Disability" shall be construed under the appropriate provisions
of the long-term disability plan maintained for the benefit of employees of the
Corporation who are regularly employed on a salaried basis. The determination
of a Holder's Disability, and the date of its commencement, shall be determined
in good faith solely by the Committee.
<PAGE> 2
1.6 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.7 "Fair Market Value" shall mean, if the Stock is traded on one or
more established markets or exchanges, the mean of the opening and closing
prices of the Stock in the primary market or exchange on which the Stock is
traded, and if the Stock is not so traded or the Stock does not trade on the
relevant date, the value determined in good faith by the Board of Directors.
1.8 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.9 "Stock" shall mean the Corporation's authorized par value $0.01
per share Common Stock together with any other securities with respect to which
Options granted hereunder may become exercisable.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, the Corporation grants to the Holder an Option (the "Option") to
purchase from the Corporation at a price per share (the "Exercise Price") for
the number of shares of Stock (the "Option Shares") as both are set out on the
final page hereof subject to adjustments as provided in Paragraph 9 hereof.
3. NOTICE OF EXERCISE. This Option may be exercised in accordance
with Paragraph 8, to purchase all or a portion of the applicable number of
Option Shares exercisable by written notice to the Corporation as provided in
Paragraph 11, which notice shall:
(a) specify the number of shares of Stock to be purchased at the
Exercise Price;
(b) if the person exercising this Option is not the named Holder,
contain or be accompanied by evidence satisfactory to the Committee of such
person's right to exercise this Option; and
(c) be accompanied by (i) payment in full of the Exercise Price in
the form of a certified or cashier's check payable to the order of the
Corporation, (ii) with the Board of Director's approval, a promissory note for
the full Exercise Price, (iii) with the Board of Director's approval, payment
in the form of shares of Stock owned by the Holder which are of at least equal
value to the aggregate exercise price payable in connection with such exercise,
(iv) with the Board of Director's approval, a share or shares of Stock owned
by the Holder and/or surrendered for actual or deemed multiple exchanges of
shares of Option Shares, or (v) with the Board of Director's approval, a
combination of any of (i) - (iv). The Committee may grant or withhold its
approval under any or all of the foregoing in its sole and absolute discretion.
4. INVESTMENT LETTER. Unless there is in effect a registration
statement under the Securities Act, with respect to the issuance of the Option
Shares (and, if required, there is available for delivery of a prospectus
meeting the requirements of Section 10(a)(3) of the Securities Act), the Holder
(or, in the event of his death, the person exercising the Option) shall, as a
condition to his right to exercise the Option, deliver to the Corporation an
agreement or certificate containing such representations, warranties, and
covenants as the Corporation may deem necessary or appropriate to ensure that
the issuance of shares of Stock pursuant to such exercise is not required to be
-2-
<PAGE> 3
registered under the Securities Act or any applicable state securities law. It
is understood and agreed that under no circumstance shall the Corporation be
obligated to file any registration statement under the Securities Act or any
applicable state securities law to permit exercise of the Option or to issue
any Stock in violation of the Securities Act or any applicable state securities
law.
5. TRANSFER AND EXERCISE OF OPTION EXCEPT AS PERMITTED BY SECTION
17. The Option is not transferable by the Holder otherwise than by will or the
laws of descent and distribution, and is exercisable, during the Holder's
lifetime, only by the Holder. The Option may not be assigned, transferred
(except by will or the laws of descent and distribution and as provided by
Section 17), pledged, or hypothecated in any way (whether by operation of law
or otherwise) and shall not be subject to execution, attachment, or similar
proceeding. Any attempted assignment, transfer, pledge, hypothecation, or
other disposition of the Option, contrary to the provisions hereof, and the
levy of any attachment or similar proceeding upon the Option, shall be null and
void and without effect.
6. STATUS OF HOLDER. The Holder shall not be deemed a stockholder
of the Corporation with respect to any of the shares of Stock subject to this
Option, except to the extent that such shares shall have been purchased and
issued. The Corporation shall not be required to issue or transfer any
certificates for shares of Stock purchased upon exercise of this Option until
there is compliance with all applicable requirements of law and this Agreement.
This Agreement is not a contract of employment and the terms of the Holder's
employment shall not be affected hereby or by any agreement referred to herein
except to the extent specifically so provided herein or therein. Nothing
herein shall be construed to impose any obligation on the Corporation to
continue the Holder's employment.
7. NO EFFECT ON CAPITAL STRUCTURE. This Option shall not affect the
right of the Corporation to reclassify, recapitalize or otherwise change its
capital or debt structure or to merge, consolidate, convey any or all of its
assets, dissolve, liquidate, windup, or otherwise reorganize and, by acceptance
of this Agreement, Holder agrees that Holder has no standing before any court
to object to or contest any such action.
8. CONDITIONS AND SCHEDULE FOR EXERCISE. Except as otherwise
provided herein, all options shall expire no later than nine (9) years from the
date of this Agreement. Subject to the provisions of Paragraph 9, Holder shall
be entitled to exercise the options granted herein at any time hereafter.
All other provisions of this Agreement to the contrary notwithstanding,
in the event of the termination of Holder as a director of the Corporation
(other than as a result of Holder's death or Disability, or in the event of
termination of Holder's employment without good cause (as defined in the Plan)
or upon retirement (with the Corporation's prior written consent)), all rights
under this Agreement and the Option shall terminate and shall thereupon be null
and void effective upon such termination; provided however, any shares of Stock
obtained through exercise prior to such effective date in accordance with the
terms of this Agreement shall remain the sole and absolute property of the
Holder.
-3-
<PAGE> 4
In the event of the termination of Holder's position as a director with
the Corporation as a result of Holder's death or Disability, or in the event of
the termination of Holder's position as a Director without good cause or upon
retirement (with the Corporation's prior written consent), all rights under
this Agreement and the Option shall terminate and shall be null and void
effective thirty (30) days after such termination (during such thirty (30) day
period, Holder shall have the right to exercise Holder's Option with respect to
all or any part of the shares of Stock which such Holder was entitled to
purchase immediately prior to the time of such termination); provided however
any shares of Stock obtained through exercise prior to such effective date in
accordance with the terms of this Agreement shall remain the sole and absolute
property of the Holder.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER, ETC. AND
ACCELERATION OF EXERCISABILITY. In the event that, by reason of any merger,
consolidation, combination, liquidation, reorganization, recapitalization,
stock divided, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in capital structure of the
Corporation (collectively, a "Reorganization"), the Stock is substituted,
combined, or changed into any cash, property, or other securities, or the
shares of Stock are changed into a greater or lesser number of shares of Stock,
the number and/or kind of shares and/or, interests subject to an Option and the
Exercise Price or value thereof shall be appropriately adjusted by the
Committee to give appropriate effect to such Reorganization. Any fractional
shares or interests resulting from such adjustment shall be eliminated.
All of the provisions of this paragraph to the contrary not
withstanding, the Corporation shall have the right to grant stock appreciation
right agreements to others and/or issue additional stock options, if such
options are to others out of authorized but unissued shares, even though the
result of such stock appreciation right agreements and/or stock options dilute
either the percentage of ownership of the Holder or the value per share of any
stock or Option herein granted and, in any such event, Holder's rights
hereunder shall not be increased in any way.
10. INTERPRETATION AUTHORITY. Any question concerning the
interpretation of this Agreement, any adjustments required to be made under
Paragraph 9 of this Agreement, and any controversy which may arise under this
Agreement and/or any paragraph thereof shall be finally determined by the Board
of Directors in its sole and absolute discretion.
11. NOTICE. Whenever any notice is required or permitted hereunder,
such notice must be in writing and personally delivered, sent by mail or sent
by overnight courier. Any notice required or permitted to be delivered
hereunder shall be deemed to be delivered on the date which it is personally
delivered, or, whether actually received or not, on the third business day
after it is deposited in the United States mail, certified or registered,
postage prepaid or next business day after it is sent by overnight courier in
each case, addressed to the person who is to receive it at the address which
such person has theretofore specified by written notice delivered in accordance
herewith. The Corporation or Holder may change, at any time and from time to
time, by written notice to the other, the address previously specified for
receiving notices. Until changed in accordance herewith, the Corporation and
the Holder specify their respective addresses as set forth below the signature
lines on the last page hereof.
-4-
<PAGE> 5
12. TAX WITHHOLDING. By acceptance hereof, Holder hereby (i) agrees
to reimburse the Corporation by which Holder is employed for any federal,
state, or local taxes required by any government to be withheld or otherwise
deducted by such Corporation in respect of Holder's exercise of all or a
portion of the Option; (ii) authorizes the Corporation by which the Holder is
employed to withhold from any cash compensation paid to the Holder or in the
Holder's behalf, an amount sufficient to discharge any federal, state, and
local taxes imposed on the Corporation by which the Holder is employed, in
respect of the Holder's exercise of all or a portion of the Option; and (iii)
agrees that the Corporation may, in its discretion, hold the stock certificate
to which the Corporation is entitled upon exercise of the Option as security
for the payment of the aforementioned withholding tax liability, until cash
sufficient to pay that liability has been accumulated, and may, in its
discretion, effect such withholding by retaining shares issuable upon the
exercise of the Option having a fair market value on the date of exercise which
is equal (in the judgment of such corporation) to the amount to be withheld.
13. CONFIDENTIAL INFORMATION. As partial consideration of the
granting of this Option, the Holder agrees that during Holder's employment with
the Corporation or at any time thereafter, irrespective of the time, manner or
cause of the termination of this Agreement, Holder will not directly or
indirectly reveal, divulge, disclose or communicate to any person or entity,
other than authorized officers, directors and employees of the Corporation, in
any manner whatsoever, any Confidential Information of the Corporation or any
direct or indirect subsidiary or parent of the Corporation without the prior
written consent of the Chairman of the Board of the Corporation.
14. AGREEMENT NOT TO SOLICIT EMPLOYEES. Holder agrees that, for a
period of two (2) years following the termination of Holder's employment by the
Corporation, Holder shall not, for Holder or on behalf of any business engaged
in a business competitive with the Corporation, solicit or induce, or in any
manner attempt to solicit or induce, any person employed by, or any agent of
the Corporation to terminate employment or agency, as the case may be, with the
Corporation.
15. SUCCESSORS. Except as otherwise provided herein, this Agreement
is binding on and enforceable by the heirs, successors, and assigns of the
parties.
16. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Delaware, except to the extent that Delaware Law is preempted by
Federal Law.
17. LIMITATION ON ASSIGNMENT. The rights granted hereunder are
personal to the Holder and are not assignable, except that for the limited
purpose of estate planning, the options granted hereunder may be assigned by
the Holder to his spouse or to any living lineal descendants, either directly
or through a trust and any such permitted assignment shall be subject to all
limitations, terms and conditions hereof as if such assignment had not been
made. Other than such an assignment, no assignment of the Options by Holder is
permitted and any other attempted assignment shall be of no force and effect.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed and the Holder has hereunto set Holder's hand as of the 4th day of
February, 1997.
HOLDINGS: VIASYSTEMS GROUP, INC.
By:
------------------------------------------
James N. Mills
Chairman and Chief Executive Officer
101 South Hanley
St. Louis, Missouri 63105
HOLDER:
------------------------------------------
Kenneth F. Yontz
411 East Wisconsin
Milwaukee, Wisconsin 53202
Number of Option Shares subject to the grant in Paragraph 2 hereof is one
hundred thousand (100,000) the Exercise Price is One Dollar and 00/100 ($1.00)
per share.
-6-
<PAGE> 1
EXHIBIT 10.14
THIRD AMENDED AND RESTATED MONITORING
AND OVERSIGHT AGREEMENT
THIS THIRD AMENDED AND RESTATED MONITORING AND OVERSIGHT
AGREEMENT (this "Agreement") is made and entered into effective as of June 6,
1997, among Viasystems Group, Inc., a Delaware corporation ("Holdings"),
Viasystems, Inc., a Delaware corporation ("VI"), Viasystems Technologies Corp.,
a Delaware corporation ("VTC"), Circo Craft Co. Inc., a Quebec corporation
("CCI"), PCB Investments plc, a United Kingdom public limited company ("PCB"),
Viasystems International, Inc., a Delaware corporation ("VI International"),
PCB Acquisition Limited, a United Kingdom limited company ("PCB Acquisition"),
Chips Acquisition Limited, a United Kingdom limited company ("Chips" and,
together with Holdings, VI, VTC, CCI, PCB, VI International and PCB
Acquisition, the "Clients") and Hicks, Muse & Co. Partners, L.P., a Texas
limited partnership (together with its successors "HMCo").
WHEREAS, Holdings, CCI, VTC, CCI, PCB, VI International, PCB
Acquisition and HMCo are parties to a Second Amended and Restated Monitoring and
Oversight Agreement dated as of April 11, 1997 (the "April 1997 Oversight
Agreement") pursuant to which HMCo renders certain financial oversight and
monitoring services to Holdings, CCI, VTC, CCI, PCB, VI International and PCB
Acquisition; and
WHEREAS, Holdings, CCI, VTC, CCI, PCB, VI International, PCB
Acquisition and HMCo desire to further amend and restate the terms of the April
1997 Oversight Agreement and to add Chips as a party to this Agreement; and
WHEREAS, Chips desires to become a party to this Agreement.
NOW, THEREFORE, in consideration of the services to be
rendered by HMCo to the Clients, and to evidence the obligations of the Clients
to HMCo and the mutual covenants herein contained, the Clients hereby jointly
and severally agree as follows:
1. Retention. The Clients hereby acknowledge that they
have retained HMCo, and HMCo acknowledges that, subject to reasonable advance
notice in order to accommodate scheduling, HMCo will provide financial
oversight and monitoring services to
NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT CONTAINS INDEMNIFICATION PROVISIONS
IN PARAGRAPH 5 THAT APPLY TO CLAIMS, LIABILITIES, LOSSES, DAMAGES OR EXPENSES
THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR
PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE OF HMCO OR ANY
OTHER INDEMNIFIED PERSON IDENTIFIED THEREIN.
<PAGE> 2
the Clients as requested by the board of directors of each of the Clients
during the term of this Agreement.
2. Term. The term of this Agreement shall continue
until the earlier to occur of (i) the tenth anniversary of the date hereof, or
(ii) the date on which Hicks, Muse, Tate & Furst Equity Fund III, L.P. and its
affiliates cease to own beneficially, directly or indirectly, any securities of
any of the Clients or their successors.
3. Compensation.
(a) As compensation for HMCo's services under this
Agreement, the Clients shall be jointly and severally obligated to pay to HMCo
an annual fee (the "Monitoring Fee") of $1,750,000 (the "Base Fee"), subject to
adjustment pursuant to paragraphs (b) and (c) below and prorated on a daily
basis for any partial calendar year during the term of this Agreement. The
Monitoring Fee shall be payable in equal quarterly installments on each January
1, April 1, July 1, and October 1 during the term of this Agreement (each a
"Payment Date"), beginning with the first Payment Date following the date
hereof. All payments shall be made by wire transfer of immediately available
funds to the account described on Exhibit A hereto (or such other account as
HMCo may hereafter designate in writing).
(b) On January 1 of each calendar year during the term of
this Agreement, the Monitoring Fee shall be adjusted to an annual amount equal
to (i) the budgeted consolidated annual net sales of Holdings and its
subsidiaries for the then-current fiscal year, multiplied by (ii) .2% (the
"Percentage"); provided, however, that in no event shall the annual Monitoring
Fee be less than the Base Fee.
(c) On each occasion that Holdings or any of its
subsidiaries shall acquire another entity or business during the term of this
Agreement, the annual Monitoring Fee for the calendar year in which such
acquisition occurs shall be adjusted prospectively (i.e., for periods
subsequent to such acquisition until the next adjustment pursuant to clause (b)
above), as of the closing of such acquisition, to an annual amount equal to (i)
the pro forma combined budgeted consolidated annual net sales of Holdings and
its subsidiaries for the entire then-current fiscal year of Holdings (including
the sales of the acquired entity or business for such entire fiscal year, on a
pro forma basis), multiplied by (ii) the Percentage; provided, however, that in
no event shall the annual Monitoring Fee be less than the Base Fee.
2
<PAGE> 3
(d) All past due payments in respect of the Monitoring
Fee shall bear interest at the lesser of the highest rate of interest which may
be charged under applicable law or the prime commercial lending rate per annum
of The Chase Manhattan Bank or its successors (which rate is a reference rate
and is not necessarily its lowest or best rate of interest actually charged to
any customer) (the "Prime Rate") as in effect from time to time, plus five
percent (5%), from the due date of such payment to and including the date on
which payment is made to HMCo in full, including such interest accrued thereon.
4. Reimbursement of Expenses. In addition to the
compensation to be paid pursuant to Section 3 hereof, the Clients jointly and
severally agree to pay or reimburse HMCo for all "Reimbursable Expenses," which
shall consist of (i) all reasonable disbursements and out-of-pocket expenses
(including without limitation costs of travel, postage, deliveries,
communications, etc.) incurred by HMCo or its affiliates for the account of any
of the Clients, or in connection with the performance by HMCo of the services
contemplated by Section 1 hereof and (ii) the applicable Client's or Clients'
Pro Rata Share of Allocable Expenditures as defined in Exhibit B hereto.
Promptly (but not more than 10 days) after request by or notice from HMCo, the
applicable Client shall pay HMCo, by wire transfer of immediately available
funds to the account described on Exhibit A hereto (or such other account as
HMCo may hereafter designate in writing), the Reimbursable Expenses for which
HMCo has provided such Client invoices or reasonably detailed descriptions.
All past due payments in respect of the Reimbursable Expenses shall bear
interest at the lesser of the highest rate of interest which may be charged
under applicable law or the Prime Rate plus 5% from the Payment Date to and
including the date on which such Reimbursable Expenses plus accrued interest
thereon are fully paid to HMCo.
5. Indemnification. The Clients jointly and severally
shall indemnify and hold harmless each of HMCo, its affiliates, and the
respective directors, officers, controlling persons (within the meaning of
Section 15 of the Securities Act of 1933, as amended, or Section 20(a) of the
Securities Exchange Act of 1934, as amended), if any, agents and employees of
HMCo and/or any of its affiliates (HMCo, its affiliates, and such other
specified persons being collectively referred to as "Indemnified Persons" and
individually as an "Indemnified Person") from and against any and all claims,
liabilities, losses, damages and expenses incurred by any Indemnified Person
(including those arising out of an Indemnified Person's negligence and fees and
disbursements of the respective Indemnified Person's counsel) which (A) are
related to or arise out of (i) actions taken or omitted to be taken (including
any untrue statements made or any statements omitted to be made) by any of the
Clients or (ii) actions taken or omitted to be taken by an Indemnified Person
with any Client's consent or in conformity with any Client's instructions or
any Client's actions or omissions or (B) are otherwise related to or arise out
of HMCo's engagement, and will
3
<PAGE> 4
reimburse each Indemnified Person for all costs and expenses, including fees
and disbursements of any Indemnified Person's counsel, as they are incurred, in
connection with investigating, preparing for, defending, or appealing any
action, formal or informal claim, investigation, inquiry or other proceeding,
whether or not in connection with pending or threatened litigation, caused by
or arising out of or in connection with HMCo's acting pursuant to the
engagement, whether or not any Indemnified Person is named as a party thereto
and whether or not any liability results therefrom. None of the Clients will,
however, be responsible for any claims, liabilities, losses, damages or
expenses pursuant to clause (B) of the preceding sentence that have resulted
primarily from HMCo's bad faith, gross negligence or willful misconduct. Each
of the Clients also agrees that neither HMCo nor any other Indemnified Person
shall have any liability to any Client for or in connection with such
engagement except for any such liability for claims, liabilities, losses,
damages or expenses incurred by any Client that have resulted primarily from
HMCo's bad faith, gross negligence or willful misconduct. The Clients further
agree that none of them will, without the prior written consent of HMCo, settle
or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnifications may be sought hereunder (whether or not any Indemnified Person
is an actual or potential party to such claim, action, suit or proceeding)
unless such settlement, compromise or consent includes an unconditional release
of HMCo and each other Indemnified Person hereunder from all liability arising
out of such claim, action, suit or proceeding. EACH CLIENT HEREBY ACKNOWLEDGES
THAT THE FOREGOING INDEMNITY SHALL BE APPLICABLE TO ALL CLAIMS, LIABILITIES,
LOSSES, DAMAGES OR EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE
RESULTED FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY
NEGLIGENCE OF HMCO OR ANY OTHER INDEMNIFIED PERSON.
The foregoing right to indemnity shall be in addition to any
rights that HMCo and/or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of the engagement. Each of the Clients hereby consents to
personal jurisdiction and to service and venue in any court in which any claim
which is subject to this Agreement is brought against HMCo or any other
Indemnified Person.
It is understood that, in connection with HMCo's engagement,
HMCo may also be engaged to act for any Client in one or more additional
capacities, and that the terms of this engagement or any such additional
engagement may be embodied in one or more separate written agreements. This
indemnification shall apply to the engagement specified in the first paragraph
hereof as well as to any such additional engagement(s) (whether written or
oral) and any modification of said engagement or such additional engagement(s)
and shall
4
<PAGE> 5
remain in full force and effect following the completion or termination of said
engagement or such additional engagement(s).
Each of the Clients further understands that if HMCo is asked
to furnish any Client a financial opinion letter or act for any Client in any
other formal capacity, such further action may be subject to a separate
agreement containing provisions and terms to be mutually agreed upon.
6. Confidential Information. In connection with the
performance of the services hereunder, HMCo agrees not to divulge any
confidential information, secret processes or trade secrets disclosed by any
Client to it solely in its capacity as a financial advisor, unless such Client
consents to the divulging thereof or such information, secret processes, or
trade secrets are publicly available or otherwise available to HMCo without
restriction or breach of any confidentiality agreement or unless required by
any governmental authority or in response to any valid legal process.
7. Governing Law. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of the State of Texas,
excluding any choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions
contained herein shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided, however, neither
this Agreement nor any of the rights, interests, or obligations hereunder shall
be assigned (other than with respect to the rights and obligations of HMCo,
which may be assigned to any one or more of its principals or affiliates) by
any of the parties without the prior written consent of the other parties.
9. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument, and the signature
of any party to any counterpart shall be deemed a signature to, and may be
appended to, any other counterpart.
10. Other Understandings. All discussions,
understandings, and agreements theretofore made between any of the parties
hereto with respect to the subject matter hereof are merged in this Agreement,
which alone fully and completely expresses the agreement of the parties hereto.
All calculations of the Monitoring Fee and Reimbursable Expenses shall be made
by HMCo and, in the absence of mathematical error, shall be final and
conclusive.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
HICKS, MUSE & CO. PARTNERS, L.P.
By: HM PARTNERS INC., its General
Partner
By: /s/
---------------------------
Jack D. Furst
Executive Vice President
VIASYSTEMS GROUP, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
VIASYSTEMS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
VIASYSTEMS TECHNOLOGIES CORP.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
6
<PAGE> 7
CIRCO CRAFT CO. INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
VIASYSTEMS INTERNATIONAL, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
PCB ACQUISITION LIMITED
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
PCB INVESTMENTS PLC
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
CHIPS ACQUISITION LIMITED
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
7
<PAGE> 8
EXHIBIT A
Wire Transfer Instructions
Texas Commerce Bank
ABA #: 113000609
Account #: 08805113824
Credit: Hicks, Muse & Co. Partners
Reference: Payment of Monitoring Fees or Expenses
by Viasystems Group, Inc., Viasystems, Inc.,
Viasystems Technologies Corp.,Circo Craft Co.
Inc., Viasystems International, Inc., PCB
Acquisition Limited PCB Investments plc, or
Chips Acquisition Limited
8
<PAGE> 9
EXHIBIT B
PRO RATA SHARE OF ALLOCABLE EXPENDITURES AND RELATED DEFINITIONS
Pro Rata Share of Allocable Expenditures shall equal the
product obtained by multiplying (i) the sum of all Allocable Expenditures that
have not previously been paid or reimbursed to HMCo by the Clients and other
Participating Acquired Companies, by (ii) a fraction, the numerator of which
shall equal the total amount of Invested Capital (as from time to time
outstanding) that any Fund has invested in the Clients' securities or
instruments, as applicable, and the denominator of which shall equal the total
amount of Invested Capital (as from time to time outstanding) that any Fund has
invested in the securities or instruments of any and all Participating Acquired
Companies.
The capitalized terms used in the foregoing definition have
the meanings set forth below:
Allocable Expenditures shall mean all variable, fixed, and
other costs, expenses, expenditures, charges, or obligations (including without
limitation letters of credit, deposits, etc.) that are related to assets
utilized, services provided, or programs administered by HMCo or its affiliates
in connection with the performance by HMCo of financial oversight and
monitoring services on behalf of any of the Clients and other Participating
Acquired Companies, including without limitation corporate airplanes,
charitable contributions, retainers for lobbyists and other professionals, and
premiums and finance charges for director and officer insurance maintained for
representatives of HMCo or its affiliates.
Fund shall mean any one or more of the equity funds now or
hereafter sponsored by Hicks, Muse, Tate & Furst Incorporated or its
successors, including any LP Investment Entity (as defined in the limited
partnership agreement for any such equity fund) formed under or with respect to
any such equity fund.
Invested Capital shall mean the total amount of partner
capital that a Fund from time to time invests in the purchase of securities or
instruments of a Participating Acquired Company, less the total cash
distributions that constitute a return of such partner capital with proceeds
from the disposition of all or any part of such securities or instruments. For
each period for which the Pro Rata Share of Allocable Expenditures is being
made, the applicable Invested Capital shall equal the amount outstanding as of
the end of the respective period.
9
<PAGE> 10
Participating Acquired Company shall mean any partnership,
corporation, trust, limited liability company, or other entity that is, for the
period for which the Pro Rata Share of Allocable Expenditures is being
determined, a party to a monitoring agreement or similar contract with HMCo or
its affiliates and is, as of the end of such period, designated by HMCo to bear
a portion of such allocable expenditures. HMCo may, in its sole and absolute
discretion, determine not to designate an entity as a Participating Acquired
Company with respect to such period. HMCo may make such determination of
non-designation for no reason or for any reason, including without limitation
the respective entity's bankruptcy or other temporary or permanent inability to
pay fees or expenses to HMCo or its affiliates.
10
<PAGE> 1
EXHIBIT 10.15
THIRD AMENDED AND RESTATED FINANCIAL ADVISORY AGREEMENT
THIS THIRD AMENDED AND RESTATED FINANCIAL ADVISORY AGREEMENT
(this "Agreement") is made and entered into effective as of June 6, 1997, among
Viasystems Group, Inc., a Delaware corporation ("Holdings"), Viasystems, Inc.,
a Delaware corporation ("VI"), Viasystems Technologies Corp., a Delaware
corporation ("VTC"), Circo Craft Co. Inc., a Quebec corporation ("CCI"),
Viasystems International, Inc., a Delaware corporation ("VI International"),
PCB Acquisition Limited, a United Kingdom limited company ("PCB Acquisition"),
PCB Investments plc, a United Kingdom public limited company ("PCB"), Chips
Acquisition Limited, a United Kingdom limited company ("Chips" and, together
with Holdings, VI, VTC, CCI, VI International, PCB Acquisition and PCB the
"Clients") and Hicks, Muse & Co. Partners, L.P., a Texas limited partnership
(together with its successors, "HMCo").
WHEREAS, Holdings, VTC, CCI, VI International, PCB Acquisition,
PCB and HMCo are parties to an Amended and Restated Financial Advisory
Agreement dated as of April 11, 1997 (the "April 1997 Advisory Agreement")
pursuant to which HMCo renders certain financial advisory, investment banking,
and other similar services to Holdings, VTC, CCI, VI International, PCB
Acquisition and PCB; and
WHEREAS, Holdings, VTC, CCI, VI International, PCB Acquisition,
PCB and HMCo desire to amend and restate the terms of the April 1997 Advisory
Agreement and to add Chips as a party to this Agreement; and
WHEREAS, Chips desires to become a party to this Agreement; and
WHEREAS, the Clients have requested that HMCo render financial
advisory, investment banking, and other similar services to them with respect
to any future proposals for a tender offer, acquisition, sale, merger, exchange
offer, recapitalization, restructuring, or other similar transaction directly
or indirectly involving the Clients or any of their respective subsidiaries,
and any other person or entity (collectively, "Add-on Transactions").
NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT CONTAINS INDEMNIFICATION PROVISIONS
IN PARAGRAPH 5 THAT APPLY TO CLAIMS, LIABILITIES, LOSSES, DAMAGES OR EXPENSES
THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR
PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE OF HMCO OR ANY
OTHER INDEMNIFIED PERSON IDENTIFIED THEREIN.
<PAGE> 2
NOW, THEREFORE, in consideration of the services rendered and to
be rendered by HMCo to the Clients, and to evidence the obligations of the
Clients to HMCo and the mutual covenants herein contained, the Clients hereby
jointly and severally agree as follows:
1. Retention. Each of the Clients acknowledges that it has
retained HMCo as its exclusive financial advisor in connection with any Add-on
Transactions that may be consummated during the term of this Agreement, and
that the Clients will not retain any other person or entity to provide such
services in connection with any such Add-on Transaction without the prior
written consent of HMCo. HMCo agrees that it shall provide such financial
advisory, investment banking, and other similar services in connection with any
such Add-on Transaction as may be requested from time to time by the board of
directors of Holdings.
2. Term. The term of this Agreement shall continue until the
earlier to occur of (i) the tenth anniversary of the date hereof or (ii) the
date on which HMTF and its affiliates cease to own beneficially, directly or
indirectly, any securities of any of the Clients or their successors.
3. Compensation. As compensation for HMCo's financial
advisory, investment banking, and other similar services rendered in connection
with any Add-on Transaction pursuant to Section 1 hereof, the applicable Client
shall pay to HMCo, at the closing of any such Add-on Transaction, a cash fee in
the amount of 1.5% of the Transaction Value of such Add-on Transaction. As
used herein, the term "Transaction Value" means the total value of the Add-on
Transaction, including, without limitation, the aggregate amount of the funds
required to complete the Add-on Transaction (excluding any fees payable
pursuant to this Section 3(b)) including the amount of any indebtedness,
preferred stock or similar items assumed (or remaining outstanding).
4. Reimbursement of Expenses. In addition to the
compensation to be paid pursuant to Section 3 hereof, the applicable Client or
Clients agree to reimburse HMCo, promptly following demand therefor, together
with invoices or reasonably detailed descriptions thereof, for all reasonable
disbursements and out-of-pocket expenses (including fees and disbursements of
counsel) incurred by HMCo in connection with the performance by it of the
services contemplated by Section 1 hereof.
5. Indemnification. The Clients jointly and severally shall
indemnify and hold harmless each of HMCo, its affiliates, and their respective
directors, officers, controlling persons (within the meaning of Section 15 of
the Securities Act of 1933, as
2
<PAGE> 3
amended, or Section 20(a) of the Securities Exchange Act of 1934, as amended),
if any, agents and employees (HMCo, its affiliates, and such other specified
persons being collectively referred to as "Indemnified Persons" and
individually as an "Indemnified Person") from and against any and all claims,
liabilities, losses, damages and expenses incurred by any Indemnified Person
(including those resulting from the negligence of the Indemnified Person and
fees and disbursements of the respective Indemnified Person's counsel) which
(A) are related to or arise out of (i) actions taken or omitted to be taken
(including any untrue statements made or any statements omitted to be made) by
any Client or (ii) actions taken or omitted to be taken by an Indemnified
Person with any Client's consent or in conformity with any Client's
instructions or any Client's actions or omissions or (B) are otherwise related
to or arise out of HMCo's engagement, and will reimburse each Indemnified
Person for all costs and expenses, including fees of any Indemnified Person's
counsel, as they are incurred, in connection with investigating, preparing for,
defending, or appealing any action, formal or informal claim, investigation,
inquiry or other proceeding, whether or not in connection with pending or
threatened litigation, caused by or arising out of or in connection with HMCo's
acting pursuant to the engagement, whether or not any Indemnified Person is
named as a party thereto and whether or not any liability results therefrom.
None of the Clients will, however, be responsible for any claims, liabilities,
losses, damages or expenses pursuant to clause (B) of the preceding sentence
that have resulted primarily from HMCo's bad faith, gross negligence or willful
misconduct. The Clients also agree that neither HMCo nor any other Indemnified
Person shall have any liability to any Client for or in connection with such
engagement except for any such liability for claims, liabilities, losses,
damages or expenses incurred by any Client that have resulted primarily from
HMCo's bad faith, gross negligence or willful misconduct. Each of the Clients
further agrees that none of them will, without the prior written consent of
HMCo, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not any Indemnified Person
is an actual or potential party to such claim, action, suit or proceeding)
unless such settlement, compromise or consent includes an unconditional release
of HMCo and each other Indemnified Person hereunder from all liability arising
out of such claim, action, suit or proceeding. EACH CLIENT HEREBY ACKNOWLEDGES
THAT THE FOREGOING INDEMNITY SHALL BE APPLICABLE TO ALL CLAIMS, LIABILITIES,
LOSSES, DAMAGES OR EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE
RESULTED FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY
NEGLIGENCE OF HMCO OR ANY OTHER INDEMNIFIED PERSON.
