<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 16, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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 principal executive offices and 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. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(a) REGISTRATION FEE(b)
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<S> <C> <C>
9 3/4% Series B Senior Subordinated Notes due 2007...... $100,000,000 $29,500
========================================================================================================
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(a) Estimated solely for the purpose of calculating the registration fee.
(b) Calculated in accordance with Rule 457(f) under the Securities Act of 1933,
as amended.
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.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
SUBJECT TO COMPLETION, DATED APRIL 16, 1998
PROSPECTUS
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<S> <C> <C>
OFFER TO EXCHANGE ALL OUTSTANDING
9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
FOR
9 3/4% SERIES B 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% Series B Senior Subordinated Notes due 2007 (the "New Notes") issued
by the Company for each $1,000 principal amount of 9 3/4% Series B Senior
Subordinated Notes due 2007 (the "Old Notes") issued by the Company (the
"Original Offering"), of which an aggregate principal amount of $100.0 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".
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SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NEW NOTES.
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Interest on the New Notes is payable semi-annually on June 1 and December 1 of
each year, commencing on June 1, 1998. 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 $35.0 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 $50.0
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 December
31, 1997, the aggregate principal amount of the Company's outstanding Senior
Indebtedness was approximately $447.4 million (excluding unused commitments) and
the Company had $400.0 aggregate principal amount of Senior Subordinated
Indebtedness, which amount did not include the Notes, and no Subordinated
Indebtedness outstanding. See "Description of New Notes -- Ranking and
Subordination." At December 31, 1997, on a pro forma basis, the Notes would have
effectively ranked junior to approximately $757.9 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."
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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 , 1998,
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 , 1998.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files 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 filed with the Commission on Form S-4 with respect to the
New Notes (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
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 Notes are outstanding.
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CERTAIN DEFINITIONS AND INDUSTRY DATA
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.
(name subsequently changed to Viasystems Canada, 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 (name subsequently changed to
Viasystems Holdings Limited) 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. (name subsequently changed to Viasystems
II Limited) in April 1997 and acquired by the Company concurrently with the
consummation of an offering (the "1997 Offering") of $400.0 million of 9 3/4%
Notes due 2007 (the "1997 Notes"); 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 backplane assemblies ("backplanes"). Such
information was available from a consistent source only for the United States
and European PCB markets and the North American and European backplanes markets.
ii
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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
Management believes that the Company is among the largest manufacturers and
marketers of PCBs, and one of the largest manufacturers and marketers of
backplanes 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. Backplanes 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. As of December 31, 1997, the Company had 16 manufacturing
facilities, strategically located in North America and Europe.
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 Muse, 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 backplane assemblers and to
integrate those acquisitions into a global enterprise that is the preferred
manufacturer and marketer of complex PCBs and backplanes.
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 combined 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.
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 backplane 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 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 backplanes in North America.
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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 $208.5 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")) plus $27.8 million for
the repayment of certain indebtedness, 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."
In June 1997, the Company issued the 1997 Notes pursuant to an indenture,
dated June 6, 1997, by and between the Company and The Bank of New York, as
trustee (the "1997 Indenture"). The Notes and the Indenture are substantially
identical to the 1997 Notes and the 1997 Indenture, respectively.
The 1997 Offering, the Forward Group acquisition, and the Chips Merger are
collectively referred to as the "1997 Transactions."
RECENT DEVELOPMENTS
In January 1998, the Company completed the acquisition of the PCB
Production Unit of Ericsson Telecom AB ("Ericsson") in Norrkoping, Sweden. In
connection with that acquisition, the Company also entered into a global supply
agreement with Ericsson to become the major supplier of PCBs to Ericsson's three
business areas: Infocom Systems, Mobile Systems and Mobile Phones and Terminals.
The purchase price of approximately $7.0 million was funded with cash generated
from operations.
In February 1998, the Company acquired all of the outstanding capital stock
of Print Service Holding N.V. ("Mommers"), for a cash purchase price of
approximately $59.4 million. Mommers is a PCB manufacturer located in The
Netherlands with sales offices in several European countries. Mommers
specializes in the production of high-volume, medium/high technology PCBs and
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backplanes for major European companies in the telecommunications and data
processing industries.
In March 1998, the Company acquired all of the outstanding capital stock of
Zincocelere, S.p.A. ("Zincocelere"), for a cash purchase price of approximately
$85.3 million. Zincocelere is a leading European PCB manufacturer, specializing
in the engineering and production of high-volume, medium/high technology PCBs
for major European customers in the telecommunications, data processing and
automotive industries.
The Mommers and Zincocelere acquisitions were funded with the proceeds from
(i) the sale of additional Common Stock of Viasystems Group in the amount of
approximately $50.0 million (the "Equity Contribution"), (ii) the Original
Offering and (iii) certain Indebtedness under the Company's Senior Credit
Facilities.
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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 $100
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 February
17, 1998, 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. 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 July 27, 1998 and (ii) consummate the
Exchange Offer on or before the twenty-fifth
business day following the
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date on which the Registration Statement is
declared effective. See "The Exchange
Offer -- Purpose and Effect."
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, , 1998, 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
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<PAGE> 10
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 within 25 business days after the
Registration Statement is declared effective,
(iii) any Initial Purchaser so requests with
respect to Old Notes not eligible to be exchanged
for New Notes in the Exchange Offer and held by
it following the consummation of the Exchange
Offer, or (iv) any applicable law or
interpretations do not permit any holder to
participate in the Exchange Offer, or (v) any
holder that participates in the Exchange Offer
does not receive freely transferable New Notes in
exchange for tendered Old Notes (the obligation
to comply with a prospectus delivery requirement
being understood not to constitute a restriction
on transferability).
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.
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THE NEW NOTES
Issuer..................... Viasystems, Inc.
Securities Offered......... $100,000,000 aggregate principal amount of 9 3/4%
Series B 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 June 1, 1998.
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 $35.0 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 $50.0 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. There can be no assurance
that sufficient funds will be available when
necessary to make any required repurchases. 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 December 31, 1997, the
aggregate principal amount of the Company's
outstanding Senior Indebtedness was approximately
$447.4 million (excluding unused commitments) and
the Company had $400.0 million aggregate principal
amount of Senior Subordinated Indebtedness, not
including the Old Notes, and no Subordinated
Indebtedness outstanding. As of December 31, 1997,
on a pro forma basis, the Notes would have
effectively ranked junior to approximately $757.9
million of accrued liabilities and obligations of
the Company's consolidated subsidiaries, including
borrowings under and guarantees in respect of the
Senior
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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 finance
the Mommers and Zincocelere acquisitions; and (ii)
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 limited 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. See "Risk Factors."
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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 December 31, 1997, the Company had approximately
$847.4 million of indebtedness outstanding and there was approximately $169.7
million available for future borrowings for general corporate purposes and
working capital needs and an additional $100.0 million available solely for
future acquisitions, subject to certain conditions, under the Senior Credit
Facilities. The Senior Credit Facilities were subsequently amended to increase
the commitments relating to the Revolving Loans (as defined) by $25.0 million
and add an additional $70.0 million term loan facility. See "Description of the
Senior Credit Facilities." On a pro forma basis, after giving effect to the
Transactions, the 1997 Notes Offering and the Original Offering, the Company's
earnings would have been insufficient to cover fixed charges by approximately
$41.1 million for the year ended December 31, 1997. 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 Notes" and "Description of Senior Credit Facilities."
The Company's high degree of leverage could have several important
consequences to the holders of the 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 are contained in the 1997
Indenture and that will be contained in the Indenture and the Senior Credit
Facilities, as amended, 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 Notes in order to pay the principal of
the 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
floating rates; therefore, the financial results of the Company are and will
continue to be affected by changes in prevailing interest rates. As of December
31, 1997, the Company had approximately $87.5 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 1997 Notes and 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 $99.2 million and $102.2 million would be
required to be paid in 1998 and 1999, respectively, based upon the pro forma
amount of debt outstanding as of December 31, 1997 after giving effect to the
Original Offering and the Exchange Offer. Such amounts do not give consideration
to any additional borrowings which may from time to time be necessary, interest
rate 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
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<PAGE> 14
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, the 1997 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 Notes and the 1997 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, the 1997 Indenture or
the Indenture. Upon the occurrence of an event of default under the Senior
Credit Facilities, the 1997 Notes, or 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 Notes and the 1997 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 Notes and the 1997
Notes. The Indenture will also provide that the failure of the Company or any
Restricted Subsidiary 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 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 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 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 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 Notes, or purchase,
redeem or otherwise retire the Notes, in the event of any default with respect
to Senior Indebtedness, including Senior Indebtedness under the Senior Credit
Facilities. See "Description of Senior Credit Facilities."
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<PAGE> 15
As of December 31, 1997, there was approximately $447.4 million of Senior
Indebtedness outstanding (represented by approximately $87.5 million of direct
borrowings by the Company under the Senior Credit Facilities, $319.3 million for
the Chips Reimbursement Obligation, $3.7 million of Forward Group Loan Notes and
$36.9 million of other indebtedness). In addition, there was approximately
$169.7 million available under the Senior Credit Facilities as of December 31,
1997 for general corporate purposes and working capital needs of the Company and
its subsidiaries and an additional $100.0 million available solely for future
acquisitions, all of which would be Senior Indebtedness if borrowed. The Senior
Credit Facilities were subsequently amended to increase the commitments relating
to the Revolving Loans by $25.0 million and add an additional $70.0 million term
loan facility. Of the amount available to be borrowed as of December 31, 1997
approximately $119.7 million was 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
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 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 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 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. 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 Notes, 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 December 31, 1997, the subsidiaries of
the Company had aggregate liabilities, including trade payables, accrued
expenses and other liabilities, of $757.9 million, including amounts borrowed
under the Senior Credit Facilities and
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guarantees of borrowings made by the Company under the Senior Credit Facilities.
As of December 31, 1997 the Company's foreign subsidiaries had additional
availability under the Senior Credit Facilities of $119.7 million.
LIMITED 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. During the period since the
consummation of the Transactions, the prior operating management of the various
subsidiaries has continued to manage their respective operations and Mills &
Partners has been responsible for the overall management of the Company. There
can be no assurance that the Company can successfully continue to 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. Investors are advised to carefully read "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and the financial
statements contained herein before making an investment decision. 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.
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 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
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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 by the Lucent Division for fiscal years 1994
and 1995, by the Company and the Lucent Division on a combined basis for fiscal
year 1996 and by the Company on a pro forma basis for fiscal year 1997 were
$277.3 million, $283.0 million, $308.8 million and $310.1 million, 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 and 1998, 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 pro forma basis, Lucent Technologies accounted for approximately 39.0%
of the Company's net sales for the fiscal year 1997. Although there is no
assurance the Company's 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."
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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 backplane
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 currency fluctuations, inflation, changes in political and economic
conditions, governmental regulation, changes in import duties, trade
restrictions, work stoppages, currency restrictions and other restraints and
burdensome taxes. On a combined basis, during fiscal year 1996 and on a pro
forma basis, during fiscal year 1997, net sales from international operations
were approximately $531.6 million and $564.9 million, or 60.9% and 62.8% of
combined and pro forma net sales, respectively.
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.
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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.
The recent economic instability in Asia may cause (i) Asian competitors of
the Company to attempt to introduce or increase their supply of products into
the North American or European markets and (ii) customers of the Company that
source their products into the Asian Market to reduce their demand for the
Company's products. As a result, demand for PCBs and backplanes in the markets
in which the Company presently conducts its operations may be adversely
affected.
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 backplane 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 backplane and other electronic assemblies. In
addition, OEMs with captive PCB and backplane 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 changes in technology. See "-- Technological Change, Process
Development and Process Disruption."
15
<PAGE> 20
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
backplane pricing. In addition, the Company believes that price competition from
PCB and backplane manufacturers in Asia and other locations may play an
increasing role in the PCB and backplane 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 33% of the Company's employees are unionized. Approximately
1,040 employees at the Company's Selkirk and Galashiels Scotland facilities are
governed by a collective bargaining agreement that is terminable by either party
upon three months notice. 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 -- 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 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
16
<PAGE> 21
(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 could reasonably be expected to 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 Notes and the 1997 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 Notes and the 1997 Notes that the
Company might be required to purchase. In the event that the Company were
required to purchase Notes and the 1997 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 Notes and
the 1997 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 Notes and the 1997 Notes would require
payment in full of the Senior Credit Facilities and any such Senior Indebtedness
before repurchase of the Notes. See "Description of 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 and the
1997 Notes, would constitute an event of default under the Indenture.
FRAUDULENT CONVEYANCE
The incurrence of indebtedness (such as the Notes) is 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
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 Notes,
subordinate the Notes to other indebtedness of the Company or take other action
detrimental to the holders of the 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 Offering, 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.
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
17
<PAGE> 22
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 NOTES
The New Notes are being offered to the holders of the Old Notes. The New
Notes constitute a new class of securities with no established trading market.
The Old Notes are eligible for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") Market. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
the remaining untendered Old Notes could be adversely affected. There is no
existing trading market for the New Notes, and there can be no assurance
regarding the future development of a market for the New Notes, or the ability
of holders of the New Notes to sell their New Notes or the price at which such
holders may be able to sell their New Notes. If such a market were to develop,
the New Notes could trade at prices that may be higher or lower than their
principal amount or purchase price, depending on many factors, including
prevailing interest rates, the Company's operating results and the market for
similar securities. Each Initial Purchaser has advised the Company that it
currently intends to make a market in the New Notes. The Initial Purchasers are
not obligated to do so, however, and any market-making with respect to the New
Notes may be discontinued at any time without notice. Therefore, there can be no
assurance as to the liquidity of any trading market for the New Notes or that an
active public market for the New Notes will develop. The Company does not intend
to apply for listing or quotation of the New Notes on any securities exchange or
stock market.
Historically, the market for noninvestment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Notes will not
be subject to similar disruptions. Any such disruptions may have an adverse
effect on Holders of the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable state
securities laws. The Company does not currently anticipate that it will register
Old Notes under the Securities Act. See "Description of the Notes -- Exchange
Offer; Registration Rights." Based on interpretations by the staff of the SEC,
as set forth in no-action letters issued to third parties, the Company believes
that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold or otherwise transferred by holders thereof
(other than any such holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course or such holders'
business and such holders, other than broker-dealers, have no arrangement or
understanding with any person to participate in the distribution of such New
Notes. However, the SEC has not considered the Exchange Offer in the context of
a no-action letter and there can be no assurance that the staff of the SEC would
make a similar determination with respect to the Exchange Offer as in such other
circumstances. Each Holder, other than a broker-dealer, must acknowledge that it
is not engaged in, and does not intend to engage in, a distribution of such New
Notes and has no arrangement or understanding to participate in a distribution
of New Notes. If any Holder is an affiliate of the Company or is engaged in or
intends to engage in or has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such Holder (i) may not rely on the applicable interpretations of the
18
<PAGE> 23
staff of the SEC and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes pursuant to the Exchange Offer must acknowledge that such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution." In addition,
to comply with the securities laws of certain jurisdictions, if applicable, the
New Notes may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or an exemption from registration or
qualification is available and is complied with. The Company has agreed,
pursuant to the Registration Rights Agreement, subject to certain limitations
specified therein, to register or qualify the New Notes for offer or sale under
the securities laws of such jurisdiction as any holder reasonably requests in
writing. Unless a holder so requests, the Company does not currently intend to
register or qualify the sale of the New Notes in any such jurisdictions. See
"The Exchange Offer."
19
<PAGE> 24
SELECTED FINANCIAL DATA
THE COMPANY
The selected information below for the period from inception (August 28,
1996) to December 31, 1996 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 selected information below for the year ended December 31, 1997,
presents the financial information of Viasystems, Inc. and its subsidiaries
subsequent to the capital contribution by Viasystems Group and the financial
information of Viasystems Group and its subsidiaries prior to the capital
contribution to Viasystems, Inc. The data for the year ended December 31, 1997,
has been derived from the audited consolidated financial statements of
Viasystems, Inc. The following information should be read in conjunction with
the audited Consolidated Financial Statements of Viasystems, Inc. and the notes
thereto and "Management's Discussion and Analysis of Results of Operations and
Financial Condition," all included elsewhere herein.
<TABLE>
<CAPTION>
FROM INCEPTION
(AUGUST 28, YEAR
1996) TO ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
-------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................... $ 50,400 $ 795,289
Cost of goods sold.......................................... 42,052 554,097
Selling, general and administrative expenses................ 3,844 75,650
Depreciation................................................ 4,102 51,884
Amortization of intangible assets........................... 533 58,153
Write-off of acquired in-process research and
development(1)............................................ 50,800 294,500
-------- ----------
Operating loss............................................ (50,931) (238,995)
Interest expense............................................ 2,503 64,612
Amortization of deferred financing costs.................... 470 6,629
Other expense............................................... 262 1,024
-------- ----------
Loss before income taxes and extraordinary item........... (54,166) (311,260)
Provision (benefit) for income taxes........................ (5,424) 8,432
-------- ----------
Loss before extraordinary item............................ (48,742) (319,692)
Extraordinary loss, net of tax(2)........................... -- 7,796
-------- ----------
Net loss............................................ $(48,742) $ (327,488)
======== ==========
OTHER DATA:
Adjusted EBITDA(3).......................................... $ 4,504 $ 165,542
Operating cash flows........................................ 1,662 104,906
Investing cash flows........................................ (286,286) (273,067)
Financing cash flows........................................ 300,713 184,077
Capital expenditures........................................ 3,563 117,163
Ratio of earnings to fixed charges(4)....................... N/A N/A
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents................................... $ 16,117 $ 27,538
Working capital............................................. 44,938 16,659
Total assets................................................ 387,741 1,068,912
Total debt, including current maturities.................... 265,620 847,375
Stockholders' equity (deficit).............................. 54,973 (92,193)
</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 in 1996 and Forward Group and Chips in 1997. 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, Inc.
(2) The Company recorded, as an extraordinary item, a non-cash write-off of
deferred financing fees of approximately $7,796, net of income tax benefit
of $4,332, related to deferred financing fees incurred on debt retired
before maturity.
(3) Adjusted EBITDA is defined as operating income (loss) plus depreciation,
amortization and the non-cash charge 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 as revenues increase more than cash expenditures
for operating expenses. 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 ("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.
(4) For the purposes of calculating the ratio of earnings to fixed charges,
"earnings" represents income (loss) before income taxes and extraordinary
item 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 interest. Earnings were
insufficient to cover fixed charges by $54,166 for the period August 28,
1996 to December 31, 1996 and $311,260 for the year ended December 31, 1997.
20
<PAGE> 25
CIRCO CRAFT CO. INC.
The selected information below represents the financial information of
Circo Craft for the periods indicated. The data for the three fiscal years ended
December 31, 1995, and the nine months ended September 30, 1996 (the period
prior to the acquisition of Circo Craft by Viasystems Group), set forth in
Canadian GAAP in Canadian dollars ("C$"), has been derived from the audited
consolidated financial statements of Circo Craft. 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 8 to the
consolidated statements of earnings, retained earnings and changes in financial
position of Circo Craft). The data set forth in U.S. GAAP for the two years
ended December 31, 1995, the nine months ended September 30, 1996, has been
derived from the audited 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 consolidated
statements of earnings, retained earnings and changes in financial position of
Circo Craft and the notes thereto and "Management's Discussion and Analysis of
Results of Operations and Financial Condition," all included elsewhere herein.
CANADIAN GAAP
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEARS ENDED DECEMBER 31, ENDED
----------------------------------- SEPTEMBER 30,
1993 1994(1) 1995(1) 1996
--------- --------- --------- -------------
(CANADIAN DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................. C$106,244 C$151,825 C$185,156 C$129,633
Cost of goods sold.................... 88,788 124,929 148,788 101,532
Selling, general and administrative
expenses............................ 7,908 10,079 11,087 7,969
Depreciation and amortization......... 7,296 7,160 7,931 8,456
--------- --------- --------- ---------
Operating income.................... 2,252 9,657 17,350 11,676
Interest expense...................... 337 515 852 646
Other income.......................... -- (195) (915) (880)
Expenses related to sale(2)........... -- -- -- 5,907
--------- --------- --------- ---------
Income before income taxes.......... 1,915 9,337 17,413 6,003
Provision for income taxes............ 1,854 2,719 5,564 3,847
--------- --------- --------- ---------
Net income before non-
controlling interest...... C$ 61 C$ 6,618 C$ 11,849 C$ 2,156
========= ========= ========= =========
OTHER DATA:
EBITDA(3)............................. C$ 9,548 C$ 16,817 C$ 25,281 C$ 20,132
Capital expenditures.................. 11,072 6,679 23,764 13,058
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>
21
<PAGE> 26
APPROXIMATE AMOUNTS IN U.S. GAAP
<TABLE>
<CAPTION>
FIVE YEARS ENDED NINE MONTHS
DECEMBER 31, ENDED
---------------------- SEPTEMBER 30,
1994(1) 1995(1) 1996
--------- --------- -------------
(CANADIAN DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................... C$142,840 C$194,140 C$129,633
Cost of goods sold................................. 122,513 148,788 101,532
Selling, general and administrative expenses....... 10,217 10,846 8,072
Depreciation and amortization...................... 7,160 7,931 8,456
--------- --------- ---------
Operating income................................. 2,950 26,575 11,573
Interest expense................................... 515 852 646
Other income....................................... (195) (915) (880)
Expenses related to sale(2)........................ -- -- 5,907
--------- --------- ---------
Income before income taxes....................... 2,630 26,638 5,900
Provision for income taxes......................... 2,822 6,079 3,680
--------- --------- ---------
Net income (loss) before non-controlling
interest...................................... C$ (192) C$ 20,559 C$ 2,220
========= ========= =========
OTHER DATA:
EBITDA(3).......................................... C$ 10,110 C$ 34,506 C$ 20,029
Operating cash flows............................... 5,653 24,388 18,034
Investing cash flows............................... (7,392) (21,790) (14,444)
Financing cash flows............................... 5,737 9,300 1,222
Capital expenditures............................... 6,679 23,764 13,058
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents.......................... C$ 4,703 C$ 16,600 C$ 21,411
Working capital.................................... 25,276 40,057 41,909
Total assets....................................... 91,139 128,964 134,725
Total debt, including current maturities........... 14,101 15,998 17,563
</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 as revenues
increase more than cash expenditures for operating expenses. 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.
22
<PAGE> 27
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 year ended December 31, 1993, 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 statements
of operations of Viasystems Technologies and the notes thereto and "Management's
Discussion and Analysis of Results of Operations and Financial Condition," all
included elsewhere herein.
<TABLE>
<CAPTION>
ELEVEN MONTHS
FISCAL YEARS ENDED DECEMBER 31, ENDED
--------------------------------- NOVEMBER 30,
1993 1994 1995 1996
--------- --------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $262,364 $310,559 $325,047 $325,102
Cost of goods sold................................... 217,277 238,623 274,824 244,313
Selling, general and administrative expenses......... 24,259 42,930 42,445 34,792
Depreciation and amortization........................ 17,606 16,111 16,378 18,317
-------- -------- -------- --------
Operating income (loss)............................ 3,222 12,895 (8,600) 27,680
Interest expense(1).................................. -- 5 204 917
Other income......................................... (249) (75) (94) (228)
-------- -------- -------- --------
Income (loss) before income taxes.................. 3,471 12,965 (8,710) 26,991
Provision (benefit) for income taxes................. 1,319 4,927 (3,310) 10,257
-------- -------- -------- --------
Net income (loss)........................... $ 2,152 $ 8,038 $ (5,400) $ 16,734
======== ======== ======== ========
OTHER DATA:
EBITDA(2)............................................ $ 20,828 $ 29,006 $ 7,778 $ 45,997
Operating cash flows(3)..............................
Investing cash flows(3)..............................
Financing cash flows(3)..............................
Capital expenditures................................. 9,823 16,884 22,173 16,485
</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 as
revenues increase more than cash expenditures for operating expenses. 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 $8,896, $14,565, $18,987, and
$7,900, net of estimated additional administrative costs to be incurred, for
fiscal years ended 1993, 1994, 1995 and the eleven months ended November 30,
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.
23
<PAGE> 28
FORWARD GROUP PLC
The selected information below presents financial information of Forward
Group for the periods indicated. The data for the four fiscal years ended
January 31, 1997, set forth in U.K. GAAP in U.K. pounds sterling ("U.K.L"), has
been derived from the audited consolidated financial statements of Forward
Group. 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 set forth in U.S. GAAP as of and for the
three fiscal years ended January 31, 1997, has been derived from the audited
consolidated 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 consolidated financial statements of Forward Group
and the notes thereto and "Management's Discussion and Analysis of Results of
Operations and Financial Condition," all included elsewhere herein.
U.K. GAAP
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JANUARY 31,
1994 1995 1996 1997
------- ------- ------- --------
(POUNDS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................................... L20,663 L23,819 L66,839 L105,029
Costs of goods sold............................... 11,505 17,032 49,850 79,030
Selling, general and administrative expenses...... 5,856 3,179 6,425 11,189
Depreciation and amortization..................... 1,143 1,215 2,701 4,694
Restructuring charges(1).......................... -- -- -- 1,244
------- ------- ------- --------
Operating income................................ 2,159 2,393 7,863 8,872
Interest expense.................................. 208 228 412 996
Other income...................................... (75) (52) (113) (229)
Gain on disposal of discontinued operation(2)..... -- (1,503) -- --
------- ------- ------- --------
Income before income taxes...................... 2,026 3,720 7,564 8,105
Provision for income taxes........................ 699 744 2,641 2,707
------- ------- ------- --------
Net income.............................. L 1,327 L 2,976 L 4,923 L 5,398
======= ======= ======= ========
OTHER DATA:
Adjusted EBITDA(3)................................ L 3,302 L 3,608 L10,564 L 14,810
Capital expenditures.............................. 3,050 2,724 4,678 11,841
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents......................... L 4 L 3 L 789 L --
Working capital................................... (94) 1,245 1,898 (3,074)
Total assets...................................... 13,968 15,589 51,124 60,282
</TABLE>
24
<PAGE> 29
APPROXIMATE AMOUNTS IN U.S. GAAP
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------
1995 1996 1997
------- -------- --------
(POUNDS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales................................................... L23,819 L 66,839 L105,029
Costs of goods sold......................................... 17,032 49,850 79,030
Selling, general and administrative expenses................ 3,179 6,390 11,029
Depreciation and amortization............................... 1,219 2,787 4,870
Restructuring charges(1).................................... -- -- 1,244
------- -------- --------
Operating income.......................................... 2,389 7,812 8,856
Interest expense............................................ 228 412 996
Other income................................................ (52) (113) (229)
Gain on disposal of discontinued operation(2)............... (1,523) -- --
------- -------- --------
Income before income taxes................................ 3,736 7,513 8,089
Provision for income taxes.................................. 1,488 2,652 2,760
------- -------- --------
Net income........................................ L 2,248 L 4,861 L 5,329
======= ======== ========
OTHER DATA:
Adjusted EBITDA(3).......................................... L 3,608 L 10,599 L 14,970
Operating cash flows........................................ 1,901 8,594 13,995
Investing cash flows........................................ 301 (12,045) (16,373)
Financing cash flows........................................ (2,203) 4,237 1,589
Capital expenditures........................................ 2,724 4,678 11,841
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents................................... L 3 L 789 L --
Working capital............................................. 1,534 2,553 (3,074)
Total assets................................................ 15,134 56,539 67,406
Total debt, including current maturities.................... 1,746 7,879 15,535
</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) 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. The Company
believes that Adjusted EBITDA provides additional information for
determining its ability to meet debt service requirements as revenues
increase more than cash expenditures for operating expenses. 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.
