<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1998
Registration No. [ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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AMM HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3089 52-2088661
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
1111 NORTHSHORE DRIVE, SUITE N-600
KNOXVILLE, TN 37919-4048
(423) 450-5300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
PHYLLIS C. BEST
CHIEF FINANCIAL OFFICER
AMM HOLDINGS, INC.
1111 NORTHSHORE DRIVE, SUITE N-600
KNOXVILLE, TN 37919-4048
(423) 450-5300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
ROBERT M. CHILSTROM, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NY 10022
(212) 735-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ] ____________
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. [ ] ____________
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) NOTE PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
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13 1/2% Senior Discount Notes due
2009.................................. $68,000,000 100% $68,000,000 $20,060
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION DATED AUGUST 7, 1998
PROSPECTUS
OFFER FOR ALL OUTSTANDING 13 1/2% SENIOR DISCOUNT NOTES DUE 2009
IN EXCHANGE FOR 13 1/2% SENIOR DISCOUNT NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OF
AMM HOLDINGS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT P.M., NEW YORK CITY TIME
ON , 1998, UNLESS EXTENDED.
AMM Holdings, Inc., a Delaware corporation ("Holdings"), hereby offers, upon
the terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to $68,000,000 aggregate principal amount at maturity of
its 13 1/2% Senior Discount Notes due 2009 (the "New Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount at maturity of its issued and outstanding 13 1/2%
Senior Discount Notes due 2009 (the "Old Notes" and, together with the New
Notes, the "Notes") from the holders thereof. The terms of the New Notes are
identical in all material respects to the Old Notes, except for certain transfer
restrictions and registration rights relating to the Old Notes and except for
certain provisions providing for an increase in the interest rate on the Old
Notes under certain circumstances relating to the timing of the Exchange Offer,
which rights will terminate upon consummation of the Exchange Offer.
The sale of the Old Notes generated gross proceeds to Holdings of
approximately $35.3 million. The Old Notes were issued pursuant to an offering
(the "Offering") which was exempt from the registration requirements of the
Securities Act and applicable state securities laws. See "Description of Notes"
and "Certain Federal Income Tax Considerations." Original issue discount on the
Notes will accrete at a rate of 13 1/2%, compounded semi-annually to an
aggregate principal amount of $68.0 million at July 1, 2003. Cash interest will
not accrue on the Notes prior to July 1, 2003. Commencing July 1, 2003, cash
interest on the Notes will accrue at the rate of 13 1/2% per annum, and will be
payable semiannually in arrears on January 1 and July 1 of each year, commencing
January 1, 2004. The Notes will be redeemable at the option of Holdings, in
whole or in part, at any time on or after July 1, 2003 in cash at the redemption
prices set forth herein, plus accrued and unpaid interest and Liquidated Damages
(as defined), if any, thereon to the date of redemption. In addition, at any
time prior to July 1, 2003, the Notes will be redeemable at the option of
Holdings, in whole but not in part, in cash at a redemption equal to 113.5% of
the Accreted Value thereof on the date of redemption plus Liquidated Damages (as
defined), if any, thereon to the date of redemption with the net cash proceeds
of a Public Equity Offering (as defined). See "Description of Notes--Optional
Redemption." In addition, upon the occurrence of a Change of Control (as
defined), each holder of Notes will have the right to require Holdings to
repurchase all or any part of such holder's Notes at an offer price in cash
equal to 101% of the Accreted Value thereof, plus Liquidated Damages, if any, to
the date of repurchase (if such date of repurchase is prior to July 1, 2003) or
101% of the aggregate principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date of repurchase (if such date
of repurchase is on or after July 1, 2003). See "Description of
Notes--Repurchase at the Option of Holders--Change of Control." There can be no
assurance that, in the event of a Change of Control, Holdings would have
sufficient funds to purchase all Notes tendered. See "Risk Factors--Limitations
on Ability to Make Change of Control Payment." Upon closing of the Offering,
subject to certain conditions, approximately $48.8 million of capacity will be
available for borrowing by the Company under the Revolving Credit Facility (as
defined), all of which borrowings would effectively rank senior to the Notes.
The Old Notes are, and the New Notes will be general unsecured obligations of
Holdings, and the Old Notes rank, and the New Notes will rank, pari passu in
right of payment to all existing and future senior unsecured indebtedness of
Holdings and the Old Notes rank, and the New Notes will rank, senior in right of
payment to all existing and future subordinated indebtedness of Holdings. The
Old Notes are, and the New Notes will be effectively subordinated to all
indebtedness of the Company and its subsidiaries. As of March 31, 1998, on a pro
forma basis after giving effect to the Transactions, Holdings' subsidiaries
would have had $329.6 million of outstanding liabilities (including trade
payables). See "Description of Certain Indebtedness."
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. The Old Notes were issued at a substantial discount from
their principal amount at maturity. Original issue discount on the Notes will
accrete at a rate of 13 1/2%, compounded semi-annually to an aggregate principal
amount of $68.0 million at July 1, 2003. Cash interest will not accrue on the
Notes prior to July 1, 2003. Commencing July 1, 2003, cash interest on the Notes
will accrue at the rate of 13 1/2% per annum, and will be payable semiannually
in arrears on January 1 and July 1 of each year, commencing January 1, 2004, to
Holders of record on the immediately preceding May 15 and December 15. No cash
interest will be payable on the Notes prior to January 1, 2004. Interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from July 1, 2003. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months.
The New Notes are being offered hereunder in order to satisfy certain
obligations of Holdings contained in the Registration Rights Agreement dated
June 26, 1998 among Holdings and the other signatories thereto (the
"Registration Rights Agreement"). Based on interpretations by the staff of the
Securities and Exchange Commission (the "Commission") as set forth in no-action
letters issued to third parties, Holdings believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by holders thereof (other than any such
holder which is an "affiliate" of Holdings within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's business and such holder has no
arrangement with any person to participate in the distribution of such New
Notes. However, Holdings does not intend to request the Commission to consider,
and the Commission has not considered, the Exchange Offer in the context of a
no-action letter and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer as in such
other circumstances. Each holder (including, without limitation, any Holder that
is a broker-dealer) must acknowledge that (A) it is not an Affiliate (as defined
in Rule 144 of the Securities Act), (B) it is not engaged in, and does not
intend to engage in, a distribution of New Notes and has no arrangement or
understanding to participate in a distribution of New Notes, and (C) it is
acquiring the New Notes in its ordinary course of business. Each broker-dealer
that receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. Holdings has agreed
that, during the Prospectus Delivery Period (as defined herein), it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution."
Holdings will not receive any proceeds from the Exchange Offer. Holdings will
pay all the expenses incident to the Exchange Offer. Tenders of Old Notes
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. In the event Holdings terminates the Exchange Offer and does
not accept for exchange any Old Notes, Holdings will promptly return the Old
Notes to the holders thereof. See "The Exchange Offer."
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes, or the
ability of holders of the New Notes to sell their New Notes or the price at
which such holders may be able to sell their New Notes. Donaldson, Lufkin, &
Jenrette Securities Corporation (the "Initial Purchaser") has advised Holdings
that it currently intends to make a market in the New Notes. The Initial
Purchaser is not obligated to do so, however, and any market-making with respect
to the New Notes may be discontinued at any time without notice. Holdings does
not intend to apply for listing or quotation of the New Notes on any securities
exchange or stock market.
------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 12 OF THIS PROSPECTUS FOR A
DESCRIPTION OF CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD
NOTES IN 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.
<PAGE> 3
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute "forward-looking statements"
as that term is defined under the Private Securities Litigation Reform Act of
1995. When used in this Prospectus, the words, "believe," "anticipate,"
"should," "intend," "plan," "will," "expects," "estimates," "projects,"
"positioned," "strategy," and similar expressions identify such forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from those contemplated or projected, forecast, estimated or budgeted in or
expressed or implied by such forward-looking statements. Such factors include,
among others, the risk and other factors set forth under "Risk Factors" as well
as the following: general economic and business conditions, industry trends, the
loss of major customers or suppliers, the timing of orders received from
customers, cost and availability of raw materials, changes in business strategy
or development plans, availability and quality of management, and availability,
terms and deployment of capital.
------------------------------
AVAILABLE INFORMATION
Anchor Holdings, Inc., the direct, wholly owned subsidiary of Holdings and
the direct parent of the Company ("Anchor Holdings"), and the Company, are
currently subject to the periodic reporting and other informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file periodic reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information can be inspected and copied at the Public Reference Room maintained
by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., room 1024,
Washington, D.C. 20549, and at the Commission's Regional Offices at 7 World
Trade Center, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials may be obtained by mail from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information on the operation of the Public Reference
Room may be obtained by calling the Commission at 1-800-SEC-0330. The Commission
maintains a Web site (http://www.sec.gov) that contains reports and information
statements and other information regarding registrants, such as the Company and
Anchor Holdings, that file electronically with the Commission.
Holdings has agreed that, whether or not it is required to do so by the
rules and regulations of the Commission, for so long as any of the Notes remains
outstanding, it will furnish to the holders of the Notes and file with the
Commission (unless the Commission will not accept such a filing) (i) all
quarterly and annual financial information that would be required to be
contained in such a filing with the Commission on Forms 10-Q and 10-K if
Holdings were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by Holdings' certified
independent public accountants and (ii) all reports that would be required to be
filed with the Commission on Form 8-K if Holdings were required to file such
reports. In addition, for so long as any of the Notes remains outstanding,
Holdings has agreed to make available to any prospective purchaser of the Notes
or beneficial owner of the Notes in connection with any sale thereof, the
information required by Rule 144A(d)(4) under the Securities Act. This
Prospectus constitutes a part of a Registration Statement on Form S-4 filed by
Holdings with the Commission under the Securities Act. This Prospectus omits
certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to Holdings and the New
Notes offered hereby. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and, in each instance, reference
is made to such copy filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference. The Registration Statement and the exhibits thereto
may by inspected without charge at the office of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies thereof may be
obtained from the Commission at prescribed rates.
------------------------------
UNTIL , 1998 (90 DAYS FOLLOWING THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES WHETHER OR NOT PARTICIPATING IN
THE EXCHANGE OFFER MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS OBLIGATION IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS ON SUBSCRIPTIONS.
i
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless the
context otherwise indicates, the term (i) "Company" refers to Moll Industries,
Inc., the surviving entity of the merger (the "Merger") of Anchor and Moll (each
as defined below), and its direct and indirect subsidiaries, and to the business
formerly conducted by each of Anchor and Moll, (ii) "Anchor" refers to Anchor
Advanced Products, Inc., and its direct and indirect subsidiaries, prior to the
Merger, (iii) "Moll" refers to Moll PlastiCrafters Limited Partnership, and its
direct and indirect subsidiaries, prior to the Merger, (iv) "Anchor Holdings"
refers to Anchor Holdings, Inc., the direct parent of the Company, (v)
"Holdings" refers to AMM Holdings, Inc., the indirect parent of the Company and
the direct parent of Anchor Holdings, and (vi) "Gemini Plastic" refers to Gemini
Plastic Services, Inc. Each of Holdings' and the Company's fiscal years end on
December 31 of each year. Unless otherwise indicated, all references to pro
forma information give effect to the Transactions. See "The Transactions."
Certain market data used in this Prospectus reflect management estimates; while
such estimates are believed by Holdings to be reliable, no assurance can be
given that such data is accurate in all material respects.
HOLDINGS
Holdings is a holding company and does not have any material operations or
assets other than ownership of all the capital stock of Anchor Holdings, which
does not have any material operations or assets other than ownership of all the
capital stock of the Company.
THE COMPANY
OVERVIEW
The Company is a leading full service manufacturer and designer of custom
molded and assembled plastic components for a broad variety of customers and end
markets throughout North America and Europe. The Company serves over 450
customers, including leading multinational companies such as Abbott
Laboratories, Colgate-Palmolive, Kimberly-Clark, L'Oreal, Maybelline, Motorola,
Procter & Gamble, Renault, Revlon, Siemens, Whirlpool and Xerox. Products using
the Company's plastic components are sold in a wide range of end markets,
including end markets for consumer products, telecommunications/business
equipment, household appliances, automobiles and medical devices. The Company
believes that the diversity of its customers, markets and geographic regions
creates a stable revenue base and reduces the Company's exposure to particular
market or regional economic cycles. On a pro forma basis after giving effect to
the Transactions, the Company generated 1997 net sales and EBITDA of $414.6
million and $54.8 million, respectively, making it the sixth largest
non-automotive plastic injection molding company in North America and one of the
largest plastic component suppliers in Europe.
The Company has 27 manufacturing facilities, with approximately 680 molding
machines throughout North America and Europe, including France, Germany, the
United Kingdom and Portugal. The Company is capable of providing its customers
with integrated design and prototype development, mold design and manufacturing,
advanced plastic injection molding capabilities, and value-added finishing
services, such as hot stamping, pad printing, assembly and complete product
testing, all of which enable it to provide "one-stop" shopping to customers
seeking a wide range of services. The Company's technologically advanced
manufacturing facilities and equipment enable it to provide customized solutions
to highly demanding customer specifications. For 1997, approximately 45% of the
Company's sales of molded products were covered by long term purchase and sale
contracts which stipulate anticipated volume requirements and pricing terms.
Management believes that few competitors offer the scale, expertise, reputation
and range of services that the Company provides.
According to industry sources, demand for injection molded plastics in the
United States is projected to grow at 3.3% annually. Such growth is expected to
result from a number of key factors, including:
1
<PAGE> 5
(i) improved resins and processing capabilities; (ii) versatility of the
injection molding process; and (iii) cost and performance advantages of plastic
over substitute materials. Despite the expected increase in demand for plastic
injection molded products, the U.S. molding industry remains highly fragmented,
with over 2,500 injection molders operating more than 10,000 plant locations. In
addition to the growth projected for the plastics industry as a whole, growth
for full service, multiple plant injection molders such as the Company is driven
by industry consolidation and the trend among customers to outsource their
injection molding needs. Management believes that larger injection molders such
as the Company will benefit from continued industry consolidation and the trend
by original equipment manufacturers ("OEMs") to outsource their injection
molding needs to larger, full-service independent molders that are able to
provide total project management.
Concurrently with the Offering, the Company was formed through the merger
of two leading plastic injection molders, Moll PlastiCrafters Limited
Partnership and Anchor Advanced Products, Inc., which were each controlled by
Mr. George Votis. Immediately prior to the Merger, Moll and Anchor were
independently operated entities. Mr. Votis acquired Moll's predecessor in 1989
and has since completed seven acquisitions, increasing Moll's revenues from
approximately $8 million in 1989 to approximately $232.4 million in 1997 on a
pro forma basis, excluding the acquisition of Anchor. Such acquisitions included
the acquisition in August 1997 of Hanning, a leading supplier of injection
molded plastic components for use in digital photocopiers with manufacturing
facilities located in the United States, the United Kingdom and Germany, which
had 1997 revenues of $49.6 million, and the acquisition in January 1998 of
Somomeca, a French injection molder which had 1997 revenues of $88.5 million. In
March 1998, Mr. Votis acquired Anchor, which had 1997 revenues of $161.2
million. See "The Company."
The Company has been formed to combine the manufacturing, marketing and
management resources of Moll and Anchor to create further opportunities for
growth and development. As a result of the Transactions, management believes
that the Company has become better positioned to benefit from the growth and
consolidation of the plastics industry. The Company also believes that
consummation of the Transactions has significantly enhanced its future growth
prospects and revenue stability by broadening its customer base, manufacturing
capabilities and geographic presence. Moreover, the Company expects to benefit
from its increased scale, ability to centralize certain key logistical functions
and attendant cost savings opportunities. Since March 1998, the Company has
eliminated approximately $2.8 million in annualized costs by reducing
duplicative administrative expenses, eliminating less profitable business lines
and streamlining manufacturing processes.
MARKETS
The Company serves the following end markets:
CONSUMER PRODUCTS--The Company designs, manufactures and packages a broad
array of plastic components used for consumer end-products such as mascara
packages and lipstick containers for leading cosmetics manufacturers such as
L'Oreal, Maybelline, Revlon and Estee Lauder, and toothbrushes for
Colgate-Palmolive, Procter & Gamble, Cheseborough-Ponds and SmithKline Beecham.
The Company derived 27.6% of 1997 pro forma net sales from this end market.
TELECOMMUNICATIONS/BUSINESS EQUIPMENT--The Company is a leading
manufacturer of various plastic components and accessories for cellular phones,
photocopiers, computers and printers for telecommunications and business
equipment manufacturers such as Siemens, Motorola, 3M and Xerox. The Company
derived 18.9% of 1997 pro forma net sales from this end market.
HOUSEHOLD APPLIANCES--The Company designs and manufactures plastic parts
for a wide variety of household appliances, including refrigerators (primarily
high end side-by-side refrigerators), ranges, room air conditioners, counter-top
appliances and televisions made by Whirlpool, Tefal, Electrolux and Daewoo. The
Company derived 17.6% of 1997 pro forma net sales from this end market.
AUTOMOTIVE--The Company designs and manufactures plastic parts such as door
handles, gear shift knobs, sunvisors and wheel covers for automobiles and light
trucks manufactured by major foreign and domestic automobile manufacturers,
including General Motors, Renault, BMW, Audi and Saab. The Company derived 12.3%
of 1997 pro forma net sales from this end market.
2
<PAGE> 6
MEDICAL DEVICES--The Company manufactures various plastic medical devices,
including blood filtration devices, angiographic syringes, intravenous equipment
and in-vitro diagnostic kits for major medical product manufacturers, including
Abbott Laboratories, Johnson & Johnson, Baxter, Pfizer and 3M. The Company
derived 8.1% of 1997 pro forma net sales from this end market.
PACKAGING AND OTHER--The Company manufactures and assembles a broad range
of plastic components and end-products such as soap dispensing equipment and
packaging materials and closures for a number of large manufacturers, including
Kimberly-Clark, Electrolux, Seaquist and Tetrapak. The Company derived 15.5% of
1997 pro forma net sales from this end market.
COMPETITIVE STRENGTHS
Management believes that the Company has achieved its current position as a
market leader because of the following competitive strengths:
BROAD GEOGRAPHIC PRESENCE. The Company's multiple plant locations
throughout North America and Europe enable it to (i) compete effectively for
contracts that require large volume runs and multiple distribution points, (ii)
offer its customers multiple production locations and (iii) allocate production
to the facility best suited for a job in view of its relative capabilities and
proximity to the customer. As a result, the Company is able to provide its
customers with a broad range of manufacturing capabilities, improved
responsiveness, timely delivery, and reduced freight costs. In addition, by
operating geographically diverse plants, the Company can mitigate customer
sourcing risks associated with single facility production.
FULL SERVICE CAPABILITIES. The Company provides its customers with
comprehensive services ranging from product design, product development,
prototyping and mold making to molding, painting and other value-added services.
As a result, management believes that the Company is one of a limited number of
full service plastic injection molders in North America and Europe that is well
positioned to benefit from the trend of customers outsourcing total project
management to full service multiple plant suppliers.
STRONG CUSTOMER RELATIONSHIPS. The Company believes that its ability to
attract and retain customers is in part attributable to the high level of
customer service it provides. The Company also believes that frequent
interaction with its customers in the product development process helps it to
develop long-term relationships. Of the Company's top ten customers in 1997, two
have been with the Company for over fifty years, three have been with the
Company for over ten years and the remainder have been with the Company for over
four years. For many of its key customers, the Company is the sole supplier for
specific parts. The Company's emphasis on customer partnerships and its
long-standing customer relationships provide it with a significant competitive
advantage.
MANUFACTURING CAPABILITIES. The Company utilizes a wide range of advanced
manufacturing processes, such as gas assist molding, co-injection and two-shot
molding, automated assembly and testing, in-mold decorating, thin-wall molding
and in-mold bristling. The Company's manufacturing capabilities enable it to
provide innovative solutions and supply components in an integrated process. For
example, the Company worked closely with Renault to produce dashboard grilles
using a newly developed co-injection molding technology.