The foregoing right to indemnity shall be in addition to any
rights that HMCo and/or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of the engagement. Each
3
<PAGE> 4
of the Clients hereby consents to personal jurisdiction and to service and
venue in any court in which any claim which is subject to this Agreement is
brought against HMCo or any other Indemnified Person.
It is understood that, in connection with HMCo's engagement, HMCo
may also be engaged to act for any Client in one or more additional capacities,
and that the terms of this engagement or any such additional engagement may be
embodied in one or more separate written agreements. This indemnification
shall apply to the engagement specified in the first paragraph hereof as well
as to any such additional engagement(s) (whether written or oral) and any
modification of said engagement or such additional engagement(s) and shall
remain in full force and effect following the completion or termination of said
engagement or such additional engagement(s).
The Clients further understand that if HMCo is asked to furnish
any Client a financial opinion letter or act for any Client in any other formal
capacity, such further action may be subject to a separate agreement containing
provisions and terms to be mutually agreed upon.
6. Confidential Information. In connection with the
performance of the services hereunder, HMCo agrees not to divulge any
confidential information, secret processes or trade secrets disclosed by any
Client to it solely in its capacity as a financial advisor, unless the
applicable Client consents to the divulging thereof or such information, secret
processes, or trade secrets are publicly available or otherwise available to
HMCo without restriction or breach of any confidentiality agreement or unless
required by any governmental authority or in response to any valid legal
process.
7. Governing Law. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of the State of Texas,
excluding any choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions contained
herein shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned (other than with respect to the rights and obligations of HMCo, which
may be assigned to any one or more of its principals or affiliates) by any of
the parties without the prior written consent of the other parties.
9. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall
4
<PAGE> 5
constitute one and the same instrument, and the signature of any party to any
counterpart shall be deemed a signature to, and may be appended to, any other
counterpart.
10. Other Understandings. All discussions, understandings,
and agreements theretofore made between any of the parties hereto with respect
to the subject matter hereof are merged in this Agreement, which alone fully
and completely expresses the agreement of the parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
HICKS, MUSE & CO. PARTNERS, L.P.
By: HM PARTNERS INC., its General
Partner
By: /s/
---------------------------
Jack D. Furst
Executive Vice
President
VIASYSTEMS GROUP, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
VIASYSTEMS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
VIASYSTEMS TECHNOLOGIES CORP.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE> 7
CIRCO CRAFT CO. INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
VIASYSTEMS INTERNATIONAL, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
PCB ACQUISITION LIMITED
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
PCB INVESTMENTS PLC
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CHIPS ACQUISITION LIMITED
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE> 1
EXHIBIT 10.18
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of the 1st day of January,
1997 by and among Circo Technologies Group, Inc. ("Circo"), Circo Craft
Technologies, Inc. and Circo Craft Co. Inc. (all, including Circo, collectively
called "Employer"), and James N. Mills ("Employee").
W I T N E S S E T H :
WHEREAS, Employer desires to retain the service of Employee as an
employee of the Employer upon the terms set forth herein; and,
WHEREAS, Employee desires to be employed by Employer and to
appropriately memorialize the terms and conditions of such employment;
NOW, THEREFORE, Employee and Employer, in consideration of the
agreements, covenants and conditions herein contained, hereby agree as follows:
1. BASIC EMPLOYMENT PROVISIONS.
(a) Employment and Term. Employer hereby agrees to employ Employee
(hereinafter referred to as the "Employment") as the Chairman of the Board of
Directors and Chief Executive Officer of Circo (the "Position"), and Employee
agrees to be employed by Employer in such Position, for a period ending on
December 31, 2001, unless terminated earlier as provided herein (the
"Employment Period"). In the event that termination (as hereinafter provided)
has not occurred prior to the last day of the Employment Period, unless either
party shall have given written notice to the contrary at least ninety (90) days
prior to the end of the Employment Period, the Employment Period shall annually
renew for one (1) year periods until terminated.
(b) Duties. Employee in the Position shall be subject to the
direction and supervision of the Board of Directors of Circo (the "Board") and
shall have those duties and responsibilities which are assigned to Employee
during the Employment Period by the Board consistent with the Position,
provided that the Board shall not assign any greater duties or responsibilities
to the Employee than are necessary to the Employee's faithful and adequate
supervision of the overall executive management of Circo and its subsidiaries,
both direct and indirect. Subject to the Employee's faithful and adequate
supervision of the overall executive management of Circo, the Employee shall be
free to participate in other endeavors. Employee agrees to perform faithfully
the duties assigned to Employee to the best of Employee's ability.
2. COMPENSATION.
(a) Salary. Employer shall pay to Employee during the Employment
Period a salary as basic compensation for the services to be rendered by
Employee hereunder. The initial amount of such salary shall be Three Hundred
Ninety-Five Thousand Dollars ($395,000) per annum. Such salary shall be
reviewed by the Board and may be increased in the Board's sole discretion but
may
<PAGE> 2
not be reduced. Such salary shall accrue and be payable in accordance with the
payroll practices of Employer in effect from time to time. All such payments
shall be subject to deduction and withholding authorized or required by
applicable law.
(b) Bonus. During the Employment Period, Employee shall be eligible
to receive an annual bonus (payable by the Employer) in an amount in accordance
with the Senior Executive Incentive Compensation Plan.
(c) Benefits. During the Employment Period, Employee shall be
entitled to such other benefits as are customarily accorded the executives of
Employer, including without limitation, group life, hospitalization and other
insurance and vacations.
(d) Medical Benefits. During the lifetime of Employee and/or
Employee's spouse, whether or not the Employment Period has terminated for any
reason, Employer shall provide health coverage to Employee and/or Employee's
spouse at least equal to the health coverage granted to other executives of
Employer at no cost to Employee and/or Employee's spouse.
(e) Directors and Officers Insurance. Employer will use its best
efforts to obtain and to maintain a policy of insurance on directors and
officers of Employer in amounts to be determined by Employer, in its reasonable
judgement based upon companies similarly situated.
3. TERMINATION.
(a) Death or Disability. This Agreement shall terminate
automatically upon the death or total disability of Employee. For the purpose
of this Agreement "total disability" shall be deemed to have occurred if
Employee shall have been unable to perform the Employee's duties of employment
due to mental or physical incapacity for a period of six (6) consecutive months
or for any one hundred (100) working days out of a twelve (12) consecutive
month period.
(b) Cause. Employer may terminate the employment of Employee under
this Agreement for Cause. For the purpose of this Agreement, "Cause" shall be
deemed to be fraud, dishonesty, competition with Employer, unauthorized use of
any of Employer's trade secrets or confidential information or continued gross
neglect by Employee of the duties assigned to Employee by the Board (if such
neglect continues for thirty (30) days after written notice, which notice shall
define the duties being neglected by Employee).
(c) Without Cause. Employer may terminate the employment of Employee
under this Agreement without Cause, subject to the continuing rights of
Employee pursuant to Section 4(c) below.
4. COMPENSATION UPON TERMINATION.
(a) Death or Disability. If the Employment Period is terminated
pursuant to the provisions of Section 3(a) above, this Agreement shall
terminate, and no further compensation shall be payable to Employee except that
Employee or Employee's estate, heirs or beneficiaries, as applicable, shall
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<PAGE> 3
be entitled, in addition to any other benefits specifically provided to them or
Employee under any benefit plan, to receive Employee's then current salary for
a period of eighteen (18) months from the date the Employment Period terminates
and Employee shall continue to receive the medical benefits provided in Section
2 (d) above during Employees lifetime.
(b) Termination for Cause or Voluntary Termination by Employee. If
the employment of Employee under this Agreement is terminated for Cause or if
Employee voluntarily terminates his employment, no further compensation shall
be paid to Employee after the date of termination but Employee shall be
entitled medical benefits provided in Section 2(d) above.
(c) Termination Without Cause. If the employment of Employee under
this Agreement is terminated pursuant to Section 3(c) above, Employee shall be
entitled to continue to receive from Employer Employee's then current salary
hereunder [which shall not be less than the amount specified in the second
sentence of Section 2(a) above] for the remainder of the Employment Period or
for one (1) year, whichever is longer, such amount to continue to be paid in
accordance with the payroll practices of Employer through the Employment
Period, and shall further be entitled to continue to receive the benefits to
which Employee would otherwise be entitled pursuant to Sections 2(c) and 2(d)
above and reimbursement for expenses incurred by Employee to own and maintain
an automobile as contemplated by Section 5 below.
5. EXPENSE REIMBURSEMENT. Upon submission of properly documented expense
account reports, Employer shall reimburse Employee for all reasonable travel
and entertainment expenses incurred by Employee in the course of his employment
with Employer. During the term hereof, Employee will be reimbursed by Employer
for expenses incurred by Employee to own and maintain an automobile.
6. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto except that this Agreement and all of the provisions hereof
may be assigned by Employer to any successor to all or substantially all of its
assets (by merger or otherwise) and may otherwise be assigned upon the prior
written consent of Employee.
7. CONFIDENTIAL INFORMATION.
(a) Non-Disclosure. During the Employment Period or at any time
thereafter, irrespective of the time, manner or cause of the termination of
this Agreement, Employee will not directly or indirectly reveal, divulge,
disclose or communicate to any person or entity, other than authorized
officers, directors and employees of the Employer, in any manner whatsoever,
any Confidential Information (as hereinafter defined) of Employer without the
prior written consent of the Chief Executive Officer.
(b) Definition. As used herein, "Confidential Information" means
information disclosed to or known by Employee as a direct or indirect
consequence of or through the Employment about Employer, or its respective
businesses, products and practices which information is not generally
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<PAGE> 4
known in the business in which Employer is or may be engaged. However,
Confidential Information shall not include under any circumstances any
information with respect to the foregoing matters which is (i) available to the
public from a source other than Employee, (ii) released in writing by Employer
to the public or to persons who are not under a similar obligation of
confidentiality to Employer and who are not parties to this Agreement, (iii)
obtained by Employee from a third party not under a similar obligation of
confidentiality to Employer, (iv) required to be disclosed by any court process
or any government or agency or department of any government, or (v) the subject
of a written waiver executed by either Employer for the benefit of Employee.
(c) Return of Property. Upon termination of the Employment, Employee
will surrender to Employer all Confidential Information, including without
limitation, all lists, charts, schedules, reports, financial statements, books
and records of the Employer, and all copies thereof, and all other property
belonging to the Employer but Employee shall be accorded reasonable access to
such Confidential Information subsequent to the Employment Period for any
proper purpose as determined in the reasonable judgment of Employer.
8. AGREEMENT NOT TO COMPETE.
(a) Termination for Cause or Voluntary Termination. In the event
that the Employee is terminated for Cause or voluntarily terminates his
employment with Employer prior to the expiration of the term of this Agreement,
Employee hereby agrees that for a period of one (1) year following such
termination, neither he nor any affiliate shall, either in his own behalf or as
a partner, officer, director, employee, agent or shareholder [other than as the
holder of less than 5% of the outstanding capital stock of any corporation with
a class of equity security registered under Section 12(b) or Section 12(g) of
the Securities Exchange Act of 1934, as amended] engage in, invest in or render
services to any person or entity engaged in the businesses in which Employer is
then engaged and situated within the United States of America. Nothing
contained in this Section 8(a) shall be construed as restricting the Employee's
right to sell or otherwise dispose of any business or investments owned or
operated by Employee as of the date hereof.
(b) Termination Without Cause or For Disability. In the event that
the employment of Employee is terminated by Employer without Cause or as a
result of the total disability of Employee, Employee hereby agrees that during
the period that Employee accepts payments from the Employer pursuant to Section
4(a) or Section 4(c) above, as applicable, but not including medical benefits
pursuant to Section 2(d), neither Employee nor any affiliate shall, either in
Employee's own behalf or as a partner, officer, director, employee, agent or
shareholder [other than as the holder of less that 5% of the outstanding
capital stock of any corporation with a class of equity security registered
under Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as
amended] engage in, invest in or render services to any person or entity
engaged in the businesses in which Employer or any subsidiary of Employers is
then engaged and situated within the United States of America. Nothing
contained in this Section 8(b) shall be construed as restricting the Employee's
right to sell or otherwise dispose of any business or investments owned or
operated by Employee as of the date hereof. In the event of Employee's
violation of the provisions of Section 8(b), the right of Employee to receive
any further payment pursuant to Sections 4(a) or 4(c) above, as applicable, but
not as to medical benefits pursuant to Section 2(d), shall immediately
terminate and the Employer shall be
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<PAGE> 5
entitled to secure reimbursement from Employee for all payments made to
Employee under Section 4(a) or 4(c) subsequent to the date of any such
violation. The parties hereto hereby acknowledge and agree that the provisions
of the immediately preceding sentence shall be the sole and exclusive remedy of
the Employer in respect of any violation of this Section 8(b).
9. AGREEMENT NOT TO SOLICIT EMPLOYEES. Employee agrees that, for a period
of three (3) years following the termination of the Employment Period, neither
Employee nor any affiliate shall, on behalf of any business engaged in a
business competitive with Employer, solicit or induce, or in any manner attempt
to solicit or induce, any person employed by, or any agent of, Employer to
terminate Employee's employment or agency, as the case may be, with Employer.
10. NO VIOLATION. Employee hereby represents and warrants to Employer that
the execution, delivery and performance of this Agreement or the passage of
time, or both, will conflict with, result in a default, right to accelerate or
loss of rights under any provision of any agreement or understanding to which
the Employee or, to the best knowledge of Employee, any of Employee's
affiliates are a party or by which Employee, or to the best knowledge of
Employee, Employee's affiliates may be bound or affected.
11. CAPTIONS. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit or
amplify the provisions hereof.
12. NOTICES. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed delivered, whether or not actually received,
two days after deposited in the United States mail, postage prepaid, registered
or certified mail, return receipt requested, addressed to the party to whom
notice is being given at the specified address or at such other address as such
party may designate by notice:
Employer: Circo Technologies Group, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Attn: Board of Directors
Employee: James N. Mills
151 North Bemiston
St. Louis, Missouri 63105
13. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provisions
shall be fully severable, and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised a part
of this Agreement; the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance of this Agreement. In lieu of each
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable.
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<PAGE> 6
14. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. This Agreement may be amended in whole or in part only
by an instrument in writing setting forth the particulars of such amendment and
duly executed by an officer of Employer expressly authorized by the Board to do
so and by Employee.
15. WAIVER. No delay or omission by any party hereto to exercise any right
or power hereunder shall impair such right or power to be construed as a waiver
thereof. A waiver by any of the parties hereto of any of the covenants to be
performed by any other party or any breach thereof shall not be construed to be
a waiver of any succeeding breach thereof or of any other covenant herein
contained. Except as otherwise expressly set forth herein, all remedies
provided for in this Agreement shall be cumulative and in addition to and not
in lieu of any other remedies available to any party at law, in equity or
otherwise.
16. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall constitute an original, and all of which together shall
constitute one and the same agreement.
17. GOVERNING LAW. This Agreement shall be construed and enforced according
to the laws of the State of Missouri.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
EMPLOYER: EMPLOYEE:
CIRCO TECHNOLOGIES GROUP, INC.
By:
------------------------------------------ --------------------------------
David M. Sindelar, Vice President James N. Mills
CIRCO CRAFT TECHNOLOGIES, INC.
By:
------------------------------------------
David M. Sindelar, Vice President
CIRCO CRAFT CO. INC.
By:
------------------------------------------
David M. Sindelar, Vice President
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<PAGE> 1
EXHIBIT 10.19
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of the 1st day of January,
1997 by and among Circo Technologies Group, Inc. ("Circo"), Circo Craft
Technologies, Inc. and Circo Craft Co. Inc. (all, including Circo, collectively
called "Employer"), and David M. Sindelar ("Employee").
W I T N E S S E T H :
WHEREAS, Employer desires to retain the service of Employee as an
employee of the Employer upon the terms set forth herein; and,
WHEREAS, Employee desires to be employed by Employer and to
appropriately memorialize the terms and conditions of such employment;
NOW, THEREFORE, Employee and Employer, in consideration of the
agreements, covenants and conditions herein contained, hereby agree as follows:
1. BASIC EMPLOYMENT PROVISIONS.
(a) Employment and Term. Employer hereby agrees to employ Employee
(hereinafter referred to as the "Employment") as the Senior Vice President -
Finance of Circo (the "Position"), and Employee agrees to be employed by
Employer in such Position, for a period ending on December 31, 2001, unless
terminated earlier as provided herein (the "Employment Period"). In the event
that termination (as hereinafter provided) has not occurred prior to the last
day of the Employment Period, unless either party shall have given written
notice to the contrary at least ninety (90) days prior to the end of the
Employment Period, the Employment Period shall annually renew for one (1) year
periods until terminated.
(b) Duties. Employee in the Position shall be subject to the
direction and supervision of the Chairman of the Board of Directors of Circo
(the "Chairman") and shall have those duties and responsibilities which are
assigned to Employee during the Employment Period by the Chairman consistent
with the Position, provided that the Chairman shall not assign any greater
duties or responsibilities to the Employee than are necessary to the Employee's
faithful and adequate supervision of the overall financial management of Circo
and its subsidiaries, both direct and indirect. Subject to the Employee's
faithful and adequate supervision of the overall financial management of Circo,
the Employee shall be free to participate in other endeavors. Employee agrees
to perform faithfully the duties assigned to Employee to the best of Employee's
ability.
2. COMPENSATION.
(a) Salary. Employer shall pay to Employee during the Employment
Period a salary as basic compensation for the services to be rendered by
Employee hereunder. The initial amount of such salary shall be One Hundred
Sixty-Eight Thousand Two Hundred Dollars ($168,200) per annum. Such salary
shall be reviewed by the Chairman and may be increased in the Chairman's sole
<PAGE> 2
discretion but may not be reduced. Such salary shall accrue and be payable in
accordance with the payroll practices of Employer in effect from time to time.
All such payments shall be subject to deduction and withholding authorized or
required by applicable law.
(b) Bonus. During the Employment Period, Employee shall be eligible
to receive an annual bonus (payable by the Employer) in an amount in accordance
with the Senior Executive Incentive Compensation Plan.
(c) Benefits. During the Employment Period, Employee shall be
entitled to such other benefits as are customarily accorded the executives of
Employer, including without limitation, group life, hospitalization and other
insurance and vacations.
(d) Medical Benefits. During the lifetime of Employee and/or
Employee's spouse, whether or not the Employment Period has terminated for any
reason, Employer shall provide health coverage to Employee and/or Employee's
spouse at least equal to the health coverage granted to other executives of
Employer at no cost to Employee and/or Employee's spouse.
(e) Directors and Officers Insurance. Employer will use its best
efforts to obtain and to maintain a policy of insurance on directors and
officers of Employer in amounts to be determined by Employer, in its reasonable
judgement based upon companies similarly situated.
3. TERMINATION.
(a) Death or Disability. This Agreement shall terminate
automatically upon the death or total disability of Employee. For the purpose
of this Agreement "total disability" shall be deemed to have occurred if
Employee shall have been unable to perform the Employee's duties of employment
due to mental or physical incapacity for a period of six (6) consecutive months
or for any one hundred (100) working days out of a twelve (12) consecutive
month period.
(b) Cause. Employer may terminate the employment of Employee under
this Agreement for Cause. For the purpose of this Agreement, "Cause" shall be
deemed to be fraud, dishonesty, competition with Employer, unauthorized use of
any of Employer's trade secrets or confidential information or continued gross
neglect by Employee of the duties assigned to Employee by the Chairman (if such
neglect continues for thirty (30) days after written notice, which notice shall
define the duties being neglected by Employee).
(c) Without Cause. Employer may terminate the employment of Employee
under this Agreement without Cause, subject to the continuing rights of
Employee pursuant to Section 4(c) below.
4. COMPENSATION UPON TERMINATION.
(a) Death or Disability. If the Employment Period is terminated
pursuant to the provisions of Section 3(a) above, this Agreement shall
terminate, and no further compensation shall be payable to Employee except that
Employee or Employee's estate, heirs or beneficiaries, as applicable, shall
-2-
<PAGE> 3
be entitled, in addition to any other benefits specifically provided to them or
Employee under any benefit plan, to receive Employee's then current salary for
a period of eighteen (18) months from the date the Employment Period terminates
and Employee shall continue to receive the medical benefits provided in Section
2 (d) above during Employees lifetime.
(b) Termination for Cause or Voluntary Termination by Employee. If
the employment of Employee under this Agreement is terminated for Cause or if
Employee voluntarily terminates his employment, no further compensation shall
be paid to Employee after the date of termination but Employee shall be
entitled medical benefits provided in Section 2(d) above.
(c) Termination Without Cause. If the employment of Employee under
this Agreement is terminated pursuant to Section 3(c) above, Employee shall be
entitled to continue to receive from Employer Employee's then current salary
hereunder [which shall not be less than the amount specified in the second
sentence of Section 2(a) above] for the remainder of the Employment Period or
for one (1) year, whichever is longer, such amount to continue to be paid in
accordance with the payroll practices of Employer through the Employment
Period, and shall further be entitled to continue to receive the benefits to
which Employee would otherwise be entitled pursuant to Sections 2(c) and 2(d)
above and reimbursement for expenses incurred by Employee to own and maintain
an automobile as contemplated by Section 5 below.
5. EXPENSE REIMBURSEMENT. Upon submission of properly documented expense
account reports, Employer shall reimburse Employee for all reasonable travel
and entertainment expenses incurred by Employee in the course of his employment
with Employer. During the term hereof, Employee will be reimbursed by Employer
for expenses incurred by Employee to own and maintain an automobile.
6. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto except that this Agreement and all of the provisions hereof
may be assigned by Employer to any successor to all or substantially all of its
assets (by merger or otherwise) and may otherwise be assigned upon the prior
written consent of Employee.
7. CONFIDENTIAL INFORMATION.
(a) Non-Disclosure. During the Employment Period or at any time
thereafter, irrespective of the time, manner or cause of the termination of
this Agreement, Employee will not directly or indirectly reveal, divulge,
disclose or communicate to any person or entity, other than authorized
officers, directors and employees of the Employer, in any manner whatsoever,
any Confidential Information (as hereinafter defined) of Employer without the
prior written consent of the Chief Executive Officer.
(b) Definition. As used herein, "Confidential Information" means
information disclosed to or known by Employee as a direct or indirect
consequence of or through the Employment about Employer, or its respective
businesses, products and practices which information is not generally
-3-
<PAGE> 4
known in the business in which Employer is or may be engaged. However,
Confidential Information shall not include under any circumstances any
information with respect to the foregoing matters which is (i) available to the
public from a source other than Employee, (ii) released in writing by Employer
to the public or to persons who are not under a similar obligation of
confidentiality to Employer and who are not parties to this Agreement, (iii)
obtained by Employee from a third party not under a similar obligation of
confidentiality to Employer, (iv) required to be disclosed by any court process
or any government or agency or department of any government, or (v) the subject
of a written waiver executed by either Employer for the benefit of Employee.
(c) Return of Property. Upon termination of the Employment, Employee
will surrender to Employer all Confidential Information, including without
limitation, all lists, charts, schedules, reports, financial statements, books
and records of the Employer, and all copies thereof, and all other property
belonging to the Employer but Employee shall be accorded reasonable access to
such Confidential Information subsequent to the Employment Period for any
proper purpose as determined in the reasonable judgment of Employer.
8. AGREEMENT NOT TO COMPETE.
(a) Termination for Cause or Voluntary Termination. In the event
that the Employee is terminated for Cause or voluntarily terminates his
employment with Employer prior to the expiration of the term of this Agreement,
Employee hereby agrees that for a period of one (1) year following such
termination, neither he nor any affiliate shall, either in his own behalf or as
a partner, officer, director, employee, agent or shareholder [other than as the
holder of less than 5% of the outstanding capital stock of any corporation with
a class of equity security registered under Section 12(b) or Section 12(g) of
the Securities Exchange Act of 1934, as amended] engage in, invest in or render
services to any person or entity engaged in the businesses in which Employer is
then engaged and situated within the United States of America. Nothing
contained in this Section 8(a) shall be construed as restricting the Employee's
right to sell or otherwise dispose of any business or investments owned or
operated by Employee as of the date hereof.
(b) Termination Without Cause or For Disability. In the event that
the employment of Employee is terminated by Employer without Cause or as a
result of the total disability of Employee, Employee hereby agrees that during
the period that Employee accepts payments from the Employer pursuant to Section
4(a) or Section 4(c) above, as applicable, but not including medical benefits
pursuant to Section 2(d), neither Employee nor any affiliate shall, either in
Employee's own behalf or as a partner, officer, director, employee, agent or
shareholder [other than as the holder of less that 5% of the outstanding
capital stock of any corporation with a class of equity security registered
under Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as
amended] engage in, invest in or render services to any person or entity
engaged in the businesses in which Employer or any subsidiary of Employers is
then engaged and situated within the United States of America. Nothing
contained in this Section 8(b) shall be construed as restricting the Employee's
right to sell or otherwise dispose of any business or investments owned or
operated by Employee as of the date hereof. In the event of Employee's
violation of the provisions of Section 8(b), the right of Employee to receive
any further payment pursuant to Sections 4(a) or 4(c) above, as applicable, but
not as to medical benefits pursuant to Section 2(d), shall immediately
terminate and the Employer shall be
-4-
<PAGE> 5
entitled to secure reimbursement from Employee for all payments made to
Employee under Section 4(a) or 4(c) subsequent to the date of any such
violation. The parties hereto hereby acknowledge and agree that the provisions
of the immediately preceding sentence shall be the sole and exclusive remedy of
the Employer in respect of any violation of this Section 8(b).
9. AGREEMENT NOT TO SOLICIT EMPLOYEES. Employee agrees that, for a period
of three (3) years following the termination of the Employment Period, neither
Employee nor any affiliate shall, on behalf of any business engaged in a
business competitive with Employer, solicit or induce, or in any manner attempt
to solicit or induce, any person employed by, or any agent of, Employer to
terminate Employee's employment or agency, as the case may be, with Employer.
10. NO VIOLATION. Employee hereby represents and warrants to Employer that
the execution, delivery and performance of this Agreement or the passage of
time, or both, will conflict with, result in a default, right to accelerate or
loss of rights under any provision of any agreement or understanding to which
the Employee or, to the best knowledge of Employee, any of Employee's
affiliates are a party or by which Employee, or to the best knowledge of
Employee, Employee's affiliates may be bound or affected.
11. CAPTIONS. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit or
amplify the provisions hereof.
12. NOTICES. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed delivered, whether or not actually received,
two days after deposited in the United States mail, postage prepaid, registered
or certified mail, return receipt requested, addressed to the party to whom
notice is being given at the specified address or at such other address as such
party may designate by notice:
Employer: CircoTechnologies Group, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Attn: Chairman
Employee: David M. Sindelar
34 Fox Meadows
Sunset Hills, Missouri 63127
13. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provisions
shall be fully severable, and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised a part
of this Agreement; the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance of this Agreement. In lieu of each
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable.
-5-
<PAGE> 6
14. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. This Agreement may be amended in whole or in part only
by an instrument in writing setting forth the particulars of such amendment and
duly executed by an officer of Employer expressly authorized by the Chairman to
do so and by Employee.
15. WAIVER. No delay or omission by any party hereto to exercise any right
or power hereunder shall impair such right or power to be construed as a waiver
thereof. A waiver by any of the parties hereto of any of the covenants to be
performed by any other party or any breach thereof shall not be construed to be
a waiver of any succeeding breach thereof or of any other covenant herein
contained. Except as otherwise expressly set forth herein, all remedies
provided for in this Agreement shall be cumulative and in addition to and not
in lieu of any other remedies available to any party at law, in equity or
otherwise.
16. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall constitute an original, and all of which together shall
constitute one and the same agreement.
17. GOVERNING LAW. This Agreement shall be construed and enforced according
to the laws of the State of Missouri.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
EMPLOYER: EMPLOYEE:
CIRCO TECHNOLOGIES GROUP, INC.
By:
-------------------------------------- -----------------------------
James N. Mills, Chairman and Chief David M. Sindelar
Executive Officer
CIRCO CRAFT TECHNOLOGIES, INC.
By:
--------------------------------------
James N. Mills, Chairman and Chief
Executive Officer
CIRCO CRAFT CO. INC.
By:
--------------------------------------
James N. Mills, Chairman and Chief
Executive Officer
-6-
<PAGE> 1
EXHIBIT 10.20
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of the 1st day of January,
1997 by and among Circo Technologies Group, Inc. ("Circo"), Circo Craft
Technologies, Inc. ("Technologies") and Circo Craft Co. Inc. (all, including
Circo and Technologies, collectively called "Employer"), and Robert N. Mills
("Employee").
W I T N E S S E T H :
WHEREAS, Employer desires to retain the service of Employee as an
employee of the Employer upon the terms set forth herein; and,
WHEREAS, Employee desires to be employed by Employer and to
appropriately memorialize the terms and conditions of such employment;
NOW, THEREFORE, Employee and Employer, in consideration of the
agreements, covenants and conditions herein contained, hereby agree as follows:
1. BASIC EMPLOYMENT PROVISIONS.
(a) Employment and Term. Employer hereby agrees to employ Employee
(hereinafter referred to as the "Employment") as the President and Chief
Operating Officer of Circo (the "Position"), and Employee agrees to be employed
by Employer in such Position, for a period ending on December 31, 2001, unless
terminated earlier as provided herein (the "Employment Period"). In the event
that termination (as hereinafter provided) has not occurred prior to the last
day of the Employment Period, unless either party shall have given written
notice to the contrary at least ninety (90) days prior to the end of the
Employment Period, the Employment Period shall annually renew for one (1) year
periods until terminated.
(b) Duties. Employee in the Position shall be subject to the
direction and supervision of the Chairman of the Board of Directors of Circo
(the "Chairman") and shall have those duties and responsibilities which are
assigned to Employee during the Employment Period by the Chairman consistent
with the Position, provided that the Chairman shall not assign any greater
duties or responsibilities to the Employee than are necessary to the Employee's
faithful and adequate supervision of the overall executive management of
Technologies and its subsidiaries, both direct and indirect. Subject to the
Employee's faithful and adequate supervision of the overall executive
management of Technologies, the Employee shall be free to participate in other
endeavors. Employee agrees to perform faithfully the duties assigned to
Employee to the best of Employee's ability.
2. COMPENSATION.
(a) Salary. Employer shall pay to Employee during the Employment
Period a salary as basic compensation for the services to be rendered by
Employee hereunder. The initial amount of such salary shall be Four Hundred
Eighty-Two Thousand Dollars ($482,000) per annum. Such salary shall be
reviewed by the Chairman and may be increased in the Chairman's sole discretion
but may
<PAGE> 2
not be reduced. Such salary shall accrue and be payable in accordance with the
payroll practices of Employer in effect from time to time. All such payments
shall be subject to deduction and withholding authorized or required by
applicable law.
(b) Bonus. During the Employment Period, Employee shall be eligible
to receive an annual bonus (payable by the Employer) in an amount in accordance
with the Senior Executive Incentive Compensation Plan.
(c) Benefits. During the Employment Period, Employee shall be
entitled to such other benefits as are customarily accorded the executives of
Employer, including without limitation, group life, hospitalization and other
insurance and vacations.
(d) Medical Benefits. During the lifetime of Employee and/or
Employee's spouse, whether or not the Employment Period has terminated for any
reason, Employer shall provide health coverage to Employee and/or Employee's
spouse at least equal to the health coverage granted to other executives of
Employer at no cost to Employee and/or Employee's spouse.
(e) Directors and Officers Insurance. Employer will use its best
efforts to obtain and to maintain a policy of insurance on directors and
officers of Employer in amounts to be determined by Employer, in its reasonable
judgement based upon companies similarly situated.
3. TERMINATION.
(a) Death or Disability. This Agreement shall terminate
automatically upon the death or total disability of Employee. For the purpose
of this Agreement "total disability" shall be deemed to have occurred if
Employee shall have been unable to perform the Employee's duties of employment
due to mental or physical incapacity for a period of six (6) consecutive months
or for any one hundred (100) working days out of a twelve (12) consecutive
month period.