25
<PAGE> 30
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 1, 1994, March 31, 1995, March 29, 1996, and April 4, 1997 set forth in
U.K. GAAP in U.K.L, has been derived from the audited consolidated financial
statements of Chips. 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 set forth in U.S. GAAP as of and for
the fiscal years ended March 31, 1995, March 29, 1996 and April 4, 1997, has
been derived from the audited 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 consolidated
financial statements of Chips and the notes thereto and "Management's Discussion
and Analysis of Results of Operations and Financial Condition," all included
elsewhere herein.
U.K. GAAP
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------------
APRIL 1, MARCH 31, MARCH 29, APRIL 4,
1994 1995 1996 1997
-------- --------- --------- --------
(POUNDS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales........................................ L51,852 L70,805 L104,611 L141,643
Costs of goods sold.............................. 36,024 49,149 73,407 94,466
Selling, general and administrative expenses..... 6,264 6,242 7,522 10,514
Depreciation and amortization.................... 6,561 10,822 17,302 19,123
------- ------- -------- --------
Operating income............................... 3,003 4,592 6,380 17,540
Interest expense................................. 449 921 807 818
Other income..................................... (200) (109) -- (44)
------- ------- -------- --------
Income before income taxes..................... 2,754 3,780 5,573 16,766
Provision for income taxes....................... 1,488 2,539 4,422 6,874
------- ------- -------- --------
Net income..................................... L 1,266 L 1,241 L 1,151 L 9,892
======= ======= ======== ========
OTHER DATA:
EBITDA(1)........................................ L 9,564 L15,414 L 23,682 L 36,663
Capital expenditures............................. 11,434 14,477 25,544 27,591
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents........................ L 27 L 2,087 L 2,636 L 26,244
Working capital.................................. (2,948) (1,094) (5,851) 11,516
Total assets..................................... 36,067 52,616 67,349 129,921
</TABLE>
26
<PAGE> 31
APPROXIMATE AMOUNTS IN U.S. GAAP
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
--------- --------- --------
(POUNDS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................... L 70,805 L104,611 L141,643
Costs of goods sold..................................... 49,149 73,407 94,466
Selling, general and administrative expenses............ 6,112 7,464 10,437
Depreciation and amortization........................... 9,124 15,752 17,522
-------- -------- --------
Operating income...................................... 6,420 7,988 19,218
Interest expense........................................ 921 807 818
Other income............................................ (109) -- (44)
-------- -------- --------
Income before income taxes............................ 5,608 7,181 18,444
Provision for income taxes.............................. 2,080 2,584 6,112
-------- -------- --------
Net income.................................... L 3,528 L 4,597 L 12,332
======== ======== ========
OTHER DATA:
EBITDA(1)............................................... L 15,544 L 23,740 L 36,740
Operating cash flows.................................... 10,763 18,670 27,826
Investing cash flows.................................... (12,670) (16,816) (24,119)
Financing cash flows.................................... 3,967 (1,305) 19,901
Capital expenditures.................................... 14,477 25,544 27,591
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents............................... L 2,087 L 2,636 L 26,244
Working capital......................................... (677) (3,929) 14,276
Total assets............................................ 45,397 62,893 105,452
Total debt, including current maturities................ 11,295 15,699 35,754
</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 as revenues
increase more than cash expenditures for operating expenses. 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.
27
<PAGE> 32
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 consolidated
financial statements of Viasystems, Inc. (included elsewhere herein), the
unaudited condensed consolidated financial statements of Forward Group for the
three months ended March 31, 1997, and the unaudited condensed consolidated
financial statements of Chips for the three months ended April 4, 1997. In order
to present the Pro Forma Financial Information, certain financial information
for Forward Group and Chips was translated from the local currency to United
States dollars at the exchange rate in effect as of the date of the financial
information based upon exchange rates published in The Wall Street Journal. Such
rates, in all cases, are not materially different from the weighted average
exchange rate for the period being translated. Forward Group financial
information for the three months ended March 31, 1997 and Chips financial
information for the three months ended April 4, 1997, were translated at U.K.
L.61= U.S.$1.00. The Company does not represent that the British pound sterling
amounts shown herein could have been converted to United States dollars at the
quoted exchange rates. 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 unaudited pro forma
statement of operations for the year ended December 31, 1997, gives effect to
the 1997 Transactions, the Original Offering and the Exchange Offer, as though
such transactions had occurred at January 1, 1997. The financial data for
Forward Group and Chips used in the preparation of the Pro Forma Financial
Information has been adjusted for the differences between U.K. GAAP and U.S.
GAAP (see notes to the consolidated financial statements of Forward Group and
Chips, 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. 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.
28
<PAGE> 33
VIASYSTEMS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ORIGINAL
OFFERING AND
1997 1997 EXCHANGE
HISTORICAL TRANSACTIONS TRANSACTIONS OFFER
COMBINED(1) ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
----------- ------------ ------------ -------------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ 899,474 $ -- $899,474 $ -- $899,474
Costs of goods sold...................... 632,435 -- 632,435 -- 632,435
Selling, general and administrative
expenses............................... 82,384 -- 82,384 -- 82,384
Depreciation and amortization............ 119,812 6,591(2) 126,403 -- 126,403
Write-off of acquired in-process R&D..... 294,500 (294,500)(3) -- -- --
--------- -------- -------- ------- --------
Operating income (loss)................ (229,657) 287,909 58,252 -- 58,252
Interest expense, net(4)................. 65,663 15,566(5) 81,229 9,426(6) 90,655
Amortization of deferred financing
costs.................................. 6,629 869(7) 7,498 324(8) 7,822
Expenses related to sale................. 2,161 (2,161)(9) -- -- --
Other expense............................ 886 -- 886 -- 886
--------- -------- -------- ------- --------
Income (loss) before income taxes and
extraordinary item.................. (304,996) 273,635 (31,361) (9,750) (41,111)
Provision (benefit) for income taxes..... 10,395 (7,088)(10) 3,307 (3,641)(10) (334)
--------- -------- -------- ------- --------
Income (loss) before extraordinary
item................................ (315,391) 280,723 (34,668) (6,109) (40,777)
--------- -------- -------- ------- --------
Extraordinary loss, net of income tax
benefit................................ 7,796 (7,796)(11) -- -- --
--------- -------- -------- ------- --------
Net income (loss).............. $(323,187) $288,519 $(34,668) $(6,109) $(40,777)
========= ======== ======== ======= ========
Ratio of earnings to fixed charges(12)... N/A
</TABLE>
See accompanying notes to Unaudited Pro Forma Statement of Operations.
29
<PAGE> 34
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
(1) The following operating data of Viasystems, Inc. is for the year ended
December 31, 1997, and was derived from the audited statement of operations,
included elsewhere herein. The Forward Group and Chips operating data is for
the three month periods ended March 31, 1997 and April 4, 1997,
respectively, and was derived from the unaudited condensed statements of
operations of Forward Group and Chips, respectively.
<TABLE>
<CAPTION>
VIASYSTEMS FORWARD COMBINED
INC. GROUP CHIPS HISTORICAL
---------- ------- ------- ----------
<S> <C> <C> <C> <C>
Net sales..................................... $ 795,289 $41,454 $62,731 $ 899,474
Costs of goods sold........................... 554,097 31,046 47,292 632,435
Selling, general and administrative
expenses.................................... 75,650 3,657 3,077 82,384
Depreciation and amortization................. 110,037 2,152 7,623 119,812
Write-off of acquired in-process R&D.......... 294,500 -- -- 294,500
--------- ------- ------- ---------
Operating income (loss)..................... (238,995) 4,599 4,739 (229,657)
--------- ------- ------- ---------
Interest expense.............................. 64,612 625 426 65,663
Amortization of deferred financing costs...... 6,629 -- -- 6,629
Expenses related to sale...................... -- 2,161 -- 2,161
Other expense (income)........................ 1,024 (66) (72) 886
--------- ------- ------- ---------
Income (loss) before income taxes and
extraordinary item....................... (311,260) 1,879 4,385 (304,996)
Provision for income taxes.................... 8,432 1,387 576 10,395
--------- ------- ------- ---------
Income (loss) before extraordinary item..... (319,692) 492 3,809 (315,391)
--------- ------- ------- ---------
Extraordinary loss, net of income tax
benefit..................................... 7,796 -- -- 7,796
--------- ------- ------- ---------
Net income (loss)........................ $(327,488) $ 492 $ 3,809 $(323,187)
========= ======= ======= =========
</TABLE>
(2) Adjustment reflects the pre-acquisition effect of the acquisitions of
Forward Group and Chips.
(3) Adjustment reflects elimination of the write-off of acquired in-process
research and development as this item is not expected to have a continuing
impact on operations.
(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 $438 in the aggregate for borrowings under the
Tranche B Loan, the Tranche C Loan, and the Forward Group Loan Notes
outstanding at December 31, 1997.
30
<PAGE> 35
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 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, 1997:
<TABLE>
<S> <C>
Senior Subordinated Notes due 2007 -- $400,000 at 9.75%..... $ 39,000
Senior Credit Facilities:
Tranche B Loan -- $55,000 at 8.5%......................... 4,675
Tranche C Loan -- $26,617 at 9.0%......................... 2,396
Chips Reimbursement Obligation(a)......................... 30,170
Forward Group Loan Notes -- $23,971 at 7.0%................. 1,678
Other -- $41,378 at 8.0%.................................... 3,310
--------
81,229
Elimination of historical interest.......................... (65,663)
--------
$ 15,566
========
</TABLE>
- ---------------
(a) Interest on the Chips Reimbursement Obligation consists of:
<TABLE>
<S> <C>
Chips Loan Notes -- $437,500 at 6.2%.................... $27,125
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)
-------
$30,170
=======
</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 Series B Senior Subordinated Notes due
2007 -- $104,500 at an effective rate of approximately
9.02%..................................................... $ 9,426
=======
</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 consummated as of the beginning of
the period and the elimination of the amortization of the deferred
financing costs associated with debt which was retired prior to maturity
with the proceeds of the Original Offering. Deferred financing 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) Adjustment reflects elimination of the extraordinary item as this item is
not expected to have a continuing impact on operations.
31
<PAGE> 36
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(12) 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 $41,111.
32
<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
The following discussion should be read in conjunction with the audited
Consolidated Financial Statements and the notes thereto included elsewhere
herein.
Certain information presented herein includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act. One can identify these
forward-looking statements by their use of words such as "expects," "plans,"
"will," "estimates," "forecasts," "projects" and other words of similar meaning.
One can also identify them by the fact that they do not relate strictly to
historical or current facts. These statements are likely to address expected or
possible future events, including statements of the plans and objectives of
management for future growth, operations, products and services and statements
relating to future economic performance. There can be no assurance that the
Company's actual results will not differ materially from its expectations. One
must carefully consider any such statement and should understand that many
factors could cause actual results to differ from the Company's forward-looking
statements. These factors include inaccurate assumptions and a broad variety of
other risks and uncertainties, including some that are known and some that are
not. No forward-looking statement can be guaranteed and actual future results
may vary materially. For a discussion of such factors, see "Risk Factors."
GENERAL
Viasystems, Inc. is a wholly owned subsidiary of Viasystems Group. Hicks
Muse and Mills & Partners formed Viasystems Group in August 1996 to make
strategic acquisitions of PCB manufacturers and backplane assemblers and to
integrate those acquisitions into a global enterprise that is the preferred
manufacturer and marketer of PCBs and backplanes. 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
approximately $200.0 million. The combination of Circo Craft and the former
Lucent Division created one of the largest independent manufacturers of PCBs and
backplanes 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 $208.5 million. Subsequently, Viasystems Group acquired Forward
Group from the Hicks Muse affiliate. Viasystems, Inc. was formed on April 2,
1997, as a subsidiary of Viasystems Group. On April 10, 1997, Viasystems Group
contributed to Viasystems, Inc. all of the capital of its then existing
subsidiaries -- Circo Craft, Viasystems Technologies, and PCB Acquisition
Limited (the acquisition parent of Forward Group). Prior to the contribution of
this capital by Viasystems Group, Viasystems, Inc. had no operations of its own.
Also in April 1997, Chips Holdings acquired Chips. Viasystems Group subsequently
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 and
the assumption of debt, and the Chips operating subsidiaries became indirect
wholly-owned subsidiaries of Viasystems, Inc.
The discussion included herein of the Company represents the results of
operations of Viasystems, Inc. and its subsidiaries subsequent to the capital
contribution by Viasystems Group and of Viasystems Group and its subsidiaries
prior to the capital contribution of such subsidiaries to Viasystems, Inc.
The Company manufactures PCBs and assembles backplanes in various regions
of the world and exports and imports these products to and from a large number
of countries. The Company's operations may therefore be subject to volatility
because of currency fluctuations, inflation and changes in political and
economic conditions in these countries. Sales and expenses are frequently
33
<PAGE> 38
denominated in local currencies and may be affected as currency fluctuations
affect the Company's product prices and operating costs or those of its
competitors. The Company, from time to time, engages in hedging operations, such
as forward exchange contracts, to reduce its exposure to foreign currency
fluctuations. Such hedging operations historically have not been material, and
gains and losses from such operations have not been significant. There can be no
assurance that such hedging operations will eliminate or substantially reduce
such risk. 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 Standard ("SFAS") No. 52.
The Company's volume of products being produced by the Company's facilities
has increased since the acquisition of each entity, and certain of the Company's
production equipment is operating at or near capacity. A significant portion of
the Company's planned capital expenditures in 1998 is directed toward expansion
of production capacity to meet increased demand.
Management has implemented a Company-wide initiative to ensure that its
information systems and systems applications are capable of processing data and
transactions pertaining to the year 2000. The initiative utilizes both Company
resources and external resources to identify systems and applications affected,
to correct existing systems or to acquire replacement systems, and to test the
systems and applications for compliance with the requirements for processing
year 2000 information. The majority of the Company's major information systems
are currently being upgraded and replaced as part of a strategy to implement
consistent systems worldwide. The new systems being installed are capable of
processing year 2000 information. All remaining systems will either be corrected
in order to enable them to process year 2000 information or will be replaced
with year 2000 compliant systems. The Company will capitalize and depreciate the
cost of replacement systems consistent with its existing capital expenditures
policies. Costs incurred to modify and maintain existing systems will be
expensed as incurred. Management believes that a substantial portion of the
costs for the new systems and the modifications will not represent incremental
costs to the Company, but rather will represent the reallocation of existing and
planned information technology resources. The amounts expensed in 1997 were
immaterial, and management expects that amounts required to be expensed in
future periods will not have a material effect on its financial position or
results of operations. The Company believes that it will achieve compliance with
year 2000 processing requirements in advance of the year 2000, and does not
anticipate any material disruption in its operations as the result of any
failure by the Company to be in compliance. The Company does not have sufficient
information concerning the year 2000 compliance of its suppliers and customers
and, therefore, is unable to predict what effect, if any, such compliance will
have on the Company. However, the Company plans to formally communicate with all
of its significant suppliers and large customers to determine the effect on the
Company if those third parties do not remediate their year 2000 issue. The
Company's present estimate of costs to address the year 2000 compliance include
any costs associated with the anticipated effect of third parties, based on
available information. However, there can be no guarantee that the systems of
third parties on which the Company's systems rely will be converted timely or
that a failure of a third party to convert would not have a material adverse
effect on the Company.
Each of Viasystems Group, Circo Craft, Viasystems Technologies, Forward
Group and Chips are predecessors to Viasystems, Inc. A discussion of the results
of operations for each of the separate entities follows the discussion below
relating to the Company. The separate results of each entity are impacted by a
number of factors including target markets, customers, and local economics.
Differing demand for printed circuit boards in general and demand for different
technologies of printed circuit boards may not be consistent for each of the
predecessor entities acquired. The Company believes that the combination of the
predecessor entities will provide it with a significant advantage in managing
its operations to meet demand. The discussion of the results of operations of
the separate entities has been prepared based upon the results of each of
separate
34
<PAGE> 39
entity in accordance with the local GAAP of the entity and should be read in
conjunction with the "Selected Financial Data" of each of entity and the
financial statements and notes thereto of Viasystems Group, Circo Craft,
Viasystems Technologies, Forward Group, and Chips, all of which are included
elsewhere herein.
RESULTS OF OPERATIONS -- THE COMPANY
Viasystems, Inc. is a wholly owned subsidiary of Viasystems Group.
Viasystems, Inc. was formed on April 2, 1997, as a subsidiary of Viasystems
Group. On April 10, 1997, Viasystems Group contributed to Viasystems, Inc. all
of the capital of its then existing subsidiaries -- Circo Craft, Viasystems
Technologies, and PCB Acquisition Limited (the acquisition parent of Forward
Group). Prior to the contribution of this capital by Viasystems Group,
Viasystems, Inc. had no operations of its own. The discussion included herein of
the Company represents the results of operations of Viasystems, Inc. and its
subsidiaries subsequent to the capital contribution by Viasystems Group and of
Viasystems Group and its subsidiaries prior to the capital contribution of such
subsidiaries to Viasystems, Inc.
Year Ended December 31, 1997
The Company's net sales for the year ended December 31, 1997 were $795.3
million and cost of goods sold were $554.1 million, or 69.7% of net sales.
Selling, general and administrative expenses for the same period were $75.6
million, or 9.5% of net sales. During the year ended December 31, 1997, net cash
from operations was $104.9 million. For the same period, the Company used
approximately $117.2 million for capital expenditures and used approximately
$155.9 million in other investing activities, primarily for the acquisitions of
Forward Group. The acquisitions were funded through the issuance of $187.1
million of long-term obligations and the proceeds of $59.8 million of equity
offerings offset by $34.5 million of financing costs.
The Period From Inception (August 28, 1996) to December 31, 1996
The Company'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 7.5% 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, the Company 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.
The Company believes that its operating results are not comparable between
the period from inception (August 28, 1996) to December 31, 1996 and the year
ended December 31, 1997 nor to the operating results expected to be achieved in
the future due to, among other things, the startup of the Company in 1996, the
acquisitions made in 1996 and 1997 and to date in 1998, the anticipated future
acquisitions, and the financing incurred to fund past and future acquisitions.
The Company believes that, due to the acquisitions made, sales in subsequent
periods will increase from that reported for the period from inception (August
28, 1996) to December 31, 1996 and for the year ended December 31, 1997.
RESULTS OF OPERATIONS -- CIRCO CRAFT
Nine Months Ended September 30, 1996 Compared to Fiscal 1995
Net sales and cost of goods sold for the nine months ended September 30,
1996, were C$129.6 million and C$101.5 million, respectively, compared to sales
and cost of goods sold for fiscal 1995 of C$185.2 million and C$148.8 million,
respectively. Net sales for the nine months ended
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September 30, 1996, were approximately 70.0% of sales for fiscal 1995. In
general, Circo Craft's sales were lower during 1996 due to a shift in the
product mix to lower layer count products driven primarily by the demand of one
of Circo Craft's customers in the automotive industry. As a percentage of sales,
cost of goods sold for the nine months ended September 30, 1996, decreased to
78.3% from 80.4% for fiscal 1995 primarily as a result of cost savings achieved
through improved production processes. Selling, general and administrative
expenses for the nine months ended September 30, 1996, were C$8.0 million
compared to selling, general and administrative expenses for fiscal 1995 of
C$11.1 million. Selling, general and administrative expenses as a percentage of
sales for the nine months ended September 30, 1996, increased to 6.1% from 6.0%
for fiscal 1995 primarily as a result of the lower sales caused by the product
mix shift discussed above.
RESULTS OF OPERATIONS -- VIASYSTEMS TECHNOLOGIES
Eleven Months Ended November 30, 1996 Compared to Fiscal 1995
Net sales and cost of goods sold for the eleven months ended November 30,
1996, were $325.1 million and $244.3 million, respectively, compared to sales
and cost of goods sold for fiscal 1995 of $325.0 million and $274.8 million,
respectively. Net sales for the eleven months ended November 30, 1996, were
approximately 100.0% of sales for fiscal 1995 as sales for Viasystems
Technologies increased during 1996 due to increased demand by Lucent
Technologies caused by the rapidly expanding telecommunications market. As a
percentage of sales, cost of goods sold for the eleven months ended November 30,
1996, decreased to 75.1% from 84.5% for fiscal 1995 primarily as a result of the
favorable impact of productivity improvements. Selling, general and
administrative expenses for the eleven months ended November 30, 1996, were
$34.8 million compared to selling, general and administrative expenses for
fiscal 1995 of $42.4 million. Selling, general and administrative expenses as a
percentage of sales for the eleven months ended November 30, 1996, decreased to
10.7% from 13.1% for fiscal 1995 as a result of decreased allocations from
Lucent Technologies.
RESULTS OF OPERATIONS -- FORWARD GROUP
Fiscal Year Ended January 31, 1997 Compared to Fiscal Year Ended January 31,
1996
Net sales and cost of goods sold for the fiscal year ended 1997 were L105.0
million and L79.0 million, respectively, compared to sales and cost of goods
sold for the fiscal year ended 1996 of L66.8 million and L49.9 million,
respectively. Sales during the fiscal year ended 1997 increased over the fiscal
year ended 1996 due primarily to the full year impact of the 1995 acquisition of
Exacta Circuits and three smaller companies in 1996. As a percentage of sales,
cost of goods sold for the fiscal year ended 1997 increased to 75.2% from 74.6%
for the fiscal year ended 1996 primarily as a result of the three smaller
acquisitions in 1996 which have products with lower margins. Selling, general
and administrative expenses for the fiscal year ended 1997 were L11.2 million
compared to selling, general and administrative expenses for the fiscal year
ended 1996 of L6.4 million. Selling, general and administrative expenses
increased in the fiscal year ended 1997 primarily due to the impact of the
acquisitions discussed above.
RESULTS OF OPERATIONS -- CHIPS
Fiscal Year Ended April 4, 1997 Compared to Fiscal Year Ended March 29, 1996
Net sales and cost of goods sold for the fiscal year ended 1997 were L141.6
million and L94.5 million, respectively, compared to sales and cost of goods
sold for the fiscal year ended 1996 of L104.6 million and L73.4 million,
respectively. Sales during the fiscal year ended 1997 increased over the fiscal
year ended 1996 due to increased demand for higher layer count PCBs for the
telecommunications and computer industries. As a percentage of sales, cost of
goods sold for the fiscal year ended 1997 decreased to 66.7% from 70.2% for the
fiscal year ended 1996 primarily as a result of improved absorption of costs due
to higher sales and productivity improvements achieved
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as a result of a number of cost savings projects underway including projects to
decrease the cost of process materials and improve process automation. Selling,
general and administrative expenses for the fiscal year ended 1997 were L10.5
million compared to selling, general and administrative expenses for the fiscal
year ended 1996 of L7.5 million. Selling, general and administrative expenses as
a percentage of sales for the fiscal year ended 1997 remained relatively
consistent at 7.4% compared to 7.2% for the fiscal year ended 1996.
LIQUIDITY AND CAPITAL RESOURCES -- THE COMPANY
Net cash provided by operating activities was $104.9 million for the year
ended December 31, 1997, which compared to $1.7 million provided by operations
for the period from inception (August 28, 1996) to December 31, 1996. Net cash
used in investing of $273.1 million for the year ended December 31, 1997,
consisted of capital expenditures of $117.2 million and acquisition activities
of a net of $155.9 million. Net cash used in investing of $286.3 million for the
period from inception (August 28, 1996) to December 31, 1996 consisted of
capital expenditures of $3.6 million and acquisition activities of a net of
$282.7 million. Net cash provided by financing activities was $184.1 million for
the year ended December 31, 1997, compared to net cash provided by financing
activities of $300.7 million for the period from inception (August 28, 1996) to
December 31, 1996. The net cash provided by financing activities for the year
ended December 31, 1997 was used primarily for the acquisition of Forward Group.
The acquisition of Chips was completed in a non-cash transaction in which the
selling stockholders received notes payable (the "Chips Loan Notes"). The net
cash provided by financing activities in the period from inception (August 28,
1996) to December 31, 1996 was used primarily to finance the acquisitions of
Circo Craft and the Lucent Division.
On April 11, 1997, the Company entered into a $216.0 million Senior
Subordinated Credit Agreement (the "Subordinated Credit Facility"). The proceeds
of the Subordinated Credit Facility were used to repay a tender facility which
was used to acquire Forward Group and $20.0 million of term loans outstanding
under the Second Amended and Restated Credit Agreement (the "Senior Credit
Facilities"). In connection with the Chips Merger, Viasystems Group assumed the
$437.5 million of Chips Loan Notes. The Chips Loan Notes are collateralized by
letters of credit issued by banks. These letters of credit are in turn
collateralized in part by a fully cash collateralized $118.3 million
reimbursement obligation of Bisto Funding, Inc., a special purpose entity and
sister company of Viasystems established as a subsidiary of Viasystems Group in
connection with the acquisition of Chips, with the remainder, including interest
on the Chips Loan Notes for one year, collateralized by a reimbursement
obligation of the Company (the "Chips Reimbursement Obligation"). As such, the
Company's liability for principal under the Chips Loan Notes represents $319.3
million, or the net amount of the Chips Loan Notes and the cash collateral of
Bisto Funding, Inc. To the extent the interest income earned by Bisto Funding,
Inc. on the $118.3 million of cash it holds is insufficient to fund interest on
$118.3 million of the 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, the first
$118.3 million of principal payments will be paid by Bisto Funding, Inc. 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
obligation in respect of the $319.3 million principal amount of the Chips Loan
Notes (see Note 10 to the Notes to Consolidated Financial Statements, included
elsewhere herein). On June 2, 1997, the Company completed the offering of $400.0
million of 9 3/4% Senior Subordinated Notes due 2007 (the "1997 Notes"). The net
proceeds of the 1997 Notes were used to repay the Subordinated Credit Facility,
approximately $130.3 million of term loans outstanding under the Senior Credit
Facilities, and approximately $41.6 million of revolving credit amounts
outstanding under the Senior Credit Facilities which was borrowed subsequent to
December 31, 1996, to repay debt assumed in the acquisition of Chips. As of
December 31, 1997, the Company's indebtedness consisted of amounts
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outstanding under the Senior Credit Facilities, the 1997 Notes, the Company's
liability under the Chips Reimbursement Obligation, capital leases and other
debt.