SUPERIOR PRODUCT QUALITY. The Company uses quality systems and operations
management techniques to meet the highest standards and to reduce costs. The
Company continually invests in technology and training to monitor and improve
quality. Included among such investments are effective management systems to
ensure real-time information and control, statistical process control systems,
failure mode and effect analysis systems, microprocessor-controlled molding
machines and automated assembly equipment. In addition, the Company has material
and product testing equipment that monitor product reliability to meet exacting
quality standards.
BUSINESS STRATEGY
The Company seeks to further strengthen its leadership position in the
plastic molding industry and to maximize its financial performance by employing
the following strategies:
CAPITALIZE ON CROSS-SELLING OPPORTUNITIES. The Company believes that the
Merger creates new opportunities to cross-sell products and services between
each of Anchor's and Moll's customer bases. For
3
<PAGE> 7
example, while Anchor's operations prior to the Merger were confined to North
America, many of its customers are multinational firms with significant European
operations. Management believes that offering such customers access to the
Company's European operations, operated by Moll prior to the Merger, is a
significant growth opportunity. The Company has hired a new Senior Vice
President, Marketing to target and capitalize on such opportunities.
CENTRALIZE SALES AND MARKETING. The Company plans to centralize management
of its sales and marketing efforts to improve communication with customers,
better cross-sell services to customers and ensure uniform pricing and sales
strategies. While local sales and management staff will maintain direct
relationships with customers and production facilities, a centralized sales and
marketing effort will enable the Company to serve national and international
accounts more effectively and to pursue customers located outside an individual
plant's geographic service area. The Company's centralized sales and marketing
group will be responsible for identifying market trends and assisting customers
with new product ideas as well as promoting the Company through customer
presentations, advertising and trade shows.
EXPAND GLOBALLY. The Company believes that it is one of the largest North
American plastic injection molders with a significant European presence. Such
capabilities allow the Company to (i) penetrate new geographic regions with its
existing multinational customers, such as L'Oreal, Siemens, Whirlpool and Xerox,
and (ii) acquire complementary manufacturing facilities in strategic locations.
Continuing to pursue this strategy will enable the Company to effectively
provide a complete and integrated range of molding, manufacturing and
value-added services on a global basis.
REDUCE COSTS. The Company continually aims to improve its cost
effectiveness by increasing productivity and implementing operational
improvements. Since March 1998, the Company has eliminated approximately $2.8
million in annualized costs by reducing duplicative administrative expenses,
eliminating less profitable business lines and streamlining manufacturing
processes. Management believes that the combination of Anchor, Moll and Gemini
Plastic will result in additional opportunities to reduce costs by: (i) reducing
overhead expenses through optimization of labor and equipment resources at each
of the Company's facilities; (ii) divesting or discontinuing less profitable
business lines; (iii) eliminating redundant administrative operations and
related personnel; and (iv) where appropriate, moving key management personnel
on-site to the Company's manufacturing plants in order to oversee expansion
and/or execution of cost control measures.
CONTINUE STRATEGIC ACQUISITIONS. Strategic acquisitions have been, and
management believes will continue to be, an important element in the Company's
growth and in its efforts to capitalize on favorable industry trends. The
Company will consider future acquisition opportunities that are attractively
priced and which the Company believes will strengthen its customer base, broaden
its geographic presence, enhance its production capabilities and provide
significant operating synergies. While the Company routinely enters into
discussions with potential acquisition candidates, no such discussions have
progressed beyond the preliminary stages.
THE TRANSACTIONS
Concurrently with the consummation of the Offering, the following
transactions were consummated: (i) the Merger; (ii) the acquisition of Gemini
Plastic; (iii) the distribution of Moll's 69% limited partnership interest in
Reliance Products Limited Partnership, a Delaware limited partnership doing
business in Canada ("Reliance Products"), to certain of Moll's limited partners;
(iv) the entering into the Revolving Credit Facility and (v) the Company Notes
Offering (as defined). The net proceeds from the Offering will be used to fund
the Distribution and the Equity Contribution. The Company consummated the
acquisition of Gemini Plastic on June 30, 1998. See "The Transactions."
Holdings' principal executive offices are located at 1111 Northshore Drive,
Suite N-600, Knoxville, Tennessee 37919-4048, and its telephone number is (423)
450-5300.
4
<PAGE> 8
THE EXCHANGE OFFER
SECURITIES OFFERED............ Up to $68,000,000 aggregate principal amount of
maturity of 13 1/2% Senior Discount Notes Due
2009, which have been registered under the
Securities Act. The terms of the New Notes and
the Old Notes are identical in all material
respects, except for certain transfer
restrictions and registration rights relating
to the Old Notes and except for certain
interest provisions relating to the Old Notes
described below under "--Summary Description of
the New Notes."
THE EXCHANGE OFFER............ The New Notes are being offered in exchange for
a like principal amount of Old Notes. The
issuance of the New Notes is intended to
satisfy obligations of Holdings contained in
the Registration Rights Agreement. For
procedures for tendering, see "The Exchange
Offer".
TENDERS, EXPIRATION DATE;
WITHDRAWAL.................... The Exchange Offer will expire at
p.m., New York City time, on ,
1998 or such later date and time to which it is
extended. The tender of Old Notes pursuant to
the Exchange Offer may be withdrawn at any time
prior to the Expiration Date. Any Old Note not
accepted for exchange for any reason will be
returned without expense to the tendering
Holder thereof as promptly as practicable after
the expiration or termination of the Exchange
Offer.
CERTAIN CONDITIONS TO EXCHANGE
OFFER......................... Holdings shall not be required to accept for
exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend
the Exchange Offer if at any time before the
acceptance of the Old Notes for exchange or the
exchange of the New Notes for such Old Notes
certain events have occurred, which, in the
reasonable judgment of Holdings, make it
inadvisable to proceed with the Exchange Offer
and/or with such acceptance for exchange or
with such exchange. Such events include (i) any
threatened, instituted or pending action
seeking to restrain or prohibit the Exchange
Offer, (ii) a general suspension of trading in
securities on any national securities exchange
or in the over-the-counter market, (iii) a
general banking moratorium, (iv) the
commencement of a war or armed hostilities
involving the United States and (v) a material
adverse change or development involving a
prospective material adverse change in
Holdings's business, properties, assets,
liabilities, financial condition, operations,
results of operations or prospects that may
affect the value of the Old Notes or the New
Notes. In addition, Holdings will not accept
for exchange any Old Notes tendered, and no New
Notes will be issued in exchange for any such
Old Notes, at any such time as any stop order
shall be threatened or in effect with respect
to the Registration Statement of which this
Prospectus constitutes a part or the
qualification of the Indentures under the Trust
Indenture Act of 1939. See "The Exchange
Offer--Certain Conditions to the Exchange
Offer."
5
<PAGE> 9
FEDERAL INCOME TAX
CONSEQUENCES.................. The exchange pursuant to the Exchange Offer
should not result in any income, gain or loss
to the holders or Holdings for federal income
tax purposes. See "Certain Federal Income Tax
Considerations."
USE OF PROCEEDS............... There will be no proceeds to Holdings from the
Exchange Offer.
EXCHANGE AGENT................ State Street Bank and Trust Company is serving
as Exchange Agent in connection with the
Exchange Offer.
SHELF REGISTRATION
STATEMENT..................... Under certain circumstances, certain holders of
Notes (including holders who are not permitted
to participate in the Exchange Offer or who may
not freely resell New Notes received in the
Exchange Offer) may require Holdings to file
and cause to become effective, a shelf
registration statement under the Securities
Act, which would cover resales of Notes by such
holders. See "Description of the
Notes--Registration rights; Liquidated
Damages".
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Holdings does not currently anticipate that it
will register Old Notes under the Securities Act. See "Description of the
Notes--Registration Rights; Liquidated Damages." Based on interpretations by the
staff of the Commission, as set forth in no-action letters issued to third
parties, Holdings 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 Holdings within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such New
Notes. However, Holdings does not intend to request the Commission to consider,
and the Commission has not considered, the Exchange Offer in the context of a
no-action letter and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer as in such
other circumstances. Each holder (including, without limitation, any Holder that
is a broker-dealer) must acknowledge that (A) it is not an Affiliate (as defined
in Rule 144 of the Securities Act), (B) it is not engaged in, and does not
intend to engage in, a distribution of New Notes and has no arrangement or
understanding to participate in a distribution of New Notes, and (C) it is
acquiring the New Notes in its ordinary course of business. As a condition to
its participation in the Exchange Offer each Holder using the Exchange Offer to
participate in a distribution of the New Notes shall acknowledge and agree that,
if the resales are of New Notes obtained by such Holder in exchange for Old
Notes acquired directly from Holdings or an Affiliate thereof, it (i) could not
rely on the applicable interpretations of the staff of the Commission and (ii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction and that such
a secondary resale transaction must be covered by an effective registration
statement containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K under the Securities Act. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution." In addition, to
6
<PAGE> 10
comply with state securities laws, the New Notes may not be offered or sold in
any state unless they have been registered or qualified for sale in such state
or an exemption from registration or qualification is available and is complied
with. Holdings currently does not intend to register or qualify the sale of the
New Notes in any state where an exemption from registration or qualification is
required and not available.
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and except for certain provisions providing for an
increase in the interest rates on the Old Notes under certain circumstances
relating to timing of the Exchange Offer, which rights will terminate upon
consummation of the Exchange Offer. The Old Notes were issued at a substantial
discount from their principal amount at maturity. Original issue discount on the
Notes will accrete at a rate of 13 1/2%, compounded semi-annually to an
aggregate principal amount of $68.0 million at July 1, 2003. Cash interest will
not accrue on the Notes prior to July 1, 2003. Commencing July 1, 2003, cash
interest on the Notes will accrue at the rate of 13 1/2% per annum, and will be
payable semiannually in arrears on January 1 and July 1 of each year, commencing
January 1, 2004, to Holders of record on the immediately preceding May 15 and
December 15. No cash interest will be payable on the Notes prior to January 1,
2004. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from July 1, 2003.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
SECURITIES OFFERED............ Up to $68.0 million in principal amount at
maturity of Holdings' 13 1/2% Senior Discount
Notes due 2009, which have been registered
under the Securities Act.
MATURITY DATE................. July 1, 2009
ACCRETION..................... Original issue discount on the Notes will
accrete at a rate of 13 1/2% compounded
semi-annually to an aggregate principal amount
of $68.0 million at July 1, 2003.
INTEREST RATE................. Cash interest will not accrue on the Notes
prior to July 1, 2003. Commencing July 1, 2003,
cash interest on the Notes will accrue at the
rate of 13 1/2% per annum, and will be payable
semi-annually in arrears on January 1 and July
1 of each year, commencing January 1, 2004.
OPTIONAL REDEMPTION........... The Notes will be redeemable at the option of
Holdings, in whole or in part, at any time on
or after July 1, 2003 in cash at the redemption
prices set forth herein, plus accrued and
unpaid interest and Liquidated Damages (as
defined), if any, thereon to the date of
redemption. In addition, at any time prior to
July 1, 2003, the Notes will be redeemable at
the option of Holdings, in whole or in part, in
cash at a redemption price equal to 113.5% of
the Accreted Value thereof on the date of
redemption, plus Liquidated Damages, if any,
thereon to the redemption date with the net
cash proceeds of a Public Equity Offering.
CHANGE OF CONTROL............. Upon the occurrence of a Change of Control,
each holder of Notes will have the right to
require Holdings to repurchase all or any part
of such holder's Notes at an offer price in
cash equal to 101% of the Accreted Value
thereof, plus Liquidated Damages, if any, to
the date of repurchase (if such date of
repurchase is prior to July 1, 2003) or 101% of
the aggregate principal amount thereof, plus
accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of
repurchase (if such date of repurchase is on or
after July 1, 2003). See "Description of
Notes--Repurchase at
7
<PAGE> 11
the Option of Holders--Change of Control."
There can be no assurance that, in the event of
a Change of Control, Holdings would have
sufficient funds to purchase all Notes
tendered. See "Risk Factors--Limitations on
Ability to Make Change of Control Payment."
RANKING....................... The Old Notes are, and the New Notes will be,
general unsecured obligations of Holdings, the
Old Notes rank, and the New Notes will rank,
pari passu in right of payment to all existing
and future senior unsecured indebtedness of
Holdings and the Old Notes rank, and the New
Notes will rank, senior in right of payment to
all existing and future subordinated
indebtedness of Holdings. However, the Old
Notes are, and the New Notes will be,
effectively subordinated to all indebtedness of
the Company and its subsidiaries. As of March
31, 1998, on a pro forma basis, after giving
effect to the Transactions, Holdings'
subsidiaries would have had $329.6 million of
outstanding liabilities (including trade
payables). See "Description of Certain
Indebtedness." Subject to certain conditions,
approximately $48.8 million of capacity is
available for borrowing by the Company under
the Revolving Credit Facility, all of which
borrowings would effectively rank senior to the
Notes.
ORIGINAL ISSUE DISCOUNT....... The Notes were issued with original issue
discount for U.S. federal income tax purposes.
Thus, although interest will not be payable on
the Notes prior to January 1, 2004, holders
will be required to include amounts in gross
income for U.S. federal income tax purposes in
advance of receipt of the cash payments to
which such income is attributable. See "Certain
Federal Income Tax Considerations."
CERTAIN COVENANTS............. The Indenture contains certain covenants that
limit, among other things, the ability of
Holdings to: (i) pay dividends, redeem capital
stock or make certain other restricted payments
or investments, (ii) incur additional
indebtedness or issue preferred equity
interests, (iii) merge, consolidate or sell all
or substantially all of its assets, (iv) create
liens on assets and (v) enter into certain
transactions with affiliates or related
persons. See "Description of Notes--Certain
Covenants."
USE OF PROCEEDS............... Holdings will not receive any proceeds from the
Exchange Offer. The gross proceeds from the
sale of the Old Notes were estimated to be
approximately $35.3 million and were used by
Holdings to fund the Distribution and the
Equity Contribution. The Company will pay all
of the fees and expenses related to the
Offering on behalf of Holdings. See "Use of
Proceeds" and "Certain Relationships and
Related Transactions."
EXCHANGE OFFER; REGISTRATION
RIGHTS........................ Holders of New Notes (other than as set forth
below) are not entitled to any registration
rights with respect to the New Notes. Pursuant
to the Registration Rights Agreement, Holdings
agreed, for the benefit of the Holders of Old
Notes, to file an Exchange Offer Registration
Statement (as defined). The Registration
Statement of which this Prospectus is a part
constitutes the Exchange Offer Registration
Statement. Under certain circumstances, certain
Holders of Notes (including Holders who may not
participate in the Exchange Offer or who may
not freely resell New Notes
8
<PAGE> 12
received in the Exchange Offer) may require
Holdings to file, and cause to become
effective, a shelf registration statement under
the Securities Act, which would cover resales
of Notes by such Holders. See "Description of
the Notes--Registration Rights; Liquidated
Damages."
RISK FACTORS
Prospective holders of New Notes should consider carefully all of the
information set forth in this Prospectus and, in particular, should evaluate the
specific factors set forth under "Risk Factors" before making a decision to
tender their Old Notes in the Exchange Offer.
9
<PAGE> 13
SUMMARY UNAUDITED PRO FORMA AND HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth summary pro forma data for Holdings, as well
as summary historical financial data of each of Anchor Holdings, Moll and
Somomeca for the periods indicated. The summary historical financial data for
the years ended 1995, 1996 and 1997 for Anchor Holdings and Moll were derived
from the audited consolidated financial statements contained elsewhere in this
Prospectus. The summary historical data for the years ended 1996 and 1997 for
Somomeca were derived from unaudited financial statements prepared by
management. The unaudited summary financial data for the first quarter of 1997
and 1998 were derived from unaudited financial statements contained elsewhere in
this Prospectus. These unaudited financial statements were prepared on the same
basis as the annual financial statements and, in the opinion of management,
reflect all adjustments (consisting of normal recurring adjustments) necessary
for a fair presentation. The unaudited pro forma data were derived from the
unaudited pro forma financial statements contained elsewhere in this Prospectus
and reflect the Transactions as if they had occurred at the beginning of the
period presented. Neither the summary historical consolidated financial data nor
the summary pro forma consolidated financial data are necessarily indicative of
either the future results of operations or the results of operations that would
have occurred if the Transactions had been consummated on any date. The
following table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the historical
consolidated financial statements of each of Anchor Holdings, Moll and Somomeca,
as well as the unaudited pro forma financial statements of Holdings, including
accompanying notes thereto, included elsewhere in this Prospectus.
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED FIRST QUARTER
DECEMBER 31, 1997 1998
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales................................................... $414,630 $100,739
Gross profit................................................ 60,048 16,410
Selling, general and administrative expenses................ 29,390 7,716
Operating income............................................ 30,458 8,644
Interest expense, net....................................... 31,019 7,898
Income before taxes and extraordinary items................. 308 568
Income (loss) before extraordinary item..................... (1,729) (121)
OTHER DATA:
EBITDA(1)................................................... $ 54,807 $ 13,315
Depreciation and amortization............................... 23,480 4,849
Capital expenditures........................................ 15,559 3,827
Cash interest expense, net(2)............................... 29,945 7,562
Ratio of EBITDA to cash interest expense, net............... 1.8x NA
Ratio of net debt to EBITDA(3).............................. 4.8x NA
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1998
<S> <C>
BALANCE SHEET DATA:
Cash........................................................ $ 25,599
Working capital............................................. 86,519
Total assets................................................ 329,817
Total debt.................................................. 287,681
Stockholders' deficit....................................... (35,128)
</TABLE>
10
<PAGE> 14
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FIRST QUARTER
-------------------------------- ------------------
ANCHOR HOLDINGS, INC.(4) 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales........................................ $149,366 $156,858 $161,161 $41,546 $39,303
Gross profit..................................... 24,338 27,637 25,187 6,893 6,608
Selling, general and administrative.............. 9,409 11,358 10,979 2,615 3,014
Income from operations........................... 13,267 14,749 12,510 3,935 3,168
Interest expense, net............................ 8,616 8,124 11,165 2,072 2,967
Income before taxes and extraordinary items...... 3,677 6,217 1,632 1,837 159
Income before extraordinary item................. 2,438 3,626 838 1,058 81
OTHER DATA:
EBITDA(1)........................................ $ 21,742 $ 23,627 $ 22,370 $ 6,238 $ 5,784
Depreciation and amortization.................... 9,449 9,286 9,573 2,329 2,658
Capital expenditures............................. 6,932 8,028 8,413 1,973 580
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FIRST QUARTER
MOLL PLASTICRAFTERS LIMITED ------------------------------ ------------------
PARTNERSHIP 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales......................................... $90,876 $89,464 $116,947 $25,632 $60,105
Gross profit...................................... 16,966 16,502 19,861 5,557 9,367
Selling, general and administrative expenses...... 8,301 7,190 10,758 2,462 4,817
Operating income.................................. 9,019 8,574 8,186 3,054 4,168
Interest expense, net............................. 2,414 2,518 3,405 676 2,337
Income before taxes and extraordinary items....... 6,485 6,037 4,645 2,169 1,449
Income before extraordinary item.................. 6,485 6,037 4,563 2,169 1,357
OTHER DATA:
EBITDA(1)......................................... $13,317 $12,703 $ 13,450 $ 4,079 $ 5,925
Depreciation and amortization..................... 4,418 4,148 5,400 1,234 2,139
Capital expenditures.............................. 2,776 1,387 6,562 335 3,204
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
SOMOMECA INDUSTRIES 1996 1997
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales....................................... $89,003 $ 88,502
Gross profit.................................... 12,055 10,559
Income from operations.......................... 5,104 5,090
Interest expense, net........................... 2,436 2,391
Income before taxes............................. 2,214 2,474
Net income...................................... 1,006 1,438
OTHER DATA:
EBITDA(1)....................................... $12,218 $ 10,923
Depreciation and amortization................... 7,568 6,058
Capital expenditures............................ 9,638 5,097
</TABLE>
- ------------------------------
(1) EBITDA represents income before taxes plus interest expenses, net,
depreciation and amortization. While EBITDA should not be construed as a
substitute for operating income, net income or cash flows from operating
activities in analyzing the referenced company's operating performance,
financial position or cash flows, the referenced company has included EBITDA
because it is commonly used by certain investors and analysts to analyze and
compare companies on the basis of operating performance, leverage and
liquidity and to determine a company's ability to service debt.