(b) Cause. Employer may terminate the employment of Employee under
this Agreement for Cause. For the purpose of this Agreement, "Cause" shall be
deemed to be fraud, dishonesty, competition with Employer, unauthorized use of
any of Employer's trade secrets or confidential information or continued gross
neglect by Employee of the duties assigned to Employee by the Chairman (if such
neglect continues for thirty (30) days after written notice, which notice shall
define the duties being neglected by Employee).
(c) Without Cause. Employer may terminate the employment of Employee
under this Agreement without Cause, subject to the continuing rights of
Employee pursuant to Section 4(c) below.
4. COMPENSATION UPON TERMINATION.
(a) Death or Disability. If the Employment Period is terminated
pursuant to the provisions of Section 3(a) above, this Agreement shall
terminate, and no further compensation shall be payable to Employee except that
Employee or Employee's estate, heirs or beneficiaries, as applicable, shall
-2-
<PAGE> 3
be entitled, in addition to any other benefits specifically provided to them or
Employee under any benefit plan, to receive Employee's then current salary for
a period of eighteen (18) months from the date the Employment Period terminates
and Employee shall continue to receive the medical benefits provided in Section
2 (d) above during Employees lifetime.
(b) Termination for Cause or Voluntary Termination by Employee. If
the employment of Employee under this Agreement is terminated for Cause or if
Employee voluntarily terminates his employment, no further compensation shall
be paid to Employee after the date of termination but Employee shall be
entitled medical benefits provided in Section 2(d) above.
(c) Termination Without Cause. If the employment of Employee under
this Agreement is terminated pursuant to Section 3(c) above, Employee shall be
entitled to continue to receive from Employer Employee's then current salary
hereunder [which shall not be less than the amount specified in the second
sentence of Section 2(a) above] for the remainder of the Employment Period or
for one (1) year, whichever is longer, such amount to continue to be paid in
accordance with the payroll practices of Employer through the Employment
Period, and shall further be entitled to continue to receive the benefits to
which Employee would otherwise be entitled pursuant to Sections 2(c) and 2(d)
above and reimbursement for expenses incurred by Employee to own and maintain
an automobile as contemplated by Section 5 below.
5. EXPENSE REIMBURSEMENT. Upon submission of properly documented expense
account reports, Employer shall reimburse Employee for all reasonable travel
and entertainment expenses incurred by Employee in the course of his employment
with Employer. (A) During the term hereof, Employer shall pay Employee an auto
allowance in an amount sufficient so that, after the effect of federal and
state income taxes, Employee shall net Two Thousand Dollars ($2,000) per month.
6. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto except that this Agreement and all of the provisions hereof
may be assigned by Employer to any successor to all or substantially all of its
assets (by merger or otherwise) and may otherwise be assigned upon the prior
written consent of Employee.
7. CONFIDENTIAL INFORMATION.
(a) Non-Disclosure. During the Employment Period or at any time
thereafter, irrespective of the time, manner or cause of the termination of
this Agreement, Employee will not directly or indirectly reveal, divulge,
disclose or communicate to any person or entity, other than authorized
officers, directors and employees of the Employer, in any manner whatsoever,
any Confidential Information (as hereinafter defined) of Employer without the
prior written consent of the Chief Executive Officer.
(b) Definition. As used herein, "Confidential Information" means
information disclosed to or known by Employee as a direct or indirect
consequence of or through the Employment about Employer, or its respective
businesses, products and practices which information is not generally
-3-
<PAGE> 4
known in the business in which Employer is or may be engaged. However,
Confidential Information shall not include under any circumstances any
information with respect to the foregoing matters which is (i) available to the
public from a source other than Employee, (ii) released in writing by Employer
to the public or to persons who are not under a similar obligation of
confidentiality to Employer and who are not parties to this Agreement, (iii)
obtained by Employee from a third party not under a similar obligation of
confidentiality to Employer, (iv) required to be disclosed by any court process
or any government or agency or department of any government, or (v) the subject
of a written waiver executed by either Employer for the benefit of Employee.
(c) Return of Property. Upon termination of the Employment, Employee
will surrender to Employer all Confidential Information, including without
limitation, all lists, charts, schedules, reports, financial statements, books
and records of the Employer, and all copies thereof, and all other property
belonging to the Employer but Employee shall be accorded reasonable access to
such Confidential Information subsequent to the Employment Period for any
proper purpose as determined in the reasonable judgment of Employer.
8. AGREEMENT NOT TO COMPETE.
(a) Termination for Cause or Voluntary Termination. In the event
that the Employee is terminated for Cause or voluntarily terminates his
employment with Employer prior to the expiration of the term of this Agreement,
Employee hereby agrees that for a period of one (1) year following such
termination, neither he nor any affiliate shall, either in his own behalf or as
a partner, officer, director, employee, agent or shareholder [other than as the
holder of less than 5% of the outstanding capital stock of any corporation with
a class of equity security registered under Section 12(b) or Section 12(g) of
the Securities Exchange Act of 1934, as amended] engage in, invest in or render
services to any person or entity engaged in the businesses in which Employer is
then engaged and situated within the United States of America. Nothing
contained in this Section 8(a) shall be construed as restricting the Employee's
right to sell or otherwise dispose of any business or investments owned or
operated by Employee as of the date hereof.
(b) Termination Without Cause or For Disability. In the event that
the employment of Employee is terminated by Employer without Cause or as a
result of the total disability of Employee, Employee hereby agrees that during
the period that Employee accepts payments from the Employer pursuant to Section
4(a) or Section 4(c) above, as applicable, but not including medical benefits
pursuant to Section 2(d), neither Employee nor any affiliate shall, either in
Employee's own behalf or as a partner, officer, director, employee, agent or
shareholder [other than as the holder of less that 5% of the outstanding
capital stock of any corporation with a class of equity security registered
under Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as
amended] engage in, invest in or render services to any person or entity
engaged in the businesses in which Employer or any subsidiary of Employers is
then engaged and situated within the United States of America. Nothing
contained in this Section 8(b) shall be construed as restricting the Employee's
right to sell or otherwise dispose of any business or investments owned or
operated by Employee as of the date hereof. In the event of Employee's
violation of the provisions of Section 8(b), the right of Employee to receive
any further payment pursuant to Sections 4(a) or 4(c) above, as applicable, but
not as to medical benefits pursuant to Section 2(d), shall immediately
terminate and the Employer shall be
-4-
<PAGE> 5
entitled to secure reimbursement from Employee for all payments made to
Employee under Section 4(a) or 4(c) subsequent to the date of any such
violation. The parties hereto hereby acknowledge and agree that the provisions
of the immediately preceding sentence shall be the sole and exclusive remedy of
the Employer in respect of any violation of this Section 8(b).
9. AGREEMENT NOT TO SOLICIT EMPLOYEES. Employee agrees that, for a period
of three (3) years following the termination of the Employment Period, neither
Employee nor any affiliate shall, on behalf of any business engaged in a
business competitive with Employer, solicit or induce, or in any manner attempt
to solicit or induce, any person employed by, or any agent of, Employer to
terminate Employee's employment or agency, as the case may be, with Employer.
10. NO VIOLATION. Employee hereby represents and warrants to Employer that
the execution, delivery and performance of this Agreement or the passage of
time, or both, will conflict with, result in a default, right to accelerate or
loss of rights under any provision of any agreement or understanding to which
the Employee or, to the best knowledge of Employee, any of Employee's
affiliates are a party or by which Employee, or to the best knowledge of
Employee, Employee's affiliates may be bound or affected.
11. CAPTIONS. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit or
amplify the provisions hereof.
12. NOTICES. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed delivered, whether or not actually received,
two days after deposited in the United States mail, postage prepaid, registered
or certified mail, return receipt requested, addressed to the party to whom
notice is being given at the specified address or at such other address as such
party may designate by notice:
Employer: Circo Technologies Group, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Attn: Chairman
Employee: Robert N. Mills
13595 Kings Glen Drive
St. Louis, Missouri 63131
13. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provisions
shall be fully severable, and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised a part
of this Agreement; the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance of this Agreement. In lieu of each
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable.
-5-
<PAGE> 6
14. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. This Agreement may be amended in whole or in part only
by an instrument in writing setting forth the particulars of such amendment and
duly executed by an officer of Employer expressly authorized by the Chairman to
do so and by Employee.
15. WAIVER. No delay or omission by any party hereto to exercise any right
or power hereunder shall impair such right or power to be construed as a waiver
thereof. A waiver by any of the parties hereto of any of the covenants to be
performed by any other party or any breach thereof shall not be construed to be
a waiver of any succeeding breach thereof or of any other covenant herein
contained. Except as otherwise expressly set forth herein, all remedies
provided for in this Agreement shall be cumulative and in addition to and not
in lieu of any other remedies available to any party at law, in equity or
otherwise.
16. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall constitute an original, and all of which together shall
constitute one and the same agreement.
17. GOVERNING LAW. This Agreement shall be construed and enforced according
to the laws of the State of Missouri.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
EMPLOYER: EMPLOYEE:
CIRCO TECHNOLOGIES GROUP, INC.
By:
------------------------------- -----------------------------
James N. Mills, Chairman and Robert N. Mills
Chief Executive Officer
CIRCO CRAFT TECHNOLOGIES, INC.
By:
-------------------------------
James N. Mills, Chairman and
Chief Executive Officer
CIRCO CRAFT CO. INC.
By:
-------------------------------
James N. Mills, Chairman and
Chief Executive Officer
-6-
<PAGE> 1
EXHIBIT 10.21
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of the 1st day of January,
1997 by and among Circo Technologies Group, Inc. ("Circo"), Circo Craft
Technologies, Inc. and Circo Craft Co. Inc. (all, including Circo, collectively
called "Employer"), and Larry S. Bacon ("Employee").
W I T N E S S E T H :
WHEREAS, Employer desires to retain the service of Employee as an
employee of the Employer upon the terms set forth herein; and,
WHEREAS, Employee desires to be employed by Employer and to
appropriately memorialize the terms and conditions of such employment;
NOW, THEREFORE, Employee and Employer, in consideration of the
agreements, covenants and conditions herein contained, hereby agree as follows:
1. BASIC EMPLOYMENT PROVISIONS.
(a) Employment and Term. Employer hereby agrees to employ Employee
(hereinafter referred to as the "Employment") as the Senior Vice President -
Human Resources of Circo (the "Position"), and Employee agrees to be employed
by Employer in such Position, for a period ending on December 31, 2001, unless
terminated earlier as provided herein (the "Employment Period"). In the event
that termination (as hereinafter provided) has not occurred prior to the last
day of the Employment Period, unless either party shall have given written
notice to the contrary at least ninety (90) days prior to the end of the
Employment Period, the Employment Period shall annually renew for one (1) year
periods until terminated.
(b) Duties. Employee in the Position shall be subject to the
direction and supervision of the Chairman of the Board of Directors of Circo
(the "Chairman") and shall have those duties and responsibilities which are
assigned to Employee during the Employment Period by the Chairman consistent
with the Position, provided that the Chairman shall not assign any greater
duties or responsibilities to the Employee than are necessary to the Employee's
faithful and adequate supervision of the human resources management of Circo
and its subsidiaries, both direct and indirect. Subject to the Employee's
faithful and adequate supervision of the human resources management of Circo,
the Employee shall be free to participate in other endeavors. Employee agrees
to perform faithfully the duties assigned to Employee to the best of Employee's
ability.
2. COMPENSATION.
(a) Salary. Employer shall pay to Employee during the Employment
Period a salary as basic compensation for the services to be rendered by
Employee hereunder. The initial amount of such salary shall be One Hundred
Fourteen Thousand Five Hundred Dollars ($114,500) per annum. Such salary shall
be reviewed by the Chairman and may be increased in the Chairman's sole
discretion
<PAGE> 2
but may not be reduced. Such salary shall accrue and be payable in accordance
with the payroll practices of Employer in effect from time to time. All such
payments shall be subject to deduction and withholding authorized or required
by applicable law.
(b) Bonus. During the Employment Period, Employee shall be eligible
to receive an annual bonus (payable by the Employer) in an amount in accordance
with the Senior Executive Incentive Compensation Plan.
(c) Benefits. During the Employment Period, Employee shall be
entitled to such other benefits as are customarily accorded the executives of
Employer, including without limitation, group life, hospitalization and other
insurance and vacations.
(d) Medical Benefits. During the lifetime of Employee and/or
Employee's spouse, whether or not the Employment Period has terminated for any
reason, Employer shall provide health coverage to Employee and/or Employee's
spouse at least equal to the health coverage granted to other executives of
Employer at no cost to Employee and/or Employee's spouse.
(e) Directors and Officers Insurance. Employer will use its best
efforts to obtain and to maintain a policy of insurance on directors and
officers of Employer in amounts to be determined by Employer, in its reasonable
judgement based upon companies similarly situated.
3. TERMINATION.
(a) Death or Disability. This Agreement shall terminate
automatically upon the death or total disability of Employee. For the purpose
of this Agreement "total disability" shall be deemed to have occurred if
Employee shall have been unable to perform the Employee's duties of employment
due to mental or physical incapacity for a period of six (6) consecutive months
or for any one hundred (100) working days out of a twelve (12) consecutive
month period.
(b) Cause. Employer may terminate the employment of Employee under
this Agreement for Cause. For the purpose of this Agreement, "Cause" shall be
deemed to be fraud, dishonesty, competition with Employer, unauthorized use of
any of Employer's trade secrets or confidential information or continued gross
neglect by Employee of the duties assigned to Employee by the Chairman (if such
neglect continues for thirty (30) days after written notice, which notice shall
define the duties being neglected by Employee).
(c) Without Cause. Employer may terminate the employment of Employee
under this Agreement without Cause, subject to the continuing rights of
Employee pursuant to Section 4(c) below.
4. COMPENSATION UPON TERMINATION.
(a) Death or Disability. If the Employment Period is terminated
pursuant to the provisions of Section 3(a) above, this Agreement shall
terminate, and no further compensation shall be payable to Employee except that
Employee or Employee's estate, heirs or beneficiaries, as applicable, shall
-2-
<PAGE> 3
be entitled, in addition to any other benefits specifically provided to them or
Employee under any benefit plan, to receive Employee's then current salary for
a period of eighteen (18) months from the date the Employment Period terminates
and Employee shall continue to receive the medical benefits provided in Section
2 (d) above during Employees lifetime.
(b) Termination for Cause or Voluntary Termination by Employee. If
the employment of Employee under this Agreement is terminated for Cause or if
Employee voluntarily terminates his employment, no further compensation shall
be paid to Employee after the date of termination but Employee shall be
entitled medical benefits provided in Section 2(d) above.
(c) Termination Without Cause. If the employment of Employee under
this Agreement is terminated pursuant to Section 3(c) above, Employee shall be
entitled to continue to receive from Employer Employee's then current salary
hereunder [which shall not be less than the amount specified in the second
sentence of Section 2(a) above] for the remainder of the Employment Period or
for one (1) year, whichever is longer, such amount to continue to be paid in
accordance with the payroll practices of Employer through the Employment
Period, and shall further be entitled to continue to receive the benefits to
which Employee would otherwise be entitled pursuant to Sections 2(c) and 2(d)
above and reimbursement for expenses incurred by Employee to own and maintain
an automobile as contemplated by Section 5 below.
5. EXPENSE REIMBURSEMENT. Upon submission of properly documented expense
account reports, Employer shall reimburse Employee for all reasonable travel
and entertainment expenses incurred by Employee in the course of his employment
with Employer. During the term hereof, Employee will be reimbursed by Employer
for expenses incurred by Employee to own and maintain an automobile.
6. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto except that this Agreement and all of the provisions hereof
may be assigned by Employer to any successor to all or substantially all of its
assets (by merger or otherwise) and may otherwise be assigned upon the prior
written consent of Employee.
7. CONFIDENTIAL INFORMATION.
(a) Non-Disclosure. During the Employment Period or at any time
thereafter, irrespective of the time, manner or cause of the termination of
this Agreement, Employee will not directly or indirectly reveal, divulge,
disclose or communicate to any person or entity, other than authorized
officers, directors and employees of the Employer, in any manner whatsoever,
any Confidential Information (as hereinafter defined) of Employer without the
prior written consent of the Chief Executive Officer.
(b) Definition. As used herein, "Confidential Information" means
information disclosed to or known by Employee as a direct or indirect
consequence of or through the Employment about Employer, or its respective
businesses, products and practices which information is not generally
-3-
<PAGE> 4
known in the business in which Employer is or may be engaged. However,
Confidential Information shall not include under any circumstances any
information with respect to the foregoing matters which is (i) available to the
public from a source other than Employee, (ii) released in writing by Employer
to the public or to persons who are not under a similar obligation of
confidentiality to Employer and who are not parties to this Agreement, (iii)
obtained by Employee from a third party not under a similar obligation of
confidentiality to Employer, (iv) required to be disclosed by any court process
or any government or agency or department of any government, or (v) the subject
of a written waiver executed by either Employer for the benefit of Employee.
(c) Return of Property. Upon termination of the Employment, Employee
will surrender to Employer all Confidential Information, including without
limitation, all lists, charts, schedules, reports, financial statements, books
and records of the Employer, and all copies thereof, and all other property
belonging to the Employer but Employee shall be accorded reasonable access to
such Confidential Information subsequent to the Employment Period for any
proper purpose as determined in the reasonable judgment of Employer.
8. AGREEMENT NOT TO COMPETE.
(a) Termination for Cause or Voluntary Termination. In the event
that the Employee is terminated for Cause or voluntarily terminates his
employment with Employer prior to the expiration of the term of this Agreement,
Employee hereby agrees that for a period of one (1) year following such
termination, neither he nor any affiliate shall, either in his own behalf or as
a partner, officer, director, employee, agent or shareholder [other than as the
holder of less than 5% of the outstanding capital stock of any corporation with
a class of equity security registered under Section 12(b) or Section 12(g) of
the Securities Exchange Act of 1934, as amended] engage in, invest in or render
services to any person or entity engaged in the businesses in which Employer is
then engaged and situated within the United States of America. Nothing
contained in this Section 8(a) shall be construed as restricting the Employee's
right to sell or otherwise dispose of any business or investments owned or
operated by Employee as of the date hereof.
(b) Termination Without Cause or For Disability. In the event that
the employment of Employee is terminated by Employer without Cause or as a
result of the total disability of Employee, Employee hereby agrees that during
the period that Employee accepts payments from the Employer pursuant to Section
4(a) or Section 4(c) above, as applicable, but not including medical benefits
pursuant to Section 2(d), neither Employee nor any affiliate shall, either in
Employee's own behalf or as a partner, officer, director, employee, agent or
shareholder [other than as the holder of less that 5% of the outstanding
capital stock of any corporation with a class of equity security registered
under Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as
amended] engage in, invest in or render services to any person or entity
engaged in the businesses in which Employer or any subsidiary of Employers is
then engaged and situated within the United States of America. Nothing
contained in this Section 8(b) shall be construed as restricting the Employee's
right to sell or otherwise dispose of any business or investments owned or
operated by Employee as of the date hereof. In the event of Employee's
violation of the provisions of Section 8(b), the right of Employee to receive
any further payment pursuant to Sections 4(a) or 4(c) above, as applicable, but
not as to medical benefits pursuant to Section 2(d), shall immediately
terminate and the Employer shall be
-4-
<PAGE> 5
entitled to secure reimbursement from Employee for all payments made to
Employee under Section 4(a) or 4(c) subsequent to the date of any such
violation. The parties hereto hereby acknowledge and agree that the provisions
of the immediately preceding sentence shall be the sole and exclusive remedy of
the Employer in respect of any violation of this Section 8(b).
9. AGREEMENT NOT TO SOLICIT EMPLOYEES. Employee agrees that, for a period
of three (3) years following the termination of the Employment Period, neither
Employee nor any affiliate shall, on behalf of any business engaged in a
business competitive with Employer, solicit or induce, or in any manner attempt
to solicit or induce, any person employed by, or any agent of, Employer to
terminate Employee's employment or agency, as the case may be, with Employer.
10. NO VIOLATION. Employee hereby represents and warrants to Employer that
the execution, delivery and performance of this Agreement or the passage of
time, or both, will conflict with, result in a default, right to accelerate or
loss of rights under any provision of any agreement or understanding to which
the Employee or, to the best knowledge of Employee, any of Employee's
affiliates are a party or by which Employee, or to the best knowledge of
Employee, Employee's affiliates may be bound or affected.
11. CAPTIONS. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit or
amplify the provisions hereof.
12. NOTICES. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed delivered, whether or not actually received,
two days after deposited in the United States mail, postage prepaid, registered
or certified mail, return receipt requested, addressed to the party to whom
notice is being given at the specified address or at such other address as such
party may designate by notice:
Employer: Circo Technologies Group, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Attn: Chairman
Employee: Larry S. Bacon
330 North Meramec
St. Louis, Missouri 63105
13. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provisions
shall be fully severable, and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised a part
of this Agreement; the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance of this Agreement. In lieu of each
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable.
-5-
<PAGE> 6
14. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. This Agreement may be amended in whole or in part only
by an instrument in writing setting forth the particulars of such amendment and
duly executed by an officer of Employer expressly authorized by the Chairman to
do so and by Employee.
15. WAIVER. No delay or omission by any party hereto to exercise any right
or power hereunder shall impair such right or power to be construed as a waiver
thereof. A waiver by any of the parties hereto of any of the covenants to be
performed by any other party or any breach thereof shall not be construed to be
a waiver of any succeeding breach thereof or of any other covenant herein
contained. Except as otherwise expressly set forth herein, all remedies
provided for in this Agreement shall be cumulative and in addition to and not
in lieu of any other remedies available to any party at law, in equity or
otherwise.
16. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall constitute an original, and all of which together shall
constitute one and the same agreement.
17. GOVERNING LAW. This Agreement shall be construed and enforced according
to the laws of the State of Missouri.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
EMPLOYER: EMPLOYEE:
CIRCO TECHNOLOGIES GROUP, INC.
By:
------------------------------------- -----------------------------------
James N. Mills, Chairman and Larry S. Bacon
Chief Executive Officer
CIRCO CRAFT TECHNOLOGIES, INC.
By:
-------------------------------------
James N. Mills, Chairman and
Chief Executive Officer
CIRCO CRAFT CO. INC.
By:
-------------------------------------
James N. Mills, Chairman and
Chief Executive Officer
-6-
<PAGE> 1
EXHIBIT 10.22
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of the 1st day of January,
1997 by and among Circo Technologies Group, Inc. ("Circo"), Circo Craft
Technologies, Inc. and Circo Craft Co. Inc. (all, including Circo, collectively
called "Employer"), and W. Thomas McGhee ("Employee").
W I T N E S S E T H :
WHEREAS, Employer desires to retain the service of Employee as an
employee of the Employer upon the terms set forth herein; and,
WHEREAS, Employee desires to be employed by Employer and to
appropriately memorialize the terms and conditions of such employment;
NOW, THEREFORE, Employee and Employer, in consideration of the
agreements, covenants and conditions herein contained, hereby agree as follows:
1. BASIC EMPLOYMENT PROVISIONS.
(a) Employment and Term. Employer hereby agrees to employ
Employee (hereinafter referred to as the "Employment") as the Secretary and
General Counsel of Circo (the "Position"), and Employee agrees to be employed
by Employer in such Position, for a period ending on December 31, 2001, unless
terminated earlier as provided herein (the "Employment Period"). In the event
that termination (as hereinafter provided) has not occurred prior to the last
day of the Employment Period, unless either party shall have given written
notice to the contrary at least ninety (90) days prior to the end of the
Employment Period, the Employment Period shall annually renew for one (1) year
periods until terminated.
(b) Duties. Employee in the Position shall be subject to the
direction and supervision of the Chairman of the Board of Directors of Circo
(the "Chairman") and shall have those duties and responsibilities which are
assigned to Employee during the Employment Period by the Chairman consistent
with the Position, provided that the Chairman shall not assign any greater
duties or responsibilities to the Employee than are necessary to the Employee's
faithful and adequate supervision of the management of the legal affairs and
the corporate secretarial duties of Circo and its subsidiaries, both direct and
indirect. Subject to the Employee's faithful and adequate supervision of the
management of the legal affairs and the corporate secretarial duties of Circo,
the Employee shall be free to participate in other endeavors. Employee agrees
to perform faithfully the duties assigned to Employee to the best of Employee's
ability.
2. COMPENSATION.
(a) Salary. Employer shall pay to Employee during the Employment
Period a salary as basic compensation for the services to be rendered by
Employee hereunder. The initial amount of such salary shall be Ninety-Nine
Thousand Dollars ($99,000) per annum. Such salary shall be
<PAGE> 2
reviewed by the Chairman and may be increased in the Chairman's sole discretion
but may not be reduced. Such salary shall accrue and be payable in accordance
with the payroll practices of Employer in effect from time to time. All such
payments shall be subject to deduction and withholding authorized or required
by applicable law.
(b) Bonus. During the Employment Period, Employee shall be
eligible to receive an annual bonus (payable by the Employer) in an amount in
accordance with the Senior Executive Incentive Compensation Plan.
(c) Benefits. During the Employment Period, Employee shall be
entitled to such other benefits as are customarily accorded the executives of
Employer, including without limitation, group life, hospitalization and other
insurance and vacations.
(d) Medical Benefits. During the lifetime of Employee and/or
Employee's spouse, whether or not the Employment Period has terminated for any
reason, Employer shall provide health coverage to Employee and/or Employee's
spouse at least equal to the health coverage granted to other executives of
Employer at no cost to Employee and/or Employee's spouse.
(e) Directors and Officers Insurance. Employer will use its best
efforts to obtain and to maintain a policy of insurance on directors and
officers of Employer in amounts to be determined by Employer, in its reasonable
judgement based upon companies similarly situated.
3. TERMINATION.
(a) Death or Disability. This Agreement shall terminate
automatically upon the death or total disability of Employee. For the purpose
of this Agreement "total disability" shall be deemed to have occurred if
Employee shall have been unable to perform the Employee's duties of employment
due to mental or physical incapacity for a period of six (6) consecutive months
or for any one hundred (100) working days out of a twelve (12) consecutive
month period.
(b) Cause. Employer may terminate the employment of Employee
under this Agreement for Cause. For the purpose of this Agreement, "Cause"
shall be deemed to be fraud, dishonesty, competition with Employer,
unauthorized use of any of Employer's trade secrets or confidential information
or continued gross neglect by Employee of the duties assigned to Employee by
the Chairman (if such neglect continues for thirty (30) days after written
notice, which notice shall define the duties being neglected by Employee).
(c) Without Cause. Employer may terminate the employment of
Employee under this Agreement without Cause, subject to the continuing rights
of Employee pursuant to Section 4(c) below.
4. COMPENSATION UPON TERMINATION.
(a) Death or Disability. If the Employment Period is terminated
pursuant to the provisions of Section 3(a) above, this Agreement shall
terminate, and no further compensation shall be payable
-2-
<PAGE> 3
to Employee except that Employee or Employee's estate, heirs or beneficiaries,
as applicable, shall be entitled, in addition to any other benefits
specifically provided to them or Employee under any benefit plan, to receive
Employee's then current salary for a period of eighteen (18) months from the
date the Employment Period terminates and Employee shall continue to receive
the medical benefits provided in Section 2 (d) above during Employees lifetime.
(b) Termination for Cause or Voluntary Termination by Employee.
If the employment of Employee under this Agreement is terminated for Cause or
if Employee voluntarily terminates his employment, no further compensation
shall be paid to Employee after the date of termination but Employee shall be
entitled medical benefits provided in Section 2(d) above.
(c) Termination Without Cause. If the employment of Employee
under this Agreement is terminated pursuant to Section 3(c) above, Employee
shall be entitled to continue to receive from Employer Employee's then current
salary hereunder [which shall not be less than the amount specified in the
second sentence of Section 2(a) above] for the remainder of the Employment
Period or for one (1) year, whichever is longer, such amount to continue to be
paid in accordance with the payroll practices of Employer through the
Employment Period, and shall further be entitled to continue to receive the
benefits to which Employee would otherwise be entitled pursuant to Sections
2(c) and 2(d) above and reimbursement for expenses incurred by Employee to own
and maintain an automobile as contemplated by Section 5 below.
5. EXPENSE REIMBURSEMENT. Upon submission of properly documented expense
account reports, Employer shall reimburse Employee for all reasonable travel
and entertainment expenses incurred by Employee in the course of his employment
with Employer. During the term hereof, Employee will be reimbursed by Employer
for expenses incurred by Employee to own and maintain an automobile.
6. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto except that this Agreement and all of the provisions hereof
may be assigned by Employer to any successor to all or substantially all of its
assets (by merger or otherwise) and may otherwise be assigned upon the prior
written consent of Employee.
7. CONFIDENTIAL INFORMATION.
(a) Non-Disclosure. During the Employment Period or at any time
thereafter, irrespective of the time, manner or cause of the termination of
this Agreement, Employee will not directly or indirectly reveal, divulge,
disclose or communicate to any person or entity, other than authorized
officers, directors and employees of the Employer, in any manner whatsoever,
any Confidential Information (as hereinafter defined) of Employer without the
prior written consent of the Chief Executive Officer.
(b) Definition. As used herein, "Confidential Information" means
information disclosed to or known by Employee as a direct or indirect
consequence of or through the Employment about
-3-
<PAGE> 4
Employer, or its respective businesses, products and practices which
information is not generally known in the business in which Employer is or may
be engaged. However, Confidential Information shall not include under any
circumstances any information with respect to the foregoing matters which is
(i) available to the public from a source other than Employee, (ii) released in
writing by Employer to the public or to persons who are not under a similar
obligation of confidentiality to Employer and who are not parties to this
Agreement, (iii) obtained by Employee from a third party not under a similar
obligation of confidentiality to Employer, (iv) required to be disclosed by any
court process or any government or agency or department of any government, or
(v) the subject of a written waiver executed by either Employer for the benefit
of Employee.
(c) Return of Property. Upon termination of the Employment,
Employee will surrender to Employer all Confidential Information, including
without limitation, all lists, charts, schedules, reports, financial
statements, books and records of the Employer, and all copies thereof, and all
other property belonging to the Employer but Employee shall be accorded
reasonable access to such Confidential Information subsequent to the Employment
Period for any proper purpose as determined in the reasonable judgment of
Employer.
8. AGREEMENT NOT TO COMPETE.
(a) Termination for Cause or Voluntary Termination. In the event
that the Employee is terminated for Cause or voluntarily terminates his
employment with Employer prior to the expiration of the term of this Agreement,
Employee hereby agrees that for a period of one (1) year following such
termination, neither he nor any affiliate shall, either in his own behalf or as
a partner, officer, director, employee, agent or shareholder [other than as the
holder of less than 5% of the outstanding capital stock of any corporation with
a class of equity security registered under Section 12(b) or Section 12(g) of
the Securities Exchange Act of 1934, as amended] engage in, invest in or render
services to any person or entity engaged in the businesses in which Employer is
then engaged and situated within the United States of America. Nothing
contained in this Section 8(a) shall be construed as restricting the Employee's
right to sell or otherwise dispose of any business or investments owned or
operated by Employee as of the date hereof.
(b) Termination Without Cause or For Disability. In the event
that the employment of Employee is terminated by Employer without Cause or as a
result of the total disability of Employee, Employee hereby agrees that during
the period that Employee accepts payments from the Employer pursuant to Section
4(a) or Section 4(c) above, as applicable, but not including medical benefits
pursuant to Section 2(d), neither Employee nor any affiliate shall, either in
Employee's own behalf or as a partner, officer, director, employee, agent or
shareholder [other than as the holder of less that 5% of the outstanding
capital stock of any corporation with a class of equity security registered
under Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as
amended] engage in, invest in or render services to any person or entity
engaged in the businesses in which Employer or any subsidiary of Employers is
then engaged and situated within the United States of America. Nothing
contained in this Section 8(b) shall be construed as restricting the Employee's
right to sell or otherwise dispose of any business or investments owned or
operated by Employee as of the date hereof. In the event of Employee's
violation of the provisions of Section 8(b), the right of Employee to receive
any further payment pursuant to Sections 4(a) or 4(c) above, as applicable, but
not as to
-4-
<PAGE> 5
medical benefits pursuant to Section 2(d), shall immediately terminate and the
Employer shall be entitled to secure reimbursement from Employee for all
payments made to Employee under Section 4(a) or 4(c) subsequent to the date of
any such violation. The parties hereto hereby acknowledge and agree that the
provisions of the immediately preceding sentence shall be the sole and
exclusive remedy of the Employer in respect of any violation of this Section
8(b).