On February 9, 1998, the Company completed the offering of an additional
$100.0 million of 9 3/4% Senior Subordinated Notes due 2007 at a price of
104.5%, yielding net proceeds of $101.0 million (the "1998 Notes" and together
with the 1997 Notes, the "2007 Notes"). As a condition of the offering of the
1998 Notes, Hicks Muse agreed to contribute an additional $50.0 million of
equity to the Company and the Senior Credit Facilities were amended to, among
other things, establish an additional $70.0 million term loan (the "Amended
Senior Credit Facilities"). A portion of the proceeds of the 1998 Notes, the
additional term loan under the Senior Credit Facilities, and the equity
contribution have been used to fund the acquisitions of the Ericsson Facility,
Mommers, and Zincocelere. In addition, the Company used a portion of these
proceeds to repay revolving credit line amounts outstanding under the Senior
Credit Facilities which were borrowed subsequent to December 31, 1997.
The Company's Adjusted EBITDA (as defined) for fiscal 1996 and 1997 was
$4.5 million and $165.5 million, respectively. As a percentage of sales,
Adjusted EBITDA was 8.9% and 20.8%, respectively, for the same periods. Adjusted
EBITDA is one of the financial measures in the covenants to the Senior Credit
Facilities. 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 as revenues increase more than cash expenditures
for operating expenses.
The Company anticipates that in addition to the acquisitions discussed
above, its primary uses of cash in 1998 will be (i) for capital expenditures for
maintenance, replacement and acquisitions of equipment, expansion of capacity,
productivity improvements and product and process technology development and
(ii) to pay interest on, and to repay principal of, indebtedness under the
Amended Senior Credit Facilities, the 2007 Notes, the Chips Reimbursement
Obligation and other outstanding indebtedness of the Company as discussed in
Note 10 to the Notes to Consolidated Financial Statements, included elsewhere
herein. The Company anticipates making capital expenditures in 1998 for
facilities, equipment and information systems, including capital expenditures on
the 1998 Acquisitions completed to date. The Amended Senior Credit Facilities
contains annual limits on the Company's capital expenditures. The Company
believes that such limits are sufficient to allow the Company to undertake all
anticipated capital projects. In 1998, the Company will be obligated to make
principal and interest payments of approximately $78.0 million under the Amended
Senior Credit Facilities, 2007 Notes, and Chips Reimbursement Obligation, which
the Company anticipates will be made from cash flow from operations.
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. The 2007 Notes bear interest at the rate of
9 3/4% per annum, which is payable semiannually in arrears. The Chips Loan Notes
have a maturity of six years and pay cash interest quarterly at a fixed rate
initially 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 have the right after the first anniversary of
their issuance to redeem the Chips Loan Notes by putting them to Viasystems
Group on any interest payment date at 100% of their principal amount. In the
event the Chips Loan Notes are redeemed, the Company's liability under the Chips
Reimbursement Obligation of $319.3 million will be funded by a term loan
available under the Senior Credit Facilities.
The Company estimates that the acquired developed technologies it has
capitalized will retain economic utility for 15 years, but that revenues
contributed by the acquired developed technologies
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may decrease 40%-45% through five years and 70-80% through ten years. The
Company also anticipates that these technologies will be supplanted over time by
new products and processes developed through the successful completion of
acquired research and development efforts and new research and development
efforts. The Company believes that efforts to complete the acquired in-process
research and development projects will consist primarily of internal engineering
costs over the next two to four years. These costs are estimated to be
approximately $40-$60 million. Such estimate is subject to revision should there
be changes in the operating environment or the technical knowledge available
within the industry or the Company. The Company anticipates that cash generated
from existing operations will be sufficient to fund such expenditures. The
Company, through its continued investment in research and development, intends
to achieve and sustain technical superiority in the design and delivery of
advanced PCB products, and believes, given its leadership position in the
industry, that it is well positioned to do so. The Company believes that the new
product and process technologies which result from ongoing research and
development will build on the existing core printed circuit board technology and
contribute to an anticipated growth in the Company's sales and anticipated
improvements in the Company's cost of production in the future.
While the core PCB technology remains relatively consistent, the Company's
research and development projects aim to advance the technical know-how, further
develop complete technological solutions, enhance the conceptual formulation and
design of possible technological alternatives, and design and improve testing
capabilities. As such, these research and development projects bear a certain
amount of risk. If these efforts are successful, they will enable the Company to
further penetrate existing markets, pursue sizable new markets, and dramatically
expand the business. If acceptable advancements are not achieved, failed
research and development projects could have a material adverse effect on the
Company's financial position or results of operations. The Company is unable to
accurately quantify the potential impact in the future of the failure of any
single project or multiple projects which were acquired as in-process research
and development in the acquisitions of Circo Craft, Viasystems Technologies,
Forward Group, and Chips. Although there can be no guarantee that the acquired
in-process research and development projects will achieve technological
feasibility, the Company believes that the likelihood of development is
reasonable for these projects. The Company does not believe that it is subject
to any greater risk of failure than its competitors, and, in fact, believes that
its size, access to financial resources and relationships with customers
contribute to a reduction of that risk which gives the Company a competitive
technical advantage.
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 December 31, 1997, there were no amounts outstanding under the
revolving credit facilities available under the Senior Credit Facilities, and
approximately $249.6 million ($100.0 million of which was only available for
future acquisitions) of available borrowing capacity thereunder, subject to
certain limitations. Pursuant to the Amended Senior Credit Facilities, the
revolving credit facilities available were increased by $25.0 million and an
additional $70.0 million term loan was added. The Company anticipates that the
cash flow from operations and additional funds available under the revolving
facilities of the Amended Senior Credit Facilities will be sufficient to meet
its foreseeable requirements for working capital, capital expenditures and debt
service and other operating cash requirements. The acquisition of other
businesses by the Company in the future likely would require external sources of
debt and/or equity financing. 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.
The Amended Senior Credit Facilities and the 2007 Notes restrict the
Company from, among other things: (i) incurring additional indebtedness (other
than permitted indebtedness); (ii) creating liens; (iii) disposing of assets;
(iv) guaranteeing indebtedness; (v) merging or selling
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substantially all of its assets; (vi) declaring and paying certain dividends;
(vii) making certain investments and loans; and (viii) entering into certain
transactions with affiliates, in each case with certain exceptions customary for
credit facilities such as the Amended Senior Credit Facilities.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1998, the Company will adopt SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," and SFAS No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits." The Company does not expect adoption of
these standards to have a material impact on its Consolidated Financial
Statements.
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BUSINESS
GENERAL
The Company believes it is among the largest manufacturers and marketers of
PCBs, and one of the largest manufacturers and marketers of backplanes, 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. Backplanes 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
backplane 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 backplanes 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.
Backplanes. Backplanes 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 backplanes to provide customers with a high level of PCB
technology on a quick-turnaround and volume basis. Net sales of backplanes
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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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 Industry 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 backplanes to
its diverse customer base. The Company's position as a strategic supplier of
prototype quick-turnaround and medium to high volume PCBs and backplane 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
December 31, 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 backplanes in the future, Lucent Technologies
entered into a five-year supply agreement with the Company, through Viasystems
Technologies, pursuant to which substantial revenues may be derived. Sales to
Lucent Technologies by the Lucent Division for fiscal years 1994 and 1995, by
the Company and the Lucent Division on a combined basis for fiscal year 1996 and
by the Company, on a pro forma basis for fiscal year 1997 were $277.3 million,
$283.0 million, $308.8 million and $310.1 million, respectively. On a pro forma
basis, Lucent Technologies accounted for 39% of the Company's net sales for the
fiscal year 1997. 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 backplanes 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 backplane 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 managed by Mills & Partners. See "Certain
Transactions."
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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 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 backplane 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
backplane 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 backplane assembly.
FACILITIES
In addition to its executive offices in St. Louis, Missouri, as of December
31, 1997, the Company operated 16 principal manufacturing and research
facilities located in seven different countries with a total area of
approximately 2.1 million square feet. The Company owns approximately 1.8
million square feet and leases approximately 300,000 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 are 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
a credit facility with a financial institution. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
herein.
44
<PAGE> 49
The Company's facilities at December 31, 1997 were 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
backplanes
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,
prototype and pre-production
Granby, Quebec.............. 103,000 Owned High volume, high density
PCBs
MEXICO
Juarez, Mexico.............. 5,000 Leased(2) Backplanes
EUROPE
Tres Cantos, Spain.......... 5,000 Leased(3) Backplanes
Galashiels, Scotland........ 121,000 Owned High volume PCBs
Selkirk, Scotland........... 142,000 Owned/Leased(4) High volume complex PCBs and
quick-turnaround
Rugby, England.............. 36,000 Leased(5) Pre-production PCBs
Tamworth, England........... 62,000 Owned Prototype, quick-turnaround
complex PCBs
Telford, England............ 44,000 Leased(6) Medium volume PCBs
Manchester, England......... 30,000 Owned Advanced prototype and pre-
production PCBs
Portsmouth, England......... 27,000 Leased(7) High reliability thick-film
hybrids
South Shields, England...... 320,000 Owned High volume PCBs and
quick-turnaround
Newcastle, England.......... 500,000 Under construction High volume PCBs
</TABLE>
- ---------------
(1) Lease expires December 31, 2002.
(2) Lease is month to month.
(3) Lease is month to month
(4) Lease portion of facility (approximately 30,000 sq. ft.) expires May 15,
2004 (includes options to renew through May 15, 2024 and to purchase).
(5) Lease expires June 24, 2009.
(6) Lease expires June 24, 2987 (999 year lease).
(7) Lease expires October 1, 2004.
In addition to the facilities listed above, at December 31, 1997 the
Company maintained 18 sales and marketing facilities, all of which are leased,
including 14 located in North America and one each in Sweden, France, Germany
and South Africa.
45
<PAGE> 50
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 December 31, 1997, the Company had approximately 7,200 employees.
Approximately 2,380 employees, or about 33%, 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.
46
<PAGE> 51
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....................... 60 Chairman of the Board and Chief Executive
Officer of the Company and Viasystems Group
Thomas O. Hicks...................... 52 Director of the Company and Viasystems Group
Jack D. Furst........................ 39 Director of the Company and Viasystems Group
Richard W. Vieser.................... 70 Director of the Company and Viasystems Group
Kenneth F. Yontz..................... 53 Director of the Company and Viasystems Group
Robert N. Mills...................... 56 President, Chief Operating Officer and Director
of the Company and Viasystems Group
David M. Sindelar.................... 40 Senior Vice President, Chief Financial Officer
of the Company and Viasystems Group
Larry S. Bacon....................... 52 Senior Vice President, Human Resources of the
Company
W. Thomas McGhee..................... 62 Secretary and General Counsel of the Company
Gerald C. Nelson..................... 46 Executive Vice President -- Operations of the
Company
James G. Powers...................... 36 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, Inc. 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 and International Wire Group, Inc. Mr. Mills was Chairman of the Board
and Chief Executive Officer of Crain Holdings Corp. and Crain Industries, Inc.
from August 1995 through December 1997 and 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.
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. and Cooperative Computing
Holding Company, Inc.
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
Dallas-based private investment firm from 1987 to May 1989. From 1984 to 1986,
Mr. Furst was a
47
<PAGE> 52
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
Omni America Holdings, Inc., 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 previously served as President of Berg
Electronics Corp. from June 1995 through December 1996 and as Chief Operating
Officer of Berg Electronics Corp. and as President and Chief Executive Officer
of Berg Electronics Group from March 1993 through December 1996. 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, Inc., Berg Electronics Corp.
and International Wire Holding Company. Mr. Sindelar was Senior Vice President
and Chief Financial Officer of Crain Industries, Inc. and Crain Holdings Corp.
from August 1995 through December 1997 and 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, Inc., Berg Electronics Corp.
and International Wire Holding Company. Mr. Bacon was Senior Vice President of
Crain Industries, Inc. and Crain Holdings Corp. from August 1995 through
December 1997 and 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. Prior
to that, he held a variety of
48
<PAGE> 53
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. and Berg Electronics Corp. Mr. McGhee was
Secretary and General Counsel of Crain Industries, Inc. and Crain Holdings Corp.
from August 1995 through December 1997.
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 receive
no compensation for their services as directors. Each director of Viasystems
Group or the Company who is not also an officer, employee or an affiliate of
Viasystems Group or the Company (an "Outside Director") will receive an annual
retainer of $12,000 and a fee of $1,000 for each meeting of the board of
directors at which the director is present. Directors of Viasystems Group and
the Company are entitled to reimbursement of their reasonable out-of-pocket
expenses in connection with their travel to and attendance at the meetings of
the board of directors or committees thereof.
49
<PAGE> 54
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the cash and non-cash compensation earned
during the fiscal year ended December 31, 1997 by the Chief Executive Officer
and the four other most highly compensated executive officers of the Company.
The executive officers of Viasystems Group and the Company did not receive any
compensation from either Viasystems Group or the Company during the period from
inception (August 28, 1996) to December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION(1) SECURITIES
----------------------- UNDERLYING ALL OTHER
YEAR SALARY($) BONUS($)(2) OPTIONS(#)(3) COMPENSATION($)
---- --------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
James N. Mills, Chairman of the
Board and Chief Executive
Officer.......................... 1997 395,000 550,000 2,132,392(4) --
Robert N. Mills, President and
Chief Operating Officer.......... 1997 482,000 313,300 -- --
Barry Brigman, President of the
Americas......................... 1997 310,000 201,500 750,000 66,285(5)
Gerald C. Nelson, Executive Vice
President........................ 1997 289,678 188,290 750,000 --
James G. Powers, Vice President --
Finance.......................... 1997 190,094 123,500 750,000 --
</TABLE>
- ---------------
(1) The Company provides a car allowance, reimbursement of club memberships and
other benefits to certain executives. The aggregate incremental costs of
these benefits to the Company do not exceed the lesser of either $50,000 or
10% of the total of annual salary and bonus reported for each executive.
(2) Bonuses were paid in 1998 for 1997.
(3) Options were granted under the Viasystems Group, Inc. 1997 Stock Option Plan
(the "Stock Option Plan") pursuant to which incentive and non-qualified
stock options may be issued to certain of its Holdings or the Company's
officers, key employees and directors.
(4) Reflects Performance Options (as hereinafter defined) granted by Viasystems
Group, Inc. For a description of the material terms of such options, see
"Benefit Plans -- Performance Options." The Performance Options are
exercisable only in the event that Hicks, Muse Equity Fund III, as of the
exercise date, realized an overall rate of return of at least 35% per annum,
compounded annually on its equity funds invested in Viasystems Group, Inc.
(5) Mr. Brigman received compensation in the form of reimbursement of relocation
expenses during 1997.
50
<PAGE> 55
The following table summarizes option grants made with respect to the
common stock, par value $.01 per share of Viasystems Group, Inc.'s common stock
during fiscal year 1997 to the executive officers named above:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING TO EMPLOYEES PRICE EXPIRATION
OPTIONS(#) IN FISCAL YEAR ($/SHARE) DATE
---------- --------------- --------- ------------------
<S> <C> <C> <C> <C>
James N. Mills (1)........ 2,132,392 26.2% 1.00 September 30, 2006
Robert N. Mills (2)....... -- N/A N/A N/A
Barry Brigman (2)......... 750,000 14.3% 1.00 February 4, 2007
Gerald C. Nelson (2)...... 750,000 14.3% 1.00 February 4, 2007
James G. Powers (2)....... 750,000 14.3% 1.00 February 4, 2007
</TABLE>
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
OF
STOCK PRICE APPRECIATION
FOR OPTION TERM(3)
-------------------------
5%($) 10%($)
---------- ------------
<S> <C> <C>
James N. Mills.............................................. -- 768,000
Robert N. Mills............................................. N/A N/A
Barry Brigman............................................... 413,000 1,020,000
Gerald Nelson............................................... 413,000 1,020,000
James G. Powers............................................. 413,000 1,020,000
</TABLE>
- ---------------
(1) Reflects Performance Options granted by Viasystems Group, Inc. for a
description of the material terms of such options, See "Benefit
Plans -- Performance Options:"
(2) Reflects Options to purchase Viasystems Group Inc.'s Common Stock granted
under the Stock Option Plan. For a description of the material terms of such
options, See "Benefit Plans -- Stock Option Plan."
(3) The potential realizable value portion of the foregoing table illustrates
the value that might be realized upon exercise of the option immediately
prior to the expiration of its term, assuming the specified compound rules
of appreciation of Viasystems Group, Inc.'s Common Stock over the term of
the options. Actual gains on the exercise of the options are dependent on
the future performance of Viasystems Group, Inc.'s Common Stock. There can
be no assurance that the potential values reflected in this table will be
achieved. All amounts have been rounded to the nearest whole dollar.
The following table summarizes the number of options exercised during the
fiscal year ended December 31, 1997 for the above named executive officers and
the value of unexercised options as of December 31, 1997:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED OPTIONS AT
FISCAL YEAR END
ACQUIRED ON VALUE ---------------------------------
EXERCISE(#) REALIZED($) EXERCISABLE(#) UNEXERCISABLE(#)
----------- ----------- -------------- ----------------
<S> <C> <C> <C> <C>
James N. Mills............. -- -- -- 2,468,800
Robert N. Mills............ -- -- -- --
Barry Brigman.............. -- -- -- 750,000
Gerald C. Nelson........... -- -- -- 750,000
James G. Powers............ -- -- -- 750,000
</TABLE>
51
<PAGE> 56
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED IN-THE-MONEY
OPTIONS AT
FISCAL YEAR END(1)
---------------------------------
EXERCISABLE($) UNEXERCISABLE($)
-------------- ----------------
<S> <C> <C>
James N. Mills....................................... -- --
Robert N. Mills...................................... -- --
Barry Brigman........................................ -- --
Gerald C. Nelson..................................... -- --
James G. Powers...................................... -- --
</TABLE>
- ---------------
(1) Represents the difference between the value at December 31, 1997 of
Viasystems Group, Inc.'s Common Stock underlying the options and the
exercise price of such options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation decisions are made by the Board of Directors. James N. Mills
served as both and Executive Officer and Director during 1997 and is expected to
serve in such capacity in 1997.
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.
The compensation provided to Mr. J. Mills under his executive employment
agreement includes an annual base salary of not less than $685,000, 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 $685,000, 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.
52
<PAGE> 57
The compensation provided to Mr. R. Mills under his executive employment
agreement includes an annual base salary of not less than $510,000, 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 $510,000, 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 $230,000, 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. 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 $230,000, 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.
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, 1999, 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 $300,000 subject to
upward adjustment at the sole discretion of the Chairman of the Board of
Directors of Viasystems Group, and such benefits as are
53
<PAGE> 58
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 $300,000, 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. As of December 31, 1997,
options to purchase an aggregate of 5,235,000 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 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. On June 2, 1997, Viasystems Group granted Performance
Options to purchase an additional 8,138,904 shares of Viasystems Group Common
Stock. Messrs. J. Mills and Sindelar were granted additional Performance Options
to purchase 2,132,392 and 1,318,501 shares of Viasystems Group Common Stock,
respectively, and additional Performance Options to purchase
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<PAGE> 59
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 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 as of March 1,
1998. 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 PERCENT NUMBER PERCENT PERCENT
OF SHARES OF CLASS OF SHARES OF CLASS OF 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)................. 200,000 -- 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................. 400,000 * -- -- *
Kenneth F. Yontz(4)............... 200,000 * -- -- *
Robert N. Mills(5)................ -- -- 7,140,000 20.5% 2.5%
David M. Sindelar(6).............. -- -- 7,333,331 21.1% 2.5%
Larry S. Bacon(7)................. -- -- 1,700,000 4.9% *
W. Thomas McGhee(8)............... -- -- 1,700,000 4.9% *
All executive officers and
directors as a group (11
persons)(9).................... 256,200,004 100.0% 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,
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<PAGE> 61
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 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, David R. Deneger 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) Excludes 200,000 shares of Viasystems Group Common Stock owned of record by
the Kenneth F. Yontz 1997 Family Trust, a trust of which Mr. Yontz does not
have the power to vote or dispose of such stock. Mr. Yontz disclaims
beneficial ownership of Viasystems Group Common Stock not owned of record by
him.
(5) Includes 7,090,000 shares held of record by the Robert N. Mills Revocable
Living Trust, a trust of which Mr. R. Mills is a trustee having the power to
vote and dispose of such stock, and 50,000 shares owned of record by another
individual, subject to an irrevocable proxy in favor of Mr. R. Mills. Mr. R.
Mills disclaims beneficial ownership of Viasystems Group Class A Common
Stock not owned of record by him.
(6) Includes 200,000 shares owned of record by two children's trusts, of which
Mr. Sindelar is a trustee having the power to vote and dispose of such
stock, Mr. Sindelar disclaims beneficial ownership of Viasystems Group Class
A Common Stock not owned of record by him. Does not include 1,546,390 shares
of Viasystems Group Common Stock issuable to Mr. Sindelar upon exercise of
Performance Options that are not exercisable within the next 60 days. See
"Management -- Benefit Plans -- Performance Options"
(7) Does not include 1,454,149 shares of Viasystems Group Common Stock issuable
to Mr. Bacon upon exercise of Performance Options that are not exercisable
within the next 60 days. See "Management -- Benefit Plans -- Performance
Options."
(8) Includes 500,000 shares held of record by the McGhee Family Limited
Partnership, of which Mr. McGhee is the general partner having the power to
vote and dispose of such stock, and 1,200,000 shares held of record by the
W. Thomas McGhee Revocable Living Trust, of which Mr. McGhee is the trustee
having the power to vote and dispose of such stock. Mr. McGhee disclaims
beneficial ownership of Viasystems Group Class A Common Stock not owned of
record by him. Does not include 1,454,149 shares of Viasystems Group Common
Stock issuable to Mr. McGhee upon exercise of Performance Options that are
not exercisable within the next 60 days. See "Management -- Benefit
Plans -- Performance Options."
(9) Does not include 10,724,091 shares of Viasystems Group Common Stock issuable
to executive officers of Viasystems Group upon the exercise of Performance
Options or options issued under the Stock Option Plan, or Performance
Options to be issued in connection with the Equity Contribution, none of
which are exercisable within the next 60 day. See "Management -- Benefit
Plans -- Performance Options."
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<PAGE> 62
CERTAIN TRANSACTIONS
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 $208.5 million (including the issuance of the Forward Group Loan
Notes) plus $27.8 million for the repayment of certain indebtedness, 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
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<PAGE> 63
Muse has received aggregate fees of approximately $6.4 million under the
Financial Advisory Agreement, including approximately $.9 million in fees in
connection with the acquisition of Mommers and approximately $1.5 million in
connection with the acquisition of Zincocelere. 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
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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. 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 backplanes 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 managed by Mills & Partners. In addition, certain of the
Company's directors and executive officers have financial interests in Berg. On
a combined basis, in fiscal year 1996 and on a pro forma basis in fiscal year
1997, the Company and the Lucent Division collectively purchased approximately
$38.8 million and $41.0 million, respectively, 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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DESCRIPTION OF SENIOR CREDIT FACILITIES
In connection with the consummation of the Original Offering, the Senior
Credit Facilities were amended (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 (now known as Viasystems Canada, Inc.), 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 (now known as Viasystems Holdings Limited and,
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.
Mommers may, and following other planned acquisitions such acquired entities may
also, become Borrowers under the Chips Revolving Loan. The Senior Credit
Facilities include (i) a $158.0 million term loan facility, (the "U.S. Term
Loan") and a $175.0 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 (the "Canadian Revolving Loan"); (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) $346.5 million Letter of Credit Facility in respect
of the Chips Loan Notes comprised of (i) a $319.3 million term loan facility
("the Chips Term Loans" and together with the U.S. Term Loan, the "Term Loans")
in respect of the principal portion of the Chips Loan Notes (up to $249.2 of
which may be converted to pounds sterling) and (ii) a $27.2 million facility in
respect of interest on the Chips Loan Notes.
The U.S. Term Loan consists of three tranches: (i) $55.0 million of tranche
B term loans (the "Tranche B Loan"), (ii) $33.0 million of tranche C term loans
(the "Tranche C Loan") and (iii) $70 million of additional U.S. term loans made
under the Amendment (the "Additional U.S. Term Loans"). The Tranche B Loan
amortizes semi-annually over seven years and the Tranche C Loan amortizes
semi-annually over eight years. The Additional U.S. Term Loans amortize
semi-annually over 7 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 $40 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"). L2.2 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 consolidated excess cash flow of the Company and its
subsidiaries, and (b) in respect of 100% of
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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, Circo Craft,
Mommers and any other entities that subsequently become borrowers under their
respective loans are unconditionally and 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 (w) 2.5% in the case of the Chips Term Loan and U.S.
Revolving Loan, (x) 2.75% in the case of the Additional U.S. Term Loans, (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 (w) 1.5% in the case of the Chips Term Loan
or U.S. Revolving Loan, (x) 1.75% in the case of Additional U.S. Term Loans, (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
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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 $525
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 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 $42.5 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, $145 million in 1998 and $125.0 million 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 fourth quarter of fiscal 1997 to 3.00:1.00
commencing with the fourth quarter of fiscal 2002 for the remainder of the term
of the loans) and maximum leverage ratios (decreasing from 5.50:1.00 in the
fourth 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 $124.0 million in the fourth
quarter of fiscal 1997 to $300.0 million in the third quarter of fiscal 2002 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
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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.
THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company on February 17, 1998, 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 July 27, 1998 and (ii) consummate the Exchange Offer on
or before the twenty-fifth business day following the date on which the
Registration Statement is declared effective. 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) any Old Notes validly tendered
pursuant to the Exchange Offer are not exchanged for New Notes within 25
business days after the effective date of the Registration Statement, or (iii)
any Initial Purchaser so requests with respect to Old Notes not eligible to be
exchanged for New Notes in the Exchange Offer and held by it following the
consummation of the Exchange Offer, or (iv) any applicable law or
interpretations do not permit any Holder to participate in the Exchange Offer,
or (v) any holder that participates in the Exchange Offer does not receive
freely transferable New Notes in exchange for tendered Old Notes (the obligation
to comply with a prospectus delivery requirement being understood not to
constitute a restriction on
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transferability). 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 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 March 1, 1998, Old Notes representing $100.0 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
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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."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, 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
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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 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
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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
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.
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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 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.
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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.
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 or Overnight Delivery:
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
</TABLE>
By Facsimile (for Eligible Institutions):
(212) 815-6339
For Information or
Confirmation by Telephone:
(212) 815-6333
(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 February
17, 1998 (the "Indenture"), between the Company and The Bank of New York, as
Trustee (the "Trustee"), a copy of which was filed as an exhibit to the
Registration Statement and 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.
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 $100 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 June 1, 1998 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 $35.0 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,
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that the Net Cash Proceeds thereof are contributed to the common or
non-redeemable preferred 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 $50.0 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).
The Company will not be permitted to redeem the Notes unless, substantially
concurrently with such redemption, the Company redeems an aggregate principal
amount of the 1997 Notes (rounded to the nearest integral multiple of $1,000)
equal to the product of: (1) a fraction, the numerator of which is the aggregate
principal amount of Notes to be so redeemed and the denominator of which is the
aggregate principal amount of Notes outstanding immediately prior to such
proposed redemption, and (2) the aggregate principal amount of the 1997 Notes
outstanding immediately prior to such proposed redemption.
"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.