(2) Cash interest expense, net represents interest expense minus amortization of
debt issuance costs.
(3) Net debt, as used in calculating this ratio, represents total debt at March
31, 1998 of $287,681 minus cash of $25,599. EBITDA, as used in this
calculation, represents EBITDA for the year ended December 31, 1997.
(4) The consolidated financial statements of Anchor Holdings do not differ
significantly from those of Anchor. See Note 16 to the historical
consolidated financial statements of Anchor Holdings.
11
<PAGE> 15
RISK FACTORS
Prospective holders of New Notes should consider carefully all of the
information set forth in this Prospectus and, in particular, should evaluate the
following risks before tendering their Old Notes in the Exchange Offer, although
the risk factors set forth below (other than "--Consequences of Failure to
Exchange") are generally applicable to the Old Notes as well as the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act, and
applicable state securities laws. Holdings does not currently anticipate that it
will register the Old Notes under the Securities Act or under any applicable
state securities laws. See "The Exchange Offer--Consequences of Exchanging or
Failing to Exchange Old Notes."
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
Holdings has substantial indebtedness and incurred additional indebtedness
in connection with the Offering. As of March 31, 1998, on a pro forma basis
after giving effect to the Transactions, Holdings' total indebtedness would have
been $287.7 million and the Company would have had, subject to certain
conditions, an additional $48.8 million of capacity available for borrowing
under the Revolving Credit Facility, all of which borrowings would effectively
rank senior to the Notes. For 1997, on a pro forma basis, the Company's ratio of
earnings to fixed charges would have been 1 to 1.
The degree to which Holdings is leveraged could have important consequences
for Holdings, including the following: (i) the ability of Holdings to obtain
additional financing for working capital, capital expenditures, acquisitions,
debt service requirements or other purposes may be impaired; (ii) a substantial
portion of the cash flow from operations will be required to pay Holdings'
interest expense and principal repayment obligations and will not be available
for its general corporate needs; (iii) the substantial indebtedness incurred by
Holdings coupled with the restrictive covenants to which Holdings is subject may
reduce the Company's flexibility to adjust to changing market conditions, and
its ability to compete against its less highly leveraged competitors; (iv) the
Company may be more vulnerable in the event of a downturn in its business; and
(v) to the extent that the Company incurs borrowings under the Revolving Credit
Facility at variable rates, it will be vulnerable to increases in interest
rates.
Holdings' ability to pay interest on the Notes, and perform on its
guarantee obligations under the Revolving Credit Facility, will depend on its
future performance, which will be affected by prevailing economic conditions and
financial, business and other factors, many of which are beyond its control.
Holdings anticipates that operating cash flow from its subsidiaries, together
with borrowings by the Company under the Revolving Credit Facility, will be
sufficient to meet the Company's operating expenses and to service the Company's
debt requirements as they become due. Holdings also anticipates that it will be
able to access the operating cash flows of the Company, subject to compliance
with the dividend and restricted payment covenants in agreements governing the
Company's indebtedness, to service cash interest payable on the Notes when such
cash interest becomes payable in 2003 and to meet its operating expenses.
However, Holdings anticipates that such operating cash flows will not be
sufficient to repay the Notes at maturity and that, accordingly, it will be
required to refinance the Notes. No assurance can be given that Holdings will be
able to refinance the Notes. However, if Holdings is unable to service its
indebtedness, Holdings may be required to take action such as reducing or
delaying capital expenditures by the Company, selling assets, restructuring or
refinancing the Company's indebtedness or seeking additional equity capital.
There can be no assurance that any of these remedies can be effected on
satisfactory terms, if at all. Each of the Revolving Credit Facility, the
12
<PAGE> 16
Company Notes Indenture (as defined) and the Indenture contains, covenants that
restrict the ability of Holdings and the Company to take certain of the
foregoing actions, including selling assets and using the proceeds therefrom.
There can be no assurance as to the timing of such actions, the ability of
Holdings to consummate such actions under its existing financing agreements or
the proceeds that Holdings could realize therefrom, and there can be no
assurance that any such transactions would be feasible at the time or that such
proceeds would be adequate to meet the obligations then due. Furthermore, a
failure to comply with the obligations contained in the Revolving Credit
Facility or any agreements with respect to any future indebtedness could result
in an event of default under such agreements and the acceleration of the related
debt. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources," "Description of Certain
Indebtedness" and "Description of Notes."
HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION; ABSENCE OF GUARANTEES
Holdings is a holding company and does not have any material operations or
assets other than ownership of all of the capital stock of Anchor Holdings,
which does not have any material operations or assets other than ownership of
all the capital stock of the Company. Accordingly, the Old Notes are, and the
New Notes will be, effectively subordinated to all existing and future
liabilities of Holdings' subsidiaries, including indebtedness under each of the
Revolving Credit Facility and the Company Notes. As of March 31, 1998, after
giving pro forma effect to the Transactions, Holdings' subsidiaries would have
had $329.6 million of outstanding liabilities (including trade payables) to
which holders of the Notes would be effectively subordinated. Holdings and its
subsidiaries may incur additional indebtedness in the future, subject to certain
limitations contained in the instruments governing their indebtedness. The
obligations of the Company under the Senior Notes are guaranteed by Anchor
Holdings and certain Restricted Subsidiaries (as defined in the Senior Notes
Indenture (defined below)) of the Company while the obligations of the Company
under the Company Notes and the Revolving Credit Facility are not guaranteed by
Anchor Holdings and such subsidiaries.
Any right of Holdings to participate in any distribution of assets of its
subsidiaries upon the liquidation, reorganization or insolvency of any such
subsidiary (and the consequent right of the holders of the Notes to participate
in the distribution of those assets) will be subject to the prior claims of the
respective subsidiary's creditors. See "Description of Certain Indebtedness."
LIMITATION ON THE PAYMENT OF FUNDS TO HOLDINGS BY ITS SUBSIDIARIES
Holdings' cash flow, and consequently its ability to service debt,
including its obligations under the Indenture, is dependent upon the cash flows
of its subsidiaries and the payment of funds by such subsidiaries to Holdings in
the form of loans, dividends or otherwise. Holdings' subsidiaries, including the
Company, have no obligations, contingent or otherwise, to pay any amounts due
pursuant to the Notes or to make any funds available therefor. In addition, each
of the indenture (the "Senior Notes Indenture") governing the Company's 11 3/4%
Senior Notes due 2004 (the "Senior Notes"), the Revolving Credit Facility and
the Company Notes Indenture imposes, and agreements entered into in the future
may impose, significant restrictions on the payment of dividends and the making
of loans by the Company and its subsidiaries to Holdings. Accordingly, repayment
of the Notes may depend upon the ability of Holdings to effect an equity
offering or to refinance the Notes.
ORIGINAL ISSUE DISCOUNT
The Old Notes were issued at a substantial discount from their principal
amount. Consequently, the Old Notes were issued with "original issue discount"
for U.S. Federal income tax purposes, and purchasers of the Notes are required
to include amounts in gross income in advance of receipt of any cash payment on
the Notes to which the income is attributable. See "Certain Federal Income Tax
Considerations" for a more detailed discussion of the U.S. Federal income tax
consequences to the Holders of the Notes resulting from the purchase, ownership
or disposition thereof.
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Under the Indenture, in the event of an acceleration of the maturity of the
Notes upon the occurrence of an Event of Default, the Holders of Notes may be
entitled to recover only the amount that may be declared due and payable
pursuant to the Indenture, which will be less than the principal amount at
maturity of such Notes. See "Description of Notes--Events of Default."
If a bankruptcy case is commenced by or against Holdings under the United
States Bankruptcy Code (the "Bankruptcy Code"), the claim of a Holder of Notes
with respect to the principal amount thereof will likely be limited to an amount
equal to the sum of (i) the issue price of the Notes as of the date of issuance
of the Notes and (ii) that portion of the original issue discount that is not
deemed to constitute "unmatured interest" for purposes of the Bankruptcy Code.
Accordingly, Holders of the Notes under such circumstances may, even if
sufficient funds are available, receive a lesser amount than they would be
entitled to under the express terms of the Indenture. In addition, there can be
no assurance that a bankruptcy court would compute the accrual of interest under
the same rules as those used for the calculation of original issue discount
under U.S. Federal income tax law and, accordingly, a Holder might be required
to recognize gain or loss in the event of a distribution related to such
bankruptcy case.
RELIANCE ON MAJOR CUSTOMERS
Approximately 55% of the Company's pro forma net sales in 1997 were derived
from its ten largest customers. Additionally, approximately 10.7% and 10.3% of
the Company's pro forma net sales in 1997 were derived from L'Oreal and
Whirlpool, respectively. The Company expects that it will continue to be
dependent upon a limited number of customers for a significant portion of its
net sales for future periods. Although the Company has ongoing supply
relationships with its principal customers, there can be no assurance that sales
to such customers will continue at the same level. As a result of this customer
concentration, the Company's businesses, operating results and financial
condition could be materially adversely affected by (i) the failure of
anticipated orders to materialize, (ii) deferrals or cancellations of orders or
(iii) increases by its largest customers of their in-house production of the
Company's products or selecting other manufacturers from whom to buy products.
There can be no assurance that in future periods the revenues from these
customers will be maintained at historic levels. In addition, certain of the
Company's agreements to produce parts are tied to specific models or product
lines of its customers. Accordingly, the Company's business, and estimates for
future business, are dependent upon consumer demand for the specific models and
product lines that incorporate parts manufactured by the Company. While
management believes that the Company's relationships with its customers are
mutually satisfactory, if any of these customers were to reduce substantially or
discontinue purchases from the Company, or if consumer demand for products
incorporating plastic parts manufactured by the Company were to significantly
decrease, the financial condition and results of operations of the Company would
be materially adversely affected.
COMPETITION
The markets in which the Company operates are highly competitive. The
Company competes with a significant number of companies of varying sizes,
including divisions or subsidiaries of larger companies, on the basis of price,
service, quality and the ability to supply products to customers in a timely
manner. Some of these competitors have, and new competitors may have, greater
financial and other resources than the Company. Additionally, each of Reliance
Products (which is controlled by the principal stockholders of the Company) and
the Company are engaged in the injection molded plastics business. The products
manufactured, and the markets served, by each of Reliance Products and the
Company are different, and Reliance Products and the Company have not competed,
and do not compete, with each other. However, no assurance can be given that
Reliance Products and the Company will not compete for the same business
opportunities in the future, which may present conflicts of interest.
Competitive pressures or other factors, including the vertical integration by
certain of the Company's major customers of manufacturing processes
traditionally outsourced to the Company, could cause the Company to lose market
share or could result in a significant price erosion with respect to the
Company's products, either of which could have a material adverse effect on the
Company's results of operations. Furthermore, the Company's customers operate in
highly competitive markets. To the extent the Company's major customers lose
market share in their respective markets, the
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Company's results of operations and financial condition could be materially
adversely affected. See "Business--Competition."
MANAGING INTEGRATION AND GROWTH
The Company's ability to implement its growth strategy depends, in part, on
its success in integrating its acquisitions, into the Company's operations. The
Company has grown significantly over the past 15 months through acquisitions
that represent a substantial increase in the scope of the Company's business.
The pursuit and integration of acquisitions, including the integration of Anchor
and Moll as part of the Transactions, will require substantial attention from
the Company's senior management, which will limit the amount of time these
individuals will have available to devote to the Company's existing operations.
Successful integration of each of their operations will depend primarily on the
Company's ability to manage such operations and to integrate their respective
managements. There can be no assurance that the Company can successfully
integrate such acquisitions into its business or implement its plans without
delay or substantial cost. In addition, future acquisitions by the Company could
result in the incurrence of debt and contingent liabilities which could have a
material adverse effect upon the Company's financial condition and results of
operations. Any failure or any inability to effectively manage and integrate
growth may have a material adverse effect on the Company's financial condition
and results of operations. See "The Company."
RAW MATERIALS
The Company's primary raw materials are various plastic resins, nylon and
packaging materials. Raw material prices are subject to cyclical price
fluctuations, including those arising from supply shortages and as a result of
changes in the prices of natural gas, crude oil and other petrochemical
intermediates from which resin is derived. Accordingly, the Company's financial
performance is directly linked to its ability to pass along increased raw
material costs to its customers. Although the Company has historically been able
to pass on increased costs to its customers, there can be no assurance that it
will be able to do so in the future or that a significant price increase in raw
materials would not have a material adverse effect on the Company's financial
condition and results of operations. Although most of the raw materials used by
the Company are available from several suppliers, several of such raw materials
are currently obtained from single sources. The Company has no reason to believe
that there will not be an ample supply of its raw materials at prices
commercially acceptable to the Company for the reasonably foreseeable future,
but the Company cannot make any prediction as to the future price of such raw
materials. See "Business--Raw Materials."
INTERNATIONAL OPERATIONS
The Company derived approximately 33% of its 1997 pro forma net sales from
its operations in Europe. The Company's international operations are subject to
risks inherent in international business activities, including, in particular,
compliance with a variety of foreign laws and regulations, unexpected changes in
regulatory requirements, overlap of different tax structures, foreign currency
exchange rate fluctuations and general economic conditions.
The Company prices its products and incurs operating expenses in Europe in
the currency of the country in which the product is manufactured and sold and,
in the United States, in United States dollars. To the extent that costs and
prices are in the currency of the country in which the products are manufactured
and sold, the costs and prices of such products in dollars will vary as the
value of the dollar fluctuates against such currencies. There can be no
assurance that there will not be increases in the value of the dollar against
such currencies that will reduce the dollar return to the Company on the sale of
its products in such countries.
COMMON EUROPEAN CURRENCY
The Treaty on European Economic and Monetary Union provides for the
introduction of a single European currency, the Euro, in substitution for the
national currencies of the member states of the European
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Union that adopt the Euro. In May 1998, the European Council determined (i) the
11 member states that met the requirements for Monetary Union, and (ii) the
currency exchange rates among the currencies of the member states joining the
Monetary Union. The transitory period for the Monetary Union starts on January
1, 1999. According to Council Resolution of July 7, 1997, the introduction of
the Euro will be made in three steps: (i) a transitory period from January 1,
1999 to December 31, 2001 in which current accounts may be opened and financial
statements may be drawn in Euros, and local currencies and Euros will coexist;
(ii) from January 1, 2002 to June 30, 2002, in which local currencies will be
exchanged for Euros; and (iii) from July 1, 2002 in which local currencies will
disappear. Although there can be no assurance that a single European currency
will be adopted or, if adopted, on what time schedule and with what success,
substantial transition costs could result as the Company redesigns its software
systems to reflect the adoption of the new currency. In addition, no assurance
can be given as to the effect of the adoption of the Euro on the Company's
payment obligations under loan agreements for borrowings in currencies to be
replaced by the Euro or on the Company's commercial agreements in such
currencies.
CONCENTRATION OF CONTROL
AMM Holdings, LLC, a Delaware limited liability company ("AMM Holdings,
LLC"), owns all the capital stock of Holdings, which owns all the capital stock
of Anchor Holdings, which owns all the Company's outstanding capital stock. Moll
PlastiCrafters, Inc. (Del), a Delaware corporation ("MPI"), owns 75.6% of the
outstanding Capital Units (as defined) and 69.3% of the outstanding Profit Units
(as defined) of AMM Holdings, LLC. George T. Votis owns all the outstanding
capital stock of MPI as well as 4.8% of the outstanding Capital Units and 10.8%
of the outstanding Profit Units of AMM Holdings, LLC. Mr. Votis is the manager
of AMM Holdings, LLC and, pursuant to the Limited Liability Company Agreement,
dated as of June 26, 1998 (the "LLC Agreement") of AMM Holdings, LLC, has
exclusive power to manage the business and affairs of AMM Holdings, LLC.
Therefore, Mr. Votis will be able to indirectly control the business, policies
and affairs of Holdings and the Company, including the election of directors and
managers and major corporate transactions of Holdings and the Company.
Circumstances may occur in which the interests of Mr. Votis could be in conflict
with the interests of the holders of the Notes. For example, if Holdings or the
Company encounters financial difficulties or is unable to pay certain of its
debts as they mature, the interests of Mr. Votis might conflict with those of
the holders of Holdings' indebtedness, including the Notes. In addition, Mr.
Votis may have an interest in pursuing acquisitions, divestitures or other
transactions that, in his judgment, could enhance his equity investment, even
though such transactions might involve risks to the holders of Holdings'
indebtedness, including the Notes. See "Certain Beneficial Owners."
DEPENDENCE ON KEY PERSONNEL
The success of Holdings and the Company depends in large part on Holdings'
and the Company's senior management and its ability to attract and retain other
highly qualified management personnel. Holdings and the Company face competition
for such personnel from other companies and other organizations. There can be no
assurance that either Holdings or the Company will be successful in hiring or
retaining key personnel. In particular, Holdings and the Company believe that
they have benefitted substantially from the leadership of Mr. George T. Votis,
the Chairman and Chief Executive Officer of Holdings and the Company. The loss
of the services of Mr. Votis or other key personnel of Holdings or the Company
could have a material adverse effect on Holdings' or the Company's business and
each of their future operations. Mr. Votis and Mr. Charles B. Schiele, President
of Holdings and the Company, devote a portion of their business time to other
companies, including Reliance Products. There can be no assurance that the
inability of either Mr. Votis or Mr. Schiele to devote their full time and
resources to the Company will not adversely affect the Company's business,
financial condition and results of operations. See "Management."
ENVIRONMENTAL MATTERS
Federal, state, local and foreign governments could enact laws or
regulations concerning environmental matters that increase the cost of
producing, or otherwise adversely affect the demand for, plastic products. The
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Company is aware that certain local governments have adopted ordinances
prohibiting or restricting the use or disposal of certain plastic products that
are among the types of products produced by the Company. If such prohibitions or
restrictions were widely adopted, such regulatory and environmental measures or
a decline in consumer preference for plastic products due to environmental
considerations could have a material adverse effect upon the Company. In
addition, certain of the Company's operations are subject to Federal, state,
local and foreign environmental laws and regulations that impose limitations on
the discharge of pollutants into the air and water and establish standards for
the treatment, storage and disposal of solid and hazardous wastes. While the
Company has not been required historically to make significant capital
expenditures in order to comply with applicable environmental laws and
regulations, the Company cannot predict with any certainty its future capital
expenditure requirements because of continually changing compliance standards
and environmental technology. The Company does not have insurance coverage for
environmental liabilities and does not anticipate obtaining such coverage in the
future. See "Business--Environmental Matters."
FRAUDULENT CONVEYANCE
Holdings believes that the indebtedness represented by the Notes has been
incurred for proper purposes and in good faith, and that, based on present
forecasts, asset valuations and other financial information, after the
consummation of the Transactions, Holdings is solvent, has sufficient capital
for carrying on its business and will be able to pay its debts as they mature.
See, however, "--Substantial Leverage; Ability to Service Debt" and
"--Limitation on the Payment of Funds to Holdings by its Subsidiaries."