9. AGREEMENT NOT TO SOLICIT EMPLOYEES. Employee agrees that, for a
period of three (3) years following the termination of the Employment Period,
neither Employee nor any affiliate shall, on behalf of any business engaged in
a business competitive with Employer, solicit or induce, or in any manner
attempt to solicit or induce, any person employed by, or any agent of, Employer
to terminate Employee's employment or agency, as the case may be, with
Employer.
10. NO VIOLATION. Employee hereby represents and warrants to Employer
that the execution, delivery and performance of this Agreement or the passage
of time, or both, will conflict with, result in a default, right to accelerate
or loss of rights under any provision of any agreement or understanding to
which the Employee or, to the best knowledge of Employee, any of Employee's
affiliates are a party or by which Employee, or to the best knowledge of
Employee, Employee's affiliates may be bound or affected.
11. CAPTIONS. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit or
amplify the provisions hereof.
12. NOTICES. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed delivered, whether or not actually
received, two days after deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the party
to whom notice is being given at the specified address or at such other address
as such party may designate by notice:
Employer: Circo Technologies Group, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Attn: Chairman
Employee: W. Thomas McGhee
29 Oak Park Drive
St. Louis, Missouri 63141
13. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provisions
shall be fully severable, and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised a part
of this Agreement; the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance of this Agreement. In lieu of each
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable.
-5-
<PAGE> 6
14. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. This Agreement may be amended in whole or in part only
by an instrument in writing setting forth the particulars of such amendment and
duly executed by an officer of Employer expressly authorized by the Chairman to
do so and by Employee.
15. WAIVER. No delay or omission by any party hereto to exercise any
right or power hereunder shall impair such right or power to be construed as a
waiver thereof. A waiver by any of the parties hereto of any of the covenants
to be performed by any other party or any breach thereof shall not be construed
to be a waiver of any succeeding breach thereof or of any other covenant herein
contained. Except as otherwise expressly set forth herein, all remedies
provided for in this Agreement shall be cumulative and in addition to and not
in lieu of any other remedies available to any party at law, in equity or
otherwise.
16. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, and all of which
together shall constitute one and the same agreement.
17. GOVERNING LAW. This Agreement shall be construed and enforced
according to the laws of the State of Missouri.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
EMPLOYER: EMPLOYEE:
CIRCO TECHNOLOGIES GROUP, INC.
By:
------------------------------------ ---------------------------------
James N. Mills, Chairman and W. Thomas McGhee
Chief Executive Officer
CIRCO CRAFT TECHNOLOGIES, INC.
By:
------------------------------------
James N. Mills, Chairman and
Chief Executive Officer
CIRCO CRAFT CO. INC.
By:
------------------------------------
James N. Mills, Chairman and
Chief Executive Officer
-6-
<PAGE> 1
EXHIBIT 10.23
EXECUTIVE EMPLOYMENT AGREEMENT
This agreement is made and entered into as of the 1st day of January,
1997 by and among Circo Technologies Group, Inc. ("Corporation") and Circo
Craft Technologies, Inc. ("Circo Craft"); (both Corporation and Circo Craft
collectively called "Employer"), and Gerald C. Nelson ("Employee").
W I T N E S S E T H :
WHEREAS, Employer desires to retain the service of Employee as an
employee of the Employer upon the terms set forth herein; and,
WHEREAS, Employee desires to be employed by Employer and to
appropriately memorialize the terms and conditions of such employment;
NOW, THEREFORE, Employee and Employer, in consideration of the
agreements, covenants and conditions herein contained, hereby agree as follows:
1. BASIC EMPLOYMENT PROVISIONS.
(a) Employment and Term. Employer hereby agrees to employ
Employee (hereinafter referred to as the "Employment") as the Executive Vice
President - Operations of Circo Craft (the "Position"), and Employee agrees to
be employed by Employer in such Position, for a period ending on December 31,
1999, unless terminated earlier as provided herein (the "Employment Period").
In the event that termination (as hereinafter provided) has not occurred prior
to the last day of the Employment Period, unless either party shall have given
written notice to the contrary at least ninety (90) days prior to the end of
the Employment Period, the Employment Period shall annually renew for one (1)
year periods until terminated.
(b) Duties. Employee in the Position shall be subject to the
direction and supervision of the President and Chief Operating Officer of Circo
Craft (the "President") and shall have those duties and responsibilities which
are assigned to Employee during the Employment Period by the President
consistent with the Position, provided that the President shall not assign any
greater duties or responsibilities to the Employee than are necessary to the
Employee's faithful and adequate supervision of the operations of Circo Craft
and its subsidiaries, both direct and indirect. Subject to the Employee's
faithful and adequate supervision of the operations of Circo Craft, the
Employee shall be free to participate in other endeavors. Employee agrees to
perform faithfully the duties assigned to Employee to the best of Employee's
ability.
2. COMPENSATION.
(a) Salary. Employer shall pay to Employee during the Employment
Period a salary as basic compensation for the services to be rendered by
Employee hereunder. The initial amount of such salary shall be Two Hundred
Seventy-Five Thousand Dollars ($275,000) per annum. Such
<PAGE> 2
salary shall be reviewed by the President and may be increased in the
President's sole discretion but may not be reduced. Such salary shall accrue
and be payable in accordance with the payroll practices of Employer in effect
from time to time. All such payments shall be subject to deduction and
withholding authorized or required by applicable law.
(b) Bonus. During the Employment Period, Employee shall be
eligible to receive an annual bonus (payable by the Employer) in an amount to
be determined by the President, in the President's sole discretion, of up to
sixty-five percent (65%) of Employee's then current annual salary.
(c) Benefits. During the Employment Period, Employee shall be
entitled to such other benefits as are customarily accorded the executives of
Employer, including without limitation, group life, hospitalization and other
insurance, vacation pay, reimbursement for the cost of state and federal income
tax preparation by the Employer's consulting tax accountant and lunch in the
executive dining room at Employer's cost.
(d) Medical Benefits. During the lifetime of Employee and/or
Employee's spouse, whether or not the Employment Period has terminated,
Employer shall provide health coverage at least equal to and on the same terms
as the health coverage granted to other executives of Employer at no cost to
Employee. Employee shall be enrolled in the Executive Medical Supplement Plan,
so long as other executives are enrolled in such plan. In addition, Employer
shall provide an annual executive physical to Employee at Employer's expense.
(e) Club Dues. During the Employment Period, Employer will
reimburse Employee for the cost of joining and remaining a member of a country
club, excluding personal charges at a country club, reasonably acceptable to
Employer and for the dues and fees for the Saint Louis Club.
3. TERMINATION.
(a) Death or Disability. This Agreement shall terminate
automatically upon the death or total disability of Employee. For the purpose
of this Agreement "total disability" shall be deemed to have occurred if
Employee shall have been unable to perform the Employee's duties of the
Position due to mental or physical incapacity for a period of six (6)
consecutive months or for any one hundred (100) working days out of a twelve
(12) consecutive month period.
(b) Cause. Employer may terminate the employment of Employee
under this Agreement for Cause. For the purpose of this Agreement, "Cause"
shall be deemed to be fraud, dishonesty, competition with Employer,
unauthorized use of any of Employer's trade secrets or confidential information
or failure to properly perform the duties assigned to Employee, in the
reasonable judgment of Employer.
(c) Without Cause. Employer may terminate the employment of
Employee under this Agreement without Cause, subject to the continuing rights
of Employee pursuant to Section 4(c) below.
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<PAGE> 3
4. COMPENSATION UPON TERMINATION.
(a) Death or Disability. If the Employment Period is terminated
pursuant to the provisions of Section 3(a) above, this Agreement shall
terminate, and no further compensation shall be payable to Employee except that
Employee or Employee's estate, heirs or beneficiaries, as applicable, shall be
entitled, in addition to any other benefits specifically provided to them or
Employee under any benefit plan, to receive Employee's then current salary for
a period of eighteen (18) months from the date the Employment Period terminates
and Employee and/or Employee's spouse shall continue to receive the medical
benefits provided in Section 2(d).
(b) Termination for Cause or Voluntary Termination by Employee.
If the employment of Employee under this Agreement is terminated for Cause or
if Employee voluntarily terminates his employment, no further compensation
shall be paid to Employee after the date of termination but Employee shall be
entitled medical benefits provided in Section 2(d) above.
(c) Termination Without Cause. If the employment of Employee
under this Agreement is terminated pursuant to Section 3(c) above, Employee
shall be entitled to continue to receive from Employer Employee's then current
salary hereunder [which shall not be less than the amount specified in the
second sentence of Section 2(a) above] for the remainder of the Employment
Period or for one (1) year, whichever is longer, such amount to continue to be
paid in accordance with the payroll practices of Employer through the
Employment Period, and shall further be entitled to continue to receive the
benefits to which Employee would otherwise be entitled pursuant to Sections
2(c) and 2(d) above and reimbursement for expenses incurred by Employee to own
and maintain an automobile as contemplated by Section 5 below.
5. EXPENSE REIMBURSEMENT. Upon submission of properly documented expense
account reports, Employer shall reimburse Employee for all reasonable travel
and entertainment expenses incurred by Employee in the course of his employment
with Employer. Employer shall pay Employee an auto allowance in an amount
sufficient so that, after the effect of federal and state income taxes,
Employee shall net Seven Hundred Fifty Dollars ($750) per month.
6. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto except that this Agreement and all of the provisions hereof
may be assigned by Employer to any successor to all or substantially all of its
assets (by merger or otherwise) and may otherwise be assigned upon the prior
written consent of Employee.
7. CONFIDENTIAL INFORMATION.
(a) Non-Disclosure. During the Employment Period or at any time
thereafter, irrespective of the time, manner or cause of the termination of
this Agreement, Employee will not directly or indirectly reveal, divulge,
disclose or communicate to any person or entity, other than authorized
officers, directors and employees of the Employer, in any manner whatsoever,
any Confidential Information (as hereinafter defined) of Employer without the
prior written consent of the Chief Executive Officer.
-3-
<PAGE> 4
(b) Definition. As used herein, "Confidential Information" means
information disclosed to or known by Employee as a direct or indirect
consequence of or through the Employment about Employer, or its respective
businesses, products and practices which information is not generally known in
the business in which Employer is or may be engaged. However, Confidential
Information shall not include under any circumstances any information with
respect to the foregoing matters which is (i) available to the public from a
source other than Employee, (ii) released in writing by Employer to the public
or to persons who are not under a similar obligation of confidentiality to
Employer and who are not parties to this Agreement, (iii) obtained by Employee
from a third party not under a similar obligation of confidentiality to
Employer, (iv) required to be disclosed by any court process or any government
or agency or department of any government, or (v) the subject of a written
waiver executed by either Employer for the benefit of Employee.
(c) Return of Property. Upon termination of the Employment,
Employee will surrender to Employer all Confidential Information, including
without limitation, all lists, charts, schedules, reports, financial
statements, books and records of the Employer, and all copies thereof, and all
other property belonging to the Employer but Employee shall be accorded
reasonable access to such Confidential Information subsequent to the Employment
Period for any proper purpose as determined in the reasonable judgment of
Employer.
8. AGREEMENT NOT TO COMPETE.
(a) Termination for Cause or Voluntary Termination. In the event
that the Employee is terminated for Cause or voluntarily terminates his
employment with Employer prior to the expiration of the term of this Agreement,
Employee hereby agrees that for a period of one (1) year following such
termination, neither he nor any affiliate shall, either in his own behalf or as
a partner, officer, director, employee, agent or shareholder [other than as the
holder of less than 5% of the outstanding capital stock of any corporation with
a class of equity security registered under Section 12(b) or Section 12(g) of
the Securities Exchange Act of 1934, as amended] engage in, invest in or render
services to any person or entity engaged in the businesses in which Employer is
then engaged and situated within the United States of America. Nothing
contained in this Section 8(a) shall be construed as restricting the Employee's
right to sell or otherwise dispose of any business or investments owned or
operated by Employee as of the date hereof.
(b) Termination Without Cause or For Disability. In the event
that the employment of Employee is terminated by Employer without Cause or as a
result of the total disability of Employee, Employee hereby agrees that during
the period that Employee accepts payments from the Employer pursuant to Section
4(a) or Section 4(c) above, as applicable, but not including medical benefits
pursuant to Section 2(d), neither Employee nor any affiliate shall, either in
Employee's own behalf or as a partner, officer, director, employee, agent or
shareholder [other than as the holder of less that 5% of the outstanding
capital stock of any corporation with a class of equity security registered
under Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as
amended] engage in, invest in or render services to any person or entity
engaged in the businesses in which Employer or any
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<PAGE> 5
subsidiary of Employers is then engaged and situated within the United States
of America. Nothing contained in this Section 8(b) shall be construed as
restricting the Employee's right to sell or otherwise dispose of any business
or investments owned or operated by Employee as of the date hereof. In the
event of Employee's violation of the provisions of Section 8(b), the right of
Employee to receive any further payment pursuant to Sections 4(a) or 4(c)
above, as applicable, but not as to medical benefits pursuant to Section 2(d),
shall immediately terminate and the Employer shall be entitled to secure
reimbursement from Employee for all payments made to Employee under Section
4(a) or 4(c) subsequent to the date of any such violation. The parties hereto
hereby acknowledge and agree that the provisions of the immediately preceding
sentence shall be the sole and exclusive remedy of the Employer in respect of
any violation of this Section 8(b).
9. AGREEMENT NOT TO SOLICIT EMPLOYEES. Employee agrees that, for a
period of three (3) years following the termination of the Employment Period,
neither Employee nor any affiliate shall, on behalf of any business engaged in
a business competitive with Employer, solicit or induce, or in any manner
attempt to solicit or induce, any person employed by, or any agent of, Employer
to terminate Employee's employment or agency, as the case may be, with
Employer.
10. NO VIOLATION. Employee hereby represents and warrants to Employer
that neither the execution, delivery and performance of this Agreement or the
passage of time, nor both, will conflict with, result in a default, right to
accelerate or loss of rights under any provision of any agreement or
understanding to which the Employee or, to the best knowledge of Employee, any
of Employee's affiliates are a party or by which Employee, or to the best
knowledge of Employee, Employee's affiliates may be bound or affected.
11. CAPTIONS. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit or
amplify the provisions hereof.
12. NOTICES. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed delivered, whether or not actually
received, two days after deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the party
to whom notice is being given at the specified address or at such other address
as such party may designate by notice:
Employer: Circo Technologies Group, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Attn: President
Employee: Gerald C. Nelson
32 Chesterfield Lakes Road
Chesterfield, MO 63005
13. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provisions
shall be fully severable, and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision had
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<PAGE> 6
never comprised a part of this Agreement; the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance of this
Agreement. In lieu of each such illegal, invalid or unenforceable provision,
there shall be added automatically as part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable.
14. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. This Agreement may be amended in whole or in part only
by an instrument in writing setting forth the particulars of such amendment and
duly executed by an officer of Employer expressly authorized by the President
to do so and by Employee.
15. WAIVER. No delay or omission by any party hereto to exercise any
right or power hereunder shall impair such right or power to be construed as a
waiver thereof. A waiver by any of the parties hereto of any of the covenants
to be performed by any other party or any breach thereof shall not be construed
to be a waiver of any succeeding breach thereof or of any other covenant herein
contained. Except as otherwise expressly set forth herein, all remedies
provided for in this Agreement shall be cumulative and in addition to and not
in lieu of any other remedies available to any party at law, in equity or
otherwise.
16. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, and all of which
together shall constitute one and the same agreement.
17. GOVERNING LAW. This Agreement shall be construed and enforced
according to the laws of the State of Missouri.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
EMPLOYER: EMPLOYEE:
CIRCO TECHNOLOGIES GROUP, INC.
By:
------------------------------------- -------------------------------
David M. Sindelar, Vice President Gerald C. Nelson
CIRCO CRAFT TECHNOLOGIES, INC.
By:
-------------------------------------
David M. Sindelar, Vice President
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<PAGE> 1
EXHIBIT 10.24
AGREEMENT
BETWEEN
VIASYSTEMS TECHNOLOGIES, INC.
AND
[CWA GRAPHICS]
THE COMMUNICATIONS WORKERS OF AMERICA
PREAMBLE
INTENT AND DUTY OF THE PARTIES
1. GENERAL AGREEMENT made this 30th day of December, 1996, by and between
ViaSystems Technologies, Inc. hereinafter called the COMPANY and the
Communications Workers of America, hereinafter called the UNION.
2. And, whereas, the parties have engaged in collective bargaining for the
purpose of developing a general agreement on wages, hours of work, and
other conditions of employment;
3. Now, therefore, in consideration of the premises and mutual agreements
herein contained, the parties hereto agree with each other as follows with
respect to the employees of the COMPANY recognized as being represented by
the UNION:
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PREAMBLE 1
ARTICLE 1 RECOGNITION 2
ARTICLE 2 RIGHTS AND OBLIGATIONS 3
ARTICLE 3 DEFINED TERMS 5
ARTICLE 4 SENIORITY 14
ARTICLE 5 UNION REPRESENTATION 15
ARTICLE 6 UNION-MANAGEMENT RELATIONS 18
ARTICLE 7 GRIEVANCE AND ARBITRATION PROCEDURE 24
ARTICLE 8 OCCUPATIONAL JOB CLASSIFICATIONS 28
ARTICLE 9 MOVEMENT OF PERSONNEL 30
ARTICLE 10 WAGES 42
ARTICLE 11 HOURS OF WORK 46
ARTICLE 12 PREMIUM PAYMENTS 49
ARTICLE 13 VACATIONS 52
ARTICLE 14 HOLIDAYS 56
ARTICLE 15 EXCUSED WORK DAYS 58
ARTICLE 16 PAY TREATMENT FOR ABSENCES 60
ARTICLE 17 FORCE ADJUSTMENT PROTECTION 63
ARTICLE 18 CONTRACT EMPLOYEES 66
ARTICLE 19 SAFETY AND HEALTH 68
ARTICLE 20 MISCELLANEOUS AGREEMENTS 70
ARTICLE 21 DURATION 84
APPENDIX A WAGE SCHEDULES 85
APPENDIX B OCCUPATIONAL JOB CLASSIFICATIONS 86
APPENDIX C JOURNEYMAN CARD - JOURNEYMAN TRADE PLAN 88
</TABLE>
<PAGE> 3
ARTICLE 1 - RECOGNITION
1. The COMPANY hereby recognizes the UNION as the exclusive representative of
all employees relative to rates of pay, hours of work, and other
conditions of employment for all its employees, as hereinafter defined, at
its manufacturing plant located at 4500 S. Laburnum Avenue, Richmond,
Virginia.
2. The term "Employee" as used in this Agreement applies to all of the
COMPANY's current hourly rated production and maintenance unit employees
and non-confidential office and factory clerical employees; (referred to
as salary-graded); it does not include security officers and supervisors
not eligible under the Act.
A) Work normally assigned to bargaining unit employees will not be
performed by either supervisory or non-supervisory, (engineers, TSM's,
etc.) except when necessary to afford instruction to employees,
supervisors or other managerial personnel, to maintain production for
temporary periods in emergency situations when appropriate bargaining
unit employees are not available. Hourly production and maintenance
personnel will not perform any non-confidential office and factory
clerical functions nor will non-confidential office and factory
clerical employees perform any production or maintenance functions.
2
<PAGE> 4
ARTICLE 2 - RIGHTS AND OBLIGATIONS
1. MANAGEMENT OF THE BUSINESS
A) Except as otherwise specifically provided in this Agreement, the
management of the COMPANY's business and the direction of the working
forces, including, but not limited to, the right to hire, suspend,
discipline or discharge for just cause, to require employees to
observe reasonable COMPANY rules and regulations, the right to
maintain order and efficiency and to promote, the right to reduce the
working forces or relieve employees from duty because of lack of
work, the right to select sources of materials, equipment and
customers, the right to determine the products to be manufactured,
purchased, handled or sold and the means, methods, processes and
schedules thereof, the right to introduce new and improved methods or
facilities or to extend, limit, change its operations when and in
such manner as it deems advisable to do so, and the exercise of such
other management prerogatives as are not restricted by this Agreement
shall be vested exclusively in the COMPANY, provided, however, that
none of the powers herein reserved to the COMPANY shall be used for
the purpose of discrimination against any members of the UNION.
2. FEDERAL AND STATE LAWS
A) In the event that any provision of this Agreement should be modified
or deleted to conform to any federal or state law or regulation, or
any order, determination, ruling or regulation of a federal or state
executive or administrative agency or court, the COMPANY shall notify
the UNION in writing. Negotiations shall then take place if requested
by the UNION. In the event of such negotiations, the changes shall not
be implemented until (a) agreement is reached, or (b) the COMPANY
determines that timely action is required by the law, regulation,
order, determination or ruling, whichever occurs sooner.
3. NONDISCRIMINATION
A) There shall be no discrimination on the part of the COMPANY or the
UNION, or its officers, members, representatives or agents, against
any employee because of membership or non-membership in the UNION.
B) No employee shall be subjected to prejudice or discrimination because
of action taken by representatives of the UNION in presenting
grievances instituted for such employee under the provisions of this
agreement.
C) Neither the UNION, nor its officers, members, representatives or
agents, will intimidate or coerce employees into joining or
continuing their membership in the UNION.
D) In a desire to restate their respective policies, neither the COMPANY
nor the UNION shall unlawfully discriminate against any employee
because of such employee's race, color, religion, sex, age, or
national origin, or because he or she is handicapped, a disabled
veteran or a veteran of
3
<PAGE> 5
the Vietnam era.
4. SUCESSORSHIP
A) If the COMPANY decides at any time during the term of this agreement
to offer the Richmond plant or a substantial part of the Richmond
plant for sale it will treat the employees represented by the UNION
as it would any legitimate potential buyer. The UNION, in the event
it chooses to pursue the purchase, will have full access to due
diligence information as would any potential legitimate buyer.
B) Regardless of the employees' status in the purchase process
(paragraph A above), the COMPANY agrees that it will not sell,
convey, assign or otherwise transfer the plant or any substantial
part thereof covered by this agreement between the COMPANY and the
COMMUNICATION WORKERS OF AMERICA to any other buyer unless the buyer
agrees to assume this collective bargaining agreement and thereby
recognizes the UNION as the bargaining representative for the
employees within the existing bargaining unit.
C) Reference to this successorship agreement will be specifically
included in any offering memorandum or purchase agreement rendered
between the COMPANY and any purchaser or transferee.
4
<PAGE> 6
ARTICLE 3 - DEFINED TERMS
1. The following definitions are applicable to terms in this and any other
agreements between the COMPANY and the UNION:
A) ADJUSTED RATE --
An employee's total rate, resulting from the sum of his or her
standard rate and any applicable premiums.
B) AGENT --
An individual who is not an employee of the COMPANY in the bargaining
unit recognized in accordance with Article 1, Recognition, who has
been so designated by the UNION in accordance with Paragraph 2(A) of
Article 5, UNION Representation.
C) CONTROL RATE ---
A rate of pay on the progression scale (Step 5) for Trades Group 2
beyond which journeyman shall not progress until after demonstrating
the ability to perform effectively the full range of work as
described in the applicable Journeyman Trades Plan Occupational
description.
D) DAY IN LIEU OF SATURDAY --
For a 7-day coverage employee, the first scheduled day off in the
workweek when operations are on a 5-day schedule basis, or the sixth
scheduled day in the workweek when operations are on a 6-day schedule
basis.
E) DAY IN LIEU OF SUNDAY --
For a 7-day coverage employee, the second scheduled day off in the
workweek when operations are on a 5-day schedule basis, or the one
scheduled day off in the workweek when operations are on a 6-day
schedule basis.
F) DISMISSAL --
Termination due to poor or marginal performance, employee's
unsuitability on present assignment, poor attendance or excessive
lateness or unsatisfactory conduct.
G) DOUBLE TIME --
Pay at 200% of an employee's adjusted rate plus applicable night work
and 7-day coverage bonuses.
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<PAGE> 7
H) DOUBLE TIME AND ONE-HALF --
Pay at 250% of an employee's adjusted rate plus applicable night work
and 7-day coverage bonuses.
I) INTERIM STATUS --
A non-disciplinary interruption of employment without pay after an
employee has been charged for a crime for which he or she would be
terminated if found guilty and continuing until a disposition of the
charge or charges or further action by the COMPANY.
J) JOURNEYMAN --
A QUALIFIED employee in a skilled trade or craft who has completed an
apprenticeship or equivalent training and who is expected to perform
all levels of work within his or her base trade and complete any
assignment consistent with skills acquired through previous
experience and/or training.
K) LAYOFF OR LAID OFF --
A termination of employment arising out of a reduction in the force
due to lack of work. Under the following circumstances, an employee's
services shall not be considered terminated by layoff nor shall an
employee be considered laid off: (1) when the employee's services are
temporarily interrupted because of but not limited to such causes as
material shortage, equipment failure, power failure, labor dispute,
or other circumstances which cause a temporary cessation or reduction
in operations; (2) when the employee is not reinstated from leave of
absence.
L) LOANED EMPLOYEE --
An employee whose normal assignment has been changed for a period of
time not to exceed four weeks, without change in the employee's
employment and payroll records.
M) MAXIMUM RATE --
The top rate of the progression scale for a specific wage schedule.
N) MINIMUM RATE --
The minimum rate of the progression scale for a specific wage
schedule.
6
<PAGE> 8
O) NATURE OF TASK --
Only routine maintenance tasks of the following nature will be
considered:
o Must be repetitive.
o Require only hand tools.
o Require no craft skills or craft skills training.
o Require no major disassembly/reassembly.
o Require no critical adjustments.
o Have no major safety ramifications if done wrong.
P) NIGHT TOUR --
When the employee's scheduled daily tour falls wholly or in part
between 6:00 p.m. and 6:00 a.m..
Q) NIGHT WORK BONUS --
A bonus of ten percent of an employee's adjusted rate.
R) NONSCHEDULED DAY --
A day outside the scheduled weekly tour.
S) OFFICER --
An agent or representative who has been so designated by the UNION in
accordance with Paragraph 2(A) of Article 5, UNION Representation.
T) PRODUCTION OCCUPATION --
An Occupational Job Classification in Production Level requiring
certain levels of expertise, proficiency and competence which is
associated with the manufacture and assembly of products and which is
assigned to an organizational unit functionally responsible for each
services in the manufacture of products.
U) REPRESENTATIVE --
An employee of the COMPANY in the bargaining unit recognized in
accordance with Article 1, Recognition, who has been so designated by
the UNION in accordance with Paragraph 2(A) of Article 5, UNION
Representation.
7
<PAGE> 9
V) SCHEDULED DAILY TOUR --
The hours in a day an employee is scheduled to work, excluding any
unpaid meal or overtime periods. An entire tour which begins four
hours or less before midnight shall be considered to be a tour on the
following calendar day.
W) SCHEDULED WEEKLY TOUR --
The portion of the workweek comprised of scheduled daily tours, but
excluding nonscheduled days.
X) 7-DAY COVERAGE BONUS --
A bonus of ten percent of an employee's adjusted rate.
Y) 7-DAY COVERAGE EMPLOYEE --
An employee whose scheduled weekly tour involves special or rotating
tours which frequently include working on calendar Saturdays and/or
Sundays, and who works on a 7-day coverage job.
Z) 7-DAY COVERAGE JOB --
A job which, because of the nature of the work or the demands of the
business, regularly requires operations on all seven days of the
workweek.
AA) STANDARD RATE --
A rate of pay assigned to an employee based on the employee's
Occupational Job Classification.
BB) TIME AND ONE-HALF --
Pay at 150% of the adjusted rate plus applicable night work and 7-day
coverage bonuses.
CC) TRADES OCCUPATION --
A skilled trades or craft job in a Trades Occupational Job
Classification which is associated with the construction, repair and
maintenance of tools, machines, equipment, buildings and service
systems used in the manufacture of the COMPANY's products and which
is assigned to an organizational unit functionally responsible for
such services.
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<PAGE> 10
DD) WORKWEEK --
Seven consecutive calendar days beginning with Sunday, except that
for employees on tours which start less than four hours before
Saturday midnight and extend into Sunday, the workweek shall be
considered as beginning with the start of such tours.
2. The use of the masculine or feminine gender or titles in this and any
other agreement between the COMPANY and the UNION shall be construed as
including both genders and not as a sex limitation unless the agreement
clearly requires a different construction.
HOURLY PRODUCTION TWELVE-HOUR WEEKEND SHIFTS
DEFINITIONS
Notwithstanding the existing provisions of Article 3, Defined Terms, the
following terms will apply to the hourly production employees working 12-hour
weekend shift.
A) TWELVE-HOUR WEEKEND SHIFT STANDARD DAILY TOUR --
A tour of duty of 12 scheduled hours of work.
B) TWELVE-HOUR WEEKEND SHIFT STANDARD WEEKLY TOUR --
Three consecutive 12-hour weekend standard daily shifts, arranged by
the COMPANY, regularly including Fridays, Saturdays, Sundays, or
Mondays.
C) NONSCHEDULED WORK DAYS --
The 1st, 2nd, 3rd and 4th days in the workweek which the employee is
not scheduled to work when the employee's 12-hour weekend shift
standard weekly shift includes three 12-hour weekend shift standard
daily tours.
D) NIGHT SHIFT --
For 12-hour weekend shift employees , a shift which begins on or
after 6:00 p.m. but before 6:00 a.m.
E) RESIDUAL TIME --
Hours in the hourly time bank described herein.
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<PAGE> 11
F) REST PERIODS --
For 12-hour weekend shift employees - one rest period of 15 minutes
during each one-half of their 12-hour weekend shift standard daily
tour and a paid 1/2 hour lunch period normally taken mid-way through
the shift.
G) NIGHT WORK BONUS --
Night work bonus will apply to the night shift as defined above.
H) TWELVE-HOUR WEEKEND SHIFT BONUS --
Four hours pay at the adjusted rate will be provided to employees
assigned to three-day, 12-hour weekend shifts.
I) OVERTIME --
Notwithstanding the provisions of Article 13, Premium Payments,
overtime payments for 12-hour weekend shift employees, shall be as
follows:
(1) Time and one-half will be paid for authorized time worked:
(A) Outside of the 12-hour weekend shift standard daily tour.
(B) On a 12-hour weekend employee's nonscheduled workday.
(i) The following will be credited as time worked in
computing such 40 hours of authorized time worked:
a) paid vacations
b) paid holidays
c) paid excused work days
d) paid sickness absences not covered under the
Sickness and Accident Disability Benefit Plan,
and
e) time spent by the Union representative in the
performance of Union duties during his or her
12-hour weekend shift standard daily work schedule
(ii) Double time shall apply for overtime hours paid at time
and one-half in excess of eight hours in the workweek.
(iii)Double time and one-half will apply to authorized time
worked on the day on which a holiday recognized for the
12-hour weekend shift employees is observed.
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<PAGE> 12
J) HOURLY TIME BANKS --
(1) For employees who work on regular eight-hour per day standard
daily shifts, time off for vacations and excused work days is
granted in a yearly allocation of days. With 12-hour weekend
shifts, vacations and EWD time must be converted to hours for
each category of time off as follows:
Eight hours X employee's annual eligibility in days = annual
hours of eligibility.
For example, an employee works an eight-hour day, and is
eligible to 10 vacation days, eight hours X 10 days = 80 hours
of vacation time in the hourly time bank. The same principle
applies to excused work days.
K) VACATIONS --
(1) Vacation eligibility for 12-hour weekend shift employees will be
converted to a hourly total by multiplying eight times the
employee's annual vacation eligibility.
(2) Vacation time for 12-hour weekend shift employees must be taken
in 12-hour increments or may be scheduled in half-day (6-hour)
increments.
(3) Any time remaining after vacation time has been scheduled in 12
hour or in half-day (6 hour) increments will be converted to
residual time and placed in the employee's hourly time bank.
(4) "Pay in lieu of" situations applicable to vacations because of
separations through dismissal (except for unsatisfactory
conduct), layoff, resignation, retirements or death, will also
apply to residual time. Pay for unused vacation time due to
leaves of absence or transfers will include payment of any
residual time due to the employees.
L) EXCUSED WORK DAYS --
(1) Excused work days (EWD) eligibility for 12-hour weekend shift
employees will be converted to an hourly total by multiplying
eight times the employee's annual EWD eligibility.
(2) Designated EWD for 12-hour weekend employees will require the
use of 12 hours.
(3) Non-designated EWD time may be taken in 12 hour or in half-day
(6 hour) increments.
(4) In addition, an employee will be permitted to designate either
eight hours of unpaid excused
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<PAGE> 13
work day, or 24 hours of paid, non- designated EWD to be
scheduled into increments with a minimum of two hours for any
such increment. An employee may utilize such increments provided
the employee notifies his or her supervisor prior to the start
of his or her standard daily tour, and further provided that the
needs of the business permit the employee to be excused from
work.