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<PAGE> 77
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
December 31, 1997, on a pro forma basis after giving effect to the Original
Offering and the Exchange Offer, there would have been approximately $447.4
million of Senior Indebtedness and $500.0 million Senior Subordinated
Indebtedness outstanding. In addition, on the same pro forma basis, there would
have been approximately $169.7 million available under the Senior Credit
Facilities as of December 31, 1997 for the general corporate purposes and
working capital needs of the Company, an additional $100.0 million available
solely for future acquisitions and an additional $70.0 million term loan
facility, all of which would be Senior Indebtedness if borrowed. Of the amount
available to be borrowed as of December 31, 1997 on a pro forma basis,
approximately $97.5 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 1997 Note
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 the 1997 Notes and 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.
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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 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
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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
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
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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. The
occurrence of the events that would constitute a Change of Control would also
constitute a "Change of Control" under the 1997 Indenture. In such a case, the
Company would be subject to the same obligations with respect to the 1997 Notes
as the Company would be subject to with respect to the Notes. Moreover, the
exercise by the holders of their right to require the Company to repurchase the
Notes or the 1997 Notes could cause a default under Senior Indebtedness of the
Company, even if the Change of 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 and 1997 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
or 1997 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) from the date of the 1997 indenture 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) from the date of the 1997 indenture shall not
exceed
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$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) from the date of the
1997 indenture 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.
(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 1997
Note 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
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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 1997 Note 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
1997 Note 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 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 1997 Note 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 1997 Note 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 1997 Note 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
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accordance with the "Merger and Consolidation" covenant subsequent to the 1997
Note 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 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, since the 1997 Note
Issue Date; 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.
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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 1997 Note 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 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 1997 Note 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 1997 Note 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
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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
(including, without limitation, the 1997 Notes), 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 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 or the 1997 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 since the 1997 Note
Issue Date 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
or 1997 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
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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 and/or the 1997 Notes tendered pursuant to an offer by the Company for the
Notes and/or the 1997 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 and the 1997
Indenture. If the aggregate purchase price of the Notes and/or the 1997 Notes
tendered pursuant to the offer is less than the Net Available Cash allotted to
the purchase of the Notes and/or the 1997 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 and/or the 1997 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.
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 1997 Note 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) the issuance of Capital Stock of the Company (other
than Disqualified Stock), (ix) any obligations of the Company pursuant to the
Monitoring and Oversight Agreement and the Financial Advisory Agreement, and (x)
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
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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, 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 Consolida-
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tion" 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.
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
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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 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
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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 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.
The Trustee is also the Trustee under the 1997 Indenture.
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
"1997 Indenture" means the Indenture dated as of June 6, 1997 between the
Company and The Bank of New York, as trustee, as the same may be amended,
supplemented or otherwise modified from time to time.
"1997 Note Issue Date" means June 6, 1997.
"1997 Notes" means the Company's 9 3/4% Senior Subordinated Notes due 2007
issued pursuant to the 1997 Indenture.
"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.
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"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
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
1997 Note 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
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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 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
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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 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
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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 1997 Note 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 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
1997 Indenture, (ii) was
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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 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 1997 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
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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 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
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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, 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.
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"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 and the 1997 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 1997 Note 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 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
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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 since the 1997 Note Issue Date, 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 since the 1997 Note Issue Date; 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 Company's common stock in
an aggregate amount outstanding at any one time not to exceed $10 million since
the 1997 Note Issue Date 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) since the 1997
Note Issue Date, exceed $50 million in the aggregate (plus, to the extent not
previously reinvested, any return of capital realized since the 1997 Note Issue
Date 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 1997 Note Issue Date; and
(xii) Investments in connection with pledges, deposits, payments or performance
bonds made or given in the ordinary
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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 1997 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 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 1997 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.
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"Senior Subordinated Indebtedness" means the Notes, the 1997 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 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
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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.
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
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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 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
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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 , 1998, 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.
102
<PAGE> 107
EXPERTS
The consolidated financial statements of Viasystems, Inc. and Subsidiaries
as of December 31, 1996 and 1997, and for the period from inception (August 28,
1996) to December 31, 1996, and for the year ended December 31, 1997 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
statements of earnings, retained earnings and changes in financial position of
Circo Craft 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 statements of earnings, retained
earnings and changes in financial position of Circo Craft for the year ended
December 31, 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
operations of Viasystems Technologies (formerly the Microelectronics Group,
Interconnection Technologies Unit of Lucent Technologies Inc.) for the year
ended December 31, 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, 1997, and for the two
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
April 4, 1997, and for the years ended 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 Circo Craft, the Company dismissed the
former accountants and on January 7, 1997, the Company named Coopers & Lybrand,
L.L.P., the accountants for Viasystems Group, Inc. and Viasystems, Inc., as the
auditor of Circo Craft. The former accountants report did not contain an adverse
opinion or disclaimer of opinion nor was it modified as to an uncertainty, audit
scope, or accounting principle. Such change to the accountant was approved by
the stockholder of Circo Craft. There was no disagreement with the former
accountant on any matter which, if not resolved to the satisfaction of the
former accountant, would have caused the former accountant to make reference to
the subject matter of the disagreement in connection with their reports.
Subsequent to the Acquisition of Forward Group and Chips, the Company
dismissed the former accountants and on November 12, 1997, the Company named
Coopers & Lybrand, L.L.P., the accountants for Viasystems Group, Inc. and
Viasystems, Inc., as the auditor of Forward Group and Chips. The former
accountants' reports did not contain an adverse opinions or disclaimers of
opinion nor were they modified as to an uncertainty, audit scope, or accounting
principle. Such changes to the accountants was approved by the stockholder of
Forward Group and Chips. 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 disagreement in connection with their reports.
103
<PAGE> 108
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
VIASYSTEMS, INC. & SUBSIDIARIES
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of December 31, 1996 and
1997...................................................... F-3
Consolidated Statements of Operations from inception (August
28, 1996) to December 31, 1996 and for the year ended
December 31, 1997......................................... F-4
Consolidated Statements of Stockholder's Equity from
inception (August 28, 1996) to December 31, 1996 and for
the year ended December 31, 1997.......................... F-5
Consolidated Statements of Cash Flows from inception (August
28, 1996) to December 31, 1996 and for the year ended
December 31, 1997......................................... F-6
Notes to Consolidated Financial Statements.................. F-7
Schedule II -- Valuation and Qualifying Accounts............ F-26
CIRCO CRAFT CO. INC.
Auditors' Report............................................ F-27
Auditors' Report............................................ F-28
Consolidated Statements of Retained Earnings for the year
ended December 31, 1995 and the nine month period ended
September 30, 1996........................................ F-29
Consolidated Statements of Earnings for the year ended
December 31, 1995 and the nine month period ended
September 30, 1996........................................ F-30
Consolidated Statements of Changes in Financial Position for
the year ended December 31, 1995 and the nine month period
ended September 30, 1996.................................. F-31
Notes to Consolidated Statements............................ F-32
VIASYSTEMS TECHNOLOGIES CORP. (FORMERLY MICROELECTRONICS
GROUP, INTERCONNECTION TECHNOLOGIES UNIT OF LUCENT
TECHNOLOGIES, INC.)
Report of Independent Auditors.............................. F-39
Statements of Operations for the year ended December 31,
1995 and the eleven month period ended November 30,
1996...................................................... F-40
Notes to Financial Statements............................... F-41
FORWARD GROUP PLC
Report of Independent Auditors.............................. F-44
Consolidated Profit and Loss Accounts for the years ended
January 31, 1996 and 1997................................. F-45
Consolidated Statements of Total Recognized Gains and Losses
for the years ended January 31, 1996, and 1997............ F-46
Consolidated Balance Sheet at January 31, 1997.............. F-47
Consolidated Statements of Cash Flows for the years ended
January 31, 1996 and 1997................................. F-48
Notes to the Consolidated Financial Statements.............. F-49
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
Report of Independent Auditors.............................. F-70
Consolidated Profit and Loss Accounts for the years ended
March 29, 1996 and April 4, 1997.......................... F-71
Consolidated Statements of Total Recognized Gains and Losses
for the years ended March 29, 1996 and April 4, 1997...... F-72
Consolidated Balance Sheet at April 4, 1997................. F-73
Consolidated Statements of Cash Flows for the years ended
March 29, 1996 and April 4, 1997.......................... F-74
Notes to the Consolidated Financial Statements.............. F-75
</TABLE>
F-1
<PAGE> 109
REPORT OF INDEPENDENT AUDITORS
The Board of Directors of Viasystems, Inc.:
We have audited the consolidated financial statements and the financial
statement schedule of Viasystems, Inc. and subsidiaries (as defined in Note 1 to
the financial statements) listed in the index on page 25 of this Form 10-K.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Viasystems,
Inc. and subsidiaries as of December 31, 1996, and 1997 and the consolidated
results of their operations and their cash flows for the period from inception
(August 28, 1996) to December 31, 1996 and for the year ended December 31, 1997,
in conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
Coopers & Lybrand L.L.P.
St. Louis, Missouri
January 30, 1998,
except for Note 19
for which the date is
March 26, 1998
F-2
<PAGE> 110
VIASYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 16,117 $ 27,538
Accounts receivable, less allowance for doubtful accounts
of $409 and $2,573, respectively....................... 37,149 113,269
Inventories, net.......................................... 43,123 84,631
Prepaid expenses and other................................ 7,333 26,240
-------- ----------
Total current assets.............................. 103,722 251,678
Property, plant and equipment, net.......................... 208,748 448,128
Deferred financing costs, net............................... 27,351 58,696
Intangible assets, net...................................... 47,920 309,470
Other assets................................................ -- 940
-------- ----------
Total assets...................................... $387,741 $1,068,912
======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term obligations............... $ 10,804 $ 31,363
Accounts payable.......................................... 5,185 86,941
Accrued and other liabilities............................. 42,112 85,860
Income taxes payable...................................... 683 30,855
-------- ----------
Total current liabilities......................... 58,784 235,019
Deferred taxes.............................................. 3,785 67,797
Long-term obligations, less current maturities.............. 254,816 816,012
Other noncurrent liabilities................................ 15,383 42,277
-------- ----------
Total liabilities................................. 332,768 1,161,105
-------- ----------
Stockholder's equity (deficit)
Common stock, par value $.01 per share, 1,000 shares
authorized, issued and outstanding..................... -- --
Contributed capital....................................... 103,794 282,763
Accumulated deficit....................................... (48,742) (376,230)
Cumulative translation adjustment......................... (79) 1,274
-------- ----------
Total stockholder's equity (deficit).............. 54,973 (92,193)
-------- ----------
Total liabilities and stockholder's equity
(deficit).................................... $387,741 $1,068,912
======== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated balance sheets
F-3
<PAGE> 111
VIASYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INCEPTION
(AUGUST 28,
1996) TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Net sales................................................... $ 50,400 $ 795,289
Operating expenses:
Cost of goods sold........................................ 42,052 554,097
Selling, general and administrative....................... 3,844 75,650
Depreciation.............................................. 4,102 51,884
Amortization of intangibles............................... 533 58,153
Write-off of acquired in-process research and
development............................................ 50,800 294,500
-------- ---------
Operating loss.............................................. (50,931) (238,995)
Other expenses:
Interest expense.......................................... 2,503 64,612
Amortization of deferred financing costs.................. 470 6,629
Other expense............................................. 262 1,024
-------- ---------
Loss before income taxes and extraordinary item............. (54,166) (311,260)
Provision (benefit) for income taxes........................ (5,424) 8,432
-------- ---------
Loss before extraordinary item.............................. (48,742) (319,692)
Extraordinary item -- loss on early extinguishment of debt,
net of income tax benefit of $4,332....................... -- 7,796
-------- ---------
Net loss.................................................... $(48,742) $(327,488)
======== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 112
VIASYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
COMMON CONTRIBUTED ACCUMULATED TRANSLATION
STOCK CAPITAL DEFICIT ADJUSTMENT TOTAL
------ ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance at Inception (August 28,
1996)............................. $ -- $ -- $ -- $ -- $ --
Capital contributed to Viasystems
Group prior to formation of the
Company........................ -- 103,794 -- -- 103,794
Net loss.......................... -- -- (48,742) -- (48,742)
Foreign currency translation
adjustment..................... -- -- -- (79) (79)
------ -------- --------- ------ --------
Balance at December 31, 1996........ -- 103,794 (48,742) (79) 54,973
Capital contribution by Viasystems
Group to the Company........... -- 178,969 -- -- 178,969
Net loss.......................... -- -- (327,488) -- (327,488)
Foreign currency translation
adjustment..................... -- -- -- 1,353 1,353
------ -------- --------- ------ --------
Balance at December 31, 1997...... $ -- $282,763 $(376,230) $1,274 $(92,193)
====== ======== ========= ====== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 113
VIASYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INCEPTION
(AUGUST 28,
1996) TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net loss.................................................. $ (48,742) $(327,488)
Adjustments to reconcile net loss to net cash provided by
Operating activities:
Write-off of acquired in-process research and
Development........................................... 50,800 294,500
Extraordinary item -- loss on early extinguishment of
debt.................................................. -- 12,128
Depreciation........................................... 4,102 51,884
Amortization of intangibles............................ 533 58,153
Amortization of deferred financing costs............... 470 6,629
Deferred taxes......................................... (5,874) (15,109)
Change in assets and liabilities, net of acquisitions:
Accounts receivable.................................. (15,469) (8,050)
Inventories.......................................... 2,655 (15,979)
Prepaid expenses and other........................... (927) (6,640)
Accounts payable and accrued and other liabilities... 14,875 38,539
Income taxes payable................................. (761) 16,339
--------- ---------
Net cash from operating activities........................ 1,662 104,906
--------- ---------
Cash flows provided by (used in) investing activities:
Acquisitions, net of cash acquired of $20,890 and
$42,778, respectively................................. (282,723) (155,904)
Capital expenditures................................. (3,563) (117,163)
--------- ---------
Net cash used in investing activities.................. (286,286) (273,067)
--------- ---------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of long-term obligations...... 238,283 --
Proceeds from the issuance of Senior Subordinated
Notes due 2007...................................... -- 400,000
Proceeds from the Subordinated Credit Facility....... -- 216,000
Repayment of amounts due under the Credit Agreements
and the Second Amended and Restated Credit
Agreement........................................... -- (151,964)
Repayment of the Subordinated Credit Facility........ -- (216,000)
Repayment of other long-term obligations............. -- (90,187)
Equity proceeds...................................... 73,794 60,719
Financing fees and other............................. (11,364) (34,491)
--------- ---------
Net cash from financing activities..................... 300,713 184,077
--------- ---------
Effect of exchange rate changes on cash................ 28 (4,495)
--------- ---------
Net change in cash and cash equivalents................ 16,117 11,421
Cash and cash equivalents at beginning of period....... -- 16,117
--------- ---------
Cash and cash equivalents at end of period............. $ 16,117 $ 27,538
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest............................... $ 323 $ 59,956
========= =========
Cash paid for income taxes........................... $ 1,184 $ 4,742
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 114
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
1. BASIS OF PRESENTATION
Viasystems, Inc. ("Viasystems") is a wholly owned subsidiary of Viasystems
Group, Inc. 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. Prior to the
contribution of this capital by Viasystems Group, Inc., Viasystems had no
operations of its own. The consolidated financial statements included herein
present the results of operations of Viasystems and its subsidiaries subsequent
to the capital contribution by Viasystems Group, Inc., and the results of
operations of Viasystems Group, Inc. and its subsidiaries prior to the capital
contribution of such subsidiaries to Viasystems. As used herein, the Company
refers to Viasystems and its subsidiaries subsequent to the capital contribution
by Viasystems Group, Inc. and Viasystems Group, Inc. and its subsidiaries prior
to such capital contribution. These financial statements have been adjusted to
reflect the equity structure of Viasystems on a retroactive basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Company is primarily involved in manufacturing and distributing
advanced printed circuit boards ("PCBs") and assembling backplanes at various
facilities located in the United States, Canada, United Kingdom and Puerto Rico.
The Company's customers include a diversified base of manufacturers in the
telecommunications, computer and automotive industries throughout North America
and Europe.
Principles of Consolidation
The consolidated financial statements include the accounts of Viasystems
and its wholly-owned subsidiaries. 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.
Derivative Financial Instruments
In 1997, the Company entered into an interest rate hedging arrangement for
the purpose of hedging against interest rate fluctuations. The Company paid a
fee of approximately $180 for the arrangement. This fee is included in deferred
financing fees and amortized on a straight-line basis over the life of the
arrangement, through March 1999. The interest rate hedging arrangement provides
a ceiling on the base interest rate of 7.0% on borrowings up to $120,000 under
the Second Amended and Restated Credit Agreement (see Note 10) through March
1998 and a ceiling on the base interest rate of 8.0% on borrowings up to
$120,000 under the Second Amended and Restated Credit Agreement thereafter
through March 1999. The Company estimates that fair value approximates the
carrying value of the interest rate hedging arrangement.
In 1997, the Company entered into forward foreign currency collars which
effectively lock in a range of exchange rates to protect the Company against
foreign currency fluctuations in connection
F-7
<PAGE> 115
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
with the Chips Term Loan (as defined in Note 10), which the Company will convert
to a foreign currency if the Chips Term Loan is drawn. As discussed in Notes 3
and 10, the Company has entered into the Chips Loan Notes that may be called,
commencing April 1, 1997. If called, the Chips Loan Notes will be repaid from
proceeds from the Chips Term Loan. The Company is required to convert the Chips
Term Loan to a foreign currency after it is drawn. The collars were acquired at
no cost and expire in April 1998. Gains and losses on the collars are recorded
in current period earnings. The amount of gain for the year ended December 31,
1997 was immaterial.
From time to time, the Company engages in short-term hedging activities to
reduce its exposure to foreign currency fluctuations. Such hedging activities
are not material and gains and losses from such activities are not significant.
There can be no assurance that these hedging activities will eliminate or reduce
foreign currency risk.
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
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
straight-line method, which approximates the effective interest method.
Intangible Assets
Intangible assets consist primarily of identifiable intangibles acquired
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. In addition, the
Company's policy for the recognition and measurement of any impairment of
goodwill is to assess the current and anticipated future discounted cash flows
associated with the goodwill. An impairment of goodwill occurs when the
discounted cash flows (excluding interest) do not exceed the carrying amount of
goodwill. The amount of the impairment loss is the difference between the amount
of the goodwill and the discounted cash flows associated with the goodwill. At
December 31, 1997 the Company does not believe there has been any impairment of
its identified
F-8
<PAGE> 116
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
intangible assets or goodwill. Amortization of intangible assets is computed
using systematic methods over the estimated useful lives of the related assets
as follows:
<TABLE>
<CAPTION>
LIFE METHOD
---- ------
<S> <C> <C>
Developed technologies........................ 15 years Double-declining balance
Assembled workforce........................... 1 year Straight-line
Customer list................................. 3 years Straight-line
Goodwill...................................... 20 years Straight-line
</TABLE>
Research and Development
Expenditures for research and development activities relating to new
products and processes are charged to expense as incurred. The Company's
research and development expenditures were $545 and $10,797 for the period from
inception (August 28, 1996) to December 31, 1996 and for the year ended December
31, 1997, respectively.
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 value of the Senior Subordinated Notes due 2007 (see Note
10) is $413,500 at December 31, 1997. The Company has estimated this fair value
data by using current market data. The fair market values of the other 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 received $2,802 and $1,778 of property, plant, and
equipment paid for by Lucent Technologies Inc. for the period from inception
(August 28, 1996) to December 31, 1996 and for the year ended December 31, 1997,
respectively.
The purchase of the shares of Forward Group was partially funded through
the issuance of approximately $24,420 of notes payable to Forward Group's former
shareholders. The purchase of shares of ISL was entirely funded through the
issuance of approximately $437,500 of loan notes.
In 1997, the Company received a non-cash contribution of $118,250 from
Viasystems Group, Inc, when Viasystems Group, Inc. transferred $118,250 in cash
to Bisto Funding, Inc. The cash transfer was recorded as a capital contribution
and a reduction of the carrying amount of the notes payable to the former
shareholders of Interconnection Systems (Holdings) Limited (see Note 3). The
notes payable recorded by the Company are net of the $118,250 as Bisto Funding,
Inc. is
F-9
<PAGE> 117
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
contractually obligated to pay such amount to the note holders in the event the
notes payable are redeemed (see Note 10).
3. ACQUISITIONS
On October 1, 1996, the Company acquired all of the outstanding stock of
Circo Craft Co. Inc. ("Circo Craft"), 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 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 allocated to the
assets and liabilities based on their estimated respective fair values. The
Company allocated a significant portion of the purchase price, as described
below, to intangible assets, 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
1-15 years. The remaining unidentified intangible asset has been allocated to
goodwill and is being amortized over its estimated useful life of 20 years (see
Note 2).
The total purchase price including fees and expenses has been allocated to
the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 52,846
Property, plant and equipment............................... 50,710
Developed technologies...................................... 13,400
Assembled workforce......................................... 5,200
Customer list............................................... 3,400
In-process R&D.............................................. 39,200
Goodwill.................................................... 9,829
Non-current assets.......................................... 2,500
Current liabilities......................................... (24,103)
Non-current liabilities..................................... (22,247)
--------
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. (the "Lucent Division"), a rigid printed circuit board
manufacturer and backplane assembler, (the "Lucent Division Acquisition")
F-10
<PAGE> 118
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 of the Company 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 allocated to the assets
and liabilities based on their estimated respective fair values. The Company
allocated a significant portion of the purchase price, as described below, to
intangible assets, including approximately $11,600 of 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 inprocess
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 1-15 years. The remaining unidentified
intangible asset has been allocated to goodwill and is being amortized over its
estimated useful life of 20 years (see Note 2).
The total purchase price including fees and expenses has been allocated to
the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 39,204
Property, plant and equipment............................... 155,674
Developed technologies...................................... 7,866
Assembled workforce......................................... 5,810
Customer list............................................... 5,099
In-process R&D.............................................. 11,600
Goodwill.................................................... 1,013
Non-current assets.......................................... 13,080
Current liabilities......................................... (9,862)
Non-current liabilities..................................... (27,515)
--------
Total............................................. $201,969
========
</TABLE>
On April 11, 1997, the Company acquired all of the outstanding stock of
Forward Group, PLC ("Forward"), a manufacturer of rigid printed circuit boards
located in the U.K. The purchase price of approximately $208,483 consisted of
cash and notes payable to certain Forward stockholders plus $5,585 of
acquisition fees and expenses (the "Forward Acquisition"). The Forward
Acquisition and 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 Note 10).
F-11
<PAGE> 119
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Forward 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.
Accordingly, the results of operations of Forward since its acquisition are
included in the results of operations of the Company. The Company has allocated
a significant portion of the purchase price, as described below, to intangible
assets, including approximately $97,800 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 $97,800 and was
charged to expense as of the acquisition date. The other acquired intangibles
include developed technology, assembled workforce, and customer list. These
intangibles are being amortized over their estimated useful lives of 1-15 years.
The remaining unidentified intangible asset has been allocated to goodwill and
is being amortized over its estimated useful life of 20 years (see Note 2).
The total purchase price including fees and expenses has been allocated to
the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.............................................. 42,656
Property, plant and equipment............................... 58,534
Developed technologies...................................... 34,800
Assembled workforce......................................... 6,600
Customer list............................................... 13,200
In-process R&D.............................................. 97,800
Goodwill.................................................... 53,083
Non-current assets.......................................... 5,660
Current liabilities......................................... (41,938)
Non-current liabilities..................................... (56,327)
--------
Total............................................. $214,068
========
</TABLE>
In April 1997, Viasystems Group, Inc.'s stockholders and certain of its
affiliates formed Chips Holding, 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 plus $8,953 of acquisition fees and expenses (the "ISL Acquisition").
The purchase price consisted entirely of notes payable to the former
stockholders of ISL. In connection with the transaction, the stockholders of
Viasystems Group, Inc. 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 (the "Chips Merger") in
consideration for the issuance to Viasystems Group, Inc.'s stockholders and
certain of its affiliates of 140,000,000 shares of Viasystems Group, Inc. common
stock valued at $140,000. 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 (see Note 10).
The ISL 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. The
Company has allocated a significant portion of the purchase price, as described
below, to intangible assets, including approximately $196,700 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 $196,700 and was charged to expense as of the acquisition date. The
other acquired intangibles include developed technology, assembled workforce,
and customer list. These intangibles are being amortized over their estimated
F-12
<PAGE> 120
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
useful lives of 1-15 years. The remaining unidentified intangible asset has been
allocated to goodwill and is being amortized over its estimated useful life of
20 years (see Note 2).
The Chips Merger was accounted for as a transfer of assets among companies
under common control and was recorded at Chips Holdings, Inc.'s historical cost.
In the Chips Merger, ISL and its subsidiaries became wholly owned subsidiaries
of Viasystems, and as such, Viasystems will account for the acquisition of ISL
as of the acquisition by Chips Holdings, Inc. and the results of operations of
ISL since the acquisition by Chips Holdings, Inc. are included in the results of
operations of the Company.
The total purchase price including fees and expenses has been allocated to
the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 96,287
Property, plant and equipment............................... 114,983
Developed technologies...................................... 66,500
Assembled workforce......................................... 8,000
Customer list............................................... 17,900
In-process R&D.............................................. 196,700
Goodwill.................................................... 115,092
Non-current assets.......................................... 12,971
Current liabilities......................................... (71,140)
Non-current liabilities..................................... (110,840)
---------
Total..................................................... $ 446,453
=========
</TABLE>
The Company will evaluate the capacities and production capabilities of all
acquired entities to assess potential cost savings from consolidating those
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 results
of operations of the Company for the year ended December 31, 1996, as though the
Circo Craft Acquisition, the Lucent Division Acquisition, the Forward
Acquisition and the ISL Acquisition and the related financing had occurred at
January 1, 1996 and for the year ended December 31, 1997, as though the Forward
Acquisition and the ISL Acquisition and the related financing had occurred at
January 1, 1997. In preparing this data, the financial data of Circo Craft for
the period from January 1, 1996 to the date of the Circo Craft Acquisition has
been translated at an exchange rate of Canadian $1.36 = U.S. $1.00, the exchange
rate at September 30, 1996, which is not materially different from the average
exchange rate for the period. Due to the differing year ends of Forward and ISL
compared to the Company, the results of Forward for the month of January and ISL
for the three months ended April 4, 1997 are included in the unaudited pro forma
data for both the year ended December 31, 1996, and 1997. The financial data of
Forward for the year ended January 31, 1997 and for the three months ended March
31, 1997 has been translated at an exchange rate of U.K.L.62 = U.S.$1.00 and
U.K.L.61 = U.S.$1.00, respectively, which is not materially different from the
average exchange rate for the respective period. The financial data for ISL for
the year and three months ended April 4,
F-13
<PAGE> 121
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1997, has been translated at an exchange rate of U.K. L0.61 = U.S. $1.00, which
is not materially different from the average exchange rate for the period.