Notwithstanding Holdings' belief, however, under federal or state fraudulent
transfer laws, if a court of competent jurisdiction in a suit by an unpaid
creditor or a representative of creditors (such as a trustee in bankruptcy or a
debtor-in-possession) were to find that, at the time of the incurrence of such
indebtedness, Holdings was insolvent, was rendered insolvent by reason of such
occurrence, was engaged in a business or transaction for which its remaining
assets constituted unreasonably small capital, intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they matured,
or intended to hinder, delay or defraud its creditors, and that the indebtedness
was incurred for less than reasonably equivalent value, then such court could,
among other things, (a) void all or a portion of Holdings' obligations to the
Holders of the Notes, the effect of which would be that the Holders of the Notes
might not be repaid in full and/or (b) subordinate Holdings' obligations to the
Holders of the Notes to other existing and future indebtedness of Holdings to a
greater extent than would otherwise be the case, the effect of which would be to
entitle such other creditors to which the Notes were not previously subordinated
to be paid in full before any payment could be made on the Notes.
LIMITATIONS ON THE ABILITY TO MAKE CHANGE OF CONTROL PAYMENT
Pursuant to the Indenture, upon a Change of Control, Holdings is obligated
to make an offer to purchase all outstanding Notes at a price equal to 101% of
the Accreted Value thereof, plus Liquidated Damages, if any, to the date of
repurchase (if such date of repurchase is prior to June 1, 2003) or 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the date of repurchase (if such date of
repurchase is on or after June 1, 2003). In addition, any Change of Control
under the Indenture would also constitute a Change of Control under the
indenture governing the Company Notes (the "Company Notes Indenture") and the
Senior Notes Indenture. The Revolving Credit Facility prohibits Holdings from
purchasing any Notes and also provides that the occurrence of certain Change of
Control events with respect to Holdings would constitute a default thereunder.
In the event of a Change of Control, the Company would be required to repay all
borrowings under the Revolving Credit Facility or obtain the consent of its
lenders under the Revolving Credit Facility to make the purchase of the Notes,
the Company Notes and the Senior Notes. If Holdings or the Company does not
obtain such consent or repay such borrowings, Holdings and the Company will
remain prohibited from purchasing Notes, the Company Notes and the Senior Notes,
respectively. In such case, Holdings' failure to purchase tendered Notes would
constitute a default under the Indenture, which, in turn, would constitute a
default under the Revolving Credit Facility. Furthermore, there can be no
assurance that Holdings will have the financial ability to purchase the Notes
upon the occurrence of a Change of Control. See "Description of Notes--Change of
Control."
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YEAR 2000
Many computer systems experience problems handling dates beyond the year
1999. Therefore, some computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The Company is assessing
both the internal readiness of its computer systems and the compliance of the
computer systems of certain significant customers and vendors for handling the
year 2000. The Company expects to implement successfully the systems and
programming changes necessary to address year 2000 issues, and does not believe
that the cost of such actions will have a material adverse effect on the
Company. There can be no assurance, however, that there will not be a delay in,
or increased costs associated with, the implementation of such changes, and the
Company's inability to implement such changes could have an adverse effect on
the Company. In addition, the failure of certain of the Company's significant
customers and vendors to address the year 2000 issue could have a material
adverse effect on the Company.
LACK OF PUBLIC MARKET FOR THE NOTES
The New Notes are being offered to the holders of the Old Notes. The Old
Notes were issued on June 26, 1998 to a small number of institutional investors
and institutional accredited investors and are eligible for trading in the
Private Offering, Resale and Trading through Automated Linkages (PORTAL) Market,
the National Association of Securities Dealers' screenbased, automated market
for trading of securities eligible for resale under Rule 144A. To the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for the remaining untendered Old Notes could be adversely affected. There
is no existing trading market for the New Notes, and there can be no assurance
regarding the future development of a market for the New Notes, or the ability
of holders of the New Notes to sell their New Notes or the price at which such
holders may be able to sell their New Notes. Although the Initial Purchaser has
informed Holdings that it currently intends to make a market in the New Notes,
it is not obligated to do so, and any such market-making may be discontinued at
any time without notice. As a result, the market price of the New Notes could be
adversely affected. Holdings does not intend to apply for listing or quotation
of the New Notes on any securities exchange or stock market.
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THE COMPANY
OVERVIEW
Holdings is a holding company and does not have any material operations or
assets other than ownership of all the capital stock of Anchor Holdings, which
does not have any material operations or assets other than ownership of all the
capital stock of the Company.
The Company is a leading full service manufacturer and designer of custom
molded and assembled plastic components for a broad variety of customers and end
markets throughout North America and Europe. The Company's products are sold to
a wide range of end-markets, including end markets for consumer products,
telecommunications/business equipment, household appliances, automobiles and
medical devices. On a pro forma basis after giving effect to the Transactions,
the Company generated 1997 net sales and EBITDA of $414.6 million and $54.8
million, respectively, making it the sixth largest non-automotive plastic
injection molding company in North America and one of the largest plastic
component suppliers in Europe.
HISTORY
Anchor
Anchor began operations in 1941 as a manufacturer of cosmetic brushes for
Maybelline and, in 1958, began producing Pepsodent(R) toothbrushes for Lever
Brothers Company, Inc. Anchor was acquired in 1990 by affiliates of the Thomas
H. Lee Company and management. Since such acquisition, Anchor has pursued a
growth strategy designed to increase sales while diversifying its revenue base.
In the pursuit of this strategy, Anchor acquired Mid-State Plastics, Inc.
("Mid-State") in 1994, which served to expand Anchor's business into the medical
device and computer components markets. In March 1997, Anchor completed a
recapitalization and in connection therewith issued the Senior Notes. In March
1998, Mr. Votis, who controls Moll, acquired Anchor from affiliates of the
Thomas H. Lee Company. Since such time, Anchor has eliminated approximately $2.8
million in annualized costs by reducing duplicative administrative expenses,
eliminating less profitable business lines and streamlining manufacturing
processes.
Moll
In July 1991, certain entities controlled by Mr. Votis and his partners
were merged to form Moll. Since 1991, Moll has grown significantly through
several strategic acquisitions in North America and Europe:
Textek Plastics, Inc. In December 1992, Moll acquired Textek Plastics,
Inc. ("Textek"), a plastic injection molding manufacturer with one facility in
each of San Antonio and Round Rock, Texas. Textek specialized in manufacturing
plastic components and end-products for the telecommunications and business
products markets. Textek had revenues of $14.2 million in 1992.
Advanced Custom Molders. In July 1993, Moll acquired Advanced Custom
Molders ("ACM"), based in Georgetown and El Paso, Texas. The acquisition of ACM
added two additional plants. ACM had revenues of $15.5 million in 1993.
Quality Plastics Company. In October 1994, Moll acquired Quality Plastics
Company, Inc. ("Quality"), based in Newberg, Oregon. The acquisition of Quality
added manufacturing capacity in the Pacific Northwest. Quality had revenues of
$13.3 million in 1994.
Hanning. In August 1997, Moll acquired the Hanning group of companies
("Hanning"), with manufacturing facilities located in the United States, the
United Kingdom and Germany, Hanning is a leading supplier of injection molded
plastic components for use in digital photocopiers. The acquisition of Hanning:
(i) established the Company's geographic presence in Europe; and (ii) broadened
the Company's product offerings to include precision plastic components for the
business equipment and automotive markets. Hanning had revenues of $49.6 million
in 1997.
Somomeca Industries. In January 1998, Moll acquired Somomeca Industries
S.A.R.L. and its subsidiaries ("Somomeca"), a major French supplier of injection
molded plastic components and plastic injection molds. Somomeca has seven
operating facilities in France and one operating facility in Portugal. The
acquisition of Somomeca: (i) expanded the Company's geographic presence in
Europe, (ii) established the Company's mold-making capabilities, and (iii)
expanded the Company's presence in the automotive sector. Somomeca had revenues
of $88.5 million in 1997.
Gemini Plastic. The Company consummated the acquisition of Gemini Plastic
on June 30, 1998. Gemini Plastic had revenues of approximately $21 million in
1997.
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THE TRANSACTIONS
Concurrently with the consummation of the Offering, the following
transactions were consummated: (i) the Merger; (ii) the acquisition of Gemini
Plastic; (iii) the distribution of Moll's 69% limited partnership interest in
Reliance Products, a Delaware limited partnership doing business in Canada, to
certain of Moll's limited partners; (iv) the entering into the Revolving Credit
Facility and (v) the Company Notes Offering. All of the foregoing transactions,
including the Offering and the Company Notes Offering, are hereinafter
collectively referred to as the "Transactions."
THE MERGER
The Company was formed through the merger of Moll and Anchor. Immediately
before and as a condition precedent to the issuance of the Holdings Notes and
the Notes, and as part of the Merger, the Company succeeded to all the assets of
Moll. Such assets included all of the equity interests in Moll's foreign
subsidiaries, which operate in France, Germany, the United Kingdom and Portugal.
As a result of the Merger, all of the U.S. operating assets of Moll and Anchor
are held by the Company. As the successor corporation in the Merger, the Company
also succeeded to the debt and other obligations of Anchor and Moll, including
the Senior Notes. See the unaudited pro forma consolidated financial statements
of the Company for a discussion of the accounting treatment of the Merger.
[ORGANIZATIONAL CHART]
Note: Certain subsidiaries of Moll Industries, Inc. are held through one or
more intermediate holding companies for certain corporate and tax
considerations. However, such holding companies have not been
reflected on this chart.
ACQUISITION OF GEMINI PLASTIC
The Company consummated the acquisition of Gemini Plastic on June 30, 1998.
Gemini Plastic had revenues of approximately $21 million in 1997.
DISTRIBUTION OF MOLL'S INTEREST IN RELIANCE PRODUCTS
In 1996, Moll acquired Reliance Products, a Delaware limited partnership
doing business in Canada, which manufactures a proprietary line of camping
equipment and bulk storage containers. Immediately prior to the Merger, Moll
distributed its 69% Class B limited partnership interest in Reliance Products to
certain of Moll's limited partners. Reliance Products had revenues of $17.4
million in 1997.
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REVOLVING CREDIT FACILITY
General. Concurrently with the Offering, the Company amended its then
existing credit facility (as amended, the "Revolving Credit Facility") with
NationsBank, N.A., as Agent and sole lender. The Revolving Credit Facility
provides for revolving loans to the Company in an aggregate amount not to exceed
$50.0 million, with a $10.0 million sublimit for the issuance of standby and
commercial letters of credit. Additionally, Anchor Holdings has guaranteed the
Company's obligations under the Revolving Credit Facility. It is anticipated
that the Revolving Credit Facility will be syndicated.
Availability. Borrowings under the Revolving Credit Facility are subject
to a borrowing base equal to the sum of (a) 85% of "eligible receivables," (b)
50% of "eligible inventory" and (c) the lesser of $5,000,000 and 25% of
"eligible inventory" which is work in progress (as such terms are defined in the
Revolving Credit Facility), valued at the lesser of book value or fair market
value.
Security. The Revolving Credit Facility is secured by (i) a first priority
perfected security interest in (a) 100% of the equity interests in all domestic
subsidiaries of the Company, (b) in the event that any foreign subsidiary of the
Company which is a direct foreign subsidiary of the Company or any of its
domestic subsidiaries shall have 5% or more of consolidated total assets or
consolidated EBITDA, 65% of the equity interests in such foreign subsidiary, and
(c) all of the inventory, trademarks, trademark licenses, accounts receivable,
cash and cash equivalents maintained on deposit with the Agent and books and
records relating to the foregoing, of the Company and its domestic subsidiaries,
which assets shall not be subject to any other lien or encumbrance, except for
liens permitted under the Revolving Credit Facility, and (ii) a negative pledge
(subject to certain carve-outs) upon all other present and future assets and
properties of the Company and all of the domestic and foreign subsidiaries of
the Company (including, without limitation, accounts receivable, inventory, real
property, machinery, equipment, contracts, trademarks, copyrights, patents,
license agreements, and general intangibles).
The foregoing security shall ratably secure the Revolving Credit Facility
and any interest rate swap/foreign currency swap or similar agreements with a
lender (or any affiliate of a lender) under the Revolving Credit Facility.
Maturity. The Revolving Credit Facility will mature on June 30, 2003.
Interest Rate. The Revolving Credit Facility bears interest at a rate
equal to IBOR plus an applicable margin, which initially is 200 basis points or
the Base Rate (defined as the higher of (i) the prime rate of NationsBank N.A.
and (ii) the Federal Funds rate plus 1/2%) plus an applicable margin, which
initially is 100 basis points. The Company may select interest periods of one,
two, three or six months for IBOR loans, subject to availability. A penalty rate
shall apply on all loans in the event of default at a rate per annum of 2% above
the applicable interest rate.
Covenants. The Revolving Credit Facility contains covenants customary for
working capital financings, including, without limitation: (i) maximum leverage
and interest coverage ratios and minimum net worth; (ii) restrictions on capital
expenditures, incurrence of additional indebtedness, dividends and redemptions;
and (iii) restrictions of mergers, acquisitions and sales of assets.
Events of Default. The Revolving Credit Facility contains events of
default customary for working capital financings, including, without limitation:
(i) nonpayment of principal, interest, fees or other amounts, (ii) violation of
covenants, and (iii) inaccuracy of representations and warranties.
COMPANY NOTES OFFERING
Concurrently with the Offering, the Company consummated an offering (the
"Company Notes Offering") of $130.0 million aggregate gross proceeds of its
10 1/2% Senior Subordinated Notes due 2008 (the "Company Notes").
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USE OF PROCEEDS
Holdings will not receive any proceeds from the Exchange Offer. The gross
proceeds to Holdings from the Offering were approximately $35 million. Holdings
used the proceeds of the Offering to fund (i) the Distribution to Holdings
stockholders of approximately $33.3 million, of which $2.3 million was retained
by Holdings stockholders and the remainder was used (a) to repay approximately
$15.6 million of indebtedness held by Textek LLC, an affiliate of Holdings
controlled by Mr. Votis, and (b) purchase the equity interests of a former Moll
partner for $15.4 million; and (ii) the Equity Contribution of approximately $2
million to Anchor Holdings, which was contributed by Anchor Holdings to the
Company. The Company paid all of the fees and expenses of Holdings related to
the Offering. See "Certain Relationships and Related Transactions."
22
<PAGE> 26
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the actual cash and cash equivalents and
capitalization of Moll and Anchor Holdings at March 31, 1998, and the
capitalization of Holdings at such date, as adjusted to give pro forma effect to
the Transactions. See "Use of Proceeds," "The Transactions" and the unaudited
pro forma consolidated financial statements of the Company. This table should be
read in conjunction with the historical consolidated financial statements of
each of Anchor Holdings and Moll, including the notes thereto, and the unaudited
pro forma financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1998
------------------------------------
PRO FORMA
MOLL ANCHOR(1) AS ADJUSTED
<S> <C> <C> <C>
Cash...................................................... $ 7,141 $ 144 $ 25,599
======== ======== ========
Total debt (including current maturities):
Revolving credit facility(2)............................ $ 7,100 $ -- $ --
Somomeca revolving credit facility...................... 16,626 -- --
Term loans.............................................. 59,250 -- --
11 3/4% Senior Notes.................................... -- 100,000 100,000
Senior Subordinated Notes............................... -- -- 130,000
Senior Discount Notes................................... -- -- 35,322
Other Somomeca long-term obligations.................... 13,258 -- 13,258
Reliance debt........................................... 6,400 -- --
Mortgage payable........................................ 2,877 -- 2,877
Payables to former owners............................... 1,500 -- 1,500
Other debt.............................................. 978 1,765 4,724
-------- -------- --------
Total long-term debt............................ 107,989 101,765 287,681
-------- -------- --------
Partners' capital/Stockholders' equity (deficit).......... 4,145 (2,758) (35,128)
-------- -------- --------
Total capitalization............................ $112,134 $ 99,007 $252,553
======== ======== ========
</TABLE>
- ------------------------------
(1) Capitalization of Anchor Holdings is taken from Anchor Holdings' April 4,
1998 unaudited consolidated financial statements.
(2) Subject to certain conditions, approximately $48.8 million of capacity is
available for borrowing by the Company under the Revolving Credit Facility.
See "Description of Certain Indebtedness--Revolving Credit Facility."
23
<PAGE> 27
SELECTED UNAUDITED PRO FORMA AND
HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected unaudited pro forma date for the
Company as well as selected historical financial data of Anchor Holdings and
Moll for the periods indicated. The selected historical financial data for the
years ended 1995, 1996 and 1997 were derived from the audited consolidated
financial statements of each of Anchor Holdings and Moll contained elsewhere in
this Prospectus. The selected historical financial data for 1993 and 1994 were
derived from the audited consolidated financial statements of each company not
contained herein. The unaudited selected financial data for the first quarter of
1997 and 1998 were derived from unaudited financial statements contained
elsewhere in this Prospectus. These unaudited financial statements were prepared
on the same basis as the annual financial statements and, in the opinion of
management, reflect all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation. The unaudited pro forma data were derived
from the unaudited pro forma financial statements contained elsewhere in the
Prospectus and reflect the Transactions as if they had occurred at the beginning
of the period presented. Neither the selected historical consolidated financial
data nor the selected pro forma consolidated financial data are necessarily
indicative of either the future results of operations or the results of
operations that would have occurred if the Transactions had been consummated on
any date. The following table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the historical consolidated financial statements of each of Anchor Holdings and
Moll, as well as the unaudited pro forma financial statements of Holdings,
including accompanying notes thereto, included elsewhere in this Prospectus.
SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED FIRST QUARTER
DECEMBER 31, 1997 1998
----------------- -------------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales................................................... $414,630 $100,739
Gross profit................................................ 60,048 16,410
Selling, general and administrative expenses................ 29,390 7,716
Operating income............................................ 30,458 8,644
Interest expense, net....................................... 31,019 7,898
Income before taxes and extraordinary items................. 308 568
Income (loss) before extraordinary item..................... (1,729) (121)
OTHER DATA:
EBITDA(1)................................................... $ 54,807 $ 13,315
Depreciation and amortization............................... 23,480 4,849
Capital expenditures........................................ 15,559 3,827
Cash interest expense, net(2)............................... 29,945 7,562
Ratio of EBITDA to cash interest expense, net............... 1.8x NA
Ratio of net debt to EBITDA(3).............................. 4.8x NA
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1998
-----------------
<S> <C>
BALANCE SHEET DATA:
Cash........................................................ $ 25,599
Working capital............................................. 86,519
Total assets................................................ 329,817
Total debt.................................................. 287,681
Stockholders' deficit....................................... (35,128)
</TABLE>
24
<PAGE> 28
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
ANCHOR HOLDINGS, INC.(4)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FIRST QUARTER
---------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net sales.................. $118,047 $118,267 $149,366 $156,858 $161,161 $41,546 $39,303
Gross profit............... 20,778 18,208 24,338 27,637 25,187 6,893 6,608
Selling, general and
administrative........... 9,096 7,634 9,409 11,358 10,979 2,615 3,014
Amortization............... 577 1,712 1,662 1,530 1,698 343 426
Income from operations..... 11,105 8,862 13,267 14,749 12,510 3,935 3,168
Other (income) expense..... (110) (739) 974 408 (287) 26 42
Interest expense, net...... 5,385 5,984 8,616 8,124 11,165 2,072 2,967
Income before taxes and
extraordinary items...... 5,830 3,617 3,677 6,217 1,632 1,837 159
Provision for income
taxes.................... 1,606 1,507 1,239 2,591 794 779 78
Extraordinary item(5)...... -- 334 -- -- (1,210) -- --
Net income (loss).......... 4,224 1,776 2,438 3,626 (372) 1,058 81
OTHER DATA:
EBITDA(6).................. $ 17,881 $ 18,439 $ 21,742 $ 23,627 $ 22,370 $ 6,238 $ 5,784
Depreciation and
amortization............. 6,666 8,838 9,449 9,286 9,573 2,329 2,658
Capital expenditures....... 6,729 5,724 6,932 8,028 8,413 1,973 580
Ratio of earnings to fixed
charges(7)............... 2.1x 1.6x 1.4x 1.7x 1.1x 1.8x 1.1x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------- AT APRIL 4,
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................... $79,227 $115,065 $116,529 $115,263 $120,839 $116,828
Long-term debt obligations..... 50,444 80,387 78,133 74,468 101,939 101,765
</TABLE>
25
<PAGE> 29
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FIRST QUARTER
---------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net sales.................. $ 56,116 $ 78,066 $ 90,876 $ 89,464 $116,947 $25,632 $60,105
Gross profit............... 9,685 15,218 16,966 16,502 19,861 5,557 9,367
Selling, general and
administrative
expenses................. 5,602 6,804 8,301 7,190 10,758 2,462 4,817
Operating income........... 4,083 8,414 9,019 8,574 8,186 3,054 4,168
Other (income) expense..... -- -- 120 50 (299) (111) 144
Interest expense, net...... 1,613 1,941 2,414 2,518 3,405 676 2,337
Income before taxes and
extraordinary items...... 2,470 6,473 6,485 6,037 4,645 2,169 1,449
Provision for income
taxes.................... -- -- -- -- 83 -- 92
Extraordinary item(5)...... -- -- -- -- -- -- 736
Net income................. 2,470 6,473 6,485 6,037 4,563 2,169 621
OTHER DATA:
EBITDA(6).................. $ 6,537 $ 11,932 $ 13,317 $ 12,703 $ 13,450 $ 4,079 $ 5,925
Depreciation and
amortization............. 2,454 3,518 4,418 4,148 5,400 1,234 2,139
Capital expenditures....... 747 2,766 2,776 1,387 6,562 335 3,204
Ratio of earnings to fixed
charges(7)............... 2.3x 3.8x 3.3x 2.9x 2.1x 3.5x 1.6x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------- AT MARCH 31,
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................. $ 33,067 $ 47,288 $ 51,287 $ 53,901 $86,925 $172,413
Long-term debt obligations... 13,777 19,739 30,466 33,640 47,932 84,262
</TABLE>
- ------------------------------
(1) EBITDA represents income before taxes plus interest expenses, net,
depreciation and amortization. While EBITDA should not be construed as a
substitute for operating income, net income or cash flows from operating
activities in analyzing the referenced company's operating performance,
financial position or cash flows, the referenced company has included EBITDA
because it is commonly used by certain investors and analysts to analyze and
compare companies on the basis of operating performance, leverage and
liquidity and to determine a company's ability to service debt.