(5) If an employee does not designate his or her unpaid EWD in
increments as described above; the employee may use his or her
unpaid EWD in an eight-hour increment. In such case, the
employee may use additional hours of paid residual time to
complete the 12-hour weekend shift increment.
(6) Any time remaining after paid EWDs have been scheduled in
accordance with the above, will be converted to residual time
and placed in the employee's hourly time bank.
M) HOLIDAYS --
(1) Authorized holidays for 12-hour weekend shift employees will be:
o New Year's Day
o Good Friday
o Easter Sunday
o Memorial Day
o July Fourth
o Labor Day
o Thanksgiving Day
o Day After Thanksgiving
o Day Before Christmas
o Christmas Day
NOTE: Employees have 80 hours of holiday time to apply to the
holidays designated above.
(2) A 12-hour weekend shift employee who does not work on an
authorized holiday will receive 12 hours holiday allowance at
straight time, provided that the maximum amount of holiday
allowance pay does not exceed 80 hours in a calendar year. In
the event an employee whose amount of holiday allowance pay has
exceeded 80 hours in a calendar year observes a holiday in
accordance with the above schedule, such employee shall be paid
using residual time. In the event that the employee has
insufficient residual time, the holiday (or portion thereof)
shall be unpaid.
N) USE OF RESIDUAL TIME --
(1) If total residual time is 12 hours or more, an employee must
take 12 hours of the residual time as excused paid time in an
increment of 12 hours. Vacation carry over provisions apply.
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<PAGE> 14
(2) If total residual time is less than 12 hours, an employee must
take the residual time as excused paid time in one or more
increments, of no less than two hours each.
(3) Residual time that is not taken in accordance with the above, if
mutually agreed to by the COMPANY and the UNION, may be "bought
out" by the COMPANY at straight time. This will be limited to a
one buyout per calendar year, of an increment of less than 12
hours.
O) OTHER PAID TIME OFF --
(1) Pay of absence from work will follow the applicable provisions of
the general agreement, based on the employee's 12-hour weekend
shift standard daily work schedule.
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<PAGE> 15
Article 4 - SENIORITY
1. DEFINITION OF SENIORITY
A) Seniority shall be taken into account in the treatment of employees
and shall apply to all provisions of the contract.
B) Seniority is defined as the length of an employee's cumulative
service with the COMPANY and shall be expressed as the date on which
such cumulative service started, i.e. the date first employed by the
COMPANY.
C) Employees will come over to the COMPANY with their employee number
assigned to them based on their seniority from LUCENT.
D) Throughout this contract when seniority is mentioned, this will
include service date and the employee's number to determine the
employee with the most seniority.
E) When two (2) or more employees are hired for the COMPANY on the same
date, the last four (4) digits of their social security number will
determine their employee number, with the lower social security number
given the first available employee number. If a tie still exists then
the entire social security number will be used with the lower number
given the first available employee number.
2. SENIORITY TRANSITION FROM LUCENT TO THE COMPANY
A) Employees with six (6) months or more LUCENT service will have no
introductory period and be covered immediately for all purposes (i.e.
discipline, grievances, arbitration, FMLA applications, benefits,
wage treatment for demotions).
B) For those employees with less than six (6) months of LUCENT service,
the introductory period will end and coverage will begin for all
purposes (i.e. discipline grievances, arbitration, FMLA application,
benefits, wage treatment for demotions) once the combined services
with the COMPANY and LUCENT equals six (6) months.
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<PAGE> 16
ARTICLE 5 - UNION REPRESENTATION
1. COLLECTIVE BARGAINING PROCEDURE
A) Collective bargaining shall be conducted by authorized bargaining
representatives of the COMPANY and of the UNION. The parties shall
notify each other initially in writing of the names of their
authorized bargaining representatives and thereafter of any changes
which may occur. All such written communications from the Union shall
be signed by the President of the UNION, or designee.
B) Neither the COMPANY nor the Union shall be represented ordinarily in
collective bargaining meetings by more than five persons.
C) Collective bargaining meetings shall be held at times and places
mutually convenient at the request of either party. The party
requesting the meeting shall inform the other reasonably in advance of
the subjects to be discussed. Except in urgent cases, such
notification shall be in writing.
D) The COMPANY's designated bargaining agent shall not be required to
bargain collectively unless at least two UNION representatives
designated for such purpose, are present.
2. AUTHORIZATION PROCEDURES FOR BARGAINING REPRESENTATIVES
A) The UNION shall advise the COMPANY in writing of the names its
representatives and agents and their respective authorities
(including titles of the UNION officers). Such notification shall be
signed by the President of the UNION.
(1) It is agreed that there shall be no more than one (1) such UNION
REPRESENTATIVE for each thirty (30) employees in the bargaining
unit as of the close of the previous fiscal month. There shall
be a minimum of five (5) such UNION REPRESENTATIVES in the
bargaining unit.
3. EXCUSED ABSENCES FOR UNION DUTIES
A) Upon request, the COMPANY will excuse a representative from COMPANY
duties to perform UNION duties, provided the work situation permits
and provided the representative:
(1) Arranges with his or her supervisor for the period of such time
off;
(2) Obtains certification of the time the representative leaves his
or her COMPANY duties;
(3) Makes the necessary arrangements with the supervisor with whom
the employee wishes to confer or with the supervisor in charge
of the area where the observation of a work operation or
condition is necessary;
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<PAGE> 17
(4) Notifies his or her supervisor upon return to assigned COMPANY
duty and obtains certification of the time of return;
(5) Complies at all times with the COMPANY's time recording and pass
routines.
(6) Carries out the UNION duties involved in such manner that there
is the least interference with COMPANY activities.
(7) The above also applies to Representatives being excused for
UNION business without pay.
(8) A representative shall be paid at his or her adjusted rate plus
applicable night work and 7-day coverage bonuses for time lost
from assigned COMPANY duty when conferring with Management
during such representative's scheduled daily tour. Such
representative shall also be reimbursed for reasonable travel
and board and lodging expenses which are directly related to
participation in such activities, however, the following
limitations shall ordinarily apply:
<TABLE>
<CAPTION>
MEETINGS WITH NUMBER OF REPRESENTATIVES TO BE PAID
------------- ------------------------------------
<S> <C>
1st Level Managers 1
2nd Level Managers 2
3rd or Higher Level Managers 3
Company Bargaining Agents 3
</TABLE>
(9) The COMPANY and the UNION agree that the UNION will have the
opportunity to meet with newly hired employees as part of the
overall orientation process for the purpose of furnishing them
with information about the UNION. The UNION's segment of this
process will be limited to a maximum of 60 minutes. Time spent
during the representative's scheduled daily tour will be paid as
time worked.
(i) The COMPANY will provide the UNION a list of new hires with
organization numbers and shift prior to completion of their
orientation.
4. LEAVES OF ABSENCE FOR UNION BUSINESS
A) Upon request of the President of the UNION Local, a reasonable number
of employees who have been selected by the Union to perform UNION
duties which will take them from their assigned COMPANY duty for a
continuous period of more than one month shall be granted leaves of
absence. However, the COMPANY may refuse to excuse an employee at a
time when such absence from assigned Company duty will seriously
interfere with the operation of the business.
(1) All absences of more than one month shall be covered by a formal
leave of absence stating the purpose for which the leave of
absence is granted and the conditions pertaining thereto.
Seniority will be broken and such leave of absence will
automatically terminate if and when an
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<PAGE> 18
employee ceases to engage in the activities for which the leave
of absence was granted, or if and when any part of the absence
is used for activities other than for which the leave of absence
was granted.
(2) Such leaves of absence shall be:
(i) without pay;
(ii) with credit in seniority for previous credited service
(upon subsequent reinstatement from the leave of absence);
(iii) with credit in seniority for the time absent (upon
subsequent reinstatement from the leaves of absence);
(iv) upon return from such a leave of absence, an employee shall
be reinstated at work generally similar to that in which
last engaged prior to the leave of absence and for which
the employee is qualified.
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<PAGE> 19
ARTICLE 6 - UNION-MANAGEMENT RELATIONS
1. CONDUCTING UNION BUSINESS ON COMPANY PREMISES
A) Neither the UNION nor any employee shall solicit UNION membership on
COMPANY premises during the assigned working time of the employees
involved in the solicitation, nor shall any other Union business be
conducted on COMPANY premises except:
(1) Collective bargaining or conferring with COMPANY representatives,
or the observation of a work operation or condition related to a
specific grievance when such observation can properly be
conducted only during the working time of the employees
involved, in which case observation shall be limited to the
scheduled weekly tour of the employees involved.
(2) The distribution of UNION material such as but not limited to
papers, leaflets, handbills or literature may be made by the
UNION or an employee, provided such distribution is not made in
working areas (as designated by the COMPANY) or during the
assigned working time of the employees involved, and provided
such distribution does not interfere with work operations or
provoke disorder, or result in littering of the premises. UNION
materials will be reviewed by Labor Relations prior to
distribution unless other arrangements have been made.
(3) The COMPANY agrees to provide all hours passes for ten (10)
Executive Board members of the local UNION.
2. ACCESS OF UNION AGENTS AND/OR OFFICIALS TO COMPANY PREMISES
A) Accredited UNION agents and/or officials not employed by the COMPANY
will have reasonable access to COMPANY premises for the purposes of
conferring with Management and/or to conduct UNION business provided:
(1) Application for such access is approved in advance by the
COMPANY's bargaining agent or such bargaining agent's delegate.
(2) There is compliance with the COMPANY's pass routines and rules
covering access to and movement of visitors within COMPANY
premises.
3. NOTICES TO THE LOCAL UNION
A) The COMPANY agrees to inform the Local UNION, in a timely manner, of
any changes in the work force resulting from changes in the work
load, including significant changes in overtime schedules.
B) The employee's supervisor will notify, in writing, the Local
representative in a timely manner regarding disciplinary action,
dismissal or resignation, formal transfers and hiring new employees.
In the case of disciplinary action or dismissal, the time limits for
Article 7, Grievance and
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<PAGE> 20
Arbitration Procedure, will start with the supervisor's notification
to the UNION.
C) The COMPANY will endeavor to provide as much notice as possible with
a minimum of fourteen (14) days in advance of layoffs due to lack of
work.
D) The COMPANY will notify the UNION, in writing and in a timely manner,
of any pay or benefits withheld from an employee.
4. PAYROLL DUES DEDUCTION PROCEDURES
A) Upon receipt of a payroll deduction authorization from an employee, in
the form attached hereto the COMPANY will initiate deductions for
amounts equal to UNION dues (and, if authorized, an initiation fee)
from such employee's salary or wages, sickness or disability
payments, or other benefit payments or vacation payments.
(1) Deduction shall be made from the employee's salary or wages,
sickness or disability payments, or other benefit payments or
vacation payments as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
EMPLOYEES PAID DEDUCTIONS
- -------------------------------------------------------------------------------
<S> <C>
Weekly installments in the first 4 fiscal
weeks each month
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(2) Deductions shall begin during the first payroll period in the
month following receipt of a newly executed payroll deduction
authorization by the Payroll Office, and provided there is
sufficient pay available to cover the amount authorized after
the following deductions have been made:
(i) those required by law.
(3) If the scheduled deduction for amounts equal to UNION dues
cannot be made in the period(s) specified above, such
deduction(s) will be made during the consecutive payroll periods
ending no later than the last payroll period in the following
month.
(4) Payroll deduction authorizations shall be suspended when an
employee:
(i) is transferred to a job that is not represented by the
Communications Workers of America, goes on a leave of
(I.) absence of more than one month, or
(II.) is removed from the payroll of the COMPANY.
(5) "Payroll Deduction Authorizations" suspended in accordance with
Paragraph 4(A)(4) shall
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<PAGE> 21
be reactivated on the first payroll period following the return
of an employee to a job that is represented by the UNION.
(6) Except as provided in Paragraph 4(A)(4), payroll deduction
authorizations shall remain in effect when an individual is
employed by the COMPANY unless canceled by such employee. Such
cancellation must be individually sent to the COMPANY Payroll
Office and to the UNION by certified mail during the 14-day
period prior to the anniversary date or termination date of the
current or subsequent collective bargaining agreement.
(7) In the event an employee who cancels a payroll deduction
authorization in accordance with the above paragraph, wishes to
resume deductions for amounts equal to UNION dues, such employee
shall be obligated to complete a new "Payroll Deduction
Authorization".
(8) By written certification, the UNION shall keep the COMPANY
currently informed of the amount of regular monthly dues
lawfully in effect in each Local having jurisdiction over any
employees in the bargaining unit. Such amount or formula shall
be uniform for all employees represented by the Local.
(9) Certifications which change the amounts equal to UNION dues
will be accepted by the COMPANY no more than three times in any
calendar year.
(10) Amounts deducted in accordance with the above provisions shall
be remitted to the UNION no later than the end of the second
(2nd) week following the months during which the deductions were
made, the COMPANY shall deliver to the UNION a check for the
amount due, payable to the UNION, accompanied by a positive tape
record showing the names of employees from whose pay:
(i) Regular deductions have been made.
(ii) No deduction has been made because of cancellation of
authorization.
(iii) No deduction has been made because of revocation of
authorization.
(iv) No deduction has been made because of insufficient
earnings in this pay period.
(v) Deduction has been made for a prior month.
(11) It is recognized that the suspension, reactivation and
cancellation procedures for payroll deduction authorizations
contained herein shall be observed for all employees in the
bargaining unit on the effective date of this collective
bargaining agreement.
(12) It is understood that the COMPANY assumes no responsibility for
the consequences of any failure to make such deduction or
mistakes in connection therewith and that neither the COMPANY
nor any of its officers, agents or employees shall in any way be
held liable or responsible for any loss.
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<PAGE> 22
5. BULLETIN BOARDS
A) The COMPANY will furnish and maintain all existing UNION bulletin
boards in the plant on the date this Agreement becomes effective.
Additional bulletin boards may be added by mutual agreement of the
parties.
6. MAINTENANCE OF WORK OPERATIONS
A) There shall be no strikes, work stoppages, slowdowns, or other
interferences with or interruptions of work operations, including
absences from assigned COMPANY duties to attend UNION meetings at any
time during the period of this agreement. No officer, agent or
representative of the UNION shall authorize, instigate or condone any
such activity. No employee shall participate in any such activity.
The COMPANY shall have the right to take disciplinary action against
any employee participating in the violation.
(1) The COMPANY shall not institute a lockout of employees
(meaning thereby - to temporarily shutdown the operations with
an intent unlawfully to affect the rights of employees in
respect to UNION representation).
7. CREATIVE SOLUTIONS TEAMS
The parties share the goals of building a world class, high performance
organization and addressing employment security through business success.
Approaches such as joint creative solutions teams may facilitate the
achievement of these goals.
Management and CWA support the participatory process as an important part
of the collective bargaining process. Collective bargaining provides a
continuing framework to discuss approaches to improving the work process
as well as terms and conditions of employment.
The parties agree to the following principles to ensure success of the
Joint Creative Team process:
A) The UNION and management must mutually agree on roles and
responsibilities, objectives and goals, how the relationship will be
described and communicated, the substance and providers of training
and other key issues.
B) The UNION shall select all representatives of bargaining unit
employees who participate in the various components outlined below.
C) The UNION shall have access to information needed to participate in a
meaningful way in the process as jointly defined by the COMPANY and
the UNION.
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<PAGE> 23
D) At each component level, the COMPANY and the UNION may jointly agree
to appoint special task forces to address specific issues and to make
recommendations.
E) Workplace models will be jointly defined by the COMPANY and the UNION
and changes will not be implemented unless jointly agreed to by the
parties.
F) A Creative Solution Team is a joint COMPANY/UNION initiative,
involving employees in the local workplace, where COMPANY and UNION
representatives jointly identify and discuss new approaches to
achieving business and UNION goals in the local workplace. Teams
include, but would not be limited to (1) employee participation
initiatives, (2) self-managed/self-directed team environments, (3)
continuous quality improvement efforts, (4) flexible, highly-skilled
work environments, (5) information sharing, (6) UNION involvement in
the development of new systems of work organization, and (7) joint
projects designed to enhance the COMPANY's competitive position and
expand employment opportunities for employees.
G) This process facilitates participation by the UNION in business
decisions regarding the development and deployment of new
technologies and work structures which will help achieve the goals of
enhanced service quality and employee job satisfaction.
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<PAGE> 24
Appendix 6-A
PAYROLL DEDUCTION AUTHORIZATION
- ------------------------------ -----------------------------------------
Social Security Number Name (Last) (First) (Initial)
I hereby authorize __________________________ to deduct from my salary or
wages, sickness or disability payments, or other benefit payments or vacation
payments, an amount equal to regular monthly Union dues. If for any reason
_______________________ fails or is unable to make a deduction, I authorize
_____________________ to make such deduction in a subsequent payroll period.
The amount equal to regular monthly Union dues shall be that which is certified
to _________________by the Communications Workers of America for the bargaining
unit and job in which I am employed and shall automatically be adjusted for any
bargaining unit and job changes.
This authorization shall remain in effect when I am employed by _______________
unless canceled by me. Such cancellation must be individually sent to
__________________________'s Payroll Office and to Union Local 2260 by
certified mail during the fourteen (14) day period prior to the anniversary
date or termination of the current or subsequent Collective Bargaining
Agreement, and shall be effective on the first payroll period in the following
month.
This authorization is voluntarily made in order to pay my fair share of the
Union's cost of representing me for purposes of collective bargaining, and this
authorization is not conditioned on my present or future membership in the
Union.
In addition, I authorize ____________________ to deduct from my salary, wages,
or other payment an amount of $________ in payment of my initiation fee.
Amounts deducted in accordance with this authorization are not deductible as
charitable contributions for federal income tax purposes.
- --------------------------- ---------------------------------
Date Signature of Employee
Phone City State Zip Code
--------------- -------------- ----- ------------
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<PAGE> 25
ARTICLE 7 - GRIEVANCE AND ARBITRATION PROCEDURE
1. GENERAL
A) To provide for the expeditious and mutually satisfactory settlement
of grievances arising with respect to the interpretation or
application of this agreement or other terms and conditions of
employment, the following procedures shall apply.
B) Any individual employee or group of employees shall have the right at
any time to present matters in their own interest to the COMPANY and
to have such matters adjusted, without the intervention of the UNION,
as long as the adjustment is not inconsistent with this agreement and
provided the UNION has been given an opportunity to be present at
such adjustment.
C) When an employee or group of employees wishes to have a grievance
presented for settlement by the UNION, such grievance shall, except
as otherwise provided in this or any other written agreement between
the COMPANY and the UNION, be presented as outlined below and
settlement sought at any one of the steps indicated.
D) After a representative has referred a grievance to the COMPANY for
adjustment, the COMPANY will not attempt to adjust the grievance
pending settlement with the UNION.
E) Disciplinary and attendance action documentation should be retained
for twenty-four (24) months and then purged from the employee's
record.
2. DISCIPLINARY MATTERS
A) Any grievance involving the suspension or dismissal of an individual
employee shall be submitted in writing to the COMPANY's bargaining
agent within ten standard working days after the UNION receives
notice of the suspension or dismissal. If such a grievance is not
submitted within the ten-day period, the matter shall be considered
closed.
B) The COMPANY shall submit a written answer to the grievance within five
standard working days of the receipt of the grievance. If the
grievance is rejected in a timely manner or, if such an answer is not
submitted within the five-day period, the grievance shall be
considered rejected and the grievance procedure shall be exhausted.
3. INTERIM STATUS
A) Any grievance involving the interim status suspension of an individual
employee shall be submitted in writing to the COMPANY bargaining
agent within ten standard working days after the UNION receives
notice of the suspension. If such a grievance is not submitted within
the ten-day period, the matter shall be considered closed.
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<PAGE> 26
B) The COMPANY shall submit a written answer to the grievance within five
standard working days of the receipt of the grievance. If the
grievance is rejected in a timely manner or, if such an answer is not
submitted within the five-day period, the grievance shall be
considered rejected and the grievance procedure shall be exhausted.
4. CONTRACT INTERPRETATION ISSUES
A) It is the desire of the parties that grievances involving contract
interpretation issues be settled informally between the
Representative and a first level supervisor, (Step 1), without a
formal written procedure or between not more than two (2)
representatives and a second level supervisor (Step 2), or between
not more than three (3) representatives and a third level supervisor.
Grievances so presented shall be answered within ten standard working
days at Steps 1 and 2 and within ten standard working days at Step 3,
following the date of presentation by the Union.
(1) Grievance will be submitted in writing at step two (2) of the
grievance procedure.
B) Grievances processed under the written procedure shall be answered by
the COMPANY within ten standard working days following the date of
presentation by the UNION.
C) When the UNION wishes to process a grievance to the next higher step,
it shall present the grievance at that step within ten standard
working days following receipt of the COMPANY's answer at the previous
step. Otherwise, the grievance shall be considered closed. If the
answer to the grievance is not given by the COMPANY within the time
limits provided herein, the grievance may be presented at the next
step.
D) By mutual agreement of the COMPANY and the UNION, the 1st and 2nd
step meetings may be waived and the grievance submitted directly to
the 3rd step. The grievance shall be submitted in writing.
E) The COMPANY cannot file a grievance or seek arbitration.
5. MEDIATION
A) Upon mutual agreement between the COMPANY's bargaining agent and the
UNION's bargaining agent, or their respective representative,
grievances appealed to arbitration may be mediated.
B) Within thirty (30) days of mutual agreement to mediate, the parties
will schedule a mediation conference to be held at the earliest date
in a mutually acceptable location.
C) The mediation conference will be limited to those individuals
actually involved in the grievance issue.
D) Proceedings before the mediator shall be informal in nature. The
issue mediated will be the same
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<PAGE> 27
as the issue the parties have failed to resolve through the grievance
process. The rules of evidence will not apply, and no record of the
mediation conference shall be made.
E) The mediator may meet separately with the parties during the
mediation conference, but will not have the authority to compel the
resolution of the grievance.
F) The COMPANY and UNION spokespersons at the mediation conference may
accept the resolution proposed by the mediator and such settlement or
any other settlement resulting from the conference shall not be
precedent setting.
G) If no grievance settlement is reached as a result of the mediation
conference, the grievance may be scheduled for arbitration in
accordance with Paragraph 6, Arbitration Procedure, of this article.
H) In the event that a grievance which has been mediated subsequently is
arbitrated, no person serving as a mediator between the parties may
serve as arbitrator. Neither party may, at the arbitration hearing,
refer to presentations made by the other party at the mediation
conference, the fact that a mediation conference was held, or any
statements made by the mediator.
I) The compensation expenses of the mediator and the general
administrative expenses of the mediation conference shall be borne
equally by the parties. Each party shall be responsible for time
consumed by and expenses of its representatives.
J) Either party may institute mediation proceedings not later than thirty
(30) days following the date of receipt of the final answer of either
party at the end of Step 3 of the grievance procedure.
6. ARBITRATION PROCEDURES
A) The following provisions shall apply:
(1) Within sixty (60) calendar days after the Union receives the
Company's Step 3 answer (if mediation, sixty (60) days after
mediator's response), the UNION must notify the COMPANY, in
writing, that it intends to arbitrate the dispute. Only the
UNION can compel arbitration. In the event the UNION does not
notify the COMPANY within said sixty (60) day period of its
intent to proceed to arbitration, the grievance shall be
considered settled based upon the COMPANY's last response.
(2) Within sixty (60) calendar days of the UNION's written
notification of appeal, the COMPANY and the UNION shall select
an impartial arbitrator. If the parties fail to agree upon an
arbitrator, the selection shall be made from panels recommended
by the Federal Mediation & Conciliation Service. Failing mutual
agreement from such panels, the Federal Mediation & Conciliation
Service shall appoint the impartial arbitrator to serve in the
dispute.
(3) The conduct of hearings and other procedures having to do with
arbitration of the dispute shall follow the procedures then in
effect under the voluntary labor arbitration rules of the
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<PAGE> 28
Federal Mediation & Conciliation Service.
(4) The arbitrator shall have no authority to add to, or subtract
from, or in any way modify the provisions of this agreement.
(5) The decision of the arbitrator made in compliance with this
article shall be final; shall be in writing; and, unless a
shorter period is specified herein, shall be rendered within 30
days following the date of the last hearing conducted by the
arbitrator unless an extension to such period is agreed to by
the COMPANY and the UNION. The COMPANY and the UNION agree to
abide by the arbitrator's decision.
(6) A case involving the disciplinary DISMISSAL, SUSPENSION or
INTERIM STATUS of an employee that is submitted under this
Sub-paragraph 6(A) shall be subject to the limitation that the
employee has more than six (6) months seniority at the time of
the COMPANY action.
B) Each party shall pay its own expenses incurred in the arbitration,
including payment for the time and expenses of its witnesses. All
other direct expenses, including the fees and expenses of the
arbitrator, shall be borne equally by the COMPANY and the UNION.
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<PAGE> 29
ARTICLE 8 - JOB CLASSIFICATIONS
1. The work performed by employees in the bargaining unit will be classified
into the classification as set forth in Appendix B - Occupational Job
Classifications to this Agreement.
2. The COMPANY will develop job descriptions for each classification that
identify the duties, responsibilities, essential functions and
qualifications of the job. The COMPANY will provide the UNION with copies
of all current job descriptions.
3. When business, technical or other conditions make it necessary to create a
new job or substantially change the content of a job, the COMPANY will
create or modify the job description accordingly. A copy of the new or
modified job description will be provided to the UNION as soon as
practical. The COMPANY and the UNION will meet and negotiate the
appropriate classification and wage rate of the new or modified job.
4. Any disputes arising from the creation of a new job or the modification of
an existing job will be resolved through the Grievance and Arbitration
Procedure. Pending resolution the COMPANY may implement its rate
immediately. If the dispute is to be resolved through arbitration, the
arbitrator shall set a rate commensurate with the rates currently existing
in the plant for like or similar job classifications if such jobs exist.
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<PAGE> 30
PRODUCTION OCCUPATION LEVEL PLAN JOB ADMINISTRATION GUIDE
<TABLE>
<CAPTION>
FUNCTION L-I L-II L-III L-III A
===========================================================================================================
<S> <C> <C> <C> <C>
===========================================================================================================
ASSIGN WORK (to Level I's) X
- -----------------------------------------------------------------------------------------------------------
ASSIGN WORK (to all Levels) X
- -----------------------------------------------------------------------------------------------------------
COMPONENT PREP AND KITTING X
- -----------------------------------------------------------------------------------------------------------
DISCUSS JOB DIFFICULTIES X X
- -----------------------------------------------------------------------------------------------------------
w/ENGINEERS, etc.
- -----------------------------------------------------------------------------------------------------------
DISPATCHING X
- -----------------------------------------------------------------------------------------------------------
INSPECTING X X
- -----------------------------------------------------------------------------------------------------------
INSTRUCT (same or lower Level) X X
- -----------------------------------------------------------------------------------------------------------
MACHINE OPERATIONS
- -----------------------------------------------------------------------------------------------------------
- - OPERATE/ADJUST/CHANGE TOOLS ON PRODUCTION MACHINES X
- -----------------------------------------------------------------------------------------------------------
- - SET UP LARGE AND/OR COMPLICATED MACHINES X
- -----------------------------------------------------------------------------------------------------------
MATERIAL HANDLING X
- -----------------------------------------------------------------------------------------------------------
PACKING X X
- -----------------------------------------------------------------------------------------------------------
PHOTOPRINTING X X
- -----------------------------------------------------------------------------------------------------------
PLATING (use of basic chemistry) X X
- -----------------------------------------------------------------------------------------------------------
PLATEMAKING X
- -----------------------------------------------------------------------------------------------------------
PROCESS AND DETAIL CHECKING X X
- -----------------------------------------------------------------------------------------------------------
REPAIR (any product) X X X
- -----------------------------------------------------------------------------------------------------------
SCREEN PRINTING X X
- -----------------------------------------------------------------------------------------------------------
STOCK SELECTING X
- -----------------------------------------------------------------------------------------------------------
TESTING
- -----------------------------------------------------------------------------------------------------------
- - GO-NO-GO-/ZEHNTEL AND GENRAD/CONTINUITY X
- -----------------------------------------------------------------------------------------------------------
- - FUNCTIONAL X
- -----------------------------------------------------------------------------------------------------------
STOCKKEEPING X
- -----------------------------------------------------------------------------------------------------------
TRUCK DRIVER X
- -----------------------------------------------------------------------------------------------------------
ELECTRICAL REPAIRER X
===========================================================================================================
</TABLE>
29
<PAGE> 31
ARTICLE 9A - MOVEMENT OF PERSONNEL
PRODUCTION OCCUPATIONS
1. GENERAL
A) It is understood and agreed that the application of this article
shall be limited to movement of personnel within Production
Occupations.
B) All adjustments to the workforce in accordance with the provisions
of this article shall be initiated and made by the COMPANY.
C) Seniority shall be the determining factor in the selection of an
employee to fill a vacancy when two or more employees under
consideration possess substantially the same qualifications needed
for such vacancy.
(1) When two or more employees possess the same qualifications for a
vacancy, ties in placement service date will be broken first by
giving consideration to seniority, and second by use of the last
four digits of the employee's social security number, with
preference going to the lowest number.
D) "Qualifications" as used in this article shall be determined by the
COMPANY based on the employee's demonstrated productive efficiency,
skill, ability and conduct on the job.
E) "Verification" as used in this article shall mean that an employee
has successfully completed the required training for an assignment
within a Production Occupation. Such verification shall be determined
by the COMPANY.
(1) The COMPANY will provide the necessary training to become
verified at all levels. Employees who fail to become verified
within a reasonable training period will be dealt with on a
case-by-case basis which may include additional training,
transfer to another job assignment, downgrade, or termination of
employment.
F) Normally, personnel movement under the provisions of this article
shall be within the Production Occupations for employees in such
jobs. It is recognized and agreed, however, that qualified employees
may, in the judgment of the COMPANY, be moved between Journeyman
Trades Occupations and Production Occupations for the purpose of
filling vacancies or displacement when there is a lack of work.
G) If the UNION objects to any move made in accordance with the
provisions of this article, the matter may, if presented within ten
working days after the effective date of such move, or within ten
working days after notification to the UNION of such move, whichever
is later, be processed in accordance with Article 7, Grievance and
Arbitration Procedure, and provided that in any such case, the
authority of the arbitrator shall be limited to a determination as to
whether the COMPANY's judgment has been unreasonably exercised.
30
<PAGE> 32
H) The employee's supervisor will notify the Union representative in
writing of employees loaned from any department or occupation to
another for more than one (1) week, and orally for up to one week.
Any changes in an employees assignment for four (4) weeks or more
will be considered as permanent placements and will require written
notice to the Union. In addition, it is agreed unless approved by the
plant manager, no employee will be moved more than three (3) times
per year.
2. FILLING JOB VACANCIES
A) A vacancy occurs when a job cannot be staffed from within the same
level and shift. When a vacancy occurs, qualified employees will be
considered in successive steps in the following order until the
vacancy is filled:
(1) Obligatory reinstatements from leaves of absence.
(2) Employees who are surplus in accordance with Paragraph 3(B).
(3) Employees will be considered for return to the same Production
Occupation level and shift on which they were surplus due to
lack of work and which they performed satisfactorily within two
years of the date when the vacancy occurs. Consideration shall
be limited to employees in the same or lower level. Employees
who are recalled from layoff will forfeit their existing
"former" rights under this paragraph.
(4) The COMPANY agrees to establish a Job preference Inventory of
employees who wish to move laterally within shift. The COMPANY
will interleave the senior, Job preference "bidder" on no more
than five placement lists per month.
(5) Experienced production occupational employees in the same level
as the vacancy, subject to the needs of the business and at the
discretion of the COMPANY who are necessary to the establishment
of a new shift or the manning of a new job.
(6) Any vacancy not filled in accordance with 1 through 4 above
shall be posted on COMPANY bulletin boards for five working
days. Each such posting shall include the closing date for
receipt of nominations and a confirmation date which
immediately follows the closing date. On this date, employees
may contact the personnel organization to confirm that their
bid form has been received.
B) Job vacancies in the Production Specialist (Level I) Production
Occupation not filled in accordance with Paragraph 2(A) will be
posted on COMPANY bulletin boards. The following employees may bid:
(1) Qualified Level I employees on a different shift.
(2) Qualified Level II and Level III employees requesting voluntary
downgrades. Employees
31
<PAGE> 33
exercising this option will be ineligible for upgrades for one
year.
(3) If the vacancy is not filled through the post and bid procedures,
Paragraph 2(E) applies.
C) Job vacancies in the Senior Production Specialist (Level II)
Production Occupation not filled in accordance with Paragraph 2(A)
will be posted on COMPANY bulletin boards. The following employees
may bid:
(1) Qualified Level I employees.