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Net sales.................................................. $872,424 $899,474
Loss before extraordinary item............................. (51,411) (35,245)
Net loss................................................... (51,411) (35,425)
</TABLE>
4. INVENTORIES
The composition of inventories at December 31 is as follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Raw materials............................................... $12,829 $24,709
Work in process............................................. 16,796 28,472
Finished goods.............................................. 13,498 31,450
------- -------
Total............................................. $43,123 $84,631
======= =======
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets are amortized using systematic methods over various
estimated useful lives (see Note 2). The composition of intangible assets at
December 31 is as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Developed technologies...................................... $ 21,185 $122,808
Assembled workforce......................................... 10,980 25,468
Customer list............................................... 8,479 39,679
Goodwill.................................................... 7,809 180,039
-------- --------
48,453 367,994
Less: Accumulated amortization.............................. (533) (58,524)
-------- --------
Total............................................. $ 47,920 $309,470
======== ========
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
The composition of property, plant and equipment at December 31 is as
follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Land and buildings.......................................... $ 52,480 $ 77,346
Machinery, equipment and other.............................. 144,455 343,028
Construction in progress.................................... 12,533 78,101
Leasehold improvements...................................... 3,368 1,505
-------- --------
212,836 499,980
Less: Accumulated depreciation.............................. (4,088) (51,852)
-------- --------
Total............................................. $208,748 $448,128
======== ========
</TABLE>
F-14
<PAGE> 122
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. ACCRUED AND OTHER LIABILITIES
The composition of accrued and other liabilities at December 31 is as
follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Accrued payroll and related costs........................... $12,069 $22,761
Accrued capital expenditures................................ 1,752 24,565
Accrued and other liabilities............................... 28,291 38,534
------- -------
Total............................................. $42,112 $85,860
======= =======
</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 and 1997, was $17,083 and $49,042, respectively, of cost
basis and $380 and $16,895, respectively, 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, 1998) to December 31, 1996
and $3,005 for the year ended December 31, 1997. 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>
1998...................................................... $12,638 $2,622
1999...................................................... 10,909 2,124
2000...................................................... 5,597 192
2001...................................................... 821 49
2002...................................................... 4 34
------- ------
Total............................................. 29,969 $5,021
======
Less: Amounts representing interest....................... (2,759)
-------
Capital lease obligation (see Note 10)............ $27,210
=======
</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 minimum annual dollar volumes
of PCBs and backplanes from the Company at defined prices. 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-15
<PAGE> 123
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 and the provision for income taxes for the year
ended December 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Current:
Federal................................................... $ -- $ 3,990
State..................................................... -- 920
Foreign................................................... 170 18,631
------- --------
170 23,541
------- --------
Deferred:
Federal................................................... (5,698) (2,195)
State..................................................... -- (507)
Foreign................................................... 104 (12,407)
------- --------
(5,594) (15,109)
------- --------
$(5,424) $ 8,432
======= ========
</TABLE>
Reconciliation between the statutory income tax rate and effective tax rate
is summarized below:
<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
U.S. Federal statutory rate................................. $(18,416) $(108,941)
Permanent items............................................. 15,680 113,159
State taxes................................................. (3,250) 269
Foreign taxes in excess of U.S. statutory rate.............. 213 3,945
Other....................................................... 349 --
-------- ---------
$ (5,424) $ 8,432
======== =========
</TABLE>
The tax effects of significant temporary differences representing deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities not yet deductible................. $10,112 $ 17,306
Net operating loss carryforwards....................... 1,037 406
Other.................................................. 186 1,590
------- --------
11,335 19,302
Valuation Allowance................................. (260) (260)
------- --------
11,075 19,042
------- --------
Deferred tax liabilities:
Intangibles............................................ (5,418) (40,251)
Fixed Assets........................................... (3,505) (27,747)
Other.................................................. (239) (1,535)
------- --------
(9,162) (69,533)
------- --------
Net deferred tax asset (liability)....................... $ 1,913 $(50,491)
======= ========
</TABLE>
F-16
<PAGE> 124
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Approximate domestic and foreign income before income tax provision are as
follows:
<TABLE>
<CAPTION>
INCEPTION YEAR ENDED
(AUGUST 28, 1996) TO DECEMBER 31,
DECEMBER 31, 1996 1997
-------------------- ------------
<S> <C> <C>
Domestic........................................... $(14,426) $ 5,307
Foreign............................................ (39,740) (316,567)
</TABLE>
As of December 31, 1997, the Company has $5,794 of Puerto Rican net
operating loss carryforwards, which will expire in 2001-2003, if not previously
utilized. At December 31, 1997, the Company has included a net current deferred
tax asset of $17,306 in prepaid expenses and other assets. Due to the recent
acquisitions of foreign subsidiaries, the Company is in the process of
determining the amount of undistributed earnings of its foreign subsidiaries.
The Company has not recognized and does not anticipate recognizing a deferred
tax liability for the undistributed earnings of its foreign subsidiaries because
the Company does not expect those earnings to reverse and become taxable to the
Company in the foreseeable future. Determination of the amount of deferred taxes
on undistributed earnings of the Company's foreign subsidiaries is not
practicable.
10. LONG-TERM OBLIGATIONS
The composition of long-term obligations at December 31 is as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Credit Agreements:
Term Facilities........................................... $238,345 $ 87,500
Revolvers................................................. 1,235 --
Senior Subordinated Notes Due 2007.......................... -- 400,000
Chips Loan Notes Liability.................................. -- 319,250
Capital lease obligations (see Note 8)...................... 17,265 27,210
Other....................................................... 8,775 13,415
-------- --------
265,620 847,375
Less current maturities........................... (10,804) (31,363)
-------- --------
$254,816 $816,012
======== ========
</TABLE>
The schedule of principal payments for long-term obligations at December
31, 1997 is as follows:
<TABLE>
<S> <C>
1998............................................. $ 31,363
1999............................................. 45,752
2000............................................. 70,388
2001............................................. 65,570
2002............................................. 65,309
Thereafter....................................... 568,993
--------
$847,375
========
</TABLE>
EXISTING FINANCING
In April 1997, the Company entered into a $216,000 Senior Subordinated
Credit Agreement (the "Subordinated Credit Facility"). The proceeds of the
Subordinated Credit Facility were used to repay $20,000 of term loans
outstanding under the Credit Agreement (see Prior Financing below)
F-17
<PAGE> 125
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and to repay a tender facility used to acquire Forward Group. In connection with
the Forward Acquisition and the subsequent organization of the Company as a
subsidiary of Viasystems Group, Inc., the Company entered into an Amended and
Restated Credit Agreement with terms substantially similar to the Credit
Agreement of Viasystems Group, Inc. In addition to existing facilities available
under the Credit Agreement, the Amended and Restated Credit Agreement provided
for a U.K. L32,000 (approximately US $52,800) revolving facility to Forward
Group.
In June 1997, Viasystems completed an offering (the "1997 Offering") of
$400,000 of 9 3/4% Senior Subordinated Notes due 2007 (the "2007 Notes").
Interest on the 2007 Notes is due semiannually. The 2007 Notes may not be
redeemed prior to June 1, 2002, except in the event of a Change of Control (as
defined) or and Initial Public Offering (as defined) and at premium (as defined
in the Indenture). The 2007 Notes are redeemable, at the Company's option, at
the redemption prices of 104.875% at June 1, 2002, and at decreasing prices to
100% at June 1, 2005, and thereafter, plus accrued interest. In addition, prior
to June 1, 2001, the Company may redeem, within specified guidelines, up to
$35,000 of the 2007 Notes with proceeds of one or more Equity Offerings (as
defined) by the Company or Viasystems Group, Inc. at a redemption price of
109.75% plus accrued interest. Viasystems used the net proceeds of the 1997
Offering to repay the Subordinated Credit Facility, approximately $130,000 of
term loans outstanding under the Amended and Restated Credit Agreement, and
approximately $41,600 of revolving credit amounts outstanding under the Amended
and Restated Credit Agreement which was borrowed subsequent to December 31,
1996, to repay debt assumed in the acquisition of Chips, plus interest on all
debt repaid.
Also in June 1997 and pursuant to the Chips Merger, Viasystems Group, Inc.
assumed the $437,500 of Chips Loan Notes, and the Company entered into a
reimbursement obligation which requires it to pay a portion of the Chips Loan
Notes in the event such notes are called. 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 rate 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 which are in turn collateralized in part by
a fully cash collateralized $118,250 reimbursement obligation of Bisto Funding,
Inc., a special purpose entity and sister company of Viasystems established as a
subsidiary of Viasystems Group, Inc. 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 (the "Chips
Reimbursement Obligation"). As such, the Company's liability for principal under
the Chips Loan Notes represents $319,250 (the "Chips Loan Notes Liability"), or
the amount achieved by netting the $118,250 of cash collateral held by Bisto
Funding, Inc. against the $437,500 of Chips Loan Notes. To the extent the
interest income earned by Bisto Funding, Inc. on the $118,250 of cash it holds
is insufficient to fund interest on $118,250 of the 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. Upon redemption of
the Chips Loan Notes, the first $118,250 of principal payments will be paid by
Bisto Funding, Inc. and the remainder will be funded by the Company in
accordance with the Chips Reimbursement Obligation.
In connection with the 1997 Offering and the Chips Merger, 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 Amended and Restated Credit Agreement. The
Second Amended and Restated Credit Agreement provides for (i) an $88,000 term
loan facility (the "U.S. Term Loan") and a $150,000 revolving credit facility
(the "U.S. Revolving Loan" and together with the U.S. Term Loan, the "U.S.
Loans"); (ii) a U.S. $25,000 revolving credit facility (the "Canadian Revolving
Loan"), (iii) a L32,000 revolving credit facility (the "Forward Group Revolving
Loan") and a L27,600 revolving credit facility (the
F-18
<PAGE> 126
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
"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$346,463 Letter of
Credit Facility in respect of the Chips Loan Notes comprised of (a) a
U.S.$319,250 term loan facility ("the Chips Term Loan" and together with the
U.S. Term Loan, the "Term Loans") in respect of the principal portion of the
Chips Loan Notes and (b) a U.S. $27,213 facility in respect of interest on the
Chips Loan Notes. The Chips Term Loan is an unfunded term loan facility that may
be drawn upon by the Company so that it may satisfy the Chips Loan Notes
Liability. Although 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
have not been classified as current at December 31, 1997, since the Company has
in place a facility to replace the Chips Loan Notes in the event they are
called. Borrowings under the Second Amended and Restated Credit Agreement are
collateralized by first priority mortgages and liens on substantially all of the
material assets of the Company and its subsidiaries.
The U.S. Term Loan consists of two tranches: (i) $55,000 of tranche B term
loans (the "Tranche B Loan") and (ii) $33,000 of tranche C term loans (the
"Tranche C Loan"). The Tranche B Loan amortizes semiannually over eight years
and the Tranche C Loan is payable $1,500 on December 31, 2004 and $31,500 on
June 30, 2005. The Chips Term Loan, if drawn, amortizes semi-annually over six
years.
The Company may use the Revolving Loans for letters of credit in an amount
not to exceed $15,000, 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 L5,000 in the case of the Forward Group Revolving
Loan and L10,000 in the case of the Chips Revolving Loan. Of the Forward Group
Revolving Loan, L2,232 is available solely to finance obligations in respect of
the notes payable to the selling stockholders of Forward. Of the U.S. Revolving
Loan, $100,000 is available solely to finance future acquisitions.
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 U.S.
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%. At December 31, 1997 the
weighted average interest rate on outstanding borrowings under the Amended an
Restated Credit Agreement was 8.69%.
The Company pays a per annum fee equal to the applicable margin on
Revolving Loans which bear interest at the Eurocurrency Base Rate, of the
average daily face amount of outstanding letters of credit, 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.
The Company pays a Commitment Fee equal to 0.5% on the undrawn portion of the
commitments in respect of
F-19
<PAGE> 127
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revolving Loans and a Facility Fee equal to 0.5% on the Canadian revolving
credit commitment. In addition, the Company pays a fee of 0.25% per annum of
Bisto Funding, Inc.'s $118,250 portion of the Chips Letter of Credit to the
extent not paid by Bisto Funding, Inc.
The Amended Senior Credit Facilities and the 2007 Notes restrict the
Company from, among other things: (i) incurring additional indebtedness (other
than permitted indebtedness); (ii) creating liens; (iii) disposing of assets;
(iv) guaranteeing indebtedness; (v) merging or selling substantially all of its
assets; (vi) declaring and paying certain dividends; (vii) making certain
investments and loans; and (viii) entering into certain transactions with
affiliates, in each case with certain exceptions customary for credit facilities
such as the Amended Senior Credit Facilities. In addition, the Second Amended
and Restated Credit Agreement contains financial covenants which require the
Company to maintain certain financial ratios and limit the Company's amount of
capital expenditures.
PRIOR FINANCING
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 "Technologies Credit Agreement", respectively, and together,
the "Credit Agreement"). Borrowings under the Credit Agreement 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 Cnd$86,750 (approximately
U.S.$65,000) Canadian term loan (the "Canadian Term Loan") and a U.S.$25,000 (or
the Canadian dollar equivalent) revolving credit facility (the "Circo
Revolver"). The Viasystems Technologies Credit Agreement consist 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 the 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
F-20
<PAGE> 128
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 was 7.68%
11. OTHER NONCURRENT LIABILITIES
Included in other noncurrent liabilities are liabilities for monitoring and
oversight fees to Hicks, Muse & Co. Partners L.P. ("Hicks, Muse"), a shareholder
and affiliate of the Company, (see Note 15) and deferred income related to
reimbursement agreements with two governmental agencies in the U.K. (the "U.K.
Agreements"). Pursuant to the U.K. Agreements, the agencies have provided funds
of approximately $18,000 as of December 31, 1997. Funds received by the Company
under the U.K. Agreements are not subject to repayment, provided that the
Company meets certain employment requirements at its manufacturing facilities.
As the Company has met and management believes that it will continue to meet
these requirements, the Company is recognizing the amounts to be received under
the U.K. Agreements as a reduction of cost of sales over the life of the U.K.
Reimbursement Agreements and, as such, recognized a reduction of cost of sales
of approximately $3,134 during the year ended December 31, 1997.
12. 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.
13. BUSINESS SEGMENT INFORMATION
The Company operates in one business segment -- the manufacture and sale of
PCBs, which are sold throughout many diverse markets.
The Company's operations are located worldwide and can be grouped into two
geographical segments.
F-21
<PAGE> 129
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pertinent financial data by major geographic segments is as follows:
<TABLE>
<CAPTION>
OPERATING TOTAL
NET SALES INCOME/(LOSS) ASSETS
--------- ------------- ----------
<S> <C> <C> <C>
NORTH AMERICA:
Inception (August 28, 1996) to December
31, 1996.............................. $ 50,400 $ (50,931) $ 447,775
Year ended December 31, 1997............. 499,266 50,495 803,526
EUROPE:
Inception (August 28, 1996) to December
31, 1996.............................. $ -- $ -- $ --
Year ended December 31,1997.............. 296,023 (289,490) 632,428
ELIMINATIONS
Inception (August 28, 1996 to December
31, 1996.............................. $ -- $ -- $ (60,034)
Year ended December 31, 1997............. -- -- (367,042)
TOTAL:
Inception (August 28, 1996) to December
31, 1996.............................. $ 50,400 $ (50,931) $ 387,741
Year ended December 31, 1997............. 795,289 (238,995) 1,068,912
</TABLE>
14. CONCENTRATION OF BUSINESS
Sales to one customer were 27% and 39% of net revenues for the period from
inception (August 28, 1996) to December 31, 1996 and for the year ended December
31, 1997, respectively.
15. 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
(a shareholder and affiliate of the Company) pursuant to which the Company paid
Hicks, Muse a cash fee of $5,013 for the period from inception (August 28, 1996)
to December 31, 1996 and $10,400 for the year ended December 31, 1997 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 Acquisitions as deferred financing costs. The Agreement further provides
that the Company shall pay Hicks, Muse an annual fee of $1,750 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 $1,750 annually. The obligation under the
Agreement and the related deferred financing costs have been recorded in the
consolidated balance sheet and will be amortized over the life of the agreement.
Pursuant to the Chips Merger, Viasystems Group, Inc. assumed the $437,500
of Chips Loan Notes, and the Company entered into a Reimbursement Obligation
which requires it to pay a portion of the principal and interest on the Chips
Loan Notes in the event such notes are called. The Company's portion of the
Chips Loan Notes is $319,250, which is the net amount of the Chips Loan Notes of
$437,500 and cash collateral held by Bisto Funding, Inc. in the amount of
$118,250. The cash collateral held by Bisto Funding, Inc. is required to be paid
to the loan note holders prior to the Company's Reimbursement Obligation
commitment (see Note 10).
The Company purchased approximately $1,307 and $41,000 of connectors from
Berg Electronics Corp. (an affiliate of the Company) for the period from
inception (August 28, 1996) to December 31, 1996 and for the year ended December
31, 1997, respectively. The Company had a
F-22
<PAGE> 130
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
payable to Berg Electronics Corp. of $1,307 and $4,600 as of December 31, 1996,
and 1997, respectively
16. STOCK OPTION PLANS
On February 4, 1997, Viasystems Group, Inc. adopted the Viasystems Group,
Inc. 1997 Stock Option Plan (the "Option 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. A
total of 8,409,782 shares of Viasystems Group, Inc. Common Stock will be
reserved for issuance under the Stock Option Plan. As of December 31, 1997,
options to purchase an aggregate of 5,235,000 shares of Viasystems Group, Inc.
Common Stock subject to the terms and conditions of the Stock Option Plan are
outstanding. The terms and vesting periods of the options granted are to be
determined by the board of directors. All options granted under the Option Plan
to date have ten year terms and vest over five year periods.
Viasystems Group, Inc. 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 applies APB Opinion No.
25, "Accounting for Stock Issued to Employees," and related Interpretations in
accounting for the Option Plan. Had compensation cost for the Option Plan and
the Performance Options been determined based upon the fair value at the grant
date for awards under these plans consistent with the methodology prescribed
under Financial Accounting Standards No. 123, pro forma net loss for the year
ended December 31, 1997, would have been $(327,588).
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following assumptions: (i) no dividend yield;
(ii) risk free interest rate of 5.5%; and (iii) expected life of 5 years.
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts of compensation costs. Additional awards in future
years are anticipated.
Changes in the status of the Option Plan are summarized below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE PRICE OPTIONS OPTIONS
PER SHARE GRANTED VESTED
-------------- --------- -------
<S> <C> <C> <C>
December 31, 1996............................. $ -- -- --
Granted..................................... 1.00 5,260,000 --
Vested...................................... 1.00 -- 200,000
Forfeited................................... 1.00 (25,000) --
--------- -------
December 31, 1997............................. $1.00 5,235,000 200,000
========= =======
</TABLE>
F-23
<PAGE> 131
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Changes in the status of the Performance Options are summarized below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE PRICE OPTIONS OPTIONS
PER SHARE GRANTED VESTED
-------------- --------- -------
<S> <C> <C> <C>
August 28, 1996 (inception)................... $ -- -- --
Granted..................................... 1.00 1,085,187 --
--------- -------
December 31, 1996............................. 1.00 1,085,187 --
Granted..................................... 1.00 8,138,904 --
Vested...................................... -- -- --
Forfeited................................... -- -- --
--------- -------
December 31, 1997............................. $1.01 9,224,091 --
========= =======
</TABLE>
The weighted average grant-date fair value of options granted during 1997
was $1.00 per share. All options outstanding under the Option Plan at December
31, 1997, have exercise prices of $1.00 per share and have weighted average
remaining contractual lives of between 9 and 10 years.
Of the Performance Options outstanding at December 31, 1997, 1,085,187 and
8,138,904 have exercise prices of $1.08 and $1.00, respectively, and have
weighted average remaining contractual lives of between 9 and 10 years.
17. RETIREMENT PLANS
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 and $807 for the
year ended December 31, 1997.
The Company and its subsidiaries have two defined benefit pension plans
covering certain groups of employees in foreign countries. The benefits are
based on years of services and final average salary. The Company's funding
policy is to make annual contributions to the extent such contributions are
actuarially determined.
Components of net pension expense are as follows:
<TABLE>
<CAPTION>
1997
------
<S> <C>
Service cost (present value of benefits earned in the
year)..................................................... $1,821
Interest cost on the projected benefit obligation........... 2,699
Actual return on assets..................................... (6,970)
Net amortization and deferral............................... 4,016
------
Net periodic pension costs.................................. $1,566
======
</TABLE>
F-24
<PAGE> 132
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the plans' funded status and the amounts
recognized in the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
1997
--------
<S> <C>
Projected benefit obligation................................ $ 44,978
Plan assets at fair value, primarily equity and fixed-income
securities................................................ (43,675)
--------
Net pension liability....................................... $ 1,303
========
</TABLE>
The principal assumptions used are as follows:
<TABLE>
<CAPTION>
PERCENT
-------
<S> <C>
Weighted average discount rates............................. 6.75%
Long term rate of return on plan assets..................... 8.75%
Salary Growth............................................... 4.75%
Pension Increases........................................... 3.00%
</TABLE>
18. EXTRAORDINARY ITEM
During the year ended December 31, 1997, the Company recorded, as an
extraordinary item, a one-time, non-cash write-off of deferred financing fees of
approximately $7,796, net of income tax benefit of $4,332, related to deferred
financing fees incurred on debt retired before maturity.
19. SUBSEQUENT EVENTS
On February 9, 1998, the Company completed the offering of an additional
$100,000 of 9 3/4% Series B Senior Subordinated Notes due 2007 (the "1998
Offering"). As a condition of the 1998 Offering and the Credit Agreement, Hicks
Muse agreed to contribute an additional $50,000 of equity to the Company and the
Second Amended and Restated Credit Agreement was amended to, among other things,
establish an additional $70,000 term loan and increase the U.S. Revolving Loan
by $25,000.
On January 30, 1998, the Company acquired certain assets and assumed
certain liabilities of the PCB production facility of Ericsson Telecom AB
("Ericsson") located in Sweden (the "Ericsson Facility"), for a cash purchase
price of approximately $7,000. In addition, the company and Ericsson signed a
three-year supply agreement whereby Ericsson committed to purchase 40% of its
PCB requirements from the Company. On February 17, 1998, the Company acquired
Print Service Holding N.V., the holding company parent of Mommers Print Service,
B.V. ("Mommers"), a PCB manufacturer located in The Netherlands and specializing
in the production of high-volume, medium- to high-complexity PCBs and
backplanes, for a cash purchase price of approximately $59,400. On March 12,
1998, the Company acquired Zincocelere S.p.A. ("Zincocelere"), a PCB
manufacturer located in northern Italy and specializing in the production of
high volume, medium to high complexity PCB's, for a cash purchase price of
approximately $85,300. The acquisition of the PCB production facility from
Ericsson, and the acquisitions of Mommers and Zincocelere are herein referred to
as the 1998 Acquisitions. The Company anticipates that it will continue to make
strategic acquisitions of PCB companies throughout the world in accordance with
its expansion strategy.
A portion of the proceeds of the 1998 Offering, the additional term loan
under the Senior Credit Facilities, and the $50,000 equity contribution by Hicks
Muse have been used to fund the acquisitions of the Ericsson Facility, Mommers,
and Zincocelere. In addition, the Company used a portion of these proceeds to
repay revolving credit line amounts borrowed subsequent to December 31, 1997,
and outstanding under the Second Amended and Restated Credit Agreement.
F-25
<PAGE> 133
VIASYSTEMS, INC. & SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE
ALLOWANCE FOR DOUBTFUL AT CHARGES TO BALANCE AT
ACCOUNTS -- DEDUCTED FROM BEGINNING COST AND ACCOUNTS TRANSLATION END OF
RECEIVABLES IN THE BALANCE SHEET OF PERIOD ACQUISITIONS EXPENSES WRITTEN OFF ADJUSTMENTS PERIOD
- -------------------------------- --------- ------------ ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996................ $ -- $ 407 $ -- $ -- $ 2 $ 409
===== ====== ====== ======= ==== ======
1997................ $ 409 $1,632 $7,176 $(7,636) $992 $2,573
===== ====== ====== ======= ==== ======
</TABLE>
F-26
<PAGE> 134
AUDITORS' REPORT
To The Directors of Circo Craft Co. Inc.
We have audited the consolidated statements of earnings, retained earnings
and changes in financial position of Circo Craft Co. Inc. for the nine-month
period ended September 30, 1996. These statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
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 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 statement presentation.
In our opinion, these consolidated statements of earnings, retained
earnings and changes in financial position present fairly, in all material
respects, the results of operations of the Company 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-27
<PAGE> 135
AUDITORS' REPORT
To the Directors of Circo Craft Co. Inc.:
We have audited the consolidated statements of earnings, retained earnings
and changes in financial position of Circo Craft Co. Inc. for the year ended
December 31, 1995. These statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these 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 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 statement presentation.
In our opinion, these consolidated statements of earnings, retained
earnings and changes in financial position present fairly, in all material
respects, the results of operations of the Company and the changes in its
financial position for the year ended December 31, 1995, in accordance with
generally accepted accounting principles in Canada.
Deloitte & Touche
Chartered Accountants
Montreal, Quebec
February 1, 1996
F-28
<PAGE> 136
CIRCO CRAFT CO. INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(EXPRESSED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Balance -- Beginning of period.............................. $32,216 $43,909
Net earnings for the period....................... 11,693 1,974
------- -------
Balance -- End of period.................................... $43,909 $45,883
======= =======
</TABLE>
F-29
<PAGE> 137
CIRCO CRAFT CO. INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(EXPRESSED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Sales....................................................... $185,156 $129,633
Cost of sales............................................... 148,788 101,532
-------- --------
Operating margin............................................ 36,368 28,101
-------- --------
Selling, general and administrative expenses................ 11,087 7,969
-------- --------
Other expenses (income)
Depreciation of fixed assets.............................. 7,931 8,456
Interest on long-term debt................................ 852 646
Interest income........................................... (915) (880)
Expenses related to sale (note 9)......................... -- 5,907
-------- --------
7,868 14,129
-------- --------
Earnings before income taxes and non-controlling interest... 17,413 6,003
Provision for income taxes (note 5)......................... 5,564 3,847
-------- --------
Earnings before non-controlling interest.................... 11,849 2,156
Non-controlling interest.................................... 156 182
-------- --------
Net earnings for the period................................. $ 11,693 $ 1,974
======== ========
</TABLE>
F-30
<PAGE> 138
CIRCO CRAFT CO. INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(EXPRESSED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Operating activities
Net earnings for the period............................... $ 11,693 $ 1,974
Non-cash items --
Depreciation of fixed assets......................... 7,931 8,456
Deferred income taxes................................ 800 1,050
Gain on sale of fixed assets......................... (397) (716)
Non-controlling interest............................. 156 182
-------- --------
20,183 10,946
Cash provided by (used for) non-cash operating working
capital items.......................................... 3,964 7,191
-------- --------
24,147 18,137
-------- --------
Financing activities
Increase in long-term debt................................ 3,537 4,186
Repayment of long-term debt............................... (2,624) (3,187)
Decrease in non-controlling interest...................... -- (2,608)
Issue of common shares.................................... 8,827 4,047
-------- --------
9,740 2,438
-------- --------
Investing activities
Acquisition of fixed assets............................... (23,764) (13,058)
Proceeds from sale of fixed assets........................ 922 1,018
-------- --------
(22,842) (12,040)
-------- --------
Increase in cash............................................ 11,045 8,535
Cash -- beginning of period................................. 6,685 17,730
-------- --------
Cash -- end of period....................................... $ 17,730 $ 26,265
======== ========
Represented by --
Cash and short-term deposits........................... 19,231 28,438
Bank indebtedness...................................... (1,501) (2,173)
-------- --------
$ 17,730 $ 26,265
======== ========
</TABLE>
F-31
<PAGE> 139
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED STATEMENTS
(EXPRESSED IN CANADIAN DOLLARS)
1. ACCOUNTING POLICIES
The consolidated statements of earnings, retained earning and changes in
financial position have been prepared in accordance with accounting principles
generally accepted in Canada and include the following significant accounting
policies:
Principles of Consolidation
The consolidated statements of earnings, retained earnings and changes in
financial position include the accounts of the company and its wholly owned
subsidiary, Circo Caribe Corporation ("Circo Caribe"). All significant
intercompany 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 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%
15% -
Machinery and equipment..................................... 33 1/3%
Leasehold improvements...................................... 10%
</TABLE>
Revenue Recognition
Sales and related cost of sales are included in income when goods are
delivered to the customer in accordance with the delivery terms.