(2) Cash interest expense, net represents interest expense minus amortization of
debt issuance costs.
(3) Net debt, as used in calculating this ratio, represents total debt at March
31, 1998 of $287,681 minus cash of $25,599. EBITDA, as used in this
calculation, represents EBITDA for the year ended December 31, 1997.
(4) The consolidated financial statements of Anchor Holdings do not differ
significantly from those of Anchor. See historical consolidated financial
statements of Anchor Holdings.
(5) With respect to Anchor Holdings in 1997, amount represents loss on
extinguishment of debt net of tax. With respect to Moll in the first quarter
of 1998, amount represents loss on extinguishment of debt.
(6) EBITDA represents income before taxes plus interest expense, net,
depreciation and amortization. While EBITDA should not be construed as a
substitute for operating income, net income or cash flows from operating
activities in analyzing the referenced company's operating performance,
financial position or cash flows, the referenced company has included EBITDA
because it is commonly used by certain investors and analysts to analyze and
compare companies on the basis of operating performance, leverage and
liquidity and to determine a company's ability to service debt.
(7) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of income before income taxes and extraordinary item, plus fixed
charges. "Fixed charges" consist of interest expense, net, which includes
the amortization of deferred financing costs, and that portion of rental
expense representative of interests (deemed to be one-third of rental
expense).
26
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations includes forward-looking statements with respect to
Holdings' future financial performance. These forward-looking statements are
subject to various risks and uncertainties, including the factors described
under "Risk Factors" and elsewhere in this Prospectus, that could cause actual
results to differ materially from historical results or those currently
anticipated.
HOLDINGS
Holdings is a holding company and does not have any material operations or
assets other than ownership of all the capital stock of Anchor Holdings, which
does not have any material operations or assets other than ownership of all the
capital stock of the Company.
THE COMPANY
OVERVIEW
The Company is a leading full service manufacturer and designer of custom
molded and assembled plastic components for a broad variety of customers and end
markets throughout North America and Europe. The Company's products are sold to
a wide range of end-markets, including end markets for consumer products,
telecommunications/business equipment, household appliances, automobiles and
medical devices. On a pro forma basis after giving effect to the Transactions,
the Company generated 1997 net sales and EBITDA of $414.6 million and $54.8
million, respectively, making it the sixth largest non-automotive plastic
injection molding company in North America and one of the largest plastic
component suppliers in Europe.
Approximately 45% of the Company's 1997 pro forma net sales of molded
products was covered by long term purchase and sale contracts which stipulate
anticipated volume requirements and pricing terms. The remainder of the
Company's sales of molded products was sold on a short-term basis with
components ordered by customers to meet their pending production requirements.
See "Risk Factors -- Reliance on Major Customers."
The Company typically charges its customers a fixed price for each
component it manufactures, which component may consist of single or multiple
parts. Prices are quoted based on (i) the type of product, (ii) the type of
services provided (design, prototyping, molding, and other value-added
services), (iii) the complexity of manufacturing processes involved, and (iv)
the Company's estimates of part weight, resin costs, machine requirements and
parts produced per hour (cycle time). In many cases, the Company purchases the
raw materials on behalf of its customers. In such instances, the Company's
arrangements with most of its customers provide that price changes in such raw
materials are passed through to the customer by changes in the component prices
charged by the Company. As customers generally seek price reductions during the
product life cycle, the Company's ability to improve operating performance is
generally dependent on increasing manufacturing efficiency through improved
process control, increased automation, engineering changes to molds and reduced
operating and labor expenses. See "Business Strategy -- Reduce Costs."
During the product life cycle, components are ordered by the Company's
customers to meet their just-in-time production requirements. Typical lead times
range from two to six weeks. Traditionally, once a mold is awarded to a
particular supplier and is in production, it is rarely moved to a competitor. As
of December 31, 1997, the Company maintained approximately 2,700 active molds
for its customers. A majority of such molds are owned by the customer but the
Company is responsible for the general maintenance and safe storage of the mold
during its lifetime. Costs for maintenance of the mold are expensed as incurred.
Major tool modifications and renovations are charged to the customer.
The Company has been formed by a number of acquisitions that have been
integrated through consolidation of manufacturing facilities, logistical
optimization and reduction of overhead. See "Business
27
<PAGE> 31
Strategy--Continue Strategic Acquisitions." In July 1991, certain entities
controlled by Mr. Votis and his partners were merged to form Moll. Since 1991,
Moll has grown significantly through several strategic acquisitions in North
America and Europe. In December 1992, Moll acquired Textek, based in San Antonio
and Round Rock, Texas. In July 1993, Moll acquired ACM, based in Georgetown and
El Paso, Texas. In October 1994, Moll acquired Quality, based in Newberg,
Oregon. See "The Company."
In 1996, Moll acquired Reliance Products, a Delaware limited partnership
doing business in Canada, which manufactures a proprietary line of camping
equipment and bulk storage containers. Immediately prior to the Merger, Moll
distributed its 69% Class B limited partnership interest in Reliance Products to
certain of Moll's limited partners. In August 1997, Moll acquired Hanning, a
leading supplier of injection molded plastic components for use in digital
photocopiers, with manufacturing facilities located in the United States, the
United Kingdom and Germany. In January 1998, Moll acquired Somomeca, a major
French supplier of injection molded plastic components and plastic injection
molds. In March 1998, Mr. Votis, who controlled Moll, acquired Anchor from
affiliates of the Thomas H. Lee Company.
Concurrently with the Offering, the Company was formed through the merger
of two leading plastic injection molders, Moll and Anchor, which were each
controlled by Mr. George Votis. Immediately prior to the Merger, Moll and Anchor
were independently operated entities. The Company consummated the acquisition of
Gemini Plastic on June 30, 1998. See "The Company" and "The Transactions."
Since 1995, the Company has generally experienced strong, growing net sales
from its Cosmetics Division and Medical Products Division despite anticipated
declines in toothbrush net sales associated with the decision of certain
customers to move production "in-house." In early 1998, the Company made a
strategic decision to discontinue production of certain business product
components at its Round Rock facility in favor of producing medical end products
and components which the Company believed to be more profitable, stable and
faster growing business. Since March 1998, the Company has eliminated
approximately $2.8 million in annualized costs by reducing duplicative
administrative expenses, eliminating less profitable business lines and
streamlining manufacturing processes.
Over the past three years, Moll experienced growth in net sales through
several strategic acquisitions and the addition of manufacturing facilities.
However, in 1997, such increases were offset by operating inefficiencies related
to such acquisitions, especially the Hanning acquisition and the closing of
Moll's El Paso facility. As a result of the acquisition of Somomeca which had
generated approximately $88.5 million of European sales in 1997, Moll enhanced
its international manufacturing capabilities.
28
<PAGE> 32
RESULTS OF OPERATIONS
ANCHOR HOLDINGS, INC.
The following financial information presents certain historical financial
information of Anchor Holdings, expressed as a percentage of net sales, for
1995, 1996 and 1997 and for the first quarters of 1997 and 1998.
<TABLE>
<CAPTION>
YEAR ENDED FIRST QUARTER
------------------------ --------------
1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit...................................... 16.3 17.6 15.6 16.6 16.8
Selling, general and administrative............... 6.3 7.2 6.8 6.3 7.7
Amortization...................................... 1.1 1.0 1.1 0.8 1.0
Operating income.................................. 8.9 9.4 7.8 9.5 8.1
Other (income) expense............................ 0.7 0.3 (0.2) 0.1 0.1
Interest expense, net............................. 5.8 5.2 6.9 5.0 7.6
Income before taxes and extraordinary items....... 2.5 3.9 1.0 4.4 0.4
Provision for income taxes........................ 0.8 1.7 0.5 1.9 0.2
Extraordinary item................................ -- -- -- -- --
Net income (loss)................................. 1.6 2.3 (0.2) 2.5 0.2
OTHER DATA:
EBITDA(1)......................................... 14.6% 15.1% 13.9% 15.0% 14.7%
Depreciation and amortization..................... 6.3 5.9 5.9 5.6 6.8
Capital expenditures.............................. 4.6 5.1 5.2 4.7 1.5
</TABLE>
- ------------------------------
(1) EBITDA represents income before taxes plus interest expense, net,
depreciation and amortization. While EBITDA should not be construed as a
substitute for operating income, net income or cash flows from operating
activities in analyzing Anchor Holdings' operating performance, financial
position or cash flows, Anchor Holdings has included EBITDA because it is
commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance, leverage and liquidity and
to determine a company's ability to service debt.
13 Weeks Ended April 4, 1998 ("Interim 1998") Compared to 13 Weeks Ended March
31, 1997
("Interim 1997")
Net Sales. Net sales decreased by $2.2 million, or 5.3%, to $39.3 million
for Interim 1998 from $41.5 million for Interim 1997. The net sales decrease
resulted primarily from lower toothbrush sales to Colgate-Palmolive and was
partially offset by increased sales to Anchor's Cosmetics Division customers.
Gross Profit. Gross profit decreased by $0.3 million, or 4.3%, to $6.6
million for Interim 1998 from $6.9 million for Interim 1997. Lower gross profit
primarily resulting from lower toothbrush sales to Colgate-Palmolive was largely
offset by efficiency improvements in the Mid-State division and increased
margins associated with strong sales to Anchor's Cosmetics Division customers.
Selling, General and Administrative. Selling, general and administrative
("SG&A") expenses increased by $0.4 million, or 15.4%, to $3.0 million for
Interim 1998 from $2.6 million for Interim 1997 primarily due to selling expense
associated with increased sales to Anchor's Cosmetics Division customers and to
salary and benefit increases for 1998.
Amortization. Amortization expense increased by $0.1 million, or 33.3%, to
$0.4 million for Interim 1998 from $0.3 million for Interim 1997 due to the
write-off of additional capitalized fees associated with the issuance of the
Senior Notes in April 1997.
29
<PAGE> 33
Operating Income. Operating income decreased by $0.7 million, or 17.9%, to
$3.2 million for Interim 1998 from $3.9 million for Interim 1997 for the reasons
listed above.
Net Interest Expense. Net interest expense increased by $0.9 million, or
42.9%, to $3.0 million for Interim 1998 from $2.1 million for Interim 1997 due
to the issuance of the Senior Notes in April 1997. Such increase was partially
offset by the retirement of bank debt of $50.7 million and $21.0 million of
subordinated debt.
Income Taxes. Income taxes decreased $0.7 million, or 87.5%, to $0.1
million for Interim 1998 from $0.8 million for Interim 1997 as a result of
decreased operating income for Interim 1998.
Net Income. Net income decreased $0.9 million, or 90.9%, to $0.1 million
for Interim 1998 from $1.0 million for Interim 1997 as a result of the factors
listed above.
EBITDA. EBITDA decreased by $0.4 million, or 6.5%, to $5.8 million for
Interim 1998 from $6.2 million for Interim 1997 as a result of the factors
listed above.
Fiscal 1997 Versus Fiscal 1996
Net Sales. Net sales increased by $4.3 million, or 2.7%, to $161.2 million
for fiscal 1997 from $156.9 million for fiscal 1996, primarily due to the
continued strong sales to Anchor's Cosmetics Division customers and the
increased sales of medical devices. Such increase was partially offset by the
drop in sales of toothbrushes to Colgate-Palmolive as a result of in-house
manufacturing by Colgate-Palmolive.
Gross Profit. Gross profit decreased by $2.4 million, or 8.7%, to $25.2
million for fiscal 1997 from $27.6 million for fiscal 1996, resulting from the
decline in sales of toothbrushes to Colgate-Palmolive, lower than expected
production volumes in the Round Rock facility, the addition of lower gross
margin Compaq sales, and a $0.6 million charge taken in the second quarter of
1997 for renegotiation of a Mexican labor contract.
Selling, General and Administrative. SG&A expenses decreased $0.4 million,
or 3.5%, to $11.0 million for fiscal 1997 from $11.4 million for fiscal 1996,
reflecting effective cost control measures.
Amortization. Goodwill and capitalized fees amortization increased by $0.2
million, or 13.3%, to $1.7 million for fiscal 1997 from $1.5 million for fiscal
1996, as a result of transaction fees incurred during the issuance of the Senior
Notes in April 1997.
Operating Income. Operating income decreased by $2.2 million, or 15.0%, to
$12.5 million for fiscal 1997 from $14.7 million for fiscal 1996 for the reasons
listed above.
Other Expense. Other expense decreased by $0.7 million, or 175.0%, to $0.3
million income for fiscal 1997 from $1.0 million expense for fiscal 1996
reflecting income from a one time legal settlement during the fourth quarter of
1997.
Net Interest Expense. Net interest expense increased by $3.1 million, or
38.3%, to $11.2 million for fiscal 1997 from $8.1 million for fiscal 1996 due to
the issuance of the Senior Notes in April 1997. Such increase was partially
offset by the retirement of bank debt of $50.7 million and $21.0 million of
subordinated debt.
Income Taxes. Income taxes decreased by $1.8 million, or 69.2%, to $0.8
million for fiscal 1997 from $2.6 million for fiscal 1996 as a result of
decreased operating income.
Extraordinary Item. Extraordinary item of $1.2 million, net of taxes, for
fiscal 1997 resulted from the writeoff of $0.4 million in bank fees, and a $0.8
million prepayment penalty associated with the retirement of bank debt and
subordinated debt.
Net Income. Net income decreased $4.0 million, or 111.1%, to $0.4 million
loss for fiscal 1997 from $3.6 million income for fiscal 1996 as a result of the
above factors.
EBITDA. EBITDA decreased $1.2 million, or 5.1%, to $22.4 million for
fiscal 1997, from $23.6 million for fiscal 1996 for the reasons listed above.
30
<PAGE> 34
Fiscal 1996 Versus Fiscal 1995
Net Sales. Net sales increased by $7.5 million, or 5.0%, to $156.9 million
for fiscal 1996 from $149.4 million for fiscal 1995, principally as a result of
inclusion of the first full year of point-of-purchase ("POP") display sales and
an increase in computer component sales. Such increase was partially offset by a
decrease in unit sales for toothbrushes.
Gross Profit. Gross profit increased by $3.3 million, or 13.6%, to $27.6
million for fiscal 1996 from $24.3 million for fiscal 1995, principally as a
result of increased net sales in the POP display and computer component markets
as well as higher gross margins. Such increase was partially offset by a decline
in gross profit for toothbrush sales. Gross margin increased to 17.6% for fiscal
1996 from 16.3% in fiscal 1995, primarily due to the realization of a full year
of efficiency gains in the Matamoros, Mexico manufacturing facility. Such
increase was partially offset by inefficiencies related to the start-up of the
manufacturing facility in Round Rock, Texas.
Selling, General and Administrative. SG&A expenses increased by $2.0
million, or 20.7%, to $11.4 million for fiscal 1996 from $9.4 million for fiscal
1995, principally as a result of professional expenses incurred in connection
with the formation of a possible joint venture in China, and costs associated
with a management information systems upgrade.
Amortization. Amortization expense decreased by $0.2 million, or 7.9%, to
$1.5 million for fiscal 1996 from $1.7 million for fiscal 1995, principally as a
result of the expiration of certain amortized fees and expenses incurred in the
1990 acquisition of Anchor by affiliates of the Thomas H. Lee Company.
Operating Income. Operating income increased by $1.4 million, or 11.2%, to
$14.7 million for fiscal 1996 from $13.3 million for fiscal 1995 as a result of
the items discussed above.
Other Expense. Other expense decreased by $0.6 million, or 58.1%, to $0.4
million for fiscal 1996 from $1.0 million for fiscal 1995, principally as a
result of expenses related to the relocation of the Matamoros, Mexico facility
in 1995 which were not repeated in 1996.
Net Interest Expense. Net interest expense decreased by $0.5 million, or
5.7%, to $8.1 million for fiscal 1996 from $8.6 million for fiscal 1995,
principally as a result of a $5.0 million pay down on a certain term loan
facility and greater use of LIBOR rates under such agreement.
Income Taxes. Income tax expense increased by $1.4 million, or 109.1%, to
$2.6 million for fiscal 1996 from $1.2 million for fiscal 1995.
Net Income. Net income increased by $1.2 million, or 48.7%, to $3.6
million for fiscal 1996 from $2.4 million for fiscal 1995 as a result of the
above factors.
EBITDA. EBITDA increased by $1.9 million, or 8.7%, to $23.6 million for
fiscal 1996 from $21.7 million for fiscal 1995 as a result of the above factors.
31
<PAGE> 35
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP
The following financial information presents certain historical financial
information of Moll expressed as a percentage of net sales, for 1995, 1996 and
1997 and for the first quarters of 1997 and 1998.
<TABLE>
<CAPTION>
YEAR ENDED FIRST QUARTER
----------------------- --------------
1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit....................................... 18.7 18.4 17.0 21.7 15.6
Selling, general and administrative expenses....... 9.1 8.0 9.2 9.6 8.0
Tooling income, net................................ 1.9 0.8 1.6 1.4 0.1
Management fee..................................... 1.5 1.6 1.4 1.6 1.3
Loss incurred on closure of facility............... -- -- 1.0 -- --
Operating income................................... 9.9 9.6 7.0 11.9 6.9
Other (income) expense............................. 0.1 -- (0.3) (0.4) 0.3
Interest expense, net.............................. 2.7 2.8 2.9 2.6 3.9
Income before taxes and extraordinary items........ 7.1 6.7 4.0 8.5 2.4
Provision for income taxes......................... -- -- 0.1 -- 0.2
Extraordinary item................................. -- -- -- -- 1.2
Net income......................................... 7.1 6.7 3.9 8.5 1.0
OTHER DATA:
EBITDA(1).......................................... 14.7% 14.2% 11.5% 15.9% 9.9%
Depreciation and amortization...................... 4.9 4.6 4.6 4.8 3.6
Capital expenditures............................... 3.1 1.6 5.6 1.3 5.3
</TABLE>
- ------------------------------
(1) EBITDA represents income before taxes plus interest expense, net,
depreciation and amortization. While EBITDA should not be construed as a
substitute for operating income, net income or cash flows from operating
activities in analyzing Moll's operating performance, financial position or
cash flows, Moll has included EBITDA because it is commonly used by certain
investors and analysts to analyze and compare companies on the basis of
operating performance, leverage and liquidity and to determine a company's
ability to service debt.