(2) Qualified Level II employees on a different shift.
(3) Qualified Level III employees requesting voluntary downgrades.
Employees exercising this option will be ineligible for upgrades
for one year.
(4) If the vacancy is not filled through the post and bid
procedures, Paragraph 2(E) applies.
D) Job vacancies in the Production Planner (Level III) Production
Occupation not filled in accordance with Paragraph 2(A) will be
posted on Company bulletin boards. The following employees may bid:
(1) Qualified Level II employees.
(2) Qualified Level III employees on a different shift.
E) The UNION recognizes the right of the COMPANY to hire additional
people of its own choice according to the needs of the business,
subject to the provisions of this article. However, former employees
if qualified for available work who have been laid off within the
bargaining unit in the preceding 36 calendar months shall be given
first consideration for re-employment before new employees are hired,
provided they have not previously refused an opportunity for
re-employment at the Works from which laid off. The COMPANY agrees to
issue a certified letter to former employees as the first step in the
recall process.
3. EFFECT OF LACK OF WORK
A) When lack of work necessitates decreasing the workforce, the
employees to be laid off shall be selected in the inverse order of
seniority from the Production Specialist (Level I) Production
Occupation.
(1) In the event such layoff results in unreasonable departmental
depletions, the COMPANY may delay the effective date of layoff
in the affected departments for a period not to exceed four
weeks for the purpose of training replacements. The COMPANY will
advise the UNION of any delays as soon as they are identified.
Names and service dates will be provided.
32
<PAGE> 34
B) When lack of work necessitates the selection of employees as surplus,
such surplus shall be selected in inverse order of their seniority
from the Production Occupation level and shift affected. An employee
selected as surplus or an employee who becomes surplus by
displacement shall be considered for placement in the following
successive steps:
(1) On vacancies for which the employee is qualified at the same
level and other shifts.
(2) If the surplus employee is not placed under 1, then by displacing
another employee who has the shortest seniority on other shifts,
provided the surplus employee is qualified to perform the job of
such other employee, and further provided that the surplus
employee has a greater seniority than the employee to be
displaced. (In order to displace at Level III, the surplus
employee must be able to become verified in all modules of the
job of such other employee within a reasonable training period.
If unable to satisfactorily complete the prescribed
verification, then the employee will be downgraded.
(3) If the surplus employee is not placed under 2, then by first
filling a job vacancy for which qualified in the next lower
level or secondly by displacing another employee in the next
lower level, provided the surplus employee is qualified to
perform the job of such other employee, and further provided
that the surplus employee has a greater seniority than the
employee to be displaced. This procedure will be repeated in
successively lower levels until the employee is placed.
NOTE: EMPLOYEES PLACED UNDER 3 WILL FILL VACANCIES OR DISPLACE ON THE SURPLUS
EMPLOYEES' CURRENT SHIFT PRIOR TO FILLING VACANCIES OR DISPLACING ON OTHER
SHIFTS.
C) Hourly employees scheduled for lay off will be considered for
vacancies in the salary graded universe prior to being laid off.
D) If the employee is not placed in accordance with the provisions of
this Paragraph 3, then the employee shall be laid off.
4. TEMPORARY RECLASSIFICATION
A) Temporary reclassification to a higher Production Occupation level.
Employees will be temporarily reclassified to higher Production
Occupation levels when the COMPANY requires positions to be filled on
a temporary basis for reasons such as vacation relief, replacement of
an absent employee, or business emergencies, and when an employee at
a higher level is not available to perform the work. Temporary
reclassifications will not be considered as qualifying experience for
movement of personnel. Temporary reclassifications to a higher
Production Occupation will be limited to three months; however, the
three months may be extended up to six months by mutual agreement
between the parties. This excludes temporary reclassifications for
replacement of employees on disability absence or anticipated
disability leave of absence. Requirements for time periods greater
than six months will be considered vacancies and will be staffed in
accordance with Paragraph 2, Filling Job Vacancies.
33
<PAGE> 35
ARTICLE 9B - MOVEMENT OF PERSONNEL
JOURNEYMAN TRADES OCCUPATIONS
1. GENERAL
A) It is understood and agreed that application of this article shall be
construed as being limited to movement of personnel within the
Richmond Works.
B) All adjustments to the work force in accordance with the provisions
of this article shall be initiated and made by the COMPANY.
C) Seniority shall be given most weight in the selection of an employee
to fill a job vacancy when two or more employees under consideration
possess substantially the same qualifications needed for such
vacancy.
D) "Qualifications" as used in this article shall be determined by the
COMPANY based on the employee's experience, demonstrated productive
efficiency, transferable skill, ability, conduct, and certification
(where applicable).
E) It is mutually agreed between the parties that the work of the
COMPANY is such that normally employees are given opportunities to
qualify for the next higher levels of work or for Journeyman Trades
Occupations by the experience gained on their present assignments. It
is further agreed that action normally taken under the provisions of
this article shall conform with this paragraph.
F) Normally, personnel movement under the provisions of this article
shall be within the Journeyman Trades Occupations for employees in
such occupations and within Production Occupation level jobs for
employees in such jobs. It is recognized and agreed, however, that
qualified employees may, in the judgment of the COMPANY, be moved
between Journeyman Trades Occupations and Production Occupation level
jobs for the purpose of filling vacancies, or displacement when there
is lack of work.
G) If the UNION objects to any move made in accordance with the
provisions of this article, the matter may, if presented within ten
working days after the effective date of such move, or within ten
working days after notification to the UNION of such move, whichever
is later, be processed in accordance with Article 7, Grievance and
Arbitration Procedure, provided that in any such case, the authority
of the arbitrator shall be limited to a determination as to whether
the COMPANY's judgment has been unreasonably exercised.
H) The UNION recognizes the right of the COMPANY to hire additional
people of its own choice and according to the needs of the business,
subject to the provisions of this article. However, former employees
if qualified for available work who have been laid off within the
bargaining unit in the preceding 36 calendar months shall be given
first consideration for re-employment before new employees are hired,
provided they have not previously refused an opportunity for
re-employment at the Works from which laid off. The COMPANY agrees to
issue a certified letter
34
<PAGE> 36
to former employees as the first step in the recall process.
I) The employee's supervisor will notify the Union representative in
writing of employees loaned from any department or occupation to
another for more than one (1) week, and orally for up to one week.
Any changes in an employees assignment for four (4) weeks or more
will be considered as permanent placements and will require written
notice to the Union. In addition, it is agreed unless approved by the
plant manager, no employee will be moved more than three (3) times
per year.
2. FILLING VACANCIES IN JOURNEYMAN TRADES OCCUPATIONS
A) When a vacancy in a Journeyman Trades Occupation occurs, Journeymen
who have qualifications for the job will be considered, consistent
with the Work's practices, in successive steps in the following order
until the vacancy is filled:
(1) Obligatory reinstatements from leaves of absence.
(2) Journeymen who are surplus in accordance with Paragraph 3(A).
(3) Journeymen for return to the same Journeymen Trades Occupations
on which they have performed satisfactorily within two years of
the date when the vacancy occurs.
(4) Journeymen, subject to the needs of the business and as
determined by the COMPANY, who are necessary to the
establishment of a new shift or the manning of a new job.
(5) Journeymen in any Trades Occupational Code who, at the Company's
discretion, may be released from their present assignment.
(6) Qualified Trades Trainees (Apprentices)
(7) Any vacancy not filled in accordance with 1 through 4 above
shall be posted on COMPANY bulletin boards for five working
days. Each such posting shall include occupation, shift,
description of duties, location, department title, supervisor,
number of vacancies, trade group, physical demands, preferred
experience, job hazards, the closing date for receipt of
nomination, and a confirmation date which immediately follows
the closing date. On this date, employees may contact the
Personnel Organization to confirm that their bid form has been
received.
Employees who bid for a posted Journeyman Trades vacancy shall
be considered by submitting the prescribed form in accordance
with established routines.
35
<PAGE> 37
FOR GROUP II VACANCIES,
(i) employees in Production Occupation level jobs.
(ii) qualified Journeymen applying for reinstatement from
leaves of absence.
The longest service qualified employees from category (i), above
shall be given first consideration for the vacancy. If no
selection is made there from, other qualified employees from
categories (ii) shall be considered in successive groups of five
in accordance with their seniority.
If the vacancy is not filled in this manner, the COMPANY may then
prepare a list of employees for its consideration.
3. EFFECT OF LACK OF WORK
A) When lack of work necessitates the selection of employees as surplus,
such surplus shall be selected in the inverse order of their
seniority from the occupation affected. An employee selected as
surplus or an employee who becomes surplus by displacement shall be
considered for placement in the following successive steps:
(1) On vacancies in the Journeymen Trades Occupations for which the
employee is qualified through previous experience to perform
efficiently within a reasonable training period.
(2) If the surplus employee is not placed under 1, then by displacing
another employee in a Journeyman Trades Occupation who has the
shortest seniority, provided the surplus employee is considered
by reason of previous experience to be able to perform the
assignment efficiently within a reasonable training period, and
further provided that the surplus employee has at least one day
more seniority than the employee to be displaced.
(3) If the surplus employee is not placed under 2, then by filling a
vacancy in a graded job for which the employee is qualified
through previous experience to perform efficiently within a
reasonable training period.
(4) If a surplus employee is not placed under 3, then by displacing
another employee in a graded job who has the shortest seniority,
provided that the surplus employee is considered by reason of
previous experience to be able to perform the job of such other
employee efficiently within a reasonable training period, and
further provided that the surplus employee has at least one day
more seniority then the employee to be displaced.
B) If the employee is not thus placed in accordance with the provisions
of this Paragraph 3, then the employee shall be laid off.
C) Special Layoff Consideration
Notwithstanding the provisions of ARTICLE 9B MOVEMENT OF PERSONNEL, a
JOURNEYMAN who is declared surplus due to lack of work may elect to
be LAID OFF in lieu of accepting an assignment in another JOURNEYMAN
TRADES OCCUPATION or in a graded job, by notification to the
JOURNEYMAN'S supervisor prior to the effective date of such
assignment.
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<PAGE> 38
ARTICLE 9C - MOVEMENT OF PERSONNEL
1. GENERAL
A) All adjustments to the work force in accordance with the provisions
of this article shall be initiated and made by the COMPANY.
B) Qualifications as used in this article shall be those factors
determined by the COMPANY to be necessary prerequisites for
performance on the job. Qualifications include:
(1) Required experience in job related tasks
(2) Required job knowledge
(3) Required job skills
(4) Required education
(5) Successful completion of a certification exam, if required
(6) Conduct and job performance
C) Seniority shall be given the most weight in the selection of an
employee to fill a job vacancy when two or more employees under
consideration possess substantially the same qualifications needed
for such vacancy.
(1) When two or more employees possess the same qualifications for a
vacancy, ties in placement service date will be broken first by
giving consideration to seniority, and second by use of the last
four digits of the employees' social security number, with
preference going to the lowest number.
D) If the UNION objects to any move made in accordance with the
provisions of this article, the matter may, if presented within 14
calendar days after the effective date of such move, be processed in
accordance with Article 7, Grievance and Arbitration Procedure,
provided that in any case, the authority of the arbitrator shall be
limited to a determination as to whether the COMPANY's judgment has
been unreasonably exercised.
E) The employee's supervisor will notify the Union representative in
writing of employees loaned from any department or occupation to
another for more than one (1) week, and orally for up to one week.
Any changes in an employees assignment for four (4) weeks or more
will be considered as permanent placements and will require written
notice to the Union. In addition, it is agreed unless approved by the
plant manager, no employee will be moved more than three (3) times
per year.
37
<PAGE> 39
2. FILLING JOB VACANCIES
A) A vacancy will not be declared when a job is to be filled by a
temporary reclassification of an employee to an Occupational Job
Classification in the same Tier but different Corridor for reasons
such as vacation relief, replacement of absent employee or business
emergencies. Such reclassification will ordinarily be limited to a
maximum of three months.
B) When a job vacancy is declared by the COMPANY, employees of the
COMPANY who have the qualifications for the job that is vacant will be
considered in successive steps, in the following order, and in
seniority within each step:
(1) Former employees eligible to mandatory reinstatement from leaves
of absence.
(2) Employees who are surplus in an Occupational Job Classification
in the same Corridor as the vacancy but at a higher Tier.
(3) Employees who are surplus in an Occupational Job Classification
in a higher Tier as the vacancy but in a different Corridor.
(4) Employees who are surplus in an Occupational Job Classification
in the same Tier as the vacancy but in a different Corridor.
(5) Employees will be considered for return to the same Occupational
Job Classification, Tier, Corridor, and shift on which they were
surplus due to lack of work, provided the vacancy occurs within
two years of the date the employee left the job. The COMPANY
agrees to issue a certified letter to inform employees as the
first step in the recall process. Employees who are recalled from
layoff will forfeit their existing former rights under this
paragraph.
C) Job vacancies not filled in accordance with Paragraph 2(B) shall be
advertised on the Company bulletin board(s) for a minimum of five full
working days. Each such advertisement shall include the following
information:
(1) Job vacancy number
(2) Occupational Job Classification, Tier and Corridor
(3) Basic duties and qualifications
(4) Work schedule
(5) Closing date for receipt of nominations
38
<PAGE> 40
(6) Confirmation date, during which employees may contact the
personnel organization to confirm that their bid forms have been
received.
(i) Employees of the COMPANY may nominate themselves for
advertised job vacancies by submitting the form prescribed by
the COMPANY.
(ii)Job vacancies not filled in accordance with Paragraph 2(B)
shall be filled by qualified employees who have nominated
themselves for the vacancy as provided in Paragraph 2(C).
D) If none of the employees considered in accordance with Paragraph 2(C)
possess the qualifications needed to fill a job vacancy, hiring may be
utilized. In such event, however, former employees of the COMPANY who
are qualified and who have been laid off within the preceding 36
calendar months shall be given first consideration, providing they
have not previously refused an opportunity for employment. The COMPANY
agrees to issue a certified letter to former employees as the first
step in the recall process.
E) Following selection of the person to fill a vacancy, a notice shall be
posted on the COMPANY designated bulletin board(s) for a minimum of
five full working days, which shall include the following information:
(1) Job vacancy number
(2) Tier and Corridor
(3) Name of person selected
(4) Effective date of assignment
3. REDUCTION IN FORCE
A) When lack of work necessitates decreasing the work force, employees
shall be selected as surplus in the inverse order of seniority, from
the Occupational Job Classification, Tier level, Corridor, and shift
affected. In some cases, employees whose jobs require successful
completion of skills tests (e.g., typing, data entry) may be exempted
from selection as surplus if other employees in the affected Tier and
Corridor do not possess those skills.
B) An employee who is selected as surplus or who becomes surplus by
displacement shall be considered for placement in the following
successive steps:
(1) By filling a vacancy in another Occupational Job Classification
in the same Tier for which the employee is qualified.
39
<PAGE> 41
(2) By displacing another employee who has the least seniority in a
different Occupational Job Classification in the same Corridor
and the same Tier for which the employee is qualified.
(3) By displacing another employee who has the least seniority in the
same Tier in a different Corridor for which the employee is
qualified provided, in the case of Tiers 4 and 5, the employee
can perform the job of such other employee efficiently within a
reasonable training period and, in the case of Tier 3, the
employee can perform the job within a reasonable training period;
in all cases the surplus employee must have at least one day more
seniority than the employee to be displaced.
(4) By filling a job vacancy in an Occupational Job Classification in
the same Corridor in the next lower Tier or by displacing another
employee who has the least seniority in such Tier and Corridor
provided the surplus employee has at least one day more seniority
than the employee to be displaced.
(5) By filling a job vacancy in an Occupational Job Classification in
a different Corridor in the next lower Tier for which the
employee is qualified or by displacing another employee who has
the least seniority in a different Corridor in such Tier for
which the employee is qualified provided that, in the case of
Tier 4, the employee has previously worked in that Tier/
Corridor, and, in the case of Tier 3, can perform the job within
a reasonable training period; in all cases, the surplus employee
must have at least one day more seniority than the employee to be
displaced.
(6) If the surplus employee is not placed under (5), then by filling
a job vacancy or by displacing another employee in the next lower
Tier on the same basis as provided in (3), (4), and then (5), and
in the same manner in successively lower Tiers.
(7) Employees placed under (4), (5), or (6) above will fill vacancies
or displace on the surplus employees' current shift prior to
filling vacancies or displacing on other shifts.
(8) Employees scheduled for lay off will be considered for vacancies
in the Production universe prior to being laid off.
C) Except as provided in Paragraph 3(B), a surplus employee who cannot be
placed in accordance with this Paragraph 3 shall be laid off.
D) Temporary Reclassification to a Higher Tier. Employees will be
temporarily reclassified to higher Tiers when the COMPANY requires
positions to be filled on a temporary basis for reasons such as
vacation relief, replacement of an absent employee, or business
emergencies, and when an employee at a higher Tier is not available to
perform the work. Temporary reclassifications will not be considered
as qualifying experience for movement of personnel.
Temporary reclassifications to a Higher Tier will be limited to three
months, however, the three months may be extended up to six months by
mutual agreement between the parties. This
40
<PAGE> 42
excludes temporary reclassifications for replacement of employees on
disability absence or anticipated disability leave of absence.
Requirements for time periods greater than six months will be
considered vacancies and will be staffed in accordance with Paragraph
2, Filling Job Vacancies.
(1) The COMPANY agreed that all temporary promotions would be for a
minimum of one week's duration.
E) Should the COMPANY find it necessary to shift realign employees within
Occupational Job Classification and organization, the COMPANY will
first solicit volunteers and then force the least senior employees.
Any employee who is forced from his or her shift as a result of shift
realignment will be given former rights per Paragraph 2(B)(5).
41
<PAGE> 43
ARTICLE 10 - WAGES
1. WAGE SCHEDULES
A) On and after December 30,1996, the following schedule shall be
effective:
SEE APPENDIX A
2. PROGRESSIONS INCREASES
A) The standard rate of each Bargaining Unit employee whose standard
rate is below the maximum rate of the applicable wage schedule shall
be increased during the term of this agreement in accordance with the
schedules in Paragraph 1(A) above, provided that such employee has
been on the active payroll for 60 days prior to the progression date
and subject to the further provisions of this Paragraph 2.
B) Progression increases provided in Paragraph 2(A) will be given
semi-annually effective on the first of the fiscal months of March
and September. (For weekly-rated employees, such increase will be
effective on the first Sunday in March and September).
C) An employee who has qualified to receive an increase under Paragraph
2(A), but who does not receive such increase because he or she is on
personal or disability leave of absence on the effective date of the
increase, shall receive the increase effective on the date of
reinstatement from such leave of absence, provided reinstatement
occurs before the next succeeding scheduled increase date.
D) If, in the judgement of the COMPANY, an employee is not entitled to an
increase under the provisions of Paragraph (a) due to the employee's
performance on the job or conduct, including excessive unexcused
absenteeism or tardiness, the COMPANY may withhold such increase
provided it has notified the UNION in writing at least ten (10) days
in advance of the date the increase was to have become effective. The
UNION will notify the COMPANY in writing within ten (10) days
following receipt of the COMPANY'S notice, if it questions such
withholding.
3. PROMOTIONS, DEMOTIONS AND LATERAL RECLASSIFICATIONS
TEMPORARY PROMOTION ALLOWANCE
A) An employee who is temporarily assigned (movement within a shift) to a
higher wage rate within their own Occupational Job Classification will
be paid at the higher rate including progression steps.
B) For promotions other than temporary promotions, and for
reclassifications to other Occupational Job Classifications, an
employee's standard rate shall be established as follows:
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<PAGE> 44
(1) Lateral Reclassifications:
The employee shall be moved to the nearest progression step on
the wage schedule of the job to which reclassified which does
not result in a reduction in standard rate.
(2) Promotions:
Except as provided below the employee shall be moved to a whole
progression step above the nearest progression step on the wage
schedule of the job to which promoted.
(i) The standard rate of an employee promoted to a level or
grade in which the employee previously performed shall not
be less than the standard rate formerly received in that
level or grade. However, when an employee had been demoted
due to lack of work from a higher level or grade to a lower
level or grade and the employee subsequently is returned to
the higher level or grade, the employee shall be moved to
the same progression step the employee held prior to
demotion.
(ii) In no case, however, shall an employee's standard rate be
increased to an amount which exceeds the maximum rate of
the job to which promoted.
(3) DEMOTIONS DUE TO LACK OF WORK:
The employee shall be moved to the nearest progression step on
the wage schedule of the job to which demoted which is
immediately below the employee's standard rate prior to demotion.
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<PAGE> 45
4. GENERAL
A. When an employee's standard rate is subject to two (2) or more
changes effective on the same date, the changes shall be made in the
following order:
(1) Progression increases in accordance with Paragraph 2
(2) General increase in accordance with Paragraph 1
(3) Demotion adjustment
B. If an employee is recalled from layoff, the employee shall be
assigned a standard rate in accordance with the following:
(1) If an employee is recalled within six months from the date of
layoff to his or her former level or grade at time of layoff,
the employee shall be assigned standard rate no less than that
received at the time such employee was laid off from that level
or grade, but which will be adjusted for wage increases granted
during the period such employee was on layoff status.
(2) If the employee is recalled more than six months from the date of
layoff, the standard rate established above shall be further
adjusted in accordance with the following, but in no event shall
the new standard rate be less than the minimum rate of the
applicable level or grade:
<TABLE>
<CAPTION>
===============================================================================================================
NUMBER OF MONTHS---LAID OFF--- EMPLOYEES WILL BE ASSIGNED A STANDARD RATE
WHICH IS
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
6 through 12 One progression step less than employee held at the time of layoff
- ---------------------------------------------------------------------------------------------------------------
12 through 18 Two progression steps less than employee held at the time of layoff
- ---------------------------------------------------------------------------------------------------------------
18 through 24 Three progression steps less than employee held at the time of layoff
- ---------------------------------------------------------------------------------------------------------------
24 through 30 Four progression steps less than employee held at the time of layoff
- ---------------------------------------------------------------------------------------------------------------
30 through 36 Five progression steps less than employee held at the time of layoff
===============================================================================================================
</TABLE>
5. TRADES TRAINEES
A) Effective December 30, 1996, the following schedule of training
periods, hours and hourly rates of pay shall apply to employees
enrolled in the formal training course(s) under the supervision of the
Training Organization leading to the Trades Occupation(s).
(1) Wage increases in the amounts necessary to adjust an employee's
STANDARD RATE to the applicable rate specified in Paragraph 5(A)
to be effective December 30, 1996, shall be paid to
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<PAGE> 46
employees on the active payroll on such date who are also on the
active payroll on the date of notification of ratification of
this agreement.
(2) There shall be credited against the periods listed in Paragraph
5(A) only the time worked within the current weekly work schedule
of the Training Organization in any week, exclusive of an
individual employee's overtime, but the COMPANY shall take such
overtime into consideration as an offset to time lost due to
absence.
(3) The COMPANY may in its judgment start an employee as a trainee in
any one of the training periods listed in Paragraph 5(A). In
addition, the progress of individual employees through the
various training periods may be varied according to the COMPANY's
judgment of the ability of the individual employee and the needs
of the business. Therefore, the number of hours listed for each
training period is an expected average and not a minimum or
maximum time for the determination of advancement. In any case
where an employee is to be held for more than ten percent (10%)
longer in any of the training periods listed in Paragraph 5(A),
the UNION will be so notified.
B) Upon graduation from a training course (or "the training course")
outlined in Paragraph 5(A), an employee shall be assigned to the
appropriate TRADES OCCUPATION, and the employee's wage treatment and
progress thereafter shall be in accordance with the applicable
provisions of this Article, the same as for other employees in TRADES
OCCUPATIONS.
C) If, in the COMPANY's judgment, it becomes necessary to transfer any or
all employees from a training course to other work before completion
of the formal training course as outlined in Paragraph 5(A), the
COMPANY will notify the UNION in advance.
D) Upon their satisfactory completion of a training course, the COMPANY
will issue a certificate to the trainees indicating that the
requirements of the course have been met.
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ARTICLE 11 - HOURS OF WORK
1. WORK SCHEDULES
A) The UNION and the COMPANY recognize the necessity for work schedules
involving two or three shift operations where the nature of the work
or the needs of the business require them.
B) The COMPANY shall have the right to introduce new work schedules, to
make changes in the starting and stopping times of scheduled daily
tours, including the starting and stopping time and length of lunch
periods, and to vary from the scheduled daily or weekly tours.
C) The COMPANY shall notify the UNION of new work schedules, or any
change or variation in existing work schedules, at least one week in
advance of the effective date, except where emergency situations make
it impractical to do so. Negotiations thereon shall take place when
requested by the UNION and in the event of such negotiations, the new
schedule, change or variation proposed by the COMPANY may be placed in
effect pending agreement between the parties.
D) The "'butt-to-butt" and 7-day coverage provisions listed below will
remain in effect.
(1) The parties have agreed that eight hours of work shall constitute
an hourly employee's standard daily tour. Where three shifts are
scheduled, it is sometimes necessary that individual employees
vacate a machine or work position to make way for employees on
the oncoming shift. Where such "butt-to-butt" schedules are
necessary, it is impossible to provide eight hours of work for
all employees with a lunch period intervening. Where an employee
is obligated to vacate his or her specific work position or
machine and other work within the scope of the employee's job
description or normal tour of duty is not available before
completing eight hours of work, a lunch period consistent with
the operation involved will be paid for by the COMPANY at the
employee's base rate. When employees on the third shift whether
or not normally on a "butt-to-butt" basis are regularly scheduled
to work six days in the workweek, their schedule shall be so
arranged to exclude the tour of duty on Saturday night extending
into Sunday.
(2) 7-Day Coverage Jobs Exceptions to the standard weekly tour as
defined above occur in certain operations in which the nature of
the work or the demands of the business regularly require 7-day
operations. In such cases, the five tours of duty of an employee
involve special or rotating shifts which frequently include the
employee working on calendar Saturdays and/or Sundays. The
standard weekly tour for such jobs will be arranged on any five
days of the calendar week. (Such jobs are designated as 7-day
coverage jobs). In the event that the Company establishes a new
7-Day Coverage schedule not in place at the time of this
agreement, the Company will negotiate the transition of people to
that new schedule with the Union.
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<PAGE> 48
2. REST PERIODS
A) The COMPANY will provide one (1) rest period of ten (10) minutes
during each four-hour work period for all employees in the bargaining
unit except for:
(1) employees who receive regular relief periods because of the
nature of their work assignment;
(2) employees on jobs involving continuous or machine operations
where it is not practicable to interrupt such processes at
regular intervals in which case, such rest periods will be
arranged at intervals other than the regular rest periods.
B) The COMPANY will ordinarily schedule rest periods approximately in the
middle of working periods but they may be staggered to permit maximum
use of facilities. During the scheduled rest periods, employees will
be permitted to leave their usual work places and utilize in the time
provided such facilities as the COMPANY designates.
C) Rest period time shall be treated as time worked.
3. MINIMUM PAY ALLOWANCE
A) An employee who reports at a designated starting time for scheduled
work not involving a called-in emergency and who has not been given at
least ten (10) hours' advance notice not to report shall be given at
least two (2) hours' work or paid a minimum of two hours at adjusted
rate plus applicable night work and 7-day coverage bonuses, except on
a day on which a holiday recognized in accordance with Article 14,
Holidays, is observed, or Saturday or Sunday (or day in lieu of
Saturday or Sunday) when such minimum hours shall be paid at the
applicable overtime rate.
(1) The minimum payment provisions of Paragraph 3(A) shall not apply
in cases where the COMPANY's inability to provide work is due to
conditions beyond the control of the COMPANY or where the
employee is sent home for disciplinary reasons.
4. LUNCH PERIODS
A) Lunch periods will not be paid for except that a lunch period of no
less than twenty (20) or more than thirty (30) minutes in accordance
with local practice with pay at Adjusted Rate plus applicable Night
Work and 7-Day Coverage Bonuses will be provided on those job
assignments where three (3) shift operations are scheduled and it is
impossible to provide eight (8) hours of work with a lunch period
intervening. (Applies only to hourly production and maintenance
employees)
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<PAGE> 49
5. WASH-UP OR CLOTHES CHANGING TIME
A) When wash-up or clothes-changing time is authorized on certain
operations by the COMPANY as a safeguard to employees' health or
protection of product quality, such time will be paid for as time
worked.
6. EQUIPMENT FAILURE, POWER OUTAGES, ETC.
A) If the COMPANY determines that an employee or group of employees would
otherwise be unable to complete their standard daily tour because of
equipment failures, power outages or other like conditions, every
reasonable effort will be made by the COMPANY to find meaningful work
assignments for those employees who wish to stay for the remainder of
their shift.
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<PAGE> 50
ARTICLE 12 - PREMIUM PAYMENTS
1. GENERAL
A) It is recognized by both parties that the needs of the business may
require overtime work (i.e., work outside the employee's scheduled
daily or weekly tour), and that the jobs involved must be manned by
qualified employees working on an overtime basis. The amount of
overtime and the schedule for working such overtime work will be
established by the COMPANY. The COMPANY in scheduling overtime work
will distribute it as evenly as practicable among qualified employees
normally engaged on the work involved. An employee scheduled for
overtime shall be expected to work unless he or she has adequate
reason for not doing so, in which event the employee may be excused
provided that other qualified employees normally engaged on the work
involved are available. The interested representative and the
employees involved shall be given at least 24 hours advance notice of
scheduled overtime unless an emergency arises which precludes giving
such notice.
B) When employees work overtime at other than their regular job location,
the scheduled daily or weekly tour for the location where the
overtime work is performed shall be used in determining when work
outside of the standard schedule starts.
C) Nothing in this article shall require or permit the payment of
overtime on overtime.
2. OVERTIME TREATMENT
A) Time and One-Half--
(1) Pay at time and one-half shall apply to authorized time worked:
(i) Outside an employee's scheduled daily tours provided the
scheduled daily tour is eight hours or more;
(ii) In excess of 40 hours during the workweek;
(iii)On a nonscheduled day other than Sunday for employees who
are not working a 7-day coverage job or a holiday.
B) Double Time--
(1) Pay at double time shall apply for overtime hours paid at time
and one-half in excess of eight hours in the workweek including
any payments for call-ins and call-ups paid at time and
one-half.
(i) Pay at double time shall apply to authorized time worked on
Sunday for employees who are not working a 7-day coverage
job.
(ii) On a 7-day coverage employee's day in lieu of Sunday.
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<PAGE> 51
Double Time and One-Half--
Pay at double time and one-half shall apply to authorized time worked
on the day on which a holiday is observed.
D) Seven-Day Coverage Bonus
A 7-day coverage employee shall be paid a 7-day coverage bonus for
all time worked.
E) Night Work Bonus
An employee on a night tour shall be paid a night work bonus for all
time worked on such tours.
(1) The COMPANY agrees to pay night work bonus to night shift
bargaining unit employees who are required by the COMPANY to work
the day shift during standard shutdown periods.
(2) Night shift employees who are temporarily assigned to dayshift
for training shall continue to receive night work bonus for the
entire period of training
F) Call-Ins
(1) When an employee is called during his or her off time to report
for a work assignment outside the employee's scheduled daily or
weekly tours, it shall be considered a call-in. However, when an
employee is requested to remain late on a day on which the
employee has reported for work, or when, prior to leaving work,
an employee is requested to report for work on a subsequent day
at either the employee's standard or non-standard starting time,
it shall not be considered a call-in.
(i) When an employee is required to make extra trips from his or
her residence to place of work and return as a result of a
call-in, the employee shall be paid for reasonable time spent
traveling both ways. When the call-in does not require extra
trips, but does involve reporting earlier than the starting
time of the employee's scheduled daily tour, reasonable
traveling time shall be paid for the trip from such residence
to place of work.
(ii)Total payment for time worked on a call-in plus pay for
traveling time, as specified in Paragraphs 2(F)(1)(i) and
2(F)(1)(ii) shall not be less than two hours' pay at the
applicable overtime rate.
G) Early Start Allowance
(1) When, during the workweek, an employee is required to change his
or her scheduled daily tour to begin earlier than his or her
prior scheduled daily tour, such employee shall receive an early
start allowance.
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<PAGE> 52
(i) For each full or partial hour difference of such early start,
the employee shall receive an amount equal to 50% of the
employee's adjusted rate.
H) Sunday Start Allowance
(1) When an employee working other than a continuous operations or
7-day coverage tour is required to begin his or her first
scheduled daily tour between 8:00 P.M. Sunday and Sunday
midnight, such employee shall receive a Sunday start allowance.
(i) For each full or partial one-half hour prior to midnight, the
employee shall receive an amount equal to 50% of the
employee's adjusted rate.