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.
F-32
<PAGE> 140
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
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.
2. 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.
3. CAPITAL STOCK
(a) As at September 30, 1996, 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.
(b) The issued and paid capital stock consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
----------------------
(THOUSANDS OF DOLLARS)
<S> <C>
16,069,300 common shares.................................... 41,823
1,200,000 Second Preferred shares, Series A (note 3(c))..... --
156,000 Second Preferred shares, Series B (note 3(c))....... --
2,556,000 Second Preferred shares, Series C (note 3(c))..... --
------
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.
F-33
<PAGE> 141
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
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 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 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.
4. 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.
5. INCOME TAXES
(a) The company's provision for income taxes includes the following:
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Current................................................. $4,764 $2,797
Deferred................................................ 800 1,050
------ ------
$5,564 $3,847
====== ======
</TABLE>
F-34
<PAGE> 142
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
(b) The company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
1995 1996
% %
----- -----
<S> <C> <C>
Combined basic federal and provincial income tax rate....... 45.09 45.09
Increase (decrease) in income tax rate resulting from:
Active business income deduction.......................... (7.35) (7.35)
Manufacturing and processing deduction.................... (7.00) (7.00)
Non-deductible expenses................................... -- 12.82
Surtax.................................................... 1.07 1.12
Other..................................................... 1.19 2.07
----- -----
Combined Canadian rates..................................... 33.00 46.75
Unrecognized (recognized) income tax benefits of Circo
Caribe.................................................... (1.05) 17.33
----- -----
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.
6. MAJOR CUSTOMERS
Approximately 26%, 19%, and 10%, respectively (1995 -- 19%, 15%, 14%, and
11%) of the company's sales were to three unrelated multinational corporations
(four in 1995) which have multiple divisions responsible for their own
purchasing decisions.
7. 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
---------------------------- ---------------------------- ----------------------------
NINE MONTH NINE MONTH NINE MONTH
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1995 1996 1995 1996 1995 1996
------------ ------------- ------------ ------------- ------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Sales to external
Customers.......... 155,326 109,756 29,830 19,877 185,156 129,633
======= ======= ====== ====== ======= =======
Inter-segment
Sales.............. -- 678 7,211 775 -- --
======= ======= ====== ====== ======= =======
Earnings (loss)
Before income taxes
And non-
controlling
Interest........... 16,859 8,228 554 (2,225) 17,413 6,003
======= ======= ====== ====== ======= =======
</TABLE>
F-35
<PAGE> 143
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
Export sales amounted to approximately 66% (1995 -- 73%) of the company's
total sales to external customers.
8. UNITED STATES ACCOUNTING PRINCIPLES
The consolidated statements of earnings, retained earnings and changes in
financial position 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").
Net Earnings
(a) The following summary sets out the material adjustments to the
company's reported net earnings, which would be made in order to conform to U.S.
GAAP:
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Net earnings for the period under Canadian GAAP......... 11,693 1,974
U.S. GAAP adjustments:
Contingent gain (note 8(b))........................... 8,984 --
Translation gains and losses (note 8(c)).............. 241 (103)
Income taxes (note 8(d)).............................. (515) 167
------ -----
Net earnings (loss) for the period under U.S. GAAP...... 20,403 2,038
====== =====
</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 4 would have been recorded in earnings in 1995
under U.S. GAAP net of related expenses of $1,544,000.
(c) 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.
(d) 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.
(e) 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 statements of earnings, retained earnings and changes in financial
position.
F-36
<PAGE> 144
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
Cash flows
(f) Under U.S. GAAP, the following amounts would be reported:
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Net cash provided by operating activities............... 24,388 18,034
Net cash provided by financing activities............... 9,300 1,222
Net cash used in investing activities................... (21,790) (14,444)
------- -------
Net increase in cash.................................... 11,898 4,812
------- -------
Cash at the end of the period........................... 16,600 21,412
======= =======
</TABLE>
(g) 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.
(h) 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). 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.
(i) 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 and
$2,052,000 for the nine-month period ended September 30, 1996 and for the year
ended December 31, 1995.
Other disclosure
(j) The disclosure of the following amounts is required under U.S. GAAP:
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Research and development expenses........................ 4,159 3,495
Payments under operating leases.......................... 795 799
Payments under capital leases............................ 975 1,713
Interest paid............................................ 1,025 631
Income taxes paid........................................ 4,115 3,931
</TABLE>
(k) 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 (year ended December 31, 1995 -- $88,000).
F-37
<PAGE> 145
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
(l) 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.
9. COMMITMENTS
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>
10. 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-38
<PAGE> 146
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 operations of the
Interconnection Business (the "Business") of the Microelectronics Group,
Interconnection Technologies Unit of Lucent Technologies Inc. ("Lucent") for the
year 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 financial 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 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'
results of operations or cash flows.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the statements of operations of the Business for the
year ended December 31, 1995 and for the period January 1, 1996 through November
30, 1996, 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-39
<PAGE> 147
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1996,
YEAR ENDED THROUGH
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ----------------
<S> <C> <C>
Net sales................................................... $325,047 $325,102
Operating expenses:
Cost of goods sold........................................ 274,824 244,313
Selling, general and administrative....................... 35,246 27,567
Research and development.................................. 7,199 7,225
Depreciation and amortization............................. 16,378 18,317
-------- --------
Operating income (loss)........................... (8,600) 27,680
Other income (expenses):
Other income.............................................. 94 228
Interest expense.......................................... (204) (917)
-------- --------
Income (loss) before income taxes................. (8,710) 26,991
Provision (benefit) for income taxes........................ (3,310) 10,257
-------- --------
Net income (loss)................................. $ (5,400) $ 16,734
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-40
<PAGE> 148
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, backplanes 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-41
<PAGE> 149
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS) -- (CONTINUED)
The allocations and other components of cost of sales and selling, general
and administrative expenses are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1996
YEAR ENDED THROUGH
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ---------------
<S> <C> <C>
Allocated cost of sales................................. $ 8,878 $ 6,004
Other cost of sales..................................... 265,946 238,309
-------- --------
$274,824 $244,313
======== ========
Allocated selling expense............................... $ 6,226 $ 3,494
Other selling expense................................... 3,823 2,472
Allocated general and administrative.................... 14,187 8,706
Other general and administrative........................ 11,010 12,895
-------- --------
$ 35,246 $ 27,567
======== ========
Allocated research and development...................... $ -- $ --
Other research and development.......................... 7,199 7,225
-------- --------
$ 7,199 $ 7,225
======== ========
</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. 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.
D. Research and Development Costs: Research and development costs are
charged to expense when incurred.
3. 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.
F-42
<PAGE> 150
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS) -- (CONTINUED)
The Business' sales to Lucent and its affiliates were $282,971 and $295,189
for the year ended December 31, 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
$239,624 and $232,276 for the year ended December 31, 1995 and for the period
January 1, 1996 through November 30, 1996, respectively.
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.
4. 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-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 1995 and 1996,
respectively.
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.
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 $7,300 and $6,200 for the year
ended December 31, 1995 and for the period January 1, 1996 through November 30,
1996, respectively.
5. 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-43
<PAGE> 151
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of Forward Group PLC
We have audited the accompanying consolidated balance sheet of Forward
Group PLC and its subsidiaries at 31 January 1997 and the related consolidated
profit and loss accounts and cash flow statements for each of the years in the
two-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 1997 and the results of their
operations and their cash flows for each of the years in the two-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 two-year period ended 31 January
1997 and equity shareholders' funds at 31 January 1997 to the extent summarized
in Note 25 to the consolidated financial statements.
KPMG Audit Plc
Chartered Accountants
Birmingham, England
7 April 1997
F-44
<PAGE> 152
FORWARD GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
YEARS ENDED
31 JANUARY
----------------
1996 1997
NOTE (L000) (L000)
---- ------ -------
<S> <C> <C> <C>
Turnover
Continuing operations..................................... 2 66,839 97,001
Acquisitions.............................................. 2 -- 8,028
------ -------
66,839 105,029
------ -------
Operating profit
Continuing operations..................................... 3 7,976 8,079
Acquisitions.............................................. 3 -- 1,022
------ -------
7,976 9,101
Net interest payable...................................... 5 (412) (996)
------ -------
Profit on ordinary activities before taxation............... 6 7,564 8,105
Tax on profit on ordinary activities........................ 8 (2,641) (2,707)
------ -------
Profit for the financial year............................... 4,923 5,398
Dividends................................................... 9 (1,089) (552)
------ -------
Retained profit for the financial year...................... 18 3,834 4,846
====== =======
</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-45
<PAGE> 153
FORWARD GROUP PLC
CONSOLIDATED STATEMENTS OF TOTAL RECOGNIZED GAINS AND LOSSES
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
YEARS ENDED
31 JANUARY
------------------
1996 1997
(L000) (L000)
------- -------
<S> <C> <C>
Profit for the financial year............................... 4,923 5,398
Currency translation adjustment............................. -- (22)
----- -----
4,923 5,376
===== =====
</TABLE>
F-46
<PAGE> 154
FORWARD GROUP PLC
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
31 JANUARY
1997
NOTE (L000)
---- ----------
<S> <C> <C>
Fixed assets
Tangible assets........................................... 10 36,407
Current assets
Stocks.................................................... 12 6,586
Debtors................................................... 13 17,289
-------
23,875
Creditors: amounts falling due within one year.............. 14 (26,949)
-------
Net current liabilities..................................... (3,074)
-------
Total assets less current liabilities....................... 33,333
Creditors: amounts falling due after more than one year..... 15 (6,574)
Provisions for liabilities and charges...................... 16 (2,616)
-------
Net assets.................................................. 24,143
=======
Capital and reserves
Called up share capital................................... 17 2,754
Share premium account..................................... 18 6,837
Revaluation reserve....................................... 18 566
Profit and loss account................................... 18 13,986
-------
Equity shareholders' funds.................................. 24,143
=======
</TABLE>
F-47
<PAGE> 155
FORWARD GROUP PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
YEARS ENDED 31,
JANUARY
------------------
1996 1997
NOTE (L000) (L000)
---- ------- -------
<S> <C> <C> <C>
Net cash inflow from operating activities................... 20a 10,667 18,561
Returns on investments and servicing of finance
Interest received......................................... 61 85
Interest paid............................................. (464) (1,018)
Dividends paid............................................ (722) (1,207)
------- -------
Net cash outflow from returns on investments and servicing
of finance................................................ (1,125) (2,140)
UK tax paid................................................. (1,670) (3,633)
Investing activities
Purchase of tangible fixed assets......................... 20e (4,153) (7,624)
Acquisition of businesses (net of cash and cash
equivalents acquired).................................. 20d (8,191) (9,184)
Sale of tangible fixed assets............................. 299 435
------- -------
Net cash outflow from investing activities.................. (12,045) (16,373)
------- -------
Net cash outflow before financing........................... (4,173) (3,585)
Financing
Issue of Ordinary share capital........................... 7,550 92
Capitalisation issue expenses............................. -- (24)
Repayment of bank loan.................................... (790) (720)
Capital element of hire purchase and finance lease
payments............................................... (1,170) (2,393)
------- -------
Net cash inflow/(outflow) from financing.................... 20b 5,590 (3,045)
------- -------
Net increase/(decrease) in cash and cash equivalents........ 20c 1,417 (6,630)
======= =======
</TABLE>
F-48
<PAGE> 156
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 under the acquisition method of accounting. The results of
companies or businesses acquired during the year are included from the date of
acquisition. Internal sales and profits are eliminated on consolidation.
Goodwill arising on acquisitions is written off directly against reserves on
acquisition.
Turnover
Turnover represents the amounts (excluding value added tax) derived from
the provision of goods to third party customers and is recognized when goods are
shipped and title has passed.
Government revenue grants
Government revenue grants are recognized 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 realizable value. Cost comprises materials, labor 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-49
<PAGE> 157
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 realized in the foreseeable future.
Hire purchase and leased assets
Assets held under hire purchase or finance lease contracts are capitalized
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-50
<PAGE> 158
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
2. SEGMENTAL ANALYSIS
Turnover is analyzed by geographical destination as follows:
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ -------
<S> <C> <C>
United Kingdom.............................................. 40,263 55,848
Rest of Europe.............................................. 25,200 42,364
Rest of the world........................................... 1,376 6,817
------ -------
66,839 105,029
====== =======
</TABLE>
The Group's turnover, profit before taxation and assets relate to only one
business segment, the electronics 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
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>
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>
F-51
<PAGE> 159
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Acquisitions in 1997 comprise the former GEC-Marconi hybrid business,
Manchester Circuits Limited and TI Technologies (Pty) Limited.
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>
1996 1997
----- -----
<S> <C> <C>
Sales....................................................... 32 51
Administration.............................................. 49 80
Production.................................................. 933 1,642
----- -----
1,014 1,773
===== =====
Employees at end of year.................................... 1,454 1,874
----- -----
</TABLE>
The aggregate payroll costs of these persons were as follows:
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Wages and salaries.......................................... 18,215 30,503
Social security costs....................................... 1,755 2,916
Other pension costs......................................... 745 1,239
------ ------
20,715 34,658
====== ======
</TABLE>
5. NET INTEREST PAYABLE
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Bank loan and overdrafts.................................... 216 609
Hire purchase and finance lease contracts................... 257 472
--- -----
Interest payable and similar charges........................ 473 1,081
Interest receivable and similar income...................... (61) (85)
--- -----
412 996
=== =====
</TABLE>
F-52
<PAGE> 160
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>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Directors' emoluments (see note 7):
As Directors.............................................. 33 86
Remuneration as executives................................ 333 333
--- ---
366 419
Compensation for loss of office........................... 81 --
Grants receivable........................................... (21) (19)
Property rental income...................................... (88) (87)
Auditors' remuneration...................................... 75 84
Research and development expenditure........................ 507 764
Payments under operating leases:
Plant and equipment....................................... 113 245
Other assets.............................................. 187 324
=== ===
</TABLE>
In addition, KPMG Audit Plc and its associates received L97,000 (1996:
L91,000) 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). The emoluments of the highest paid Director, excluding
pension contributions, were 136,000. In 1996 the Chairman was also the highest
paid director.
The emoluments of the Directors, excluding pension contributions, were
within the following ranges:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
L5,001 -- L10,000............................... 1 --
L10,001 -- L15,000............................... 2 --
L15,001 -- L20,000............................... -- 1
L20,001 -- L25,000............................... -- 1
L25,001 -- L30,000............................... 2 --
L40,001 -- L45,000............................... -- 1
L70,001 -- L75,000............................... 1 --
L75,001 -- L80,000............................... 1 --
L95,001 -- L100,000.............................. 1 1
L100,001 -- L105,000............................. -- 1
L135,001 -- L140,000............................. -- 1
== ==
</TABLE>
F-53
<PAGE> 161
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>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
The charge for taxation all arises in the UK and comprises:
Corporation tax on profit for the year at 33% (1996:
33%)................................................... 2,486 2,556
Deferred taxation......................................... 202 439
Prior year adjustments in respect of:
Corporation tax........................................... (111) (281)
Deferred taxation......................................... 64 (7)
----- -----
2,641 2,707
===== =====
</TABLE>
The 1997 current year charge includes the effect of tax losses which have
not been relieved.
9. DIVIDENDS
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Interim dividend paid....................................... 434 552
Proposed final dividend..................................... 655 --
----- ---
1,089 552
===== ===
</TABLE>
F-54
<PAGE> 162
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. Accumulated historical cost depreciation was L258,000.
The net book value of Group tangible fixed assets includes L10,412,000 in
respect of assets held under hire purchase or finance lease contracts, after
charging depreciation for the year of L1,286,000 and L1,439,000 of freehold
land, which is not depreciated.
Plant and machinery includes L1,143,000 of assets which are under the
course of construction.
11. INVESTMENTS
(a) 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.
F-55
<PAGE> 163
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
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>
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 7,904
acquisition...............................................
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.
F-56
<PAGE> 164
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
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.
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.
F-57
<PAGE> 165
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
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>
The following table, which is presented for the purposes of disclosure
under US GAAP in accordance with the requirements of Accounting Principles Board
Opinion No. 16 "Business Combinations" ("APB 16"), reflects the unaudited pro
forma combined results of operations of the Group, together with the companies
and businesses acquired during the years ended 31 January 1996 and 1997 on the
basis that the acquisitions had taken place on 1 February 1995:
<TABLE>
<CAPTION>
1996 1997
------- -------
(L000) (L000)
(UNAUDITED)
<S> <C> <C>
Turnover.................................................... 103,007 107,617
Profit on ordinary activities after taxation................ 7,553 5,161
</TABLE>
The following table, which is presented for the purposes of disclosure
under US GAAP in accordance with the requirements of APB 16, reflects the
unaudited pro forma combined results of continuing operations of the Group,
together with the companies and businesses acquired during the years ended 31
January 1996 and 1995 on the basis that the acquisitions had taken place on 1
February 1994:
<TABLE>
<CAPTION>
1995 1996
------- -------
(L000) (L000)
(UNAUDITED)
<S> <C> <C>
Turnover.................................................... 68,211 90,845
Profit on ordinary activities after taxation................ 3,927 7,425
</TABLE>
These unaudited pro forma combined results have been prepared for
comparative purposes only. In management's opinion the unaudited pro forma
results of operations are not indicative of the actual results that would have
occurred had the acquisitions been consummated at the beginning of the years
presented or of future operations of the combined companies under the ownership
and management of the Company.
F-58
<PAGE> 166
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
12. STOCKS
<TABLE>
<CAPTION>
1997
(L000)
------
<S> <C>
Raw materials and consumables............................... 3,233
Work in progress............................................ 2,465
Finished goods and goods for resale......................... 888
-----
6,586
=====
</TABLE>
13. DEBTORS
<TABLE>
<CAPTION>
1997
(L000)
------
<S> <C>
Trade debtors............................................... 16,368
Other debtors............................................... 454
Prepayments and accrued income.............................. 467
------
17,289
======
</TABLE>
14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1997
(L000)
------
<S> <C>
Bank overdrafts............................................. 5,841
Bank loan................................................... 720
Obligations under hire purchase and finance lease
contracts................................................. 2,400
Trade creditors............................................. 10,884
Corporation tax and Advance Corporation Tax payable......... 2,540
Other taxes and social security............................. 1,448
Other creditors............................................. 278
Accruals and deferred income................................ 2,838
------
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>
1997
(L000)
------
<S> <C>
Bank loan................................................... 1,800
Obligations under hire purchase and finance lease
contracts................................................. 4,774
-----
6,574
=====
Bank loan and overdrafts are repayable as follows:
Within one year............................................. 6,561
Between one and two years................................... 720
Between two and five years.................................. 1,080
-----
8,361
=====
</TABLE>
F-59
<PAGE> 167
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>
1997
(L000)
------
<S> <C>
Within one year............................................. 2,400
Between one and two years................................... 4,498
Between two and five years.................................. 276
-----
7,174
=====
</TABLE>
16. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
1997
(L000)
------
<S> <C>
Deferred taxation........................................... 2,616
Pension provision........................................... --
-----
2,616
=====
</TABLE>
(a) Deferred taxation
Deferred taxation is provided using the liability method at a rate of 33%
as follows:
<TABLE>
<CAPTION>
1997
(L000)
------
<S> <C>
Accelerated capital allowances.............................. 2,413
Short term timing differences............................... 203
-----
2,616
=====
</TABLE>
<TABLE>
<CAPTION>
1997
(L000)
------
<S> <C>
At beginning of year........................................ 2,068
Charged to profit and loss account.......................... 432
Arising on purchase of businesses........................... (48)
Movement in Advance Corporation Tax......................... 164
-----
At end of year.............................................. 2,616
=====
</TABLE>
Unprovided deferred taxation in respect of deferred capital gains amounted
to L744,000.
(a) Pension provision
The pension provision which arose during the year ended 31 January 1996 as
a result of the acquisition of Exacta Circuits Limited 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.
F-60
<PAGE> 168
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
17. SHARE CAPITAL
<TABLE>
<CAPTION>
1997
---------------
(L000) (L000)
------ ------
<S> <C> <C>
Authorised:
Ordinary shares of 5p each................................ 72,900 3,645
====== =====
Allotted, called up and fully paid:
Ordinary shares of 5p each................................ 55,088 2,754
====== =====
</TABLE>
On 13 March 1996 the Company issued 63,593 Ordinary shares for a non-cash
consideration of 157,000 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.
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
- ---------------- -------------- ---------------
<S> <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>
F-61
<PAGE> 169
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
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 1996.................. 8,840 65 578 10,340 19,823
Retained profit for the financial
year.............................. -- -- -- 4,846 4,846
Capitalization 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.
19. RECONCILIATION OF MOVEMENT IN CONSOLIDATED EQUITY SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Profit for the financial year............................... 4,923 5,398
Dividends................................................... (1,089) (552)
------ ------
3,834 4,846
Issue of shares............................................. 13,432 284
Shares to be issued......................................... 157 --
Expenses of capitalisation issue............................ -- (24)
Goodwill written off........................................ (5,852) (1,446)
Currency translation adjustment............................. -- (22)
------ ------
Net increase in equity shareholders' funds.................. 11,571 3,638
At beginning of year........................................ 8,934 20,505
------ ------
At end of year.............................................. 20,505 24,143
====== ======
</TABLE>
F-62
<PAGE> 170
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
20. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
(a) Reconciliation of operating profit to net cash inflow from operating
activities
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Operating profit............................................ 7,976 9,101
Depreciation................................................ 2,701 4,694
Profit on sale of tangible fixed assets..................... (15) (169)
------ ------
10,662 13,626
Movements in working capital:
(Increase)/decrease in stocks............................... (1,552) 1,454
(Increase)/decrease in debtors.............................. (778) 2,837
Increase in creditors....................................... 2,335 644
------ ------
5 4,935
------ ------
Net cash inflow from operating activities................... 10,667 18,561
====== ======
</TABLE>
(b) Analysis of changes in financing during the year
<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>
F-63
<PAGE> 171
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
(c) Analysis of cash and cash equivalents
<TABLE>
<CAPTION>
CHANGE CHANGE
1995 IN YEAR 1996 IN YEAR 1997
(L000) (L000) (L000) (L000) (L000)
------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C>
Cash at bank and in hand............... 3 786 789 (789) --
Bank overdrafts........................ (631) 631 -- (5,841) (5,841)
---- ----- --- ------ ------
(628) 1,417 789 (6,630) (5,841)
==== ===== === ====== ======
</TABLE>
(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) Major non-cash transactions
Fixed asset additions of L4,548,000 (1996: L658,000) were financed by hire
purchase borrowings.
F-64
<PAGE> 172
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>
1997
(L000)
------
<S> <C>
Contracted but not provided for............................. 830
===
</TABLE>
Annual commitments under operating leases are as follows:
<TABLE>
<CAPTION>
LAND AND
BUILDINGS OTHER
--------- ------
1997 1997
(L000) (L000)
--------- ------
<S> <C> <C>
Expiring within one year.................................... 8 61
Expiring between two and five years......................... 30 180
Expiring in more than five years............................ 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.
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 during the year to
several defined contribution schemes.
F-65
<PAGE> 173
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
SFAS NO 87 DISCLOSURES (UNAUDITED)
For the purpose of the disclosure in accordance with US GAAP, the pension
cost of the Exacta Circuits Limited pension scheme has been restated in the
following tables, in accordance with the requirements of SFAS No 87. The funded
status of the scheme, under SFAS No 87 is as follows:
<TABLE>
<CAPTION>
1997
(L000)
------
<S> <C>
Projected benefit obligations............................... 19,380
Plan assets at fair value................................... 19,864
------
Projected benefit obligations less than plan assets......... (484)
Unrecognised net gain....................................... 1,099
------
Accrued pension at end of year.............................. 615
======
</TABLE>
Plan assets consist primarily of investments in UK and overseas equity and
fixed interest securities. The principal assumptions used for SFAS No 87
purposes were as follows:
<TABLE>
<CAPTION>
PERCENT
-------
<S> <C>
Discount rate............................................... 8.5
Long term rate of increase in remuneration.................. 6.5
Long term rate of increase in pensions...................... 3.5
</TABLE>
The net periodic pension cost for the pension scheme under SFAS No 87
comprised:
<TABLE>
<CAPTION>
1997
(L000)
-------
<S> <C>
Service cost -- present value of benefits earned in the
year...................................................... 1,476
Interest cost on projected benefit obligations.............. 1,397
Actual return on assets..................................... (1,893)
Net amortization and deferral............................... 328
Contributions by employees.................................. (513)
------
Net periodic pension cost................................... 795
======
</TABLE>
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-66
<PAGE> 174
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
Ordinary circuit boards
Exacta Circuits Limited Scotland L1 100% Manufacture of printed
Ordinary circuit boards
Technograph Microcircuits England L1 100% Manufacture of ceramic
Limited Ordinary based microcircuits
Forward Circuits England L1 100% International trading in
International Limited Ordinary printed circuit boards
Manchester Circuits Limited England L1 100% Manufacture of printed
Ordinary circuit boards
L1 100%
Preferred
Ordinary
L1 100%
Cumulative
redeemable
preference
TI Technologies (Pty) South Africa R1 100% Manufacture of printed
Limited Ordinary circuit boards
Swift International (Pty) South Africa R1 100% Manufacture of printed
Limited Ordinary circuit boards
Exacta Circuits (France) France FF 100 100% Sale of printed circuit
SARL Ordinary boards 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-67
<PAGE> 175
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.
Under US GAAP, the following amounts would be reported:
<TABLE>
<CAPTION>
YEAR ENDED 31 JANUARY
----------------------
1996 1997
(L000) (L000)
--------- ---------
<S> <C> <C>
Net cash provided by operating activities................... 8,594 13,995
Net cash used in investing activities....................... (12,045) (16,373)
Net cash provided by financing activities................... 4,237 1,589
------- -------
Net increase/(decrease) in cash and cash equivalents........ 786 (789)
======= =======
Cash and cash equivalents under US GAAP..................... 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.