First Quarter 1998 Versus First Quarter 1997
Net Sales. Net sales increased $34.5 million, or 134.0%, in the 1998 first
quarter to $60.1 million, from $25.6 million in the 1997 first quarter,
primarily due to the acquisitions of Hanning and Somomeca, which contributed net
sales of $32.3 million, as well as increased production volume in Moll's Austin,
Fort Smith, Nashville and San Antonio locations, offset by a decrease resulting
from the closing of Moll's El Paso facility in September 1997.
Gross Profit. Gross profit increased $3.8 million, or 68.6%, in the 1998
first quarter to $9.4 million from $5.6 million in the 1997 first quarter,
primarily due to the acquisitions of Hanning and Somomeca, which contributed
gross profits of $3.6 million, as well as production efficiencies at Moll's Fort
Smith, Nashville and San Antonio facilities. Gross margin declined to 15.6% in
1998 from 21.7% in 1997 due to operating inefficiencies in the acquired Hanning
facilities.
Selling, General and Administrative Expenses. SG&A increased $2.3 million,
or 95.7%, in the 1998 first quarter to $4.8 million from $2.5 million in the
1997 first quarter, primarily due to the acquisitions of Hanning and Somomeca,
which incurred expenses of $2.4 million, as well as costs incurred related to a
new year 2000 compliant application software and increased staffing in a new
facility in Austin, Texas.
Tooling Income, Net. Tooling income, net remained stable at $0.4 million
for each of the 1997 and 1998 first quarters. The majority of the tooling
income, net in the 1998 first quarter was generated in the acquired companies,
as U.S. operations did not complete any significant tooling projects in this
period.
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<PAGE> 36
Management Fee. Management fee increased $0.4 million, or 91.7%, in the
1998 first quarter to $0.8 million from $0.4 million in the 1997 first quarter,
primarily due to an increase in net sales.
Operating Income. Operating income increased $1.1 million, or 36.5%, in
the 1998 first quarter to $4.2 million from $3.1 million in the 1997 first
quarter, primarily due to the acquisitions discussed above.
Interest Expense. Interest expense increased $1.6 million, or 245.7%, from
$0.7 million in the 1997 first quarter to $2.3 million in the 1998 first
quarter, due to the borrowings associated with the acquisitions discussed above.
Provision for Income Taxes. The provision for income taxes in the 1998
first quarter represents foreign income taxes recorded in connection with the
new corporate subsidiaries in Germany and the United Kingdom.
Extraordinary Item. The extraordinary item in the 1998 first quarter
represents loss on the extinguishment of debt.
Net Income. Net income decreased by $1.6 million, or 71.4% in the 1998
first quarter, to $0.6 million from $2.2 million in the 1997 first quarter as a
result of the above factors.
EBITDA. EBITDA increased $1.8 million, or 45.3% in the 1998 first quarter,
to $5.9 million from $4.1 million in the 1997 first quarter as a result of the
above factors.
Fiscal 1997 Versus Fiscal 1996
Net Sales. Net sales increased $27.4 million, or 30.7%, in fiscal 1997 to
$116.9 million from $89.5 million in fiscal 1996, primarily due to the
inclusion, in fiscal 1997 results, of a full year of Reliance Products results,
and Hanning results since August 7, 1997. Such increases were partially offset
by a decrease of $3.3 million in net sales due to the closing of Moll's El Paso
facility and a decrease of $4.8 million in net sales resulting from raw material
price adjustments and lower volumes of certain components.
Gross Profit. Gross profit increased $3.4 million, or 20.4%, in fiscal
1997 to $19.9 million from $16.5 million in fiscal 1996 primarily due to the
inclusion, in fiscal 1997 results, of a full year of Reliance Products results.
Such increase was partially offset by operating inefficiencies encountered in
the acquired Hanning facilities, which was also responsible for the gross margin
decline to 17.0%, in 1997 from 18.4% in 1996.
Selling, General and Administrative Expenses. SG&A expenses increased $3.6
million, or 49.6% in fiscal 1997 to $10.8 million from $7.2 million in fiscal
1996 primarily due to the inclusion, in fiscal 1997 results, of a full year of
Reliance Products results, and Hanning results since August 7, 1997.
Tooling Income, Net. Tooling income, net, increased $1.2 million, or
170.4%, in fiscal 1997 to $1.9 million from $0.7 million in fiscal 1996
primarily due to the completion of several projects completed by the acquired
Hanning companies.
Management Fee. Management fee increased $0.3 million, or 14.3%, in fiscal
1997 to $1.7 million from $1.4 million in fiscal 1996 primarily due to the
increase in net sales.
Operating Income. Operating income decreased $0.4 million, or 4.5%, in
fiscal 1997 to $8.2 million from $8.6 million in fiscal 1996 due to the loss
incurred on the closure of Moll's El Paso facility offset by factors listed
above.
Interest Expense. Interest expense increased $0.9 million, or 35.2%, in
fiscal 1997 to $3.4 million from $2.5 million in fiscal 1996 primarily due to
the debt acquired in connection with the acquisition of Reliance Products and an
increase in debt to complete the Hanning acquisition.
Provision for Income Taxes. The provision for income taxes in 1997
represents foreign income taxes recorded in connection with the new corporate
subsidiaries in Germany and the United Kingdom.
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<PAGE> 37
Net Income. Net income decreased $1.4 million, or 24.4% in fiscal 1997 to
$4.6 million from $6.0 million in fiscal 1996 as a result of the items discussed
above.
EBITDA. EBITDA increased $0.7 million, or 5.9%, to $13.4 million for
fiscal 1997 from $12.7 million for fiscal 1996 as a result of the above factors.
Fiscal 1996 Versus Fiscal 1995
Net Sales. Net sales for fiscal 1996 decreased by $1.4 million, or 1.6%,
to $89.5 million from $90.9 million for fiscal 1995, primarily due to raw
material price adjustments on certain components and the discontinuation of the
production of certain keyboard components at Moll's El Paso facility. Such
decrease was partially offset by increases in sales at Moll's other facilities.
Gross Profit. Gross profit for fiscal 1996 decreased by $0.5 million, or
2.7%, to $16.5 million from $17.0 million for fiscal 1995 primarily due to
unrecovered fixed costs incurred at Moll's El Paso facility.
Selling, General and Administrative Expenses. SG&A expenses decreased $1.1
million, or 13.4% to $7.2 million in fiscal 1996 from $8.3 million in fiscal
1995, primarily due to the integration of the Quality acquisition and staff
reductions in Moll's El Paso facility.
Tooling Income, Net. Tooling income, net decreased $1.0 million, or 58.8%,
in fiscal 1996 to $0.7 million from $1.7 million in fiscal 1995 primarily due to
the completion in 1995 of major tooling programs for two large customers. Such
programs are cyclical by nature.
Management Fee. Management fee remained relatively stable at $1.4 million
in fiscal 1996 and 1995 due to the relatively constant net sales.
Operating Income. Operating income decreased $0.4 million, or 4.9%, to
$8.6 million for fiscal 1996 from $9.0 million in fiscal 1995 due to the factors
listed above.
Interest Expense. Interest expense for fiscal 1996 increased by $0.1
million, or 4.3%, to $2.5 million from $2.4 million for fiscal 1995, primarily
due to increased debt issued in connection with the recapitalization of Moll in
September 1995.
Net Income. Net income for fiscal 1996 decreased by $0.5 million, or 6.9%,
to $6.0 million from $6.5 million for fiscal 1995 as a result of the items
listed above.
EBITDA. EBITDA decreased $0.6 million, or 4.6%, to $12.7 million in fiscal
1996 from $13.3 million for fiscal 1995 as a result of the above factors.
LIQUIDITY AND CAPITAL RESOURCES
Moll
Historically, Moll funded its business with cash generated from operations
and borrowings under its revolving credit agreement and its term loan facility
with Bank of America, as Agent. In 1995, 1996 and 1997, Moll generated cash from
operating activities of $9.7 million, $10.8 million, and $5.5 million,
respectively. The decrease in cash from operating activities in 1997 resulted
from a substantial increase in accounts receivable due to a change in credit
terms with a large customer. Moll's capital expenditures for 1995, 1996 and 1997
were $2.8 million, $1.4 million and $6.6 million, respectively, principally for
additions to maintain or improve Moll's manufacturing capacity and efficiency.
The increase in capital expenditures in 1997 was primarily due to the
construction of a new facility in Austin, Texas. In 1996, Moll spent $10.2
million to purchase the assets of the Reliance division of Lawson Mardon
Packaging, Inc., and in 1997, Moll spent $7.2 million to purchase the Hanning
companies. In 1995, Moll received proceeds from the issuance of long-term debt
of $14.3 million to fund a recapitalization of Moll.
34
<PAGE> 38
Anchor Holdings
Anchor's liquidity requirements consisted primarily of working capital
needs and capital expenditures, required payments of principal and interest on
any borrowings under the Revolving Credit Facility (as it existed prior to the
Merger) and required payments of interest on the Senior Notes and principal at
maturity. The Revolving Credit Facility, prior to the Merger, provided for
revolving loans to, and the issuance of letters of credit on behalf of, Anchor
in an aggregate amount not to exceed $15.0 million, $13.8 of which was available
under the revolving loans, and $1.2 million of which was reserved under the
letters of credit, at December 31, 1997.
Cash generated by operations in 1997 was used to fund $13.0 million
purchases of property, plant and equipment, and other long-term assets. Anchor's
cash grew by $5.3 million to $6.9 million for 1997 from $1.6 million for 1996.
On April 2, 1997 Anchor issued the Senior Notes. Cash from this financing
activity allowed Anchor to retire $50.7 million in borrowings under a certain
revolving credit and term loan agreement, to redeem $21.0 million of certain
subordinated notes, and to pay $22.8 million of a $29.5 million dividend on the
common stock of Anchor Holdings, Inc.
Following the Transactions
Holdings is a holding company and does not have any material operations or
assets other than ownership of all the capital stock of Anchor Holdings, which
does not have any material operations or assets other than the ownership of all
the capital stock of the Company. The Company's liquidity requirements consist
primarily of working capital needs and capital expenditures, required payments
of principal and interest on any borrowings under the Revolving Credit Facility
and required payments of interest on the Senior Notes and the Company Notes. The
Company estimates that its capital expenditures in 1998 will total approximately
$12 million.
The Revolving Credit Facility provides for revolving loans to, and the
issuance of letters of credit on behalf of, the Company, in an aggregate amount
not to exceed $50.0 million, $48.8 million of which is available for borrowing
by the Company, subject to certain conditions. All borrowings under the
Revolving Credit Facility will effectively rank senior to the Notes. The
Revolving Credit Facility will mature in 2003 and contains certain covenants
customary for working capital financings (including restrictions on: capital
expenditures, incurrence of additional indebtedness, dividends and redemptions,
and mergers, acquisitions and sales of assets). See "Description of Certain
Indebtedness--Revolving Credit Facility."
The Company believes that cash flows from operating activities and its
ability to borrow under the Revolving Credit Facility will be adequate to meet
the Company's debt service obligations, working capital needs, and planned
capital expenditures at least through December 31, 1998. Holdings also
anticipates that it will be able to access the operating cash flows of the
Company, subject to compliance with the dividend and restricted payment
covenants in agreements governing the Company's indebtedness, to service cash
interest payable on the Notes when such cash interest becomes payable in 2003
and to meet its operating expenses. However, Holdings anticipates that such
operating cash flows will not be sufficient to repay the Notes at maturity and
that, accordingly, it will be required to refinance the Notes. No assurance can
be given that Holdings will be able to refinance the Notes. See "Risk
Factors--Substantial Leverage; Ability to Service Debt."
While the Company routinely enters into discussions with potential
acquisition candidates, no such discussions have progressed beyond the
preliminary stages. Management expects that funding for future acquisitions may
come from a variety of sources, depending on the size and nature of any such
acquisition. Potential sources of capital include cash generated from
operations, borrowings under the Revolving Credit Facility, additional equity
investments or other external debt or equity financings. There can be no
assurance that such additional capital sources will be available to the Company
on terms that the Company finds acceptable, or at all.
35
<PAGE> 39
YEAR 2000
Many computer systems experience problems handling dates beyond the year
1999. Therefore, some computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The Company is assessing
both the internal readiness of its computer systems and the compliance of the
computer systems of certain significant customers and vendors for handling the
year 2000. The Company expects to implement successfully the systems and
programming changes necessary to address year 2000 issues, and does not believe
that the cost of such actions will have a material adverse effect on the
Company. There can be no assurance, however, that there will not be a delay in,
or increased costs associated with, the implementation of such changes, and the
Company's inability to implement such changes could have an adverse effect on
the Company. In addition, the failure of certain of the Company's significant
customers and vendors to address the year 2000 issue could have a material
adverse effect on the Company. See "Risk Factors -- Year 2000."
COMMON EUROPEAN CURRENCY
The Treaty on European Economic and Monetary Union provides for the
introduction of a single European currency, the Euro, in substitution for the
national currencies of the member states of the European Union that adopt the
Euro. In May 1998, the European Council determined (i) the 11 member states that
met the requirements for Monetary Union, and (ii) the currency exchange rates
among the currencies of the member states joining the Monetary Union. The
transitory period for the Monetary Union starts on January 1, 1999. According to
Council Resolution of July 7, 1997, the introduction of the Euro will be made in
three steps: (i) a transitory period from January 1, 1999 to December 31, 2001
in which current accounts may be opened and financial statements may be drawn in
Euros, and local currencies and Euros will coexist; (ii) from January 1, 2002 to
June 30, 2002, in which local currencies will be exchanged for Euros; and (iii)
from July 1, 2002 in which local currencies will disappear. Although there can
be no assurance that a single European currency will be adopted or, if adopted,
on what time schedule and with what success, substantial transition costs could
result as the Company redesigns its software systems to reflect the adoption of
the new currency. In addition, no assurance can be given as to the effect of the
adoption of the Euro on the Company's payment obligations under loan agreements
for borrowings in currencies to be replaced by the Euro or on the Company's
commercial agreements in such currencies. See "Risk Factors -- Common European
Currency."
SEASONALITY
Historically, shipments of the Company's components have been higher in the
first, second and third quarters as a result of increased demands for the
products manufactured by the Company's customers during such periods. As a
result, sales may vary from period to period solely dictated by the demand for
the products manufactured by the Company's customers. Also, many manufacturing
facilities in Europe, including those belonging to the Company, shut down during
certain parts of the months of August and December for the holidays, and as a
result there is no production at such facilities during such periods.
36
<PAGE> 40
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), Holdings will accept for exchange Old Notes which are properly
tendered on or prior to the Expiration Date and not withdrawn as permitted
below. As used herein, the term "Expiration Date" means p.m., New York
City time, on , 1998; provided, however, that if Holdings, in its
sole discretion, has extended the period of time for which the Exchange Offer is
open, the term "Expiration Date" means the latest time and date to which the
Exchange Offer is extended.
As of the date of this Prospectus, $68,000,000 aggregate principal amount
at maturity of the Old Notes was outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about , 1998, to all
holders of Old Notes known to Holdings. The Company's obligation to accept Old
Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth below under "--Certain Conditions to the Exchange
Offer."
Holdings expressly reserves the right, at any time or from time to time, to
extend the period of time during which the Exchange Offer is open, and thereby
delay acceptance for exchange of any Old Notes, by giving oral or written notice
of such extension to the holders thereof as described below. During any such
extension, all Old Notes previously tendered will remain subject to the Exchange
Offer and may be accepted for exchange by Holdings. Any Old Notes not accepted
for exchange for any reason will be returned without expense to the tendering
holder thereof as promptly as practicable after the expiration or termination of
the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
Holdings expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not therefore accepted for
exchange, upon the occurrence of any of the events specified below under
"--Certain Conditions to the Exchange Offer." Holdings will give oral or written
notice of any extension, amendment, non-acceptance or termination to the holders
of the Old Notes as promptly as practicable, such notice in the case of any
extension to be issued by means of a press release or other public announcement
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to Holdings of Old Notes by a holder thereof as set forth below
and the acceptance thereof by Holdings will constitute a binding agreement
between the tendering holder and Holdings upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal. Except as set forth below, a holder who wishes to tender Old Notes
for exchange pursuant to the Exchange Offer must transmit either (i) a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to State Street Bank and Trust Company,
as Exchange Agent, at the address set forth below under "--Exchange Agent" on or
prior to the Expiration Date, or (ii) if such Old Notes are tendered pursuant to
the procedures for book-entry transfer set forth below, a holder tendering Old
Notes may transmit an Agent's Message (as defined herein) to the Exchange Agent
in lieu of the Letter of Transmittal on or prior to the Expiration Date. In
addition, either (i) certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal, (ii) a timely confirmation
of a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if
such procedure is available, into the Exchange Agent's account at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure for
book-entry transfer described below, along with the Letter of Transmittal or an
Agent's Message, as the case may be, must be received by the Exchange Agent
prior to the Expiration Date, or (iii) the holder must comply with the
guaranteed delivery procedures described below. The term "Agent's Message" means
a message, transmitted to the Book-Entry Transfer Facility and received
37
<PAGE> 41
by the Exchange Agent and forming a part of the Book-Entry Confirmation, which
states that the Book-Entry Transfer Facility has received an express
acknowledgment from the tendering Participant (as defined herein) that such
Participant has received and agrees to be bound by the Letter of Transmittal and
Holdings may enforce the Letter of Transmittal against such Participant. THE
METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL OR AGENT'S MESSAGES AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO HOLDINGS.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined herein). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than a
signer of the Letter of Transmittal, the Old Notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by Holdings in its sole
discretion, duly executed by, the registered Holder with the signature thereon
guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
Holdings in its sole discretion, which determination shall be final and binding.
Holdings reserves the absolute right to reject any and all tenders of any
particular Old Notes not properly tendered or to not accept any particular Old
Notes which acceptance might, in the judgment of Holdings or its counsel, be
unlawful. Holdings also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to any particular Old
Notes either before or after the Expiration Date (including the right to waive
the ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer as
to any particular Old Notes either before or after the Expiration Date
(including the Letter of Transmittal and the instructions thereto) by Holdings
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such reasonable period of time as Holdings shall determine. Neither
Holdings, the Exchange Agent nor any other person shall be under any duty to
give notification of any defect or irregularity with respect to any tender of
Old Notes for exchange, nor shall any of them incur any liability for failure to
give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Old Notes, such Old Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered holder or holders that appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
Holdings, proper evidence satisfactory to Holdings of their authority to so act
must be submitted.
By tendering, each holder will represent to Holdings that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the holder, and that neither the holder nor such
other person has any arrangement or understanding with any person to participate
in the distribution of the New Notes. As a condition to its participation in the
Exchange Offer each Holder using the Exchange Offer to participate in a
distribution of the New Notes shall acknowledge and agree that, if the resales
are of New Notes obtained by
38
<PAGE> 42
such Holder in exchange for Old Notes acquired directly from Holdings or an
Affiliate thereof it (i) could not rely on the applicable interpretations of the
staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction and that such a secondary resale transaction must
be covered by an effective Registration Statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K under the Securities Act. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution." The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the terms and conditions to the
Exchange Offer, Holdings will accept, promptly after the Expiration Date, all
Old Notes properly tendered and will issue the New Notes promptly after
acceptance of the Old Notes. See "--Certain Conditions to the Exchange Offer."