3. EXCESSIVE OVERTIME
A) This will confirm the parties' understanding in which it was agreed
that where an excessive overtime situation has developed, supervision
will be encouraged to seek qualified employees not currently engaged
in the work involved to substitute for the affected employee.
B) This agreement will become effective upon ratification of General
Agreement CWA ___ dated December 30, 1996, in accordance with its
terms. When so effective, it shall continue in effect until the final
termination of said general agreement.
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<PAGE> 53
ARTICLE 13 - VACATIONS
1. ELIGIBILITY
A) Employees will be eligible to vacation with pay during the current
calendar year in accordance with Paragraphs 1(A)(1) through 1(A)(5)
and subsequent provisions of this article.
(1) One week after seniority of six months.
(2) Two weeks after seniority of 12 months, provided that if
seniority of six months and of 12 months are both completed in
the same calendar year, only two weeks of vacation will be
granted, with the second week to be scheduled after completion of
12 months seniority. The first week may be scheduled at any time
after completion of six months seniority.
(3) Three weeks beginning with the year in which seniority of seven
years will be completed.
(4) Four weeks beginning with the year in which seniority of 15 years
will be completed.
(5) Five weeks beginning with the year in which seniority of 25 years
will be completed.
B) The weeks of vacation provided for in Paragraph 1(A) will each consist
of the number of days and hours which the employee would have been
scheduled to work (excluding overtime) during the vacation absence,
except that an employee whose weekly working schedule (excluding
overtime) is four and one-half days per week, or alternating five-day
and four-day weeks, shall be eligible to 14 days and 23 days,
respectively, when seniority is at least seven and 25 years,
respectively.
C) Solely for the purpose of granting vacation eligibility for seniority
of six months and 12 months as provided in Paragraph 1(A), an employee
hired or rehired on the first working day of a calendar month will
have seniority computed from the first calendar day of that month.
D) An employee reinstated from leave of absence or rehired who has
previously taken vacation or received allowance in lieu thereof in the
current calendar year will be eligible to the number of days of
vacation for his or her seniority as determined in accordance with
Paragraphs 1(A) and 1(B), less the number of days of vacation
previously taken or paid for.
E) An employee reinstated from leave of absence or rehired from layoff
who was not previously on the roll in the current calendar year will
be eligible to vacation with pay in the following amounts, applied to
the number of days of vacation for his or her seniority as determined
in accordance with Paragraphs 1(A) or 1(B):
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<PAGE> 54
<TABLE>
<CAPTION>
REINSTATED OR REHIRED AMOUNT OF ELIGIBILITY
--------------------- ---------------------
<S> <C>
On or before March 31 Full
April 1 through June 30 Three-fourths
July 1 through September 30 One-half
After September 30 One-fourth
</TABLE>
In computing the vacation to which eligible as provided herein,
fractions of less than one-half day will be disregarded and fractions
of one-half day or more will be considered as one day. In no event,
however, will the employee's vacation eligibility as determined herein
be less than would be applicable if the employee were hired as of the
date reinstated or rehired.
2. SCHEDULING VACATIONS
A) Vacations are not cumulative. Except as provided in Paragraphs 2(E),
2(F), 2(H) and 2(I), the vacation to which an employee is eligible in
each calendar year shall be taken before midnight December 31 of that
year.
B) Vacations shall be taken during standard vacation periods except for
those employees who are required by the COMPANY to work during such
periods due to the needs of the business. Vacations not scheduled
during standard vacation periods will be scheduled in accordance with
the employee's wishes to the extent consistent with the needs of the
business, giving due consideration to seniority.
(1) If the COMPANY determines that a one week summer vacation
shutdown is appropriate the shutdown period will be the fiscal
7IV week.
C) An employee may elect to schedule all or part of his or her vacation
to which eligible on a day-at-a-time basis subject to the provisions
of Paragraph 2(B). Nothing shall prevent an employee from requesting a
days' vacation prior to the start of their shift.
D) When an employee's scheduled vacation week or fractional week includes
a holiday recognized in accordance with Article 14, Holidays, and
observed in accordance therewith on any day Monday through Friday in
such week (or, for a 7-day coverage employee on any day other than
such employee's day in lieu of Saturday or day in lieu of Sunday), an
extra day off with pay will be granted in lieu thereof.
E) When an employee is disabled due to illness or injury at the time
vacation is scheduled to begin, the vacation shall be postponed, and
rescheduled to the extent possible in the current calendar year. When
an employee becomes disabled due to illness or injury while on a
scheduled vacation, the vacation will be terminated as of the end of
the day immediately preceding the first day of such disability and
the remaining portion of the terminated vacation shall be rescheduled
during the current calendar year. Any portion of a vacation
rescheduled as provided herein which cannot be completed in the
current calendar year shall be rescheduled in the following calendar
year,
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<PAGE> 55
provided that the vacation so rescheduled shall be completed prior to
April 1 and prior to the employee taking any of the vacation to which
eligible in that year.
(1) Rescheduling as provided in Paragraph 2(E) shall be subject to
the employee's having furnished within a reasonable time a
physician's certificate acceptable to the COMPANY showing
evidence of such disability. Vacation rescheduled as provided
therein shall be taken after the employee has been approved to
return to full-time duty by a COMPANY physician, except that in
special circumstances and upon request of the employee, the
COMPANY may permit the employee to take such rescheduled vacation
after recovery from the illness or injury but before returning to
full-time duty.
F) Vacation to which an employee becomes eligible upon completion of
seniority of six or 12 months shall be scheduled after completion of
such seniority, provided that allowance in lieu thereof may be paid to
any such employee who was on the roll but was not scheduled to work
during a standard vacation period provided in Paragraph 2(B), and
provided further that, when an employee completes such seniority after
December 1, such vacation may be scheduled in the following calendar
year if the employee so requests, provided it is completed prior to
April 1 and prior to the employee's taking any of the vacation to
which eligible in that year.
G) In the event that it is necessary for an employee to be absent for a
death in his or her immediate family, as provided in Article 16, Pay
Treatment for Absences, on a day the employee had previously scheduled
as a paid vacation day, such day shall be rescheduled, provided
however, that the combined number of vacation days and excused work
days which may be rescheduled in accordance with this article and
Article 15, Excused Work Days, shall not exceed the number of days
determined by the COMPANY to be a reasonable absence under Article 16,
Paragraph 2(C).
H) An employee who cannot take a vacation because of reasons beyond his
or her control may reschedule such vacation into the following year,
provided that any vacation so rescheduled shall be completed prior to
April 1.
I) At the option of the employee and subject to the needs of the
business, up to five vacation days to which an employee is eligible
may be carried over into the following year, provided that the carry
over vacation is scheduled and taken on or before March 31. An
employee's request to carry over vacation shall not be unreasonably
denied.
3. COMPUTATION OF VACATION PAY
A) Vacation pay will be computed based on the employee's adjusted rate
plus applicable night work and 7-day coverage bonuses in effect during
the vacation absence.
4. EMPLOYEES LEAVING THE COMPANY
A) When an employee's service with the COMPANY is terminated before the
employee has taken vacation with pay to which eligible, an allowance
in lieu thereof will be granted, except that:
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<PAGE> 56
(1) An employee granted a leave of absence shall be granted vacation
with pay to which eligible, ordinarily before the leave of
absence begins.
(2) No vacation or allowance in lieu thereof shall be granted to an
employee who is dismissed for unsatisfactory conduct.
B) An employee granted vacation or allowance in lieu thereof as provided
in Paragraph 4(A) shall also be granted vacation or allowance in lieu
thereof, as applicable, for any vacation rescheduled or carried over
from the previous calendar year in accordance with Paragraphs 2(E),
2(F), 2(H) or 2(I), respectively.
C) In the event an employee dies before taking all the vacation to which
eligible as provided in this article, an allowance in lieu of the
vacation not taken will be paid to the employee's beneficiary, or to
the employee's estate if no beneficiary is designated.
D) An employee whose service with the COMPANY is terminated shall not be
required to make repayment for any vacation already taken to which the
employee might become ineligible in accordance with the provisions of
Paragraph 4(A)(2).
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<PAGE> 57
ARTICLE 14 - HOLIDAYS
1. The following shall be recognized as holidays covered by this agreement,
and the calendar day on which the holiday falls shall be observed as the
holiday, except as provided in Paragraphs 2, 3 and 4:
<TABLE>
==========================================================================================================================
<S> <C> <C>
New Year's Day Good Friday Easter Sunday
- --------------------------------------------------------------------------------------------------------------------------
Memorial Day Independence Day Labor Day
- --------------------------------------------------------------------------------------------------------------------------
Thanksgiving Day Day After Thanksgiving (A) Day Before Christmas (B)
- --------------------------------------------------------------------------------------------------------------------------
Christmas Day
==========================================================================================================================
</TABLE>
A) The holiday Day After Thanksgiving shall be the workday within the
scheduled weekly tour which immediately follows the day observed as
the Thanksgiving Day holiday.
B) The holiday Day Before Christmas shall be the workday within the
scheduled weekly tour which immediately precedes the day observed as
the Christmas Day holiday.
2. When a holiday specified in Paragraph 1 falls on Sunday (or, for a 7-day
coverage employee, such employee's day in lieu of Sunday), the first
following day within the employee's scheduled weekly tour shall be
observed as the holiday.
3. When a holiday specified in Paragraph 1 falls on Saturday (or, for a 7-day
coverage employee, on such employee's day in lieu of Saturday), the
Company shall designate any one of the following as the day to be observed
as such holiday:
A) The calendar day on which the holiday falls, or
B) The workday, within the employee's scheduled weekly tour, which
immediately precedes the calendar day on which the holiday falls, or
C) The workday, within the employee's scheduled weekly tour, which
immediately follows the calendar day on which the holiday falls.
4. The holiday period shall be the period between midnight and midnight on
the day observed as the holiday as specified in Paragraphs 1, 2 or 3,
except that for shifts crossing midnight, it shall be the 24 consecutive
hour period beginning with the regular starting time on the day observed
as the holiday. (By mutual agreement between the COMPANY and the UNION,
the holiday period for shifts crossing midnight may be changed for a
particular holiday to the 24 consecutive hour period beginning with the
regular starting time on the eve of the day observed as the holiday).
5. When, in observance of the holiday, an employee is not scheduled to work
on a day observed as a holiday within the employee's scheduled weekly
tour, the employee shall receive a holiday allowance not to exceed eight
hours at his or her adjusted rate plus applicable night work and 7-day
coverage bonuses for time not worked during the employee's scheduled daily
tour, provided such employee receives pay from the COMPANY for all or part
of either the employee's scheduled workday preceding or scheduled workday
following the day observed as the holiday.
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<PAGE> 58
6. When the COMPANY designates the Saturday (or a 7-day coverage employee's
day in lieu of Saturday) on which the holiday falls as the day to be
observed as the holiday and an employee is not scheduled to work on such
day, such employee shall receive a holiday allowance not to exceed eight
hours at his or her adjusted rate plus applicable night work and 7-day
coverage bonuses for time not worked during the employee's scheduled daily
tour, provided the employee works all or part of both such scheduled daily
tours preceding and following such Saturday and is excused by the COMPANY
for all partial-day absences on such preceding and following days.
Paid-for vacation absences shall be considered as time worked for purposes
of this paragraph.
7. An employee who is scheduled to work on a day observed as a holiday but
who is absent on such day shall not be paid holiday allowance, except that
subject to the provisions of Paragraph 5 or Paragraph 6, whichever is
applicable, holiday allowance shall be paid:
A) Provided the employee's absence from work on the holiday is due to
sickness or injury sustained otherwise than in the course of
employment, and such absence is substantiated by a physician's
certificate acceptable to the COMPANY, or
B) For the portion of the employee's scheduled daily tour not worked, in
the event that while at work on such day, the employee is sent home by
the COMPANY because of sickness or injury.
C) In the event an employee is absent for reasons beyond his or her
control on any day observed as a holiday during the month of December,
excluding Christmas Day and day before Christmas, but including any
floating holiday, such day may be rescheduled in the following
calendar year if the employee so requests provided it is completed
prior to April 1.
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ARTICLE 15 - EXCUSED WORK DAYS
1. A regular employee with seniority of six months on January 1 in the
current year shall be eligible for four excused work days with pay and one
excused work day without pay during that year.
2. The COMPANY shall have the option of converting one paid excused work day
to a designated day provided the COMPANY so designates prior to January 31
of the current year.
A) An employee in any work group for which an excused work day is
designated by the COMPANY and who is not otherwise eligible for a paid
excused work day shall be excused and paid for such designated day,
provided he or she is on the active payroll of the COMPANY on the
designated excused work day.
3. An employee who is not required to work on any paid excused work day shall
receive pay not to exceed eight hours at his or her adjusted rate plus
applicable night work and 7-day coverage bonuses for such day.
4. If an employee agrees to work on any paid excused work day and, in the
event the COMPANY determines that such day cannot be rescheduled, such
employee shall be paid as follows:
A) An employee who works on any paid excused work day shall be paid in
lieu of his or her excused work day in accordance with the provisions
of Paragraph 3 and shall in addition be paid for all hours worked on
such day in the same manner as a regularly scheduled work day.
B) Time worked by an employee on an excused work day shall be considered
time worked for all purposes.
5. An employee who is absent with pay on a non-designated excused work day
shall be permitted to reschedule such day.
6. Non-designated excused work days may be scheduled in one-half day
increments.
7. The COMPANY and the UNION recognize that it may be in the best interest of
employees to have the ability to take time off for brief intervals because
of personal, immediate needs. Accordingly, for the years 1997, 1998, and
1999, up to three excused work days (EWDs) may be used as follows:
A) An employee may designate and schedule, as applicable, three EWDs to
be used flexibly. This provision shall apply to an employee's unpaid
EWD and/or his/her paid EWDs which are not designated by the COMPANY.
B) Each flexible EWD may be divided into increments of two hours for an
increment, provided, however, that where the length of an employee's
scheduled daily tour is not evenly divisible by two, the last
increment of each EWD may be less than two hours.
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(1) An increment may be taken at any time during the year up to and
including the actual scheduled flexible EWD provided:
(a) the employee's supervisor is notified before the beginning
of the tour
(b) such time granted is consistent with the needs of the
business.
C) The time may be taken based on the employee's personal need to take
the time.
D) Any remaining portion of the excused work day(s) so designated must
be taken no later than the end of each calendar year.
8. In the event that it is necessary for an employee to be absent for a death
in his or her immediate family, as provided in Article 16, Pay Treatment
for Absences, on a day the employee had previously scheduled as a paid
excused work day, such day shall be rescheduled, provided, however, that
the combined number of excused work days and vacation days which may be
rescheduled in accordance with this article and Article 13, Vacations,
shall not exceed the number of days determined by the COMPANY to be a
reasonable absence under Article 16, Paragraph 2(C).
9. An employee who cannot take a non-designated excused work day because of
reasons beyond his or her control may reschedule such excused work day
into the following year, provided that any excused work day so rescheduled
shall be completed prior to April 1.
A) The provisions of Paragraph 9 also may be applied in the event of a
death in an employee's immediate family occurring in December.
B) Except as provided in Paragraphs 9 or 9(A), an excused work day shall
not be rescheduled into the following year.
C) Under no circumstances shall an employee be paid an allowance in lieu
of any excused work days not taken prior to termination of employment.
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<PAGE> 61
ARTICLE 16 - PAY TREATMENT FOR ABSENCES
1. GENERAL
A) Before an employee is granted absence with pay under any of the
provisions of this article, such employee shall submit satisfactory
evidence to substantiate the reason for such absence.
(1) It is recognized that there shall be no duplication of payment
by the Company for the same period of absence whether to be paid
for under the provisions of any agreement between the parties or
otherwise.
(2) Pay for absences, as provided herein, shall be computed at an
employee's adjusted rate plus applicable night work and 7-day
coverage bonuses in effect on the first full or partial day
of such absence.
2. DEATH IN FAMILY
A) An employee shall be granted reasonable absence, defined below,
because of a death in his or her immediate family with pay for such
time lost from assigned COMPANY duty, provided the employee's
seniority is six months or more at the time such absence begins.
B) An employee's immediate family shall be considered as husband, wife,
son, daughter, mother, father, mother-in-law, father-in-law,
grandparent, grandchild, sister, brother. Also any relative residing
with the employee.
C) In determining reasonable absence, consideration shall be given to the
relationship of the employee to the deceased and the responsibility of
the employee for making funeral arrangements. However, for deaths of a
husband, wife, son, daughter, mother or father, a reasonable absence
shall not exceed five consecutive scheduled daily tours. For all other
immediate family members, a reasonable absence shall not exceed three
consecutive scheduled daily tours.
3. JURY DUTY AND OTHER COURT ATTENDANCE
A) An employee summoned for jury duty or to serve as a witness (not as a
plaintiff or defendant) in a court case which necessitates absence
from assigned COMPANY duty within the employee's scheduled weekly tour
shall be granted pay for such absence. Such an employee shall report
for regular assigned COMPANY duty while excused from such attendance
in court unless it is impossible or unreasonable to do so.
4. QUARANTINE
A) An employee required to be absent due to quarantine imposed by duly
constituted health authorities shall be paid for such absence the
amount, if any, that would be paid if the employee were sick.
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5. SERVICE AS JUDGES AND CLERKS OF ELECTION
A) An employee appointed to serve as a judge or a clerk of election
whose service necessitates absence from assigned COMPANY duty within
the employee's scheduled weekly tour may be excused for such absence,
consistent with the needs of the business, and when so excused, shall
be paid for such absence the amount, if any, by which the employee's
pay at adjusted rate exceeds the compensation received for such
election board service.
6. SICKNESS ABSENCE
A) Subject to all the other provisions of this paragraph, an employee
absent because of personal sickness for consecutive days of sickness
absence up to but not including eight (8) days, will be paid for such
absence as provided in Paragraph 6(A)(1). For the purpose of computing
consecutive days of sickness absence, the first (1st) day of such
absence will start at the time within the employee's SCHEDULED DAILY
and WEEKLY TOUR when the employee is first absent due to sickness
disability and shall continue for a period of twenty-four (24)
consecutive hours thereafter. Subsequent consecutive days of such
absence will start and end at the same times on the days following.
(1) An employee absent as provided in Paragraph 6(A) will be paid for
such time lost (not to exceed eight (8) hours per day) within the
employee's SCHEDULED DAILY and WEEKLY TOUR, based on the
employee's seniority on the first (1st) day of such absence, as
follows:
<TABLE>
<CAPTION>
========================================================================================================
SENIORITY PAYMENT
- --------------------------------------------------------------------------------------------------------
<S> <C>
Less than two (2) years None
- --------------------------------------------------------------------------------------------------------
Two (2) years but less than five (5 years) Commencing with third (3rd) day of absence within
employee's SCHEDULED WEEKLY TOUR
- --------------------------------------------------------------------------------------------------------
Five (5) years but less than ten (10) years Commencing with second (2nd) day of absence within
employee's SCHEDULED WEEKLY TOUR
- --------------------------------------------------------------------------------------------------------
Ten (10) years or more Commencing first (1st) day of absence within
employee's SCHEDULED WEEKLY TOUR
========================================================================================================
</TABLE>
(2) No sickness absence payment shall be made for any such time for
which benefits are paid under the Sickness and Accident
Disability Benefit Plan, nor for which holiday allowance, in
accordance with ARTICLE 14, HOLIDAYS, is paid.
(3) The COMPANY may require the employee to furnish a physician's
certificate, acceptable to the COMPANY, showing inability to
work during the entire period of sickness absence.
(4) It is understood on disputes between the COMPANY physician and
the employee's personal physician concerning the employee's
ability to return to work following a sickness absence,
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<PAGE> 63
when a dispute arises that cannot be resolved through discussion
between the two physicians, the COMPANY physician will seek an
independent medical evaluation (IME) from a third party before
making a final decision regarding the employee's ability to
return to work.
7. VETERANS' ABSENCES
A) Necessary absences of veterans during scheduled weekly tours within
the first year of reinstatement from special leave of absence for the
purpose of visiting a government hospital, doctor, or Veterans Bureau
in connection with service-incurred disabilities when so scheduled by
a government agency shall be paid for, subject to a limitation on such
payments of ten scheduled daily tours or an equivalent number of
hours. A copy of the government agency letter authorizing the veterans
to visit the doctor, or other satisfactory evidence of the necessity
for absence will be required as a condition of payment for the time
lost.
8. OTHER PERSONAL REASONS
A) An employee who is absent because of personal reasons not covered
elsewhere in this article and other than is covered in Paragraph 9 of
Article 5, UNION Representation, may, at the discretion of the
COMPANY, be granted pay for such time lost within his or her scheduled
weekly tour.
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<PAGE> 64
ARTICLE 17 - FORCE ADJUSTMENT PROTECTION
1. DEMOTIONS AND RECLASSIFICATION DUE TO LACK OF WORK
A) When an employee would suffer an immediate reduction in standard rate
because of demotion or other formal reclassification made due to lack
of work or directly and immediately due to either the contracting out
of work to another company or the movement of a job to another
location, the employee shall be paid a wage protection allowance (WPA)
starting with the effective date of such reclassification or demotion.
Except as provided in Paragraph 1(B) below, such WPA shall be four (4)
weeks of full pay
B) Except as provided in Paragraph 1(C) the amount of the WPA shall be
calculated as follows:
(1) If the employee's standard rate (plus any existing WPA) is at or
above the maximum rate of the Occupational Job Classification
from which demoted or reclassified, the allowance shall be the
difference between the standard rate (plus any existing WPA) of
the Occupational Job Classification from which demoted or
reclassified and the maximum rate of the new Occupational Job
Classification.
(2) If the employee's standard (plus any existing WPA) rate is below
the maximum rate of the Occupational Job Classification from
which demoted or reclassified, the allowance shall be the
difference between the employee's standard rate (plus any
existing WPA) on the job from which demoted or reclassified and
the standard rate on the progression step to which assigned on
the lower level Occupational Job Classification. However, such
allowance will be reduced by the amount of any progression
increases the employee subsequently receives in the lower level
Occupational Job Classification.
C) A WPA will be adjusted to include an amount for any standard rate
supplement or any other form of wage protection which is eliminated or
reduced as a result of movement to a lower level or to another
location.
D) A WPA shall be recomputed upon the employee's promotion or
reclassification on an assignment at a higher level Occupational Job
Classification or upon the employee's refusal of such an assignment. A
WPA shall cease upon the employee's placement on an assignment at his
or her former level or upon the employee's refusal of such an
assignment.
(1) In the event such an employee's WPA ceases as the result of a
promotion and the employee is then again demoted within six
months of such promotion, the employee will receive a WPA for a
period which is limited to the remaining portion of the WPA
period associated with the original demotion or transfer in the
amounts applicable thereto.
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<PAGE> 65
2. SHORT-TIMING
A) When it appears desirable and possible to do so, the COMPANY shall
have the right to institute short-timing, for employees in all or any
part of a section, department, assistant manager's or manager's
organization, or the entire plant, in an effort to avoid layoffs or
force adjustments in situations where layoffs or force adjustments
might otherwise be necessary because of short-term fluctuations in
workload or changes or adjustments in product programs. However,
nothing in this article shall require the COMPANY to introduce
short-timing when in the COMPANY's judgment, layoffs or force
adjustments are necessary, nor shall the COMPANY be required to
short-time before any employees are laid off or any force adjustments
are made.
B) Short-timing shall mean the reduction of the scheduled weekly tour in
a particular workweek as designated by the COMPANY. Any such week
shall be called a short-time week.
C) The UNION shall be given advance notice when short-time weeks are
scheduled, specifying the employee(s) involved.
D) The employees involved shall be given at least 24 hours' notice when
they are scheduled to be off work due to short-timing, unless unknown
or unforeseen conditions prevent the COMPANY from giving such notice.
E) No employee shall be scheduled to be off work due to short-timing for
more than a total of ten days in any 12-month period.
F) If, in the judgment of the COMPANY, subsequent developments indicate
that the lack of work or expected lack of work cannot be offset by
short-timing, the COMPANY may terminate short-timing instituted in
accordance with the foregoing provisions at any time upon one week's
advance notice to the UNION. In such event, the COMPANY may thereupon
decrease the work force as provided in Paragraph 3 of Article 9A,B,C,
Movement of Personnel. Likewise, if subsequent developments indicate
that work is available on a full-time basis, employees who are off due
to short-timing may be recalled upon 24 hours' advance notice to such
employees.
G) An employee scheduled for a short-time week shall be paid a short-time
allowance as indicated in the table below for each day off during such
week due to short-timing, provided the employee works all the hours,
if any, that he or she is scheduled to work during that week or, if
the employee is absent from scheduled work, the absence is excused by
the COMPANY. Such allowance shall be based on the employee's seniority
as of the date the allowance is applicable, and the employee's
scheduled daily tour and shall be a percentage of the employee's
adjusted rate plus any applicable 7-day coverage and night work
bonuses as follows:
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<PAGE> 66
<TABLE>
<CAPTION>
===============================================================================
Seniority Short-Time Allowance Percentage
- -------------------------------------------------------------------------------
<S> <C>
Up to 6 months None
- -------------------------------------------------------------------------------
6 months up to 2 years 35%
- -------------------------------------------------------------------------------
2 years up to 5 years 50%
- -------------------------------------------------------------------------------
5 years up to 10 years 65%
- -------------------------------------------------------------------------------
10 years up to 15 years 75%
- -------------------------------------------------------------------------------
15 years and over 85%
===============================================================================0
</TABLE>
H) Employees shall not be considered short-timed nor shall short-timing
allowances be payable in the event employees' services are temporarily
interrupted because of but not limited to such causes as material
shortage, equipment failure, power failure, labor dispute, snowstorms,
hurricanes, tornadoes, or other "acts of God", failure or disruption
of house services (light, heat, water, etc.), gas leaks, fires or any
situations that might imperil the health or safety of employees.
(1) Employees who are scheduled for short-time weeks shall not be
considered laid off.
(i) Short-time weeks described herein shall not be used to affect
the calculation of the number of days of vacation with pay
for which an employee is eligible as provided in Paragraph 1
of Article 13, Vacations.
I) Employees shall not be scheduled to be off due to short-timing for
less than one full day, nor shall short-time allowance be payable for
any time off work other than as provided herein. However, an employee
who would otherwise be paid for absence in accordance with the
provisions of any other article in this agreement on a day when he or
she is scheduled to be off due to short-timing shall be paid for such
absence at the rate (percentage) specified in the table in Paragraph
2(G), except that an employee absent due to sickness or quarantine
shall be paid for such absence as provided in Paragraphs 4 and 6,
respectively, of Article 16, Pay Treatment for Absences.
J) The decision to institute short-timing and the establishment of
short-time week schedules, or the termination of short-timing, shall
be solely at the COMPANY's discretion. Grievances relative to
short-timing may be presented in accordance with Article 7, Grievance
and Arbitration Procedure.
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<PAGE> 67
ARTICLE 18 - CONTRACT EMPLOYEES
1. In the utilization of contract employees, the COMPANY will first seek such
employees from the UNION, it being understood that the COMPANY in each
instance shall have the right to accept or reject any contract employee
the UNION tenders.
2. The COMPANY will pay the UNION for each contract employee it provides an
amount no greater than it would pay any other temporary employment agency
in the greater Richmond, Virginia area for the same labor.
3. In the event the UNION is unable or unwilling to supply the number of
qualified contract employees required by the COMPANY, the COMPANY shall
have the right to receive contract employees from any other source
available.
4. The maximum number of contract employees to be in the factory at any given
time is limited to 150. If a business need arises requiring additional
contract employees, the COMPANY and the UNION must agree on the
appropriate number to be added.
5. If a surplus condition occurs, contract employees shall be separated prior
to a layoff of regular, full-time employees.
6. Contract employees will be utilized exclusively in Production Level I
assignments. Contract employees will be assigned work based on minimal
training requirements and desirability of assignment as agreed to by the
COMPANY and the UNION.
7. The COMPANY will provide the UNION with contract employees' job
assignments within one (1) week of starting work.
8. All overtime will be offered to regular full-time employees consistent
with the provisions of the Agreement prior to being offered to contract
employees. The sequence for offering overtime is as follows:
A) 1st - offer within work group - same shift
B) 2nd - offer within work group - across shifts
C) 3rd - offer to qualified employees from other areas who have
volunteered and made themselves known
D) 4th - to contract employees for Level I jobs
9. Dispute Resolution:
A) Disputes pertaining to job assignments and/or overtime assignments
will be referred to the Shift Administrator and the Union Vice
President-Production for resolution. They will discuss the matter with
the appropriate function manager. Unresolved disputes will be referred
to the responsible Manufacturing Director for resolution.
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<PAGE> 68
B) All other disputes pertaining to the administration of this article
will be referred to the Bargaining Agent and the Local Union President
for resolution.
C) Disputed should be resolved in 24 hours.
10. Contract employees shall be permitted to work for a period not to exceed
six (6) months. In the event that a contract employee continuously works
for six(6) months, then:
A) that contract employee shall be offered full-time employment with the
COMPANY, provided however, that contract employee meets all the hiring
criteria of the COMPANY, and that employee's seniority shall date from
his/her date of hire by the COMPANY.
B) provided further, a contract employee may be offered full-time
employment by the COMPANY prior to the conclusion of the six (6)
months work at the plant.
11. Unless and until a contract employee is hired by the COMPANY as set forth
above, contract employees shall not be employees of the COMPANY.
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<PAGE> 69
ARTICLE 19 - HEALTH AND SAFETY
1. OBJECTIVES AND OBLIGATIONS OF THE PARTIES
A) The COMPANY and the UNION will cooperate in the continuing objective
to eliminate accident and health hazards. The COMPANY shall make
reasonable provisions for the safety and health of its employees at
the plant during the hours of their employment.
B) The COMPANY, the UNION and the employees recognize their obligations
under the existing federal and state laws and regulations with respect
to safety and health matters. The COMPANY shall meet its obligation of
providing a safe workplace in the manner required by law.
C) Where the COMPANY knowingly uses toxic materials, it shall inform the
affected employees what hazards, if any, are involved and what
precautions shall be taken to insure the safety and health of those
affected employees. Upon the request of the UNION Co-Chairman of the
Safety and Health Committee, the COMPANY will provide information from
material safety data sheets or their equivalent when available, on
toxic substances to which employees are exposed in their workplace;
provided, however, that when the information is considered
proprietary, the COMPANY will so advise the UNION Co-Chairman and
provide sufficient information for the UNION to make further inquiry.
D) The COMPANY will establish where necessary, a program of periodic
in-plant air sampling and noise testing under the direction of
qualified personnel.
2. PROTECTIVE DEVICES, WEARING APPAREL AND EQUIPMENT
A) The COMPANY shall provide all necessary safety devices, wearing
apparel and equipment warranted by the job. Once provided, the
employees are required to use all such devices, apparel and equipment.
3. JOINT COMPANY/UNION SAFETY COMMITTEE
The parties agree to establish a Joint COMPANY/UNION Safety Committee as
follows:
A) The committee shall be comprised of equal representation with each
party having the privilege of designating an alternate for each of
their respective Committee members.
B) It shall be the responsibility of the Committee to review and discuss
safety and health practices within the plant.
C) In carrying out its responsibilities, the committee will:
(1) Review the causes and prevention of accidents.
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<PAGE> 70
(2) Review safety and health matters raised by bargaining unit
employees.
(3) Review possible methods of encouraging employees to form habits
of safety and health, and to observe applicable rules and
regulations.
(4) Review protective equipment or devices.
D) The names of UNION Committee members shall be submitted in writing to
the COMPANY by the Local President
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<PAGE> 71
ARTICLE 20 MISCELLANEOUS AGREEMENTS
1. CONSOLIDATION OF JOURNEYMAN TRADES
A) A Joint Trades Consolidation Committee, consisting of equal numbers of
COMPANY and UNION representatives, will be established to develop a
special cross-training curriculum designed to enhance the skills of
trades employees and to enable them to perform the full range of
duties contained in their respective Occupational Descriptions. In
addition, this committee will have an oversight responsibility to
perform benchmarking analyses, to resolve issues associated with the
implementation of these trades consolidations.
B) It is understood that these trades consolidations will not result in
any trades employees being declared surplus per Paragraph 3.1 of
Article 9B, Movement of Personnel, for the life of this agreement.
However, it is also understood that this would not preclude
involuntary force reductions that might occur as a result of business
or volume reductions. This is not an across the board guarantee of
"no layoffs..."it is a qualified guarantee that no trades layoffs
will occur as a result of trades consolidations. Except as provided
herein, said general agreement shall apply in accordance with its
terms.
C) Upon completion of training set forth, above agreement becomes void.