F-68
<PAGE> 176
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Approximate effects on net profit of differences between UK and US GAAP:
<TABLE>
<CAPTION>
YEAR ENDED 31
JANUARY
----------------
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Net profit in conformity with UK GAAP....................... 4,923 5,398
Adjustments:
Goodwill.................................................. (99) (188)
Revaluation of properties................................. 13 12
Pension cost.............................................. 35 160
Tax effect of US GAAP adjustments......................... (11) (53)
----- -----
Net profit in conformity with US GAAP....................... 4,861 5,329
===== =====
</TABLE>
Approximate effects on equity shareholders' funds of differences between UK
and US GAAP at 31 January:
<TABLE>
<CAPTION>
1997
(L000)
------
<S> <C>
Equity shareholders' funds in conformity with UK GAAP....... 24,143
Adjustments:
Goodwill.................................................. 7,690
Deferred taxation......................................... (744)
Revaluation of properties................................. (566)
Pension cost.............................................. (615)
Tax effect of US GAAP adjustments......................... 203
------
Equity shareholders' funds in conformity with US GAAP....... 30,111
======
</TABLE>
26. 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 and 1996, on which the auditors' reports were unqualified.
The statutory accounts for the year ended 31 January 1996 have been delivered to
the Registrar of Companies for England and Wales. Those for the year ended 31
January 1997 have not yet been delivered.
F-69
<PAGE> 177
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 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 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 April 4, 1997, and the
consolidated results of its operations and its consolidated cash flows for the
years ended 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-70
<PAGE> 178
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
MARCH 29, APRIL 4,
1996 1997
NOTES (L000) (L000)
----- --------- --------
<S> <C> <C> <C>
Turnover.................................................... 2 104,611 141,643
Cost of sales............................................. 90,170 112,980
------- -------
Gross profit.............................................. 14,441 28,663
Distribution costs........................................ 1,148 1,632
Administrative expenses................................... 6,913 9,491
------- -------
6,380 17,540
Other operating income.................................... -- 44
------- -------
Operating profit............................................ 3 6,380 17,584
Interest receivable....................................... 6 -- 414
Interest payable.......................................... 7 (807) (1,232)
------- -------
Profit on ordinary activities before taxation............... 5,573 16,766
Tax on profit on ordinary activities...................... 8 4,422 6,874
------- -------
Profit for the year after taxation*......................... 1,151 9,892
Dividends................................................. 9 500 450
------- -------
Retained profit for the period.............................. 20 651 9,442
======= =======
</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>
YEAR ENDED
---------------------
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Note of historical cost profits
Reported profit on ordinary activities before taxation.... 5,573 16,766
Depreciation charged during the period in respect of the
excess of valuation over historical cost of revalued
assets................................................. 1,449 1,500
------- -------
Historical cost profit on ordinary activities before
taxation............................................... 7,022 18,266
======= =======
Historical cost profit on ordinary activities after
taxation and dividends................................. 2,100 10,942
======= =======
</TABLE>
The Notes to the Consolidated Financial Statements are an integral part of
these Financial Statements.
F-71
<PAGE> 179
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONSOLIDATED STATEMENTS OF TOTAL RECOGNIZED GAINS AND LOSSES
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
MARCH 29, APRIL 4,
1996 1997
NOTES (L000) (L000)
----- --------- --------
<S> <C> <C> <C>
Profit on ordinary activities after taxation................ 1,151 9,892
Unrealized surplus on revaluation of freehold land and
buildings................................................. 10 -- (1,564)
Unrealized surplus on revaluation of plant and machinery.... 10 -- 23,743
------- -------
Total recognized gains and losses relating to the period.... 1,151 32,071
======= =======
</TABLE>
The Notes to the Consolidated Financial Statements are an integral part of
these Financial Statements.
F-72
<PAGE> 180
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONSOLIDATED BALANCE SHEET
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
APRIL 4,
1997
NOTES (L000)
----- --------
<S> <C> <C>
Fixed assets
Tangible assets........................................... 10 70,542
-------
Current assets
Stocks.................................................... 11 9,132
Debtors................................................... 12 24,003
Cash at bank and in hand.................................. 13 26,244
-------
59,379
Creditors: amounts falling due within one year.............. 14 (47,863)
-------
Net current (liabilities)/assets............................ 11,516
-------
Total assets less current liabilities....................... 82,058
Creditors: amounts falling due after more than one year
Loans..................................................... 16 27,336
Obligations under finance leases.......................... 15 3,203
Accruals and deferred income
Deferred Government grants................................ 18 --
-------
51,519
=======
Capital and reserves*
Called up share capital................................... 19 --
Share premium account..................................... 20 4,650
Revaluation reserve....................................... 20 26,364
Other reserves............................................ 20 216
Profit and loss account................................... 20 20,289
-------
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-73
<PAGE> 181
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN THOUSANDS OF BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
MARCH 29, APRIL 4,
1996 1997
NOTES (L000) (L000)
----- --------- --------
<S> <C> <C> <C>
Net cash inflow from operating activities................... 3(b) 22,757 33,842
------- -------
Returns on investments and servicing of finance
Interest paid............................................. (776) (1,077)
Interest received......................................... -- 414
Dividends paid to parent company shareholders............. (500) (450)
------- -------
Net cash outflow from returns on investments and servicing
of finance................................................ (1,276) (1,113)
------- -------
Taxation
Corporation tax paid...................................... (2,811) (4,903)
------- -------
Tax paid.................................................... (2,811) (4,903)
------- -------
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................. (16,816) (24,119)
Net cash outflow from investing activities.................. (16,816) (24,119)
Net cash inflow/(outflow) before financing.................. 1,854 (12,293)
======= =======
Financing
New loans................................................. 16 -- (22,089)
Repayment of loans........................................ 16 682 1,183
Repayment of finance leases............................... 15 623 1,005
------- -------
Net cash outflow/(inflow) from financing.................... 1,305 (19,901)
Increase in cash and cash equivalents....................... 13 549 7,608
------- -------
1,854 (12,293)
======= =======
</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-74
<PAGE> 182
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.
Revenue Recognition
Revenue is recognized in the period in which goods are dispatched to
customers.
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>
F-75
<PAGE> 183
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Net realizable value is based on estimated selling price less further costs
expected to be incurred to completion and disposal.
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.
2. TURNOVER
Turnover represents the net invoiced sales, excluding value added tax, of
goods sold during the period.
The Company's operations are all located in the United Kingdom and its
turnover and pre-tax profit is attributable to one continuing activity, the
manufacture of printed circuit boards.
F-76
<PAGE> 184
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 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
United Kingdom.............................................. 55,236 61,209
Belgium..................................................... 11,539 16,915
Germany..................................................... 10,931 19,524
Sweden...................................................... 8,065 21,630
Other Continental Europe.................................... 18,840 22,365
------- -------
104,611 141,643
======= =======
</TABLE>
Of the total turnover, 16.3% related to one customer (1996: 17.3%) and
15.8% to another (1996: 11.5%).
3. OPERATING PROFIT
(a) This is stated after charging/(crediting):
<TABLE>
<CAPTION>
YEAR ENDED
--------------------
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Directors' remuneration (see note 4)........................ 42 192
Auditors' remuneration for audit services................... 31 35
Auditors' remuneration for non audit services............... 63 75
Depreciation of tangible fixed assets....................... 17,302 19,123
Exceptional depreciation charge............................. -- --
Research and development expenditure........................ 549 475
Exchange gains.............................................. 41 (431)
Hire of plant and machinery................................. 42 18
Regional Selective Assistance............................... (600) (600)
====== ======
</TABLE>
(b) Reconciliation of operating profit to net cash inflow from operating
activities
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Operating profit............................................ 6,380 17,584
Depreciation................................................ 17,302 19,123
Loss on disposal of tangible fixed assets................... -- --
Government grants released.................................. (600) (600)
Increase in debtors......................................... (2,691) (6,632)
Increase in stocks.......................................... (3,301) (1,685)
Increase in creditors....................................... 5,667 6,052
------- ------
Net cash inflow from operating activities................... 22,757 33,842
======= ======
</TABLE>
F-77
<PAGE> 185
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
4. DIRECTORS' REMUNERATION
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Fees........................................................ -- --
Other emoluments (including pension contributions).......... 42 192
------- --------
42 192
======= ========
Emoluments of the chairman (excluding pension contributions)
were:..................................................... L23,547 L 9,078
======= ========
Emoluments of the highest paid director (excluding pension
contributions) were:...................................... L23,547 L181,413
======= ========
</TABLE>
Directors emoluments (excluding pension contributions) fell within the
following ranges:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
MARCH 29, APRIL 4,
1996 1997
--------- --------
<S> <C> <C>
LNil -- L5,000 1 --
L5,001 -- L10,000 -- 1
L15,001 -- L20,000 1 --
L20,001 -- L25,000 1 --
L180,001 -- L185,000 -- 1
</TABLE>
5. STAFF COSTS
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Wages and salaries.......................................... 19,320 26,429
Social security costs....................................... 1,706 2,185
Other pension costs......................................... 232 212
-------- ------
21,258 28,826
======== ======
</TABLE>
The average weekly number of employees during the period was made up as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
MARCH 29, APRIL 4,
1996 1997
--------- --------
<S> <C> <C>
Sales and administration.................................... 78 67
Manufacturing............................................... 1,050 1,332
----- -----
1,128 1,399
===== =====
</TABLE>
F-78
<PAGE> 186
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
6. INTEREST RECEIVABLE
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Bank deposit interest....................................... -- 414
=== ===
</TABLE>
7. INTEREST PAYABLE
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Bank overdraft.............................................. 141 10
Other loans wholly repayable within five years (net of
rebate)................................................... 389 478
Other loans not wholly repayable within five years.......... 77 544
Loan stock.................................................. 200 200
Other interest.............................................. -- --
----- -----
807 1,232
===== =====
</TABLE>
8. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
MARCH 29, APRIL 4
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
The taxation charge is made up as follows:
Based on the profit for the period
Corporation tax at 33%...................................... 4,422 6,463
Deferred taxation........................................... -- --
----- -----
4,422 6,463
Corporation tax under/(over) provided in previous Periods... -- 411
----- -----
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).
9. DIVIDENDS
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C> <C>
Ordinary -- interim paid......................................... 500 450
-- final proposed....................................... -- --
--- ---
500 450
=== ===
</TABLE>
F-79
<PAGE> 187
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 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 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 29, 1996.............................. 7,420 32,475 39,895
====== ======= =======
At April 4, 1997............................... 14,109 56,433 70,542
====== ======= =======
</TABLE>
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 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 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>
F-80
<PAGE> 188
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
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>
APRIL 4,
1997
(L000)
--------
<S> <C>
Plant and machinery......................................... 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 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>
APRIL 4,
1997
(L000)
--------
<S> <C>
Raw materials and consumables............................... 5,401
Work in progress............................................ 2,492
Finished goods for resale................................... 1,239
-----
9,132
=====
</TABLE>
12. DEBTORS
<TABLE>
<CAPTION>
APRIL 4,
1997
(L000)
--------
<S> <C>
Trade debtors............................................... 20,910
Other debtors............................................... 2,499
Prepayments and accrued income.............................. 594
------
24,003
======
</TABLE>
F-81
<PAGE> 189
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
13. CASH AND CASH EQUIVALENTS
Analysis of balances as shown in the consolidated balance sheet and changes
during the periods:
<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.
14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
APRIL 4,
1997
(L000)
--------
<S> <C>
Current installment due on loan (note 16)................... 4,183
Trade creditors............................................. 21,021
Amounts under finance leases (note 15)...................... 1,032
Current corporation tax..................................... 7,233
Other taxes and social security costs....................... 702
Other creditors............................................. 361
Accruals.................................................... 13,331
------
47,863
======
</TABLE>
15. OBLIGATIONS UNDER FINANCE LEASES AND HIRE PURCHASE CONTRACTS
<TABLE>
<CAPTION>
APRIL 4,
1997
(L000)
--------
<S> <C>
Amounts payable:
Within one year........................................... 1,371
In two to five years...................................... 3,654
-----
5,025
Less: finance charges allocated to future periods........... 790
-----
4,235
=====
Finance leases and hire purchase contracts are analyzed as
follows:
Current obligations (note 14)............................. 1,032
Noncurrent obligations.................................... 3,203
-----
4,235
=====
</TABLE>
F-82
<PAGE> 190
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Analysis of changes in finance leases and hire purchase contracts:
<TABLE>
<CAPTION>
APRIL 4,
1997
(L000)
--------
<S> <C>
Opening balance............................................. 5,086
Inception of finance lease contracts........................ 154
Capital element on finance lease rental payments............ (1,005)
------
Closing balance............................................. 4,235
======
</TABLE>
16. LOANS
<TABLE>
<CAPTION>
APRIL 4,
1997
GROUP (L000)
----- --------
<S> <C>
Wholly repayable within five years:
Bank loan Bank of Scotland(1)............................. 3,500
Loan stock................................................ 2,000
European Coal and Steel Community (ECSC) loan(1).......... 125
European Coal and Steel Community (ECSC) loan(2).......... 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................................................... 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
------
31,519
Less: included in current liabilities (see note 14)......... (4,183)
------
27,336
======
For loans not wholly repayable within five years the amounts
repayable by installments are:
Within five years......................................... 8,090
After five years.......................................... 8,804
------
16,894
======
</TABLE>
F-83
<PAGE> 191
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
1997
(L000)
--------
<S> <C>
Loans are repayable as follows:
Amounts falling due: --
Within one year........................................... 4,183
Between one and two years................................. 3,058
Between two and five years................................ 15,474
In five years or more..................................... 8,804
------
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.
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 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Opening balance............................................. 11,295 10,613
New loans raised............................................ -- 22,089
Repayment of loans.......................................... (682) (1,183)
------ ------
Closing balance............................................. 10,613 31,519
====== ======
</TABLE>
F-84
<PAGE> 192
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
17. DEFERRED TAXATION
Deferred taxation provided in the financial statements and the amounts not
provided are as follows:
<TABLE>
<CAPTION>
NOT
PROVIDED PROVIDED
-------- --------
APRIL 4, APRIL 4,
1997 1997
(L000) (L000)
-------- --------
<S> <C> <C>
Capital allowances in advance of depreciation............... -- 725
Other timing differences.................................... -- (2,978)
Taxation on valuation surplus............................... -- 8,720
-- ------
-- 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 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Opening balance............................................. 1,200 600
Received in the period...................................... -- --
Released during the period.................................. (600) (600)
----- ----
Closing balance............................................. 600 --
===== ====
</TABLE>
19. SHARE CAPITAL
The authorised and allotted, called up and fully paid share capital at
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 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>
F-85
<PAGE> 193
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
21. CAPITAL COMMITMENTS
<TABLE>
<CAPTION>
APRIL 4,
1997
(L000)
--------
<S> <C>
Contracted for but not provided............................. --
======
Authorized but not contracted for........................... 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.
Included within accruals under "Creditors -- amounts falling due within one
year" is a pension scheme accrual of L515,877.
The net periodic pension cost for each fiscal year is as follows:
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
L L
--------- --------
<S> <C> <C>
Service cost................................................ 176 263
Interest cost............................................... 385 443
Actual return on plan assets................................ (830) (509)
Net amortization and deferral............................... 375 (57)
---- ----
Net periodic pension cost................................... 106 140
==== ====
</TABLE>
23. DIRECTORS' INTERESTS
I H Bradbury has an interest in payments of L389,933 (1996 -- L383,640)
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.
F-86
<PAGE> 194
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
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 year ended March 29, 1996, 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, 1995. 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, 1995 has been allocated to shareholders' funds based on a ratio of
6/15, being the number of years elapsed between the effective date of FAS 87 and
April 1, 1995 over the 15 year period being used to amortize the transition
liability.
Summary of principal assumptions made by the actuary:
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
% %
--------- --------
<S> <C> <C>
Discount rate............................................... 9.0 8.5
Salary growth............................................... 7.0 6.5
Long-term return on assets.................................. 9.0 9.0
Pension increases........................................... 3.0 3.0
</TABLE>
The following table details the funded status of the plan under US GAAP:
<TABLE>
<CAPTION>
APRIL 4,
1997
(L000)
--------
<S> <C>
Vested benefit obligation................................... 5,800
Accrued benefit obligation.................................. 5,800
Projected benefit obligation................................ 6,520
Assets at market value...................................... 6,368
Funded status............................................... (152)
Unrecognized transition asset............................... (395)
Other unrecognised net loss................................. 787
Prepaid pension cost........................................ 240
</TABLE>
F-87
<PAGE> 195
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Amounts funded to the pension are primarily invested in equity and fixed
income securities.
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 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>
YEAR ENDED
----------------------
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- ---------
<S> <C> <C>
Profit for the year as reported in the consolidated profit
and loss account.......................................... 1,151 9,892
Pension costs............................................... 58 77
Amortization of Goodwill.................................... (84) (84)
Depreciation of tangible fixed assets....................... 1,634 1,685
Deferred taxation -- methodology............................ 1,858 787
-- on adjustments....................... (20) (25)
----- -----
Net income for the year as adjusted to accord with US
GAAP...................................................... 4,597 12,332
===== =====
</TABLE>
F-88
<PAGE> 196
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 29, APRIL 4,
1996 1997
(L000) (L000)
--------- ---------
<S> <C> <C>
Shareholders' funds as reported in the consolidated balance
sheet..................................................... 19,898 51,519
Intangible fixed assets -- goodwill:
Cost...................................................... 840 840
Amortization.............................................. (472) (556)
Tangible fixed assets:
Cost...................................................... (4,076) (2,304)
Amortization.............................................. (2,491) (24,942)
Current assets/liabilities:
Pension costs............................................. 679 756
Deferred taxation -- methodology.......................... 1,466 2,253
-- on adjustments.................... (224) (249)
Provisions for liabilities and charges:
Deferred taxation -- methodology.......................... -- --
-- on adjustments.................... -- --
------ -------
Shareholders' equity as adjusted to accord with US GAAP..... 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.
The categories of cash flow activity under US GAAP can be summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Cash inflow from operating activities....................... 18,670 27,826
Cash outflow on investing activities........................ (16,816) (24,119)
Cash (outflow)/inflow from financing activities............. (1,305) 19,901
------- -------
Increase in cash and cash equivalents....................... 549 23,608
Cash and cash equivalents:
Opening balance........................................... 2,087 2,636
------- -------
Closing balance........................................... 2,636 26,244
======= =======
</TABLE>
F-89
<PAGE> 197
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 and Industry Data.......... ii
Summary........................................ 1
Risk Factors................................... 9
Selected Financial Data........................ 20
Unaudited Pro Forma Financial Information...... 28
Management's Discussion and Analysis of Results
of Operations and Financial Condition........ 33
Business....................................... 41
Management..................................... 47
Security Ownership of Certain Beneficial
Owners....................................... 56
Certain Transactions........................... 58
Description of Senior Credit Facilities........ 61
The Exchange Offer............................. 64
Description of New Notes....................... 71
Certain Federal Income Tax Considerations...... 101
Plan of Distribution........................... 102
Legal Matters.................................. 102
Experts........................................ 103
Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure....... 103
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% SERIES B SENIOR SUBORDINATED NOTES
DUE 2007 FOR
9 3/4% SERIES B SENIOR SUBORDINATED NOTES
DUE 2007
[VIASYSTEMS, INC. LOGO]
------------------------
PROSPECTUS
------------------------
, 1997
<PAGE> 198
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. 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 20, 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 whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-1
<PAGE> 199
ITEM 21. 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) (incorporated by reference
to exhibit 2.1 to the Registration Statement filed by the
Company on Form S-1 with the Commission on June 19, 1997
(the "Form S-1")).
2.2 -- Acquisition Agreement, dated November 26, 1996, among
Lucent Technologies Inc., Circo Technologies Group, Inc.
and Circo Craft Technologies, Inc. (incorporated by
reference to exhibit 2.2 to the Registration Statement
filed by the Company on Form S-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 Coinvestors, L.P.
(incorporated by reference to exhibit 2.3 to the
Registration Statement filed by the Company on Form S-1).
2.4 -- Agreement and Plan of Merger dated as of June 6, 1997, by
and between Viasystems Group, Inc. and Chips Holdings,
Inc. (incorporated by reference to exhibit 2.4 to the
Registration Statement filed by the Company on Form S-1).
2.5 -- Agreement and Plan of Merger dated as of June 6, 1997, by
and between Viasystems, Inc. and Chips Acquisition, Inc.
(incorporated by reference to exhibit 2.5 to the
Registration Statement filed by the Company on Form S-1).
3.1 -- Certificate of Incorporation of Viasystems, Inc.
(incorporated by reference to exhibit 3.1 to the
Registration Statement filed by the Company on Form S-1).
3.2 -- Bylaws of Viasystems, Inc. (incorporated by reference to
exhibit 3.2 to the Registration Statement filed by the
Company on Form S-1).
4.1 -- Indenture, dated as of June 6, 1997, by and between
Viasystems, Inc. and The Bank of New York, as Trustee.
(incorporated by reference to exhibit 4.1 to the
Registration Statement filed by the Company on Form S-1).
4.2 -- Form of the 1997 Note (included in Exhibit 4.1, Exhibit
B) (incorporated by reference to exhibit 4.2 to the
Registration Statement filed by the Company on Form S-1).
4.3 -- Indenture, dated as of February 17, 1998, by and between
Viasystems, Inc. and the Bank of New York, as Trustee
(incorporated by reference to exhibit 4.7 of the annual
report filed by the Company on Form 10-K).
4.4 -- Form of the Old Note (included in Exhibit 4.3, Exhibit A)
(incorporated by reference to exhibit 4.8 of the annual
report filed by the Company on Form 10-K).
4.5 -- Form of the New Note (included in Exhibit 4.3, Exhibit B)
(incorporated by reference to exhibit 4.9 of the annual
report filed by the Company on Form 10-K).
4.6 -- 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. (incorporated by reference to
exhibit 4.4 to the Registration Statement filed by the
Company on Form S-1).
4.7 -- Amended and Restated Guarantee and Collateral Agreement
dated as of April 11, 1997 (incorporated by reference to
exhibit 4.5 to the Registration Statement filed by the
Company on Form S-1).
4.8 -- Supplement to Guarantee and Collateral Agreement dated as
of June 5, 1997 (incorporated by reference to exhibit 4.6
to the Registration Statement filed by the Company on
Form S-1).
5.1 -- Opinion of Legality of Weil, Gotshal & Manges LLP*
</TABLE>
II-2
<PAGE> 200
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
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)
(incorporated by reference to exhibit 10.1 to Amendment
No. 2 to Form S-1 with the Commission on September 16,
1997 (the "Amendment No. 2 to Form S-1")).
10.2 -- [Intentionally omitted.]
10.3 -- Amended and Restated Viasystems Group, Inc. 1997 Stock
Option Plan (incorporated by reference to exhibit 10.3 to
the Registration Statement filed by the Company on Form
S-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
(incorporated by reference to exhibit 10.4 to Amendment
No. 1 to the Form S-1 filed with the Commission on July
31, 1997 ("Amendment No. 1 to Form S-1")).
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 (incorporated by reference to exhibit 10.5 to
Amendment No. 1 to the Form S-1).
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
(incorporated by reference to exhibit 10.6 to Amendment
No. 1 to the Form S-1).
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
(incorporated by reference to exhibit 10.7 to Amendment
No. 1 to the Form S-1).
10.8 -- Stock Option Agreement dated as of June 6, 1997 between
Viasystems Group, Inc. and James N. Mills (incorporated
by reference to exhibit 10.8 to Amendment No. 1 to the
Form S-1).
10.9 -- Stock Option Agreement dated as of June 6, 1997 between
Viasystems Group, Inc. and David M. Sindelar
(incorporated by reference to exhibit 10.9 to Amendment
No. 1 to the Form S-1).
10.10 -- Stock Option Agreement dated as of June 6, 1997 between
Viasystems Group, Inc. and Larry S. Bacon (incorporated
by reference to exhibit 10.10 to Amendment No. 1 to the
Form S-1).
10.11 -- Stock Option Agreement dated as of June 6 1997 between
Viasystems Group, Inc. and W. Thomas McGhee (incorporated
by reference to exhibit 10.11 to Amendment No. 1 to the
Form S-1).
10.12 -- Viasystems Group, Inc. Stock Option Agreement dated as of
February 4, 1997, with Richard W. Vieser (incorporated by
reference to exhibit 10.12 to Amendment No. 1 to the Form
S-1).
10.13 -- Viasystems Group, Inc. Stock Option Agreement dated as of
February 4, 1997, with Kenneth F. Yontz (incorporated by
reference to exhibit 10.13 to Amendment No. 1 to the Form
S-1).
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.
(incorporated by reference to exhibit 10.14 to Amendment
No. 1 to the Form S-1).
</TABLE>
II-3
<PAGE> 201
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
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.
(incorporated by reference to exhibit 10.15 to Amendment
No. 1 to the Form S-1).
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 (incorporated by reference to exhibit 10.16
to the Registration Statement filed by the Company on
Form S-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 (incorporated by
reference to exhibit 10.17 to the Registration Statement
filed by the Company on Form S-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 (incorporated
by reference to exhibit 10.18 to Amendment No. 1 to the
Form S-1).
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
(incorporated by reference to exhibit 10.19 to Amendment
No. 1 to the Form S-1).
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
(incorporated by reference to exhibit 10.20 to Amendment
No. 1 to the Form S-1).
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 (incorporated
by reference to exhibit 10.21 to Amendment No. 1 to the
Form S-1).
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
(incorporated by reference to exhibit 10.22 to Amendment
No. 1 to the Form S-1).
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
(incorporated by reference to exhibit 10.23 to Amendment
No. 1 to the Form S-1).
10.24 -- Agreement dated as of December 30, 1996, between Circo
Craft Technologies, Inc. and the Communication Workers of
America (incorporated by reference to exhibit 10.24 to
Amendment No. 1 to the Form S-1).
10.25 -- Environmental, Health and Safety Agreement, dated as of
November 26, 1996, between Lucent Technologies and Circo
Craft Technologies, Inc. (incorporated by reference to
exhibit 10.25 to the Registration Statement filed by the
Company on Form S-1).
10.26 -- Purchase Agreement, dated as of February 9, 1998, by and
among Viasystems, Inc. and Chase Securities Inc. and
NatWest Capital Markets Limited (incorporated by
reference to exhibit of the annual report filed by the
Company on Form 10-K).
10.27 -- Exchange and Registration Rights Agreement, dated as of
February 17, 1998 by and among Viasystems, Inc. and Chase
Securities Inc. and NatWest Capital Markets Limited
(incorporated by reference to exhibit 10.27 of the annual
report filed by the Company on Form 10-K).
12.1 -- Computation of Ratio of Earnings to Fixed Charges.*
16.1 -- Letter from Deloitte & Touche regarding change in
certifying accountant for Circo Craft.*
16.2 -- Letter from KPMG Audit Plc regarding change in auditors
for Forward Group Plc.*
16.3 -- Letter from Ernst & Young regarding change in auditors
for Interconnection System (Holdings) Limited.*
</TABLE>
II-4
<PAGE> 202
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
21.1 -- Subsidiaries of Viasystems, Inc. (incorporated by
reference to exhibit 21.1 to the Registration Statement
filed by the Company on Form S-1 with the Commission on
June 19, 1997 (the "Form S-1")).