For purposes of the Exchange Offer, Holdings shall be deemed to have accepted
properly tendered Old Notes for exchange when, as and if Holdings has given oral
or written notice thereof to the Exchange Agent, with written confirmation of
any oral notice to be given promptly thereafter.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. The Old Notes were issued at a substantial discount from
their principal amount at maturity. Original issue discount on the Notes will
accrete at a rate of 13 1/2%, compounded semi-annually to an aggregate principal
amount of $68.0 million at July 1, 2003. Cash interest will not accrue on the
Notes prior to July 1, 2003. Commencing July 1, 12003, cash interest on the
Notes will accrue at the rate of 13 1/2% per annum, and will be payable
semiannually in arrears on January 1 and July 1 of each year, commencing January
1, 2004, to Holders of record on the immediately preceding May 15 and December
15. No cash interest will be payable on the Notes prior to January 1, 2004.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from July 1, 2003. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
The Registration Rights Agreement provides that (i) if Holdings fails to
file an Exchange Offer Registration Statement with the Commission on or prior to
the 45th day after the Closing Date, (ii) if the Exchange Offer Registration
Statement is not declared effective by the Commission on or prior to the 180th
day after the Closing Date, (iii) if the Exchange Offer is not consummated on or
before the 30th business day after the Exchange Offer Registration Statement is
declared effective, (iv) if obligated to file the Shelf Registration Statement
and Holdings fails to file the Shelf Registration Statement with the Commission
on or prior to the 60th day after such filing obligation arises, (v) if
obligated to file a Shelf Registration Statement and the Shelf Registration
Statement is not declared effective on or prior to the 90th day after the
obligation to file a Shelf Registration Statement arises, or (vi) if the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, is declared effective but thereafter ceases to be effective or
useable in connection with resales of the Old Notes, for such time of
non-effectiveness or non-usability (each, a "Registration Default"), Holdings
agrees to pay to each Holder of Old Notes affected thereby liquidated damages
("Liquidated Damages") in an amount equal to $0.05 per week per $1,000 in
principal amount of Old Notes held by such Holder for each week or portion
thereof that the Registration Default continues for the first 90 day period
immediately following the occurrence of such Registration Default. The amount of
the Liquidated Damages shall increase by an additional $0.05 per week per $1,000
in principal amount of Old Notes with respect to each subsequent 90 day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $0.50 per week per $1,000 in principal amount of Old
Notes. Holdings shall not be required to pay Liquidated Damages for more than
one Registration Default at any given time. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease
39
<PAGE> 43
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents or, in the case of a Book-Entry
Confirmation, an Agent's Message in lieu thereof. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount than
the holder desired to exchange, such unaccepted or non-exchanged Old Notes will
be returned without expense to the tendering holder thereof (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry procedures described
below, such non-exchanged Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees, or an Agent's Message in lieu of a
Letter of Transmittal, and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at one of the addresses set
forth below under "--Exchange Agent" on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by Holdings (by facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of Old Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be, and
any other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent, and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal, are received by the Exchange Agent within three NYSE trading
days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"--Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes are registered, if different from that of the
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<PAGE> 44
withdrawing holder. If certificates for Old Notes have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the procedure
for book-entry transfer described above, any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by Holdings,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "--Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, Holdings shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order of decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (ii) resulting in a material delay in the
ability of Holdings to accept for exchange or exchange some or all of the
Old Notes pursuant to the Exchange Offer; or any statute, rule, regulation,
order or injunction shall be sought, proposed, introduced, enacted,
promulgated or deemed applicable to the Exchange Offer or any of the
transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the reasonable judgment of
Holdings might directly or indirectly result in any of the consequences
referred to in clauses (i) or (ii) above or, in the reasonable judgment of
Holdings, might result in the holders of New Notes having obligations with
respect to resales and transfers of New Notes which are greater than those
described in the interpretation of the Commission referred to on the cover
page of this Prospectus, or would otherwise make it inadvisable to proceed
with the Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of Holdings to complete the transactions contemplated by the
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of Holdings and its subsidiaries taken as a whole that, in the
reasonable judgment
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<PAGE> 45
of Holdings, is or may be adverse to Holdings, or Holdings shall have
become aware of facts that, in the reasonable judgment of Holdings, have or
may have adverse significance with respect to the value of the Old Notes or
the New Notes;
which in the reasonable judgment of Holdings in any case, and regardless of the
circumstances (including any action by Holdings) giving rise to any event
described above, makes it inadvisable to proceed with the Exchange Offer and/or
with such acceptance for exchange or with such exchange.
The foregoing conditions are for the sole benefit of Holdings and may be
asserted by Holdings regardless of the circumstances giving rise to any such
condition or may be waived by Holdings in whole or in part at any time and from
time to time in its sole discretion. The failure by Holdings 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, Holdings will not accept for exchange any Old Notes tendered,
and no New Notes will be issued in exchange for any such Old Notes, if at such
time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indentures under the Trust Indenture Act of 1939 (the
"TIA").
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal and Agent's
Messages should be directed to the Exchange Agent at one of the addresses set
forth below. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal or Agent's Message and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
Delivery To: State Street Bank and Trust Company, Exchange Agent
By Mail:
State Street Bank and Trust Company
P.O. Box 778
Boston, Massachusetts 02102
Attention: Corporate Trust Department
Kellie Mullen
By Overnight Courier or Hand:
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Kellie Mullen
By Facsimile Transmission
(for Eligible Institutions only):
(617) 664-5290
Attention: Corporate Trust Department
Confirm by Telephone:
(617) 664-5587
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
Holdings will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by Holdings and are estimated in the aggregate to be
$[ ].
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<PAGE> 46
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
Holdings to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Holdings does not currently anticipate that it
will register Old Notes under the Securities Act. See "Description of the
Notes--Registration Rights; Liquidated Damages." Based on interpretations by the
staff of the Commission, as set forth in no-action letters issued to third
parties, Holdings 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 Holdings within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such New
Notes. However, Holdings does not intend to request the Commission to consider,
and the Commission has not considered, the Exchange Offer in the context of a
no-action letter and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer as in such
other circumstances. Each holder (including, without limitation, any Holder that
is a broker-dealer) must acknowledge that (A) it is not an Affiliate (as defined
in Rule 144 of the Securities Act), (B) it is not engaged in, and does not
intend to engage in, a distribution of New Notes and has no arrangement or
understanding to participate in a distribution of New Notes, and (C) it is
acquiring the New Notes in its ordinary course of business. As a condition to
its participation in the Exchange Offer each Holder using the Exchange Offer to
participate in a distribution of the New Notes shall acknowledge and agree that,
if the resales are of New Notes obtained by such Holder in exchange for Old
Notes acquired directly from Holdings or an Affiliate thereof, it (i) could not
rely on the applicable interpretations of the staff of the Commission and (ii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction and that such
a secondary resale transaction must be covered by an effective registration
statement containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K under the Securities Act. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution." In addition, to comply with state securities laws, the
New Notes may not be offered or sold in any state unless they have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with. Holdings currently does not
intend to register or qualify the sale of the New Notes in any state where an
exemption from registration or qualification is required and not available.
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<PAGE> 47
BUSINESS
OVERVIEW
Holdings is a holding company and does not have any material operations or
assets other than ownership of all the capital stock of Anchor Holdings, which
does not have any material operations or assets other than ownership of all the
capital stock of the Company.
The Company is a leading full service manufacturer and designer of custom
molded and assembled plastic components for a broad variety of customers and end
markets throughout North America and Europe. The Company serves over 450
customers, including leading multinational companies such as Abbott
Laboratories, Colgate-Palmolive, Kimberly-Clark, L'Oreal, Maybelline, Motorola,
Procter & Gamble, Renault, Revlon, Siemens, Whirlpool and Xerox. Products
utilizing the Company's plastic components are sold in a wide range of end
markets, including end markets for consumer products,
telecommunications/business equipment, household appliances, automobiles and
medical devices. The Company believes that the diversity of its customers,
markets and geographic regions creates a stable revenue base and reduces the
Company's exposure to particular market or regional economic cycles. On a pro
forma basis after giving effect to the Transactions, the Company generated 1997
net sales and EBITDA of $414.6 million and $54.8 million, respectively, making
it the sixth largest non-automotive plastic injection molding company in North
America and one of the largest plastic component suppliers in Europe.
The Company has 27 manufacturing facilities with approximately 680 molding
machines throughout North America and Europe, including France, Germany, the
United Kingdom and Portugal. The Company is capable of providing its customers
with integrated design and prototype development, mold design and manufacturing,
advanced plastic injection molding capabilities, and value-added finishing
services, such as hot stamping, pad printing, assembly and complete product
testing, all of which enable it to provide "one-stop" shopping to customers
seeking a wide range of services. The Company's technologically advanced
manufacturing facilities and equipment enable it to provide customized solutions
to highly demanding customer specifications. For 1997, approximately 45% of the
Company's sales of molded products were covered by long term purchase and sale
contracts which stipulate anticipated volume requirements and pricing terms.
Management believes that few competitors offer the scale, expertise, reputation
and range of services that the Company provides.
The Company was formed through the merger of two leading plastic injection
molders, Moll PlastiCrafters Limited Partnership and Anchor Advanced Products,
Inc., which were each controlled by Mr. George Votis. Immediately prior to the
Merger, Moll and Anchor were independently operated entities. Mr. Votis acquired
Moll's predecessor in 1989 and has since completed seven acquisitions,
increasing Moll's revenues from approximately $8 million in 1989 to
approximately $232.4 million in 1997 on a pro forma basis excluding the
acquisition of Anchor. Such acquisitions included the acquisition in August 1997
of Hanning, a leading supplier of injection molded plastic components for use in
digital photocopiers with manufacturing facilities located in the United States,
the United Kingdom and Germany, which had 1997 revenues of $49.6 million, and
the acquisition in January 1998 of Somomeca, a French injection molder which had
1997 revenues of $88.5 million. In March 1998, Mr. Votis acquired Anchor which
had revenues of $161 million in 1997. See "The Company."
The Company has been formed to combine the manufacturing, marketing and
management resources of Moll and Anchor to create further opportunities for
growth and development. As a result of the Transactions, management believes
that the Company will become better positioned to benefit from the growth and
consolidation of the plastics industry. The Company also believes that the
consummation of the Transactions has significantly enhanced its future growth
prospects and revenue stability by broadening its customer base, manufacturing
capabilities and geographic presence. Moreover, the Company expects to benefit
from its increased scale, ability to centralize certain key logistical functions
and attendant cost savings opportunities. Since March 1998, the Company has
eliminated approximately $2.8 million in annualized costs by reducing
duplicative administrative expenses, eliminating less profitable business lines
and streamlining manufacturing processes.
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<PAGE> 48
COMPETITIVE STRENGTHS
Management believes that the Company has achieved its current position as a
market leader because of the following competitive strengths:
BROAD GEOGRAPHIC PRESENCE. The Company's multiple plant locations
throughout North America and Europe enable it to (i) compete effectively for
contracts that require large volume runs and multiple distribution points, (ii)
offer its customers multiple production locations and (iii) allocate production
to the facility best suited for a job in view of its relative capabilities and
proximity to the customer. As a result, the Company is able to provide its
customers with a broad range of manufacturing capabilities, improved
responsiveness, timely delivery, and reduced freight costs. In addition, by
operating geographically diverse plants, the Company can mitigate customer
sourcing risks associated with single facility production.
FULL SERVICE CAPABILITIES. The Company provides its customers with
comprehensive services ranging from product design, product development,
prototyping and mold making to molding, painting and other value-added services.
As a result, management believes that the Company is one of a limited number of
full service plastic injection molders in North America and Europe that is well
positioned to benefit from the trend of customers outsourcing total project
management to full service multiple plant suppliers.
STRONG CUSTOMER RELATIONSHIPS. The Company believes that its ability to
attract and retain customers is in part attributable to the high level of
customer service it provides. The Company also believes that frequent
interaction with its customers in the product development process helps it to
develop long-term relationships. Of the Company's top ten customers in 1997, two
have been with the Company for over fifty years, three have been with the
Company for over ten years and the remainder have been with the Company for over
four years. For many of its key customers, the Company is the sole supplier for
specific parts. The Company's emphasis on customer partnerships and its
long-standing customer relationships provide it with a significant competitive
advantage.
MANUFACTURING CAPABILITIES. The Company utilizes a wide range of advanced
manufacturing processes, such as gas assist molding, co-injection and two-shot
molding, automated assembly and testing, in-mold decorating, thin-wall molding
and in-mold bristling. The Company's manufacturing capabilities enable it to
provide innovative solutions and supply components in an integrated process. For
example, the Company worked closely with Renault to produce dashboard grilles
using a newly developed co-injection molding technology.
SUPERIOR PRODUCT QUALITY. The Company uses quality systems and operations
management techniques to meet the highest standards and to reduce costs. The
Company continually invests in technology and training to monitor and improve
quality. Included among such investments are effective management systems to
ensure real-time information and control, statistical process control systems,
failure mode and effect analysis systems, microprocessor-controlled molding
machines and automated assembly equipment. In addition, the Company has material
and product testing equipment that monitor product reliability to meet exacting
quality standards.
BUSINESS STRATEGY
The Company seeks to further strengthen its leadership position in the
plastic molding industry and to maximize its financial performance by employing
the following strategies:
CAPITALIZE ON CROSS-SELLING OPPORTUNITIES. The Company believes that the
Merger creates new opportunities to cross-sell products and services between
each of Anchor's and Moll's customer bases. For example, while Anchor's
operations prior to the Merger were confined to North America, many of its
customers are multinational firms with significant European operations.
Management believes that offering such customers access to the Company's
European operations, operated by Moll prior to the Merger, is a significant
growth opportunity. The Company has hired a new Senior Vice President, Marketing
to target and capitalize on such opportunities.
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<PAGE> 49
CENTRALIZE SALES AND MARKETING. The Company plans to centralize management
of its sales and marketing efforts to improve communication with customers,
better cross-sell services to customers and ensure uniform pricing and sales
strategies. While local sales and management staff will maintain direct
relationships with customers and production facilities, a centralized sales and
marketing effort will enable the Company to serve national and international
accounts more effectively and to pursue customers located outside an individual
plant's geographic service area. The Company's centralized sales and marketing
group will be responsible for identifying market trends and assisting customers
with new product ideas as well as promoting the Company through customer
presentations, advertising and trade shows.
EXPAND GLOBALLY. The Company believes that it is one of the largest North
American plastic injection molders with a significant European presence. Such
capabilities allow the Company to (i) penetrate new geographic regions with its
existing multinational customers, such as L'Oreal, Siemens, Whirlpool and Xerox,
and (ii) acquire complementary manufacturing facilities in strategic locations.
Continuing to pursue this strategy will enable the Company to effectively
provide a complete and integrated range of molding, manufacturing and
value-added services on a global basis.
REDUCE COSTS. The Company continually aims to improve its cost
effectiveness by increasing productivity and implementing operational
improvements. Since March 1998, Anchor has eliminated approximately $2.8 million
in annualized costs by reducing duplicative administrative expenses, eliminating
less profitable business lines and streamlining manufacturing processes.
Management believes that the combination of Anchor, Moll and Gemini Plastic will
result in additional opportunities to reduce costs by: (i) reducing overhead
expenses through optimization of labor and equipment resources at each of the
Company's facilities; (ii) divesting or discontinuing less profitable business
lines; (iii) eliminating redundant administrative operations and related
personnel; and (iv) where appropriate, moving key management personnel on-site
to the Company's manufacturing plants in order to oversee expansion and/or
execution of cost control measures.
CONTINUE STRATEGIC ACQUISITIONS. Strategic acquisitions have been, and
management believes will continue to be, an important element in the Company's
growth and in its efforts to capitalize on favorable industry trends. The
Company will consider future acquisition opportunities that are attractively
priced and which the Company believes will strengthen its customer base, broaden
its geographic presence, enhance its production capabilities and provide
significant operating synergies. While the Company routinely enters into
discussions with potential acquisition candidates, no such discussions have
progressed beyond the preliminary stages.
INDUSTRY OVERVIEW AND TRENDS
Injection molding is one of the most widely used plastic processing methods
in the world due to the high-quality properties of the finished product and its
cost effectiveness. According to industry sources, demand for injection molded
plastics in the United States is projected to grow at 3.3% annually. Such growth
is expected to result from a number of key factors including: (i) improved
resins and processing capabilities; (ii) versatility of the injection molding
process; and (iii) cost and performance advantages of plastic over substitute
materials. Despite the expected increase in demand for plastic injection molded
products, the U.S. molding industry remains highly fragmented with over 2,500
injection molders operating more than 10,000 plant locations. The capabilities
of these molders vary widely, as do their end markets.
In recent years, plastic injection molders have benefited from technology
improvements that have enabled plastic to replace other materials (most notably
metal, glass and paper) in a variety of applications. Plastic has been
substituted for these materials primarily because of its disposability, ease of
manufacture, durability, aesthetic appeal, flexibility of form and weight.
Additionally, plastic often provides significant cost savings over other
materials due to design and fabrication and raw material cost advantages. By
successfully substituting plastic for other materials, manufacturers can
significantly reduce the amount of necessary parts, manufacturing steps, labor
costs, energy costs and transportation expenses associated with producing their
products. As a result, management believes that substantial growth potential
exists for plastics through further materials substitution.
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In addition to the growth projected for the plastics industry as a whole,
growth for larger injection molders such as the Company is driven by industry
consolidation and the trend among customers to outsource their injection molding
needs. Management believes that the consolidation of the highly fragmented
plastics injection molding industry has accelerated in recent years as a result
of customer preferences toward larger, full-service independent molders that are
able to provide total project management. As customers place increasing emphasis
on minimizing the "time to market" for their new products and ensuring that
their requirements for production, quality and timely delivery are satisfied,
they are increasingly relying on one full-service supplier for each new product
launch. Given that molders in these relationships are involved in many decisions
that affect cost and prevent complications in production, they are better able
to preserve attractive margins.
The trend toward customer consolidation of suppliers has created
significant opportunities for injection molders such as the Company who possess
full-service capabilities. Given the capital investment required to successfully
compete as a full-service injection molder, management believes that an
increasingly limited number of injection molders will be capable of providing
the quality and breadth of services demanded by high volume customers.
Furthermore, management believes that the trend among customers to develop
closer relationships with full-service injection molders mitigates the potential
threat of out-of-market competition. Inconsistent product quality, weak tooling
capabilities and significant distance from customers' manufacturing locations
have traditionally hindered limited service or out-of-market competitors from
competing effectively for projects that require full-service capabilities,
outstanding quality and quick response time.
MARKETS AND PRODUCTS
MARKETS
The following table sets forth the percentages of the Company's total net
sales for the periods presented that were derived from sales to its different
end markets:
<TABLE>
<CAPTION>
1996(1) 1997(1)
<S> <C> <C>
Consumer Products........................................... 26.6% 27.6%
Telecommunications/Business Equipment....................... 17.3 18.9
Household Appliances........................................ 16.2 17.6
Automotive.................................................. 15.2 12.3
Medical Devices............................................. 7.2 8.1
Packaging and Other......................................... 17.5 15.5
---- ----
Total............................................. 100% 100%
</TABLE>
- ------------------------------
(1) The information for 1996 and 1997 gives effect to the Transactions as if
they had occurred on the beginning of the periods presented.