2. CWA COPE PAC
A) The COMPANY will establish procedures to permit CWA represented
employees to contribute to the CWA-COPE-Political Action Committee
through payroll deduction.
B) A payroll deduction authorized pursuant to this Agreement will be
transmitted to the Treasurer of the CWA-COPE-Political Action
Committee on a monthly basis.
C) The COMPANY will deduct COPE payments on a weekly basis consistent
with the COPE deduction card the employees have signed.
D) Such procedures shall continue in effect during the term of this
Agreement
3. EMERGENCY RESPONSE TEAMS
A) This will confirm our understanding concerning Emergency Response
Teams. Effective ____________, employees who are members of Emergency
Response Teams will receive an allowance of $75 per quarter
($300 per year) for serving as a member of their respective team.
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<PAGE> 72
4. NEW COMPENSATION PLANS AND RECOGNITION AWARD PROGRAMS
A) The parties recognize that it may be in their mutual interest to
negotiate additional profit sharing and compensation plans during the
period of the Agreement. Accordingly, the parties agree that, should
the COMPANY or the UNION seek to negotiate new plans during the period
of this Agreement, the initiating party shall notify the other party
of its intention to open discussions. Thereafter, the COMPANY and the
UNION shall work together to design and negotiate an agreed upon plan
that will meet the needs of the COMPANY and the employees. Should the
parties reach agreement, the plan shall be implemented upon a mutually
agreed date.
B) It is also recognized that the procedures described above shall apply
to any new Recognition Award Programs which the COMPANY may seek to
introduce during the period of the Agreement. For purposes of this
agreement, "Recognition Award Programs" shall be deemed to include
cash awards, gift certificates or other means of compensation in
excess of $50 to any employee in recognition of individual or group
performance.
C) It is the intention of the parties to jointly design plans and
programs that achieve the mutual goals of the UNION and the COMPANY.
5. MILITARY LEAVES OF ABSENCE
A) A regular employee (not temporary, term or occasional) who enters the
United States Uniformed Services for Active Duty for Military Service
shall be granted a Military Leave of Absence for the period of
his/her necessary absence. Voluntary extension of military service
beyond five (5) years shall not be construed as necessary absence. A
regular employee (not temporary, term or occasional) who is a member
of a reserve component or organized militia of the state and enters
upon Military Training Duty will be granted a Military Leave of
Absence for the period of the necessary absence for such training.
The term Uniformed Services" as used herein shall mean Uniformed
Services of the United States as specified in the Uniformed Services
Employment and Re-employment Rights Act of 1994.
B) An employee, on a Military Leave of Absence for Active Duty for
Military Service or military training duty and who has re-employment
rights under the Uniformed Services Employment and Re-employment
Rights Act of 1994 and who makes application for reinstatement within
the period provided in the law, will receive upon reinstatement, full
service credit for the period of absence for military service or
training duty.
C) Military Leaves of Absence will be with eligibility to sickness
disability benefits at the termination of the leave if the employee is
then disabled but otherwise entitled to reinstatement in accordance
with the terms of the ViaSystems Benefit Plans.
D) In death cases occurring during a Military Leave of Absence, sickness
death benefits, where payable, shall be based upon the term of net
credited service at the time the leave was granted,
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<PAGE> 73
plus the elapsed time of Military Leave of Absence to the date of
death, and shall be computed at the time the leave began.
E) Sickness disability benefits, where payable, shall be granted upon the
net credited service at the time the leave was granted plus the
elapsed time on Military Leave of Absence to the termination of such
leave, and shall be computed on the basis of ViaSystems pay in effect
at the time of the employee's reinstatement.
F) ViaSystems will pay a Military Differential Pay to regular employees
(not temporary, term or occasional) who receive and provide the
COMPANY with a copy of military orders for military service in the U.
S. Armed Forces subject to conditions imposed by federal law.
G) Military Differential Pay is the excess of ViaSystems pay over
military pay received by an eligible employee while on a Military
Leave of Absence.
H) ViaSystems pay is an employee's adjusted rate (excluding overtime) in
effect at the time the Military Leave of Absence begins. Night work
differentials, seven-day coverage and transition payments (non-lump
sum) are included.
I) Military pay is an employee's military basic pay rate in effect when
the Military Leave of Absence begins. All allowances and supplementary
pay elements [i.e., BAS (Basic Allowance for Subsistence), BAQ (Basic
Allowance for Quarters), Hazardous Duty Pay, Proficiency Pay, Special
Duty Pay] are not included.
J) The Military Differential Pay shall be up to the limits prescribed in
the following or the period of Military Service, whichever is
shorter:
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<PAGE> 74
<TABLE>
==========================================================================================================================
<S> <C> <C>
And the date the leave begins the
If the leave of absence employee's net credited service is Then the duration of military
and duration are... differential pay is...
Active Duty for Military 1 year or less First 15 weeks
Service (normally 2-5
years) (See note 3) more than 1 year First 26 weeks
- --------------------------------------------------------------------------------------------------------------------------
Military Training Duty-normally 2 No minimum A max. of 13 scheduled workdays (including
weeks holidays) in each military fiscal year (Oct.
(See note 1) 1-Sept. 30)
- --------------------------------------------------------------------------------------------------------------------------
Initial Active Duty for Training No minimum First 2 weeks (10 days)
(at least 3 consecutive months but
no more than 18 months)
- --------------------------------------------------------------------------------------------------------------------------
Emergency Service No minimum A max. of 13 scheduled workdays (including
holidays) in each calendar year (See note 2)
==========================================================================================================================
</TABLE>
Note 1: Includes attendance at schools for special military courses
of instruction which may last several months.
Note 2: An absence for Emergency Service does not affect an
employee's right or eligibility with respect to Military
Training Duty, Initial Active Duty for Training, or Active
Duty for Military Service. If the local emergency situation
exceeds 13 scheduled workdays, pay treatment for additional
time must be approved by the ViaSystems Pension Plan
Administrator
Note 3: Payment of Military Differential Pay, for up to the
maximum duration's described above, is limited to the time
when an employee initially enters Active Duty for Military
Service. The employee is not again eligible for the maximum
payments, regardless of the number of times the employee
enters Active Duty for Military Service.
K) Regular employees who volunteer for Military Training Duty (including
attendance at schools for special military courses or instruction) or
Emergency Service without receiving military pay, will be authorized
time off, but without ViaSystems pay or Military Differential Pay.
L) Upon furnishing official written documentation to his/her supervisor,
a regular employee may be granted up to three (3) scheduled workdays
off with pay to report for registration, testing and/or
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a physical examination for induction into Active Duty for Military
Service or Initial Active Duty for Training.
M) An employee who receives a notice to report for Active Duty for
Military Service or any Military Training Duty, shall immediately
present such notice to his/her supervisor.
6. EMPLOYEE ASSISTANCE PROGRAM
A) The COMPANY agrees to develop an Employee Assistance Program (EAP)
which will provide assistance in dealing with alcoholism, drug abuse,
emotional illness and other medical/behavioral problems. The Program
will utilize qualified professionals including employees who have a
thorough knowledge of workplace environment and of the services
offered by the EAP.
7. RETURN TO THE UNIT
A) This will confirm our understanding in applying the COMPANY's policy
of returning employees to the bargaining unit. For an employee who
leaves the bargaining unit and later returns to the bargaining unit
within two (2) years, the COMPANY will return the employee to the same
occupational job classification from which they left. If the employee
returns to the bargaining unit beyond two (2) years, then the employee
shall return to an entry level position
8. OTHER TRADES AGREEMENTS
A) Reinstatement of the Special Projects Trades Team Letter Of
Understanding will require the agreement of both parties.
B) The COMPANY will utilize the Joint Skilled Trades Committee in an
effort to plan maintenance work so as to avoid scheduling overtime on
weekends.
C) Journeyman Trades overtime will be administered in accordance with the
attached guidelines for the Assignment and Distribution of Overtime.
D) Journeyman Trades guidelines for the assignment and distribution
of overtime
(1) Overtime will be distributed to employees in their respective
crafts by shift.
(2) Trades employees working on 7-day coverage assignments or in the
areas listed below will be considered in a separate universe for
the purpose of overtime distribution:
AC & RM
Planning
Operating Engineering
Water & Waste Treatment
Toolroom
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(3) They will cover for themselves within their own specific crafts
and universes except during emergency situations.
(4) The COMPANY will offer overtime opportunities to the low person
first. Business reasons could result in other than the low person
being scheduled. In this case, a grievance will not be filed
unless there was a spread of more than 28 hours between the low
person and the person scheduled to work. No attempt shall be made
to balance overtime between shifts. The low person rule shall
apply when scheduling mid-week overtime, with mid-week emergency
overtime being the only exception.
(5) Trades employees interested in working the upcoming weekend will
sign up each week by 4:00 A.M. Wednesday for 3rd shift, 11:00
A.M. Wednesday for 1st shift, and 7:00 P.M. Wednesday for 2nd
shift.
(6) Trades employees who do not sign up will be charged with a
refusal provided their cumulative equivalent hours paid are less
than those of the highest trades employee selected to work in
their craft. All actual overtime hours worked will always be
charged.
(7) Trades employees who are unable to work overtime because of a
work restriction, or who are unable to sign up because of
sickness, vacation, etc., will be charged with a refusal if their
cumulative equivalent paid hours are less than those of the
highest trades employee selected to work in the craft. Those who
fail to report for scheduled overtime will be charged with the
same hours that would have been paid. Any employee offered an
overtime opportunity with less than 24 hours notice will not be
charged with a refusal.
(8) Trades employees who sign up but are not scheduled to work will
not be charged with a refusal. Trades employees who are scheduled
to work will be notified prior to the end of their Thursday
shift.
(9) Trades employees may sign up to work Sunday overtime only, but if
only Sunday is worked, then the individual will be charged with
12 hours for the Saturday not worked, if Saturday was refused.
(10) Trades employees in their respective crafts will be given the
opportunity to work overtime before the opportunity is presented
to the Project Trades Planners. No attempt will be made to keep
Project Trades Planner's overtime even with their original craft.
(A) RECORD KEEPING
(i) The UNION will maintain a record of cumulative hours
paid (refused and worked) and will provide a copy to
the COMPANY prior to 12:00 noon on Wednesday for the
upcoming weekend overtime. A reasonable period of time
each week will be paid for by the COMPANY to perform
this task.
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(ii) Records will be kept on an annual basis starting over
each January. The low person will be brought to zero,
and any spreads will be carried into the new year.
(iii) Overtime averaging:
a) New employee - average of the trade at the time
of entry.
b) Upgraded employee - average of the trade at the
time of upgrade.
c) Reclassified employee - average of the new trade
at the time of reclassification.
d) Shift change - average of the trade on the new
shift at the time of the change.
(iv) Overtime hours worked and refused will be charged as
hours paid and will be calculated as follows:
8 hours Saturday or holiday = 12 hours charged 8
hours Sunday = 16 hours charged
Any changes or variations to these guidelines must
be mutually agreed upon by both parties.
E) The COMPANY will issue a JOURNEYMAN Card, a specimen of which is
attached hereto as Appendix C, to each JOURNEYMAN who:
(1) is currently classified a JOURNEYMAN and assigned in a
JOURNEYMAN TRADES OCCUPATION and
(2) has satisfactorily completed an accredited apprenticeship
training program in said occupation, or has performed in said
occupation for at least ten (10) years and has progressed to the
MAXIMUM RATE applicable hereto.
9. OUTSOURCING
A) Skilled Trades Universe and Salary Graded Universe
The COMPANY will not outsource work traditionally performed by
bargaining unit trades or salary graded employees unless one or more
of the following conditions exists:
(1) The skills, manpower, and/or equipment needed are not available
in the plant, or
(2) The work is on a project of short duration or accelerated
schedule that the use of Company employees is not practical.
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B) Production Universe
(1) In the event the COMPANY decides to outsource production work
traditionally performed at the plant, in whole or in part, it
shall notify the UNION on a monthly basis of all production work
it intends to outsource in the near term. Work transferred to,
or produced by other COMPANY plants, shall not be considered
outsourcing, unless it causes a layoff.
10. SCHEDULING TIME OFF
A) It was agreed that any employee who cannot take any holiday scheduled
in the month of December (excluding Christmas Eve and Christmas), or
his or her vacation or Excused Work Days in a calendar year, because
of needs of the business the employee may schedule such paid days in
the next calendar year, provided such days are taken by March 31 of
that year.
11. EDUCATIONAL SUPPORT EFFORT
A) The COMPANY and the UNION agree that tuition assistance to
occupational employees is an integral and important aspect of the
overall employee developmental process.
B) ViaSystems, as it seeks ways to make tuition assistance more
responsive to individual employee needs and to conform to government
regulations, may at times find it necessary to alter certain aspects
of the Tuition Assistance Plan. Where it becomes necessary to change
the Plan to conform with applicable government regulations, the
COMPANY shall notify the UNION in writing. Negotiations shall then
take place if requested by the UNION. In the event of such
negotiations, the changes proposed by the COMPANY shall not be
implemented until (a) agreement is reached, or (b) the COMPANY
determines that timely action is required by law, regulation, order,
determination or ruling whichever occurs sooner.
C) In all other cases, the COMPANY agrees that it will not make any
changes in the Tuition Assistance Plan which would reduce or diminish
the benefits or privileges provided by such Plan for employees
represented by the UNION without negotiating such changes with the
UNION. The COMPANY and the UNION further agree that the changes
implementing the $4,000 and $5,000 caps have been agreed to pursuant
to these provisions.
12. FLEXIBLE EXCUSED WORK DAY
A) The COMPANY and the UNION recognize that it may be in the best
interest of employees to have the ability to take time off for brief
intervals because of personal, immediate needs. Accordingly, for the
years 1997, 1998 and 1999, up to three (3) Excused Work Days (EWDs)
may be used as follows:
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<PAGE> 79
(1) An employee may designate and schedule, as applicable, three (3)
EWDs to be used flexibly. This provision shall apply to an
employee's unpaid EWD and/or his/her paid EWD(s) which are not
designated by the COMPANY.
(2) Each flexible EWD may be divided into increments of two (2) hours
for an increment, provided, however, that where the length of an
employee's scheduled daily tour is not evenly divisible by two
(2), the last increment of each EWD may be less than two (2)
hours.
(3) An increment may be taken at any time during the vacation
schedule period up to and including the actual scheduled Excused
Work Day provided his/her supervisor is notified before the
beginning of the tour and not more than 25 percent of the work
group has already been granted time off. In the event more than
25 percent of the work group is scheduled off, then the time may
be granted consistent with the needs of the business.
(4) The time may be taken based on the employee's personal need to
take the time.
(5) If there is unused time available on the day of the so-scheduled
EWD, the employee must take the remaining time on the scheduled
day even if that increment is less than two (2) hours.
13. EMPLOYEE PREFERENCE DATABASE
A) This will confirm our understanding to jointly develop an employee
preference database as a replacement for the job posting and bidding
process.
B) The UNION and the COMPANY will appoint an equal number of
representatives to begin work on an employee preference database
system as soon as possible after ratification of this Agreement.
C) Any Agreement on a new employee preference database system will not be
subject to membership ratification.
14. VIASYSTEMS STATEMENT ON SUBSTANCE ABUSE
The Company is concerned about the safety of employees and their general state
of health and well-being. Because the Company recognizes that its employees are
not immune to the problems associated with substance abuse in society today, it
has established a policy to help them contend with these problems and to
prevent drug or alcohol use which adversely affects job performance and safety.
Comprehensive health care benefits are available for treatment of alcohol and
drug problems. In addition, the Employee Assistance Program (EAP) has been
established so that individuals with substance abuse problems or other personal
difficulties will be encouraged to seek help.
The Company has an obligation to provide a safe work environment free from
substance abuse and its effects. With this in mind, the Company's Policy on
Substance Abuse is as follows:
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<PAGE> 80
The Company recognizes that some types of substance dependence can be treated
successfully. Employees with dependence problems are encouraged to seek help
voluntarily through EAP or other means. Although an employee's rehabilitation
efforts will be strongly supported, participation in EAP will not serve as
protection against a normal disciplinary process associated with job
performance and behavior. Likewise, employees who continue to have detectable
quantities of illegal drugs in their bodies, whether or not impaired on the
job, will not be protected from discipline by agreeing to participate in EAP.
The Company will not engage in the random testing of employees for substance
abuse except when required to do so by law.
ALCOHOL AND CONTROLLED SUBSTANCE TESTING POLICY
1. Applicants for Employment:
An applicant for employment with the Company who has been offered employment
will be given a drug screen prior to placement in the position that she/he has
been offered. Applicants for employment will be subject to alcohol testing when
required by law. An applicant who has a positive test result will be rejected
from employment.
2. Employees:
A. An employee will be subject to controlled substance ("drug") and
alcohol testing under the following circumstances:
1) "For cause" testing will be based on a "reasonable suspicion." A
determination that a "reasonable suspicion" exists must be based
on specific, contemporaneous, articulable observations concerning
appearance, behavior, speech or body odors of the employee. The
determination must be made by a supervisor who has specific
training in the identification of drug and alcohol abuse. "Cause"
will be determined in consultation with a licensed health
professional.
2) The supervisor shall determine and convey "reasonable suspicion"
To a qualified health care provider before the health care
provider proceeds to evaluate the employee.
3) The supervisor shall tell the employee the reason for medical
evaluation prior to sending the employee for medical evaluation
which may include drug and alcohol testing. The employee will be
told that the medical evaluation may include a drug and alcohol
test.
4) A qualified health care provider will determine "reasonable
suspicion" before subjecting an employee to a drug and/or alcohol
test.
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<PAGE> 81
5) The supervisor will give the employee an opportunity to provide
an explanation for the problem prior to taking any of the above
steps. If the employee initiates a discussion of substance abuse
or another personal problem, or if the discussion indicates that
a personal problem may be the cause of poor performance or
behavior, the supervisor will advise the employee to seek help
through the EAP or their medical benefits.
6) Following a positive drug and alcohol test, employees should be
subject to unannounced testing only if recommended by a substance
abuse professional. Any unannounced testing shall be limited to a
five-year period following a positive test for CDL holders and a
two-year period for non-CDL holders.
B. In the event an employee, under any circumstances set forth above,
refuses to take a drug or alcohol screen, such refusal shall be deemed
for all purposes to be a positive result under this policy.
3. TEST PROCEDURES
Except when required by law or regulation, the visual observation of an
employee producing a urine specimen may not take place.
Test samples will be analyzed by a Department of Health and Human Services
("DHHS") certified laboratory utilizing scientifically reliable technology.
Within 72 hours following a Medical Review Officer's ("MRO") notice to an
employee that she/he has tested positive for drugs, the employee or the
employee's designated representative may request the MRO to have a reanalysis
of a portion of the positive test sample conducted by a DHHS certified
laboratory designated by the employee or the employee's designated
representative.
This reanalysis shall be at the employee's expense. If the reanalysis is
negative, the employee will have the cost of the reanalysis refunded by the
Company and the results will be deemed conclusive.
4. NOTIFICATION OF POSITIVE RESULTS:
Applicants for employment who have been offered positions with the Company and
employees who have tested for alcohol or drugs will be informed of a positive
test result.
A positive test result will be disclosed to an employee's legal or designated
representative if the employee provides the Company with a written
authorization to release the information.
5. CONSEQUENCES:
A. Drug Tests:
An employee who tests positive for drugs will be subject to the
following consequences:
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<PAGE> 82
1) On the first occasion of a positive drug test, the employee: (i)
may be suspended from work without pay with a suspension of a
maximum of two (2) weeks; (ii) will be warned that a second
positive test may result in a suspension of up to four (4) weeks
and a third positive test may result in dismissal; (iii) shall be
evaluated by a Substance Abuse Professional ("SAP"); (iv) will be
restricted from driving, working on a vehicle or performing other
safety sensitive functions until she/he is evaluated by a SAP and
tests negative on a drug test; and (v) will be subject to
unannounced testing as required by law but not to exceed two
years.
2) On the second occasion of a positive drug test, the employee: (i)
may be suspended without pay for up to four (4) weeks; (ii) will
be warned that she/he may be dismissed should she/he have a third
positive drug test; (iii) shall be evaluated by a (SAP); will be
restricted from driving, working on a vehicle, or performing
other safety sensitive functions until she/he is evaluated by an
SAP and tests "negative" on a test; and (v) will be subject to
unannounced testing as required by law but not to exceed two
years.
3) On the third occasion of a positive drug test, the employee may
be dismissed.
4) Employees who do not produce a urine specimen of at least 45 ml
will be directed to consume up to 40 ounces of liquid over a
three hour period. Employees who are still unable to produce an
adequate specimen will be referred to a company designated
physician to evaluate whether such inability is medically
related.
B. Alcohol Tests:
1) Consequences of positive test results showing .04 or more grams
of alcohol per 210 liters of breath:
A) On the first occasion, the employee may be suspended from
work for a maximum of two (2) weeks; will be warned that a
second positive test may result in a suspension of up to four
(4) weeks and a third positive test may result in dismissal;
shall be evaluated by a Substance Abuse Professional (SAP),
will be restricted from driving a vehicle, working on a
vehicle, or performing other safety sensitive functions until
she/he is evaluated by a SAP and tests less than .02 grams of
alcohol per 210 liters of breath on an alcohol test; and will
be subject to unannounced testing as required by law but not
to exceed two years.
B) On the second occasion, the employee may be suspended for a
maximum of four weeks; will be warned that she/he may be
dismissed should she/he have a third positive alcohol test;
shall be evaluated by SAP, will be restricted from driving a
vehicle, working on a vehicle, or performing other safety
sensitive functions until she/he is evaluated by an SAP and
tests less than .02 grams of alcohol per 210 liters of breath
in an alcohol test and will be subject to unannounced testing
as required by law but not to exceed two years.
C) On the third occasion of a positive alcohol test, the
employee may be dismissed.
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<PAGE> 83
2) Consequences of positive test results showing .02 but less than
.04 grams per 210 liters of breath for employees who are required
to have a Commercial Driver's License:
If at any time an employee is tested for alcohol and has a test
result reflecting .02 but less than .04 grams of alcohol per 210
liters of breath in her/his body, she/he may be suspended without
pay for the remainder of the day and be restricted from driving,
performing work on a vehicle or performing other safety sensitive
functions for 24 hours. She/he will also be warned of the
consequences of additional positive tests set forth in this
section. Employees who are restricted from working more than
twice within a rolling twelve month period following the date of
the first positive alcohol test reflecting .02 but less than .04
grams of alcohol per 210 liters of breath will be subject to the
following consequences:
A) On the third occasion of a positive alcohol test during a
rolling 12 month period reflecting .02 but less than .04
grams of alcohol per 210 liters of breath, the employee may
be given a suspension of up to four weeks; and
B) On the fourth occasion of a positive test during a rolling 12
month period reflecting .02 but less than .04 grams of
alcohol per 210 liters of breath, the employee may be
dismissed.
15. PENSION
Viasystems will establish a defined benefit pension plan. This plan will
be designed to receive assets transferred by Lucent Corporation which
represent the pension benefits accrued by ViaSystems employees during
their employment with Lucent and its predecessors.
The newly defined plan will maintain benefits equal to those represented
by the assets transferred by Lucent. The plan will be frozen at current
levels of benefit. Any costs related to the new pension plan will be paid
by ViaSystems, though such costs may be offset by any excess assets
generated by future investment earnings. Any earnings in excess of plan
administrative expenses will be deemed to be the property of the plan
participants and distributed as per a future agreement between the
parties.
16. INSURANCE
ViaSystems will cover all costs related to the establishment and operation
of the following Insurance benefit programs:
A) MEDICAL, PRESCRIPTION DRUG AND VISION CARE insurance plans, which
mirror the coverage made available to ViaSystems employees by the
previous employer.
B) LIFE INSURANCE to automatically provide for one year base pay,
without employee contribution. (Employees may apply for additional
coverage and are responsible for the payment of resulting premiums.)
Employees may elect to purchase DEPENDENT LIFE INSURANCE through an
employer sponsored program.
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<PAGE> 84
C) ACCIDENTAL DEATH AND DISABILITY insurance providing for one years
base pay, at employer expense. The policies offered will include
supplemental insurance available at the employee's option and
expense. (Additional, dependent coverage may be purchased at the
employee's option.)
D) LONG TERM DISABILITY coverage will provide for the replacement of 50%
of base pay after short-term disability benefits have been exhausted.
Benefits can continue until the end of the qualifying disability or
to age 65, whichever occurs first.
17. FLEXIBLE SPENDING/REIMBURSEMENT ACCOUNTS
The employer will also establish flexible spending/reimbursement accounts to
allow participants to set aside pre-tax dollars to provide reimbursement for
qualified expenses for dependent care and medical care expenses.
18. SAVINGS PLAN
ViaSystems will work with the CWA Savings and Retirement Trust to establish a
"401(K)" savings plan. Employees may contribute up to 15% of their annual pay
to their account, subject to the IRS annual contribution limitations. The
employer will make a basic, minimum contribution of 1.0% of each employee's
annual pay regardless of the employee's level of participation. In addition,
the employer agrees to match fifty cents for each dollar of an employee's
contribution up to a maximum employer match of 2.5% of annual pay assuming an
employee contribution of at least 5%. The employer will insure that both the
employee contributions and the employer's match are deposited into the
employee's account as often as the employee receives his or her pay.
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<PAGE> 85
ARTICLE 21 DURATION
This Agreement shall become effective at 12:01 a.m. on December 30th, but only
if ratified by the Union membership and the Company so notified on or before
11:59 p.m. on November 26th, 1996. When so effective, it shall continue in
effect until 11:59 p.m. on December 29th, 1999. However, in accordance with and
subject to the following provisions, this Agreement may be reopened once during
its term solely for the purpose of negotiating changes in basic wages and other
economic issues. Such reopening shall take place 23 months from the effective
date of this Agreement.
In Witness Whereof, the parties have executed this Agreement on the day and
year first above written.
For the UNION For the COMPANY
- ---------------------------------- ----------------------------------
Jack R. Dotson, CWA Representative Alan I. Berger, Attorney at Law
- ---------------------------------- ----------------------------------
Thomas A. Thurston, President Larry S. Bacon, Sr. Vice President
Local 2260
- ---------------------------------- ----------------------------------
Raffael A. Toskes, Committee Richard Mattern, Plant Manager
- ----------------------------------
Kathy S. Clark, Committee
- ----------------------------------
John Reynolds, Committee
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APPENDIX A
WAGE SCHEDULES
<TABLE>
<CAPTION>
PL1 PL2 PL3 PL3A
<S> <C> <C> <C> <C>
STEP1 $7.39 $9.83 $11.09 $16.19
STEP2 $7.91 $10.30 $11.53
STEP3 $8.47 $10.78 $12.05
STEP4 $9.07 $11.30 $12.59
STEP5 $9.71 $11.83 $13.16
STEP6 $10.39 $12.39 $13.75
STEP7 $11.12 $12.98 $14.37
STEP8 $11.91 $13.60 $15.01
STEP9 $12.75 $14.24 $15.69
</TABLE>
<TABLE>
<CAPTION>
TRADES GROUP II TRADES TRAINEE
<S> <C> <C>
STEP1 $16.63 $10.93
STEP2 $17.39 $11.82
STEP3 $18.18 $12.79
STEP4 $19.01 $13.83
STEP5 $19.87 $14.97
STEP6 $20.77 $16.19
STEP7 $21.72 $17.51
STEP8 $18.94
STEP9 $20.49
</TABLE>
<TABLE>
<CAPTION>
TIER2 TIER3 TIER4 TIER5
<S> <C> <C> <C> <C>
STEP1 $236 $275 $327 $400
STEP2 $259 $302 $359 $439
STEP3 $284 $332 $394 $482
STEP4 $312 $364 $433 $529
STEP5 $343 $400 $475 $581
STEP6 $376 $439 $522 $638
STEP7 $413 $483 $573 $700
STEP8 $454 $530 $629 $769
STEP9 $498 $582 $691 $844
</TABLE>
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<PAGE> 87
APPENDIX B
OCCUPATIONAL JOB CLASSIFICATIONS
PRODUCTION OCCUPATION LEVEL PLAN CLASSIFICATIONS
Production Occupation Level I
Production Specialist
Production Occupation Level II
Senior Production Specialist
Production Occupation Level III
Production Planner
Production Occupation Level IIIA
Electrical Repairer
JOURNEYMAN TRADES PLAN CLASSIFICATION
Air Conditioning & Refrigeration Mechanic
Control Systems Technician
Composite Master Toolmaker
Manufacturing Systems Technician
Operating Engineer
Project Trades Planner
Water & Waste Treatment Operator
Trades Trainee
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<PAGE> 88
TIER PLAN OCCUPATIONAL JOB CLASSIFICATIONS
<TABLE>
<CAPTION>
OCCUPATIONAL JOB CLASSIFICATION CORRIDOR
<S> <C>
TIER 2
Secretary Not Applicable
Senior Clerk Not Applicable
TIER 3
Senior Secretary Not Applicable
Associate Not Applicable
TIER 4
Administrative Analyst Administrative
Computer Operations Analyst Computer Operations
Drafting Analyst Drafting
Financial Analyst Financial
Materials Management Analyst Materials Management
Technical Support Analyst Technical Support
Lab Assistant (Environmental) Not Applicable
TIER 5
Senior Administrative Analyst Administrative
Senior Computer Operations Analyst Computer Operations
Senior Drafting Analyst Drafting
Senior Financial Analyst Financial
Senior Materials Management Analyst Materials Management
Senior Technical Support Analyst Technical Support
</TABLE>
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<PAGE> 89
APPENDIX C
JOURNEYMAN CARD -- JOURNEYMAN TRADES PLAN
----------------------------------------------------------
JOURNEYMAN CARD
This certifies that ______________________
has qualified as a journeyman ____________
at ViaSystems Technologies, Inc.
Date: / /
CWA Local 2260 ViaSystems Tech. Inc.
----------------------------------------------------------
SAMPLE JOURNEYMAN CARD
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<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated June 18, 1997, on our audit of the balance sheet of Viasystems,
Inc. We also consent to the reference to our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
St. Louis, Missouri
July 31, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated February 28, 1997, except for Note 18, for which the date is
June 6, 1997, on our audit of the financial statements and financial statement
schedule of Viasystems Group, Inc. We also consent to the reference to our firm
under the caption "Experts."
Coopers & Lybrand L.L.P.
St. Louis, Missouri
July 31, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF CHARTERED ACCOUNTANTS
We hereby consent to the use in the Registration Statement of Viasystems,
Inc. on Form S-1 of our report dated December 20, 1996, relating to the
consolidated balance sheet of Circo Craft Co. Inc. as at September 30, 1996, and
the consolidated statements of earnings, retained earnings, and changes in
financial position for the nine-month period then ended, included in the
Prospectus, which is part of the Registration Statement, and to the reference to
our firm under the heading "Experts".
Coopers & Lybrand
General Partnership
Chartered Accountants
Montreal, Quebec
July 31, 1997
<PAGE> 1
EXHIBIT 23.5
CONSENT OF CHARTERED ACCOUNTANTS
The Directors
Circo Craft Co. Inc.
We hereby consent to the use in the Registration Statement of Viasystems,
Inc. on Form S-1 of our report dated February 1, 1996 relating to the
consolidated balance sheet of Circo Craft Co. Inc. as at December 31, 1995 and
the consolidated statements of earnings, retained earnings and changes in
financial position for each of the years in the two-year period ended December
31, 1995 included in the Prospectus, which is part of the Registration
Statement, and to the references to us under the heading "Experts" in such
Prospectus.
Deloitte & Touche
Chartered Accountants
Montreal, Quebec
July 28, 1997
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated February 21, 1997, on our audit of the statements of net assets
sold to Viasystems Technologies Corp. of the Interconnection Business of the
Microelectronics Group, Interconnection Technologies Unit of Lucent Technologies
Inc. and the related statements of operations. We also consent to the reference
to our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
St. Louis, Missouri
July 31, 1997
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
Forward Group PLC:
We consent to the use of our report dated 7 April 1997 on the consolidated
financial statements of Forward Group PLC as of 31 January 1997 and 1996 and for
each of the years in the three-year period ended 31 January 1997 included
therein, and to the reference to our firm under the heading "Experts" in this
registration statement on Form S-1.
KPMG Audit Plc
Chartered Accountants
Birmingham, England
July 31, 1997
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated May 27, 1997, with respect to the consolidated
financial statements of Interconnection Systems (Holdings) Limited in the
Registration Statement (Form S-1) and related Prospectus of Viasystems, Inc. for
the registration of $400,000,000 Senior Subordinated Notes due 2007.
ERNST & YOUNG
Chartered Accountants
Newcastle upon Tyne, England
July 28, 1997