23.1 -- Consent of Weil, Gotshal & Manges LLP (included in the
opinion filed as Exhibit 5.1)*
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 1997 Indenture filed as
Exhibit 4.1 to the Form S-1 on Form T-1 (incorporated by
reference to exhibit 25.1 to the Registration Statement
filed by the Company on Form S-1).
25.2 -- Statement of Eligibility and Qualification of The Bank of
New York, as Trustee under the Indenture filed as Exhibit
4.3 hereto on Form T-1*
27.1 -- Financial Data Schedule*
99.1 -- Form of Letter of Transmittal*
99.2 -- Form of Notice of Guaranteed Delivery*
</TABLE>
- ---------------
* Filed herewith.
(b) Financial Statement Schedules:
The following financial statement schedule is included in this Registration
Statement:
F-2 Report of Independent Public Accountants on Financial Statement
Schedule
F-26 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.
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
II-5
<PAGE> 203
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.
(4) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request.
(5) The undersigned registration hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
(h) See Item 20.
II-6
<PAGE> 204
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Louis, State of
Missouri, on April 15, 1998.
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 April 15, 1998
- ----------------------------------------------------- Directors and Chief
James N. Mills Executive Officer (Principal
Executive Officer)
/s/ DAVID M. SINDELAR Chief Financial Officer April 15, 1998
- ----------------------------------------------------- (Principal Accounting and
David M. Sindelar Financial Officer)
/s/ ROBERT N. MILLS President, Chief Operating April 15, 1998
- ----------------------------------------------------- Officer and Director
Robert N. Mills
/s/ THOMAS O. HICKS Director April 15, 1998
- -----------------------------------------------------
Thomas O. Hicks
/s/ JACK D. FURST Director April 15, 1998
- -----------------------------------------------------
Jack D. Furst
/s/ RICHARD W. VIESER Director April 15, 1998
- -----------------------------------------------------
Richard W. Vieser
/s/ KENNETH F. YONTZ Director April 15, 1998
- -----------------------------------------------------
Kenneth F. Yontz
</TABLE>
II-7
<PAGE> 205
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
5.1 -- Opinion of Legality of Weil, Gotshal & Manges LLP
12.1 -- Computation of Ratio of Earnings to Fixed Charges
16.1 -- Letter from Deloitte & Touche regarding change in
certifying accountant for Circo Craft Co. Inc.*
16.2 -- Letter from KPMG Audit Plc regarding change in auditors
for Forward Group Plc.*
16.3 -- Letter from Ernst & Young regarding change in auditors
for Interconnection System (Holdings) Limited.*
23.1 -- Consent of Weil, Gotshal & Manges LLP (included in
Exhibit 5.1)
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, independent auditors
23.8 -- Consent of Ernst & Young, independent auditors
25.2 -- Statement of Eligibility and Qualification of The Bank of
New York, as Trustee under the indenture filed as exhibit
4.3 hereto on Form T-1
27.1 -- Financial Data Schedule
99.1 -- Form of Letter of Transmittal
99.2 -- Form of Notice of Guaranteed Delivery
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[WEIL, GOTSHAL & MANGES LLP LETTERHEAD]
April 16, 1998
Viasystems, Inc.
101 South Hanley, Suite 400
St. Louis, Missouri 63105
Ladies and Gentlemen:
We have acted as counsel to Viasystems, Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing by the Company
of a Registration Statement on Form S-4 (Registration No. 333-_______) (the
"Registration Statement") filed with the Securities and Exchange Commission on
April 16, 1998 under the Securities Act of 1933, as amended (the "Act"),
relating to $100,000,000 aggregate principal amount of 9 3/4% Series B Senior
Subordinated Notes due 2007 (the "New Notes") of the Company that may be issued
in exchange for a like principal amount of the issued and outstanding 9 3/4%
Series B Senior Subordinated Notes due 2007 (the "Old Notes") of the Company.
The Company proposes to offer, upon the terms set forth in the prospectus
contained in the Registration Statement, to exchange $1,000 principal amount of
New Notes for each $1,000 principal amount of Old Notes (the "Exchange Offer").
The New Notes will be issued under the Indenture, dated as of February 17,
1998, by and between the Company and The Bank of New York, as trustee (as
amended or supplemented to the date hereof, the "Indenture"). Capitalized
terms defined in the Registration Statement and not otherwise defined herein
are used herein as so defined.
In so acting, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Indenture, the form of the New
Notes set forth in the Indenture and such corporate records, agreements,
documents and other instruments, and such certificates or comparable documents
of public officials and of officers and representatives of the Company and have
made such inquiries of such officers and representatives as we have deemed
relevant and necessary as a basis for the opinion hereinafter set forth.
<PAGE> 2
Viasystems, Inc.
April 16, 1998
Page 2
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions of
fact material to this opinion that have not been independently established, we
have relied upon certificates or comparable documents of officers and
representatives of the Company.
Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that the New Notes have been duly authorized by
the Company for issuance and, when executed by the Company and authenticated by
the Trustee in accordance with the terms of the Indenture, and delivered in
exchange for the Old Notes in accordance with the Exchange Offer, will be
legal, valid and binding obligations of the Company, enforceable against it in
accordance with their terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity).
The opinion expressed herein is limited to the laws of the State of
New York, and we express no opinion as to the effect on the matters covered by
this letter of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
/s/ WEIL, GOTSHAL & MANGES LLP
<PAGE> 1
EXHIBIT 12.1
VIASYSTEMS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
ACTUAL
---------------------- PRO FORMA
DEC. 1996 DEC. 1997 DEC. 1997
--------- --------- ---------
<S> <C> <C> <C>
Income before taxes and
extraordinary item................................... $(54,166) $(311,260) $(41,111)
Fixed charges
Interest expense..................................... 2,503 64,612 90,655
Amortization of deferred financing costs............. 470 6,629 7,822
1/3 of rent expense................................. 83 591 591
-------- --------- --------
Earnings............................................... (51,110) (239,428) 57,957
Fixed charges.......................................... 3,056 71,832 99,068
-------- --------- --------
Ratio of earnings to fixed charges..................... N/A N/A N/A
======== ========= ========
Deficiency of earnings to cover fixed charges.......... $(54,166) $(311,260) $(41,111)
======== ========= ========
</TABLE>
<PAGE> 1
EXHIBIT 16.1
[DELOITTE & TOUCHE LETTERHEAD]
April 15, 1998
Securities and Exchange Commission
450-5th Street, N.W.
Washington, D.C. 20549
U.S.A.
Gentlemen:
We have read the statements made by Viasystems, Inc., which we understand will
be filed with the Commission, pursuant to Item 304 of Regulation S-K, as part
of the Company's Form S-4 for the month of April 1998. We agree with the
statements concerning our Firm relative to our association with Circo Craft as
described under the heading "Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure" in such Form S-4.
Very truly yours,
/s/ DELOITTE & TOUCHE
Chartered Accountants
<PAGE> 1
EXHIBIT 16.2
[KPMG LETTERHEAD]
Securities and Exchange Commission
450 5th Street NW
Washington, DC 20549
United States of America
14 April 1998
Dear Sirs
We have read the statements made by Viasystems, Inc, which we understand will
be filed with the Securities and Exchange Commission pursuant to Item 304 of
Regulation S-K, as part of that company's Form S-4 for the month of April 1998.
We agree with the statements concerning our Firm in such Form S-4.
Yours faithfully
/s/ KPMG AUDIT PLC
KPMG Audit Plc
<PAGE> 1
EXHIBIT 16.3
[ERNST & YOUNG LETTERHEAD]
Securities and Exchange Commission April 15,1998
450 5th Street NW
Washington, DC 20549
Dear Sirs
We have read the statements pertaining to our firm made by Viasystems Inc., in
its form S-4 under the caption "Changes in and disagreements with
accountants on auditing and financial disclosure" and are in agreement
therewith.
Yours faithfully
ERNST & YOUNG
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of
our report dated January 30, 1998, except for Note 19, for which the date is
March 26, 1998, on our audits of the financial statements and financial
statement schedule of Viasystems Inc. We also consent to the reference to our
firm under the caption "Experts."
Coopers & Lybrand L.L.P.
St. Louis, Missouri
April 15, 1998
<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-4 of our report dated December 20, 1996, relating to the
consolidated statements of earnings, retained earnings, and changes in financial
position of Circo Craft Co. Inc. for the nine-month period ended September 30,
1996, 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
April 15, 1998
<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-4 of our report dated February 1, 1996 relating to the
consolidated statements of earnings, retained earnings and changes in financial
position of Circo Craft Co. Inc. for the year 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
April 15, 1998
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of
our report dated February 21, 1997, on our audits of the statements of
operations of the Interconnection Business of the Microelectronics Group,
Interconnection Technologies Unit of Lucent Technologies Inc. We also consent to
the reference to our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
St. Louis, Missouri
April 15, 1998
<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 for each of
the years in the two-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-4.
KPMG Audit Plc
Chartered Accountants
Birmingham, England
April 14, 1998
<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 on Form S-4 and related Prospectus of Viasystems, Inc.
for the registration of $100,000,000 9 3/4% Senior Subordinated Notes due 2007.
ERNST & YOUNG
Chartered Accountants
Newcastle upon Tyne, England
April 15, 1998
<PAGE> 1
EXHIBIT 25.2
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE
901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
- ------------------------------------------------------------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
- ------------------------------------------------------------------------------
Viasystems, Inc.
(Exact name of obligor as specified in its charter)
Delaware 43-1777252
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
James N. Mills
Chief Executive Officer
101 South Hanley Road, Suite 400
St. Louis, Missouri 63105
(Address of principal executive offices) (Zip code)
----------------------
9 3/4% Series B Senior Subordinated Notes due 2007
(Title of the indenture securities)
==============================================================================
<PAGE> 2
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE
901(d) OF REGULATION S-T
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Name Address
-------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No.E1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-2-
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 13th day of April, 1998.
THE BANK OF NEW YORK
By: /s/ THOMAS B. ZAKRZEWSKI
---------------------------
Name: THOMAS B. ZAKRZEWSKI
Title: ASSISTANT VICE PRESIDENT
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 27,538
<SECURITIES> 0
<RECEIVABLES> 115,842
<ALLOWANCES> 2,573
<INVENTORY> 84,631
<CURRENT-ASSETS> 251,678
<PP&E> 499,980
<DEPRECIATION> 51,852
<TOTAL-ASSETS> 1,068,912
<CURRENT-LIABILITIES> 235,019
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (92,193)
<TOTAL-LIABILITY-AND-EQUITY> 1,068,912
<SALES> 795,289
<TOTAL-REVENUES> 795,289
<CGS> 554,097
<TOTAL-COSTS> 554,097
<OTHER-EXPENSES> 480,187<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71,241
<INCOME-PRETAX> (311,260)
<INCOME-TAX> 8,432
<INCOME-CONTINUING> (319,692)
<DISCONTINUED> 0
<EXTRAORDINARY> 7,796
<CHANGES> 0
<NET-INCOME> (327,488)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES CHARGES OF $294,500 RELATING TO THE WRITE-OFF OF ACQUIRED IN-PROCESS
RESEARCH AND DEVELOPMENT COSTS ASSOCIATED WITH THE ACQUISITIONS OF FORWARD GROUP
AND ISL. THE WRITE-OFF RELATES TO ACQUIRED RESEARCH AND DEVELOPMENT PROJECTS
THAT DO NOT HAVE A FUTURE ALTERNATIVE USE.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER
9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
OF
VIASYSTEMS, INC.
PURSUANT TO THE EXCHANGE OFFER AND PROSPECTUS DATED MARCH , 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1998 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE
OFFER IS EXTENDED BY THE COMPANY.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery:
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
Attn: Reorganization Section, New York, New York 10286
Marcia Brown Attn: Reorganization Section,
(212) 815-3428 Marcia Brown
(212) 815-3428
</TABLE>
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 815-6339
For Information or
Confirmation by Telephone:
(212) 815-6333
(Originals of all documents sent by facsimile should be sent promptly by
registered
or certified mail, by hand, or by overnight delivery service).
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
The undersigned acknowledges that it has received the Prospectus, dated
, 1998 (the "Prospectus"), of Viasystems, Inc., a Delaware corporation
(the "Company"), and this Letter of Transmittal, which together constitute the
Company's offer (the "Exchange Offer") to exchange an aggregate principal amount
of up to $100,000,000 of its 9 3/4% Series B Senior Subordinated Notes due 2007,
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act") (the "New Notes") of the Company for a like principal amount
of the issued and outstanding 9 3/4% Series B Senior Subordinated Notes due 2007
(the "Old Notes") of the Company.
IF YOU WISH TO EXCHANGE 9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF 9 3/4% SERIES B SENIOR SUBORDINATED
NOTES DUE 2007, PURSUANT TO THE EXCHANGE OFFER, YOU MUST VALIDLY TENDER (AND NOT
WITHDRAW) OLD NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
SIGNATURES MUST BE PROVIDED
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY BEFORE COMPLETING THIS
LETTER OF TRANSMITTAL.
<PAGE> 2
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus.
This Letter of Transmittal is to be completed by holders of Old Notes (as
defined) either if Old Notes are to be forwarded herewith or if tenders of Old
Notes are to be made by book-entry transfer to an account maintained by The Bank
of New York (the "Exchange Agent") at the Depository Trust Company (the
"Book-Entry Transfer Facility" or "DTC") pursuant to the procedures set forth in
"The Exchange Offer -- Procedures for Tendering" in the Prospectus.
Holders of Old Notes whose certificates (the "Certificates") for such Old
Notes are not immediately available or who cannot deliver their Certificates and
all other required documents to the Exchange Agent on or prior to the Expiration
Date (as defined in the Prospectus) or who cannot complete the procedures for
book-entry transfer on a timely basis, must tender their Old Notes according to
the guaranteed delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures" in the Prospectus.
DESCRIPTION OF TENDERED OLD NOTES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Owner(s) Aggregate
as it appears on the 9 3/4% Series B Senior Subordinated Certificate Principal Amount
Notes due 2007 ("Old Notes") Number(s) of Old Notes
(Please fill in, if blank) of Old Notes Tendered
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Total Principal
Amount of Notes
Tendered
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
----------------------------------------------
Account Number
-------------------------------------------------------------
Transaction Code Number
----------------------------------------------------
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
-----------------------------------------------
Window Ticket Number (if any)
----------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-------------------------
Name of Institution which Guaranteed Delivery
-----------------------------
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution
----------------------------------------------
Account Number
-------------------------------------------------------------
Transaction Code Number
----------------------------------------------------
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD
NOTES ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
<PAGE> 4
LADIES AND GENTLEMEN:
1. The undersigned hereby tenders to Viasystems, Inc., a Delaware
corporation (the "Company"), the 9 3/4% Series B Senior Subordinated Notes due
2007 (the "Old Notes"), described above pursuant to the Company's offer of
$1,000 principal amount of 9 3/4% Series B Senior Subordinated Notes due 2007
(the "New Notes"), in exchange for each $1,000 principal amount of the Old
Notes, upon the terms and subject to the conditions contained in the Prospectus
dated , 1998 (the "Prospectus"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which together with the
Prospectus constitute the "Exchange Offer").
2. THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD
NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD
NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY,
AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION
RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
3. The undersigned understands that the tender of the Old Notes pursuant to
any one of the procedures set forth in the Prospectus and in the instructions,
attached hereto, will, upon the Company's acceptance for exchange of such
tendered Old Notes, constitute a binding agreement between the undersigned and
the Company as to the terms and conditions set forth in the Prospectus.
4. Unless the box under the heading "Special Registration Instructions" is
checked, the undersigned hereby represents and warrants that:
(i) the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the undersigned,
whether or not the undersigned is the holder;
(ii) neither the undersigned nor any such other person is engaging in or
intends to engage in a distribution of such New Notes;
(iii) neither the undersigned 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
such term is defined under Rule 405 promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), of the Company.
<PAGE> 5
5. The undersigned may, if, and only if, unable to make all of the
representations and warranties contained in Item 4 above, elect to have its Old
Notes registered in the shelf registration described in the Exchange and
Registration Rights Agreement, dated as of February 17, 1998, between the
Company and Chase Securities Inc. and NatWest Capital Markets Limited in the
form filed as an exhibit to the Registration Statement (the "Registration
Agreement") (all terms used in this Item 5 with their initial letters
capitalized, unless otherwise defined herein, shall have the meanings given them
in the Registration Agreement). Such election may be made by checking the box
under "Special Registration Instructions" below. By making such election, the
undersigned agrees, as a Holder participating in a Shelf Registration, to
indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act, (collectively referred to for purposes of this indemnification
provision as the "Company"), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holder's Information, and shall
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending or preparing to defend
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that no such Holder shall be liable for any indemnity claims hereunder
in excess of the amount of net proceeds received by such Holder from the sale of
Securities, Exchange Securities or Private Exchange Securities pursuant to such
Shelf Registration Statement. Any such indemnification shall be governed by the
terms and subject to the conditions set forth in the Registration Agreement,
including, without limitation, the provisions regarding notice, retention of
counsel, contribution and payment of expenses set forth therein. The above
summary of the indemnification provision of the Registration Agreement is not
intended to be exhaustive and is qualified in its entirety by the Registration
Agreement.
6. If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
New Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and delivering a prospectus, the undersigned will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. If the undersigned is a broker-dealer and Old Notes held for its
own account were not acquired as a result of market-making or other trading
activities, such Old Notes cannot be exchanged pursuant to the Exchange Offer.
7. Any obligation of the undersigned hereunder shall be binding upon the
successors, assigns, executors, administrators, trustees in bankruptcy and legal
and personal representatives of the undersigned.
8. Unless otherwise indicated herein under "Special Delivery Instructions,"
please issue the certificates for the New Notes in the name of the undersigned.
<PAGE> 6
9. Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last Interest Payment Date to which interest has been paid or duly provided for
on such Old Notes prior to the original issue date of the New Notes or, if no
such interest has been paid or duly provided for, will not receive any accrued
interest on such Old Notes, and the undersigned waives the right to receive any
interest on such Old Notes accrued from and after such Interest Payment Date or,
if no such interest has been paid or duly provided for, from and after February
17, 1998.
10. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company or the Exchange Agent to be necessary or
desirable to complete the sale, assignment and transfer of the Old Notes
tendered hereby. All authority herein conferred or agreed to be conferred in
this Letter of Transmittal shall survive the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, executors, administrators, personal representatives, trustees in
bankruptcy, legal representatives, successors and assigns of the undersigned.
Except as stated in the Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX.
<PAGE> 7
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 1)
To be completed ONLY IF the New Notes are to be issued or sent to someone
other than the undersigned or to the undersigned at an address other than that
provided above.
Mail [ ] Issue [ ] (check appropriate boxes) certificates to:
Name:
----------------------------------------------------------------------
(PLEASE PRINT)
Address:
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
(INCLUDING ZIP CODE)
SPECIAL REGISTRATION INSTRUCTIONS
(See Item 5)
To be completed ONLY IF (i) the undersigned satisfies the conditions set
forth in Item 5 above, (ii) the undersigned elects to register its Old Notes in
the shelf registration described in the Registration Agreement, and (iii) the
undersigned agrees to indemnify certain entities and individuals as set forth in
Item 5 above.
[ ] By checking this box the undersigned hereby (i) represents that it is
unable to make all of the representations and warranties set forth in Item 4
above, (ii) elects to have its Old Notes registered pursuant to the shelf
registration described in the Registration Agreement, and (iii) agrees to
indemnify certain entities and individuals identified in, and to the extent
provided in, Item 5 above.
<PAGE> 8
SIGNATURE
To be completed by all exchanging noteholders. Must be signed by registered
holder exactly as name appears on Old Notes. If signature is by trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, please set forth
full title. See Instruction 3.
X
-----------------------------------------------------------------------------
X
-----------------------------------------------------------------------------
SIGNATURE(S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATURE
Dated:
-----------------------------------------------------------------------------
Name(s):
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity:
-----------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone No.:
--------------------------------------------------------------------------
SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 1 BELOW)
Certain Signatures Must be Guaranteed by an Eligible Institution
-----------------------------------------------------------------------------
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
-----------------------------------------------------------------------------
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF
FIRM)
-----------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
-----------------------------------------------------------------------------
(PRINTED NAME)
-----------------------------------------------------------------------------
(TITLE)
Dated:
-----------------------------------------------------------------------------
PLEASE READ THE INSTRUCTIONS ON THE REVERSE SIDE HEREOF,
WHICH FORM A PART OF THIS LETTER OF TRANSMITTAL.
<PAGE> 9
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal must
be guaranteed by an eligible guarantor institution that is a member or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program, the Stock Exchange Medallion
Program, or by an "eligible guarantor institution" within the meaning of Rule
17Ad-15 promulgated under the Exchange Act (an "Eligible Institution") unless
the box entitled "Special Delivery Instructions" has not been completed or the
Old Notes described above are tendered for the account of an Eligible
Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND OLD NOTES; GUARANTEED DELIVERY
PROCEDURES. The Old Notes, together with a properly completed and duly executed
Letter of Transmittal (or copy thereof), should be mailed or delivered to the
Exchange Agent at the address set forth above.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent on or prior
to the Expiration Date or (iii) who cannot complete the procedures for delivery
by book-entry transfer on a timely basis, may tender their Old Notes by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed
Delivery Procedures" in the Prospectus. Pursuant to such procedures: (i) such
tender must be made by or through an Eligible Institution (as defined below);
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Company, must be received by the
Exchange Agent on or prior to the Expiration Date; and (iii) the Certificates
(or a Book-Entry Confirmation (as defined in the Prospectus)) representing all
tendered Old Notes, in proper form for transfer, together with a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent within three New
York Stock Exchange, Inc. trading days after the date of execution of such
Notice of Guaranteed Delivery, all as provided in "The Exchange
Offer -- Guaranteed Delivery Procedures" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Old Notes to be
properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein and in the Prospectus, "Eligible Institution" means 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.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL OR THE
NOTICE OF GUARANTEED DELIVERY, 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 THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
3. SIGNATURE ON LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by a person other than a registered holder
of any Old Notes, such Old Notes must be endorsed or accompanied by appropriate
bond powers, signed by such registered holder exactly as such registered
holder's name appears on such Old Notes.
<PAGE> 10
If this 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, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted with this Letter of Transmittal.
4. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Capital Securities" is inadequate, the Certificate number(s)
and/or the principal amount of Old Capital Securities and any other required
information should be listed on a separate signed schedule which is attached to
this Letter of Transmittal.
5. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address and
telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
6. MISCELLANEOUS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance, and withdrawal of tendered Old Notes
will be resolved by the Company in its sole discretion, which determination will
be final and binding. The Company reserves the absolute right to reject any or
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 this Letter of
Transmittal) will be final and binding. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Neither the Company, the Exchange Agent,
nor any other person shall be under any duty to give notification of defects in
such tenders or 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 holder thereof as soon as practicable following the
Expiration Date.
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
ANY AND ALL OUTSTANDING
9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
(LIQUIDATION AMOUNT $1,000 PER NOTE)
OF
VIASYSTEMS, INC.
PURSUANT TO THE EXCHANGE OFFER AND PROSPECTUS DATED , 1998
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the 9 3/4% Series B Senior Subordinated Notes due 2007 (the
"Old Notes"), of VIASYSTEMS, INC. (the "Company") are not immediately available,
(ii) Old Notes, the Letter of Transmittal and all other required documents
cannot be delivered to The Bank of New York (the "Exchange Agent") on or prior
to 5:00 P.M. New York City time, on the Expiration Date (as defined in the
Prospectus referred to below) or (iii) the procedures for delivery by book-entry
transfer cannot be completed on a timely basis. This Notice of Guaranteed
Delivery may be delivered by hand, overnight courier or mail, or transmitted by
facsimile transmission, to the Exchange Agent. See "The Exchange
Offer -- Guaranteed Delivery Procedures" in the Prospectus. In addition, in
order to utilize the guaranteed delivery procedure to tender Old Notes pursuant
to the Exchange Offer, a completed, signed and dated Letter of Transmittal
relating to The Old Notes (or facsimile thereof) must also be received by the
Exchange Agent prior to 5:00 P.M. New York City time, on the Expiration Date.
Capitalized terms not defined herein have the meanings assigned to them in the
Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery:
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
Attn: Reorganization Section, New York, New York 10286
Marcia Brown Attn: Reorganization Section,
(212) 815-3428 Marcia Brown
(212) 815-3428
</TABLE>
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 815-6339
For Information or
Confirmation by Telephone:
(212) 815-6333
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of this Notice of Guaranteed Delivery via
facsimile to a number other than as set forth above will not constitute a valid
delivery.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Viasystems, Inc., a Delaware Corporation
(the "Corporation"), upon the terms and subject to the conditions set forth in
the Prospectus dated November 13, 1998 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of Old Capital Securities
set forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures."
Name(s) of Registered Holder(s):
- -------------------------------------------------------------------
Aggregate Principal Amount
Amount Tendered: $
- ------------------------------------------------------------------------------*
Certificate No.(s)
(if available):
- --------------------------------------------------------------------------------
(Total Principal Amount Represented by
Old Notes Certificate(s))
- -----------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------
If Old Notes will be tendered by book-entry transfer, provide the following
information:
DTC Account Number:
- --------------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
- ---------------
* Must be in denominations of a Liquidation Amount of $1,000 and any integral
multiple thereof, and not less than $100,000 aggregate Principal amount.
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs personal representatives, successors
and assigns of the undersigned.
<PAGE> 3
PLEASE SIGN HERE
<TABLE>
<S> <C>
X --------------------------------------------------------- ------------------------------------------
X --------------------------------------------------------- ------------------------------------------
Signature(s) of Owner(s) Date
or Authorized Signatory
</TABLE>
Area Code and Telephone Number:
- -----------------------------------------------------------------
Must be signed by the holder(s) of the Old Notes as their name(s) appear(s)
on certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
Please print name(s) and address(es)
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 4
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of or participant in the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Signature Program, the
Stock Exchange Medallion Program or a firm or other entity identified in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended, as an "eligible
guarantor institution," including (as such terms are defined therein): (i) a
bank; (ii) a broker, dealer, municipal securities broker, municipal securities
dealer, government securities broker, government securities dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or learning agency; or (v) a savings association that is a
participant in a Securities Transfer Association recognized program (each of the
foregoing being referred to as an "Eligible Institution"), hereby guarantees to
deliver to the Exchange Agent, at one of its addresses set forth above, either
the Old Notes tendered hereby in proper form for transfer, or confirmation of
the book-entry transfer of such Old Notes to the Exchange Agent's account at The
Depositary Trust Company ("DTC"), pursuant to the procedures for book-entry
transfer set forth in the Prospectus, in either case together with one or more
properly completed and duly executed Letter(s) of Transmittal (or facsimile
thereof) and any other required documents within five business days after the
date of execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Old Notes tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
<TABLE>
<S> <C>
- --------------------------------------------------- ---------------------------------------------------
Name of Firm Authorized Signature
- --------------------------------------------------- ---------------------------------------------------
Address Title
- --------------------------------------------------- ---------------------------------------------------
Zip Code (Please Type or Print)
Area Code and Telephone No. -------------- Dated: ------------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