CONSUMER PRODUCTS
Within the consumer products market, the Company has particular strength in
the cosmetics and oral care sectors. The Company manufactures and supplies
plastic components to the cosmetics industry in five major product categories:
mascara, nail applicators, compacts, closures and lipstick containers which
collectively account for more than 220 different mascara packages and 19
different lipstick containers. The Company enjoys substantial business with the
leading cosmetics companies, including Estee Lauder, L'Oreal, Maybelline, Mary
Kay, Revlon, Amway and Aveda, which produce products marketed under the brand
names Great Lash(R), Clinique and many others. The Company manufactures
toothbrushes for Colgate-Palmolive, Procter & Gamble, Cheseborough-Ponds and
SmithKline Beecham, under such well-known brand names as Crest(R), Colgate(R),
Pepsodent(R) and Flexosaurus(R), and electric toothbrush heads for Teledyne
Water Pik, a division of Teledyne Industries, Inc. The Company also manufactures
and assembles POP displays for Maybelline. Approximately 10.7% of the Company's
pro forma net sales in 1997 were derived from L'Oreal.
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<PAGE> 51
The Company serves the eye and lip preparation and nail polish segments of
the domestic cosmetics market. Management estimates that in 1996, eye make-up,
lip make-up and nail care products accounted for approximately 24% ($662
million), 22% ($611 million), and 11% ($318 million), respectively, of the total
U.S. cosmetics market, which management estimates totaled $2.8 billion in 1996.
The Company is also a leading independent designer, manufacturer and packager of
toothbrushes in the United States with an estimated 1997 market share of
approximately 27% of all toothbrush manufacturing. Management estimates that the
domestic market for toothbrushes was 676 million units in 1996.
Management believes that the consumer products market is largest segment of
the injection molded plastic industry. In 1996, market demand for this end
market was approximately 35.8% of the total plastic injection market.
TELECOMMUNICATIONS/BUSINESS EQUIPMENT
The Company designs and manufactures plastic components for
telecommunications and business equipment in North America and Europe, including
complete multi-component assemblies for business telephones and cellular
telephone handsets manufactured by Siemens and Motorola, and electronic
telecommunications equipment and cellular tower construction hardware
manufactured by the 3M Corporation and Specialty Teleconstructers. The Company
also manufactures plastic components used in business equipment such as (i)
photocopiers and digital imaging systems manufactured by Xerox, (ii) printers
and computer assemblies manufactured by Tektronix, Ogden Atlantic, Lexmark and
Sequent and (iii) custom casings and assemblies for computers manufactured by
Compaq and IBM.
Management believes that this end market offers attractive growth
opportunities due to growth currently being experienced in the
telecommunications market, particularly with respect to cellular telephones and
other personal communications devices. In addition, many multinational business
equipment manufacturers have also enjoyed strong and steady market growth
through international expansion as international sales continue to strengthen
profits. Based on industry sources, management believes that computer and office
equipment shipments will grow at over 6% annually (in real inflation-adjusted
terms through the year 2001) from $135 billion in 1996 to $182 billion in 2001.
HOUSEHOLD APPLIANCES
The Company is a leading independent designer and manufacturer of plastic
components used in household appliances including (i) refrigerators (primarily
high end side-by-side refrigerators), room air conditioning systems and free
standing and built-in ranges manufactured by Whirlpool, (ii) countertop
appliances manufactured by Tefal, (iii) laundry washers and dryers manufactured
by Electrolux and (iv) televisions manufactured by Daewoo. Approximately 10.3%
of the Company's pro forma net sales in 1997 were derived from Whirlpool.
Management believes that this market offers attractive growth opportunities
due to steady growth in the household appliance market. Based on industry
sources, management believes that home appliance shipments will grow at over
2.3% annually (in real inflation-adjusted terms through the year 2001) from $223
billion in 1996 to $250 billion in 2001 driven by replacement demand as
appliances purchased in the 1980's are replaced with new products.
AUTOMOTIVE
The Company designs and manufactures plastic automotive components which
include (i) door handles, sun visors, wheel covers, intake grill manifolds for
Renault, (ii) gear shift knobs used in buses and trucks manufactured by General
Motors, (iii) motor scooter components for Peugeot, (iv) plastic components used
in turn signal and cruise control systems manufactured by Delphi, (v) interior
components used in vehicles manufactured by Audi, BMW and Freightliner and (vi)
insulating battery cases for Lydall.
Management believes that this market offers favorable growth opportunities
due to the steady growth in the automobile market in North America and Europe.
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<PAGE> 52
MEDICAL DEVICES
The Company manufactures products for the U.S. medical device market. The
Company manufactures various plastic medical devices, including blood filtration
devices, angiographic syringes, intravenous equipment, in-vitro diagnostic kits,
medical scrub brushes and cardiotomy reservoirs, as well as various internal and
external plastic components used in medical and dental equipment manufactured by
Adec, Acquson, Abbott Hospital Products Division and Alcon Medical.
Plastics are becoming more widely used in medical devices as the medical
field realizes the value of reduced breakage, the ability to manufacture
extremely consistent parts in a cost effective manner and the infection control
benefits of disposable products. Management believes that the medical device
market offers attractive growth opportunities.
PACKAGING AND OTHER
The Company manufactures and assembles a broad range of commercial and
industrial soap dispensing equipment for Kimberly-Clark. The Company also
manufactures hatch covers used in recreational boats manufactured by Tempress,
and plastic lawn and garden equipment for Electrolux Consumer Products. In
addition, the Company manufactures resealable "living hinge" plastic closures
for Tetrapak and dispensing closures for Seaquist.
GEOGRAPHIC MARKETS
The Company is a leading full service manufacturer and designer of custom
molded and assembled plastic components for a broad variety of customers and end
markets throughout North America and Europe. The Company has 27 manufacturing
facilities with approximately 680 molding machines throughout North America and
Europe, including France, Germany, the United Kingdom and Portugal. The Company
derived approximately 67% and 33% of its fiscal 1997 pro forma net sales in
North America and Europe, respectively. Through its recent acquisitions, the
Company's geographic presence has been strategically expanded into new regional,
national and international markets. While the Company believes its increased
global presence allows it to better service its numerous multinational
customers, the Company views its markets in North America and Europe as distinct
in terms of customer base and product requirements. Within each of these
markets, the Company places great emphasis on serving individual regional and
national markets separately from interna-tional markets and customers because
such regional and national customers often have specific requirements and
preferences. Overall, the Company believes that its expanded global presence has
improved international market penetration while facilitating more customized and
expedient service at the local and regional market level through proximity to
its customers.
PRODUCTION
The Company utilizes a broad range of manufacturing processes and tool
making capabilities to service the needs of its diverse customer base. Using
such processes and capabilities, the Company can manufacture products ranging
from simple plastic parts to highly complex multi-component assemblies. The
Company's automated, high volume assembly and on-site testing capabilities
further broaden its manufacturing capabilities and provide it with a competitive
edge in obtaining and maintaining preferred supplier status with its customers.
The process for producing a plastic component can be divided into two
functions: (i) design and tooling and (ii) molding. These different functions
often are not performed by one supplier. Many customers have "in-house" design
departments for their plastic components. To manufacture the molds to design
specifications, such departments frequently use tooling companies that are
specialists in mold manufacturing but are not manufacturers of plastic
components. Such molds are owned by the customer who then provides them to the
suppliers for the purpose of manufacturing plastic components from such molds.
Unlike numerous plastic component manufacturers, the Company has the capability
to design and produce plastic components as well as the molds used to
manufacture such plastic components.
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<PAGE> 53
DESIGN AND TOOLING
The Company has three tooling facilities in the United States, three such
facilities in France and one such facility in Portugal.
The Company produces prototypes and molds to make plastic components for
customers without in-house tooling capabilities. The Company also sells
prototypes and molds to other plastic component manufacturers, as well as
manufacturing them for some of its own operations. The Company performs, or
expects to perform, the injection molding for a majority of the products for
which it makes molds. Plastic products for which the Company builds the mold but
which are not injection molded by the Company are typically molded in-house by
the customer.
The Company produces a broad range of injection mold prototypes and molds
weighing from 1,100 pounds to 88,000 pounds. Injection molds are used for the
mass production of plastic parts in amounts that can vary considerably depending
on the application, but that usually exceed one million parts over the life of
the mold. Each of the Company's mold making facilities offers a full range of
services, including conceptual part and tool design, building and testing, and
is staffed with engineers skilled in mold design and manufacture. The primary
areas of focus include product design, process improvement, enhancement of
product performance and maximization of aesthetics. Such engineers incorporate,
on an experimental basis, the expertise that is derived from having the
capabilities to design, build and run molds that incorporate the strategies of
the operating unit. Management views the Company's mold designing and building
operations primarily as supportive of its manufacturing business, and also as an
independent profit center.
MOLDING
The Company has 12 plants for manufacturing plastic components in the
United States, five such plants in France and one such plant in each of Mexico,
the United Kingdom and Germany. See "--Properties."
The Company manufactures a majority of its plastic components utilizing the
injection molding process of thermoplastic materials. This process requires
sophisticated injection molding machines and ancillary equipment and produces a
high quality engineered product at relatively high speed. In this process,
thermoplastic materials created from plastic resins and other raw materials are
specially prepared and treated, melted to a defined temperature, injected into a
mold under high pressure at relatively high speed, cooled by channels conveying
water throughout the mold and transformed into a plastic part that is
automatically removed when the mold opens. In some cases, additional finishing
operations are performed on the plastic part. The typical molding cycle falls
into a range of 8 to 60 seconds and is dependent upon the material type, part
design, mold design, and the dimensional and aesthetic requirements established
by the customer.
In addition to relatively common and established technology for injection
molding, the Company utilizes other newer technologies that employ advanced
manufacturing processes such as gas-assist molding, co-injection, two-shot
molding, insert molding and in-mold decorating.
While the Company has developed proprietary techniques and manufacturing
expertise for the manufacture of injection-molded plastic components, the
Company has no patents for these proprietary techniques and chooses to rely on
trade secret protection. The Company believes that although its proprietary
techniques and expertise are subject to misappropriation or obsolescence,
development of improved methods and processes and new techniques by the Company
will continue on an ongoing basis as dictated by the technological needs of the
business.
VALUE-ADDED SERVICES
The Company offers a broad range of value-added services, including
finishing and automated assembly services. These services include hot stamping,
painting, pad printing, silkscreening, ultrasonic welding and insertion, heat
staking, solvent bonding, painting and impulse welding. At a customer's request,
the Company also outsources additional value-added services such as
electromagnetic and radio frequency interference shielding.
50
<PAGE> 54
The Company also provides a wide range of inventory management services and
logistical support to its customers. Moving beyond just-in-time delivery, the
Company assists its customers with planning and managing production
requirements; routing inventory to in-process, intermediate and final
distribution points; and adjusting to customers' inventory requirements on a
real time basis through the alignment of the Company's production capabilities
with a customer's production requirements through electronic data interchange.
RAW MATERIALS
The Company's primary raw materials are various plastic resins, nylon and
packaging materials. Raw material prices are subject to cyclical price
fluctuations, including those arising from supply shortages and as a result of
changes in the prices of natural gas, crude oil and other petrochemical
intermediates from which resin is derived. Accordingly, the Company's financial
performance is directly linked to its ability to pass along increased raw
material costs to its customers. Although the Company has historically been able
to pass on increased costs to its customers, there can be no assurance that it
will be able to do so in the future or that a significant price increase in raw
materials would not have a material adverse effect on the Company's financial
condition and results of operations. Although most of the raw materials used by
the Company are available from several suppliers, several of such raw materials
are currently obtained from single sources. The Company has no reason to believe
that there will not be an ample supply of its raw materials at prices
commercially acceptable to the Company for the reasonably foreseeable future,
but the Company cannot make any prediction as to the future price of such raw
materials. See "Risk Factors--Raw Materials."
MARKETING AND SALES
The Company seeks to increase its sales through cross-selling to its
existing customer base and by attracting new customers. The Company's primary
marketing strategy is to develop and maintain close working relationships with
the engineering, procurement, quality, tooling and manufacturing departments of
its customers. Several of the Company's largest customers are serviced by a
dedicated sales agent. These relationships help ensure close cooperation in
product design and help the Company in gaining repeat and new business with its
existing customer base. The Company believes that its design, engineering and
tooling expertise, together with its ability to service and cross sell to
customers from multiple locations on a worldwide basis, have enabled it to
broaden its product lines, further penetrate its existing customer base and
attract new customers.
COMPETITION
The markets in which the Company operates are highly competitive. The
Company competes with a significant number of companies of varying sizes,
including divisions or subsidiaries of larger companies and the in-house
departments of potential customers, on the basis of price, service, quality and
the ability to supply products to customers in a timely manner. Some of these
competitors have, and new competitors may have, greater financial and other
resources than the Company. Additionally, each of Reliance Products (which is
controlled by the principal stockholders of the Company) and the Company are
engaged in the injection molded plastics business. The products manufactured,
and the markets served, by each of Reliance Products and the Company are
different, and Reliance Products and the Company have not, and do not, compete
with each other. However, no assurance can be given that Reliance Products and
the Company will not compete for the same business opportunities in the future,
which may present conflicts of interest. Competitive pressures or other factors,
including the vertical integration by certain of the Company's major customers
of manufacturing processes traditionally outsourced to the Company, could cause
the Company to lose market share or could result in a significant price erosion
with respect to the Company's products, either of which could have a material
adverse effect on the Company's results of operations. Furthermore, the
Company's customers operate in highly competitive markets. To the extent the
Company's major customers lose market share in their respective markets, the
Company's results of operations and financial condition could be materially and
adversely affected. See "Risk Factors--Competition."
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<PAGE> 55
ENVIRONMENTAL MATTERS
Federal, state, local and foreign governments could enact laws or
regulations concerning environmental matters that increase the cost of
producing, or otherwise adversely affect the demand for, plastic products. The
Company is aware that certain local governments have adopted ordinances
prohibiting or restricting the use or disposal of certain plastic products that
are among the types of products produced by the Company. If such prohibitions or
restrictions were widely adopted, such regulatory and environmental measures or
a decline in consumer preference for plastic products due to environmental
considerations could have a material adverse effect upon the Company. In
addition, certain of the Company's operations are subject to Federal, state,
local and foreign environmental laws and regulations that impose limitations on
the discharge of pollutants into the air and water and establish standards for
the treatment, storage and disposal of solid and hazardous wastes. While the
Company has not been required historically to make significant capital
expenditures in order to comply with applicable environmental laws and
regulations, the Company cannot predict with any certainty its future capital
expenditure requirements because of continually changing compliance standards
and environmental technology. The Company does not have insurance coverage for
environmental liabilities and does not anticipate obtaining such coverage in the
future. See "Risk Factors--Environmental Matters."
EMPLOYEES
As of December 31, 1997, the Company had 3,776 employees, and approximately
40% of such employees were covered by collective bargaining agreements. The
Company's employees in the United States and the United Kingdom are neither
represented by a union nor covered by any collective bargaining agreement. In
Germany, the Company's plant workers are represented by a union, however, the
Company is not liable for any severance costs associated with any workforce
reductions at its German facilities. The Company's employees in Mexico are
covered by a collective bargaining agreement. The Company's employees in France
are covered by national and regional collective agreements for the plastics
industry and the steel and metal industry. Such collective agreements were not
negotiated between the Company and its employees, but rather were concluded by
representatives of all employers and employees in such industries. Some of the
collective agreements covering the Company and its employees have been extended
by the French Labor Ministry to have nationwide scope, while others apply
regionally only. Such collective agreements do not expire until the employers'
or employees' representatives give the other party prior notice.
The Company has historically enjoyed good employee relations.
PROPERTIES
As of March 31, 1998, the Company owned or leased 15 production facilities
in the United States, seven production facilities in France and one production
facility in each of Mexico, the United Kingdom, Germany and Portugal. The
Company believes that its facilities are well maintained and in good operating
condition and anticipates that, although substantial capital expenditures will
be required to meet the production requirements for new and developing product
lines, the facilities themselves will be sufficient to meet the Company's needs
for the next several years. There can be no assurance, however, that
unanticipated developments will not occur that would require the Company to add
or eliminate production facilities sooner than expected. The following table
indicates as at the date hereof the locations, the area, nature of ownership,
and principal use of the Company's land and related facilities.
<TABLE>
<CAPTION>
LOCATION AREA (SQ. FT.) OWNERSHIP USE
<S> <C> <C> <C>
North America
Austin, Texas............................. 79,000 Owned Manufacturing
Elk Grove, Illinois....................... 10,000 Leased Mold Shop/engineering
Evansville, Indiana....................... 5,000 Leased Engineering office
Fort Lauderdale, Florida.................. 85,000 Leased Manufacturing
Fort Smith, Arkansas...................... 143,000 Owned Manufacturing
Harlingen, Texas.......................... 45,000 Leased Warehouse
</TABLE>
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<PAGE> 56
<TABLE>
<CAPTION>
LOCATION AREA (SQ. FT.) OWNERSHIP USE
<S> <C> <C> <C>
Knoxville, Tennessee...................... 12,000 Leased Office
Matamoros, Mexico......................... 118,000 Owned Manufacturing
Morristown, Tennessee..................... 90,000 Leased Warehouse
Morristown, Tennessee, Plant B............ 180,000 Owned Manufacturing
Morristown, Tennessee, Plant C............ 120,000 Owned Manufacturing
Nashville, Tennessee...................... 121,000 Owned Manufacturing
Newberg, Oregon........................... 108,000 Owned Manufacturing
Rochester, New York....................... 79,000 Owned Manufacturing
Round Rock, Texas......................... 71,300 Owned Manufacturing
San Antonio, Texas........................ 62,000 Leased Manufacturing
Sanford, North Carolina................... 12,500 Owned Mold Shop
Seagrove, North Carolina.................. 31,700 Leased Warehouse
Seagrove, North Carolina.................. 133,200 Owned Manufacturing
Waterbury, Connecticut.................... 120,000 Owned Manufacturing
Europe
Blanzy, France............................ 57,750 Leased Manufacturing
35,400 Leased Warehouse
Bonneval, France.......................... 19,800 Owned Manufacturing
26,080 Leased Mold shop/engineering
Chalon, France............................ 23,400 Owned Mold shop/engineering
16,200 Leased Mold shop
21,175 Leased Manufacturing
Marinha Grande, Portugal.................. 81,850 Owned Mold shop
Mitcheldean, United Kingdom............... 15,000 Leased Manufacturing
Paderborn, Germany........................ 160,000 Leased Manufacturing
Rouvray, France........................... 109,000 Leased Manufacturing
Saint-Vit, France......................... 12,320 Owned Mold shop
12,000 Leased Mold shop
Villers-La-Montagne, France............... 111,000 Owned Manufacturing
</TABLE>
To the extent any such properties are leased, the Company expects to be
able to renew such leases or lease comparable facilities on terms commercially
acceptable to the Company. Management believes that the Company's facilities are
suitable for its operations and provide sufficient capacity to meet the
Company's requirements for the foreseeable future.
LEGAL PROCEEDINGS
The Company believes that it is not presently a party to, or threatened
with, any litigation the outcome of which would have a material adverse effect
on its financial condition or results of operation.
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<PAGE> 57
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The current directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
George T. Votis.............................. 36 Chairman and Chief Executive Officer
Charles B. Schiele........................... 56 President and Director
Phyllis C. Best.............................. 51 Chief Financial Officer
Michael N. Red............................... 51 Senior Vice President, Marketing
T. Michael Bauer............................. 48 Executive Vice President, Eastern Operations
and U.K.
Walter J. Masnyk............................. 46 Executive Vice President, Western Operations
Geoffrey A. de Rohan......................... 41 Executive Vice President, Cosmetics
Robert T. Parkey............................. 61 Executive Vice President, Oral Care
Jean-Jacques de Boissieu..................... 40 Executive Vice President, France and Portugal
Mogens Andersen.............................. 47 Vice President, Germany
</TABLE>
George T. Votis. Mr. Votis serves as Chairman and Chief Executive Officer
of the Company and as Chairman and Chief Executive Officer of Galt Industries
which he founded in 1988. Prior to 1988, Mr. Votis was a Vice President and
Principal at Carlisle Capital in Boston, Massachusetts.
Charles B. Schiele. Mr. Schiele joined Anchor in March 1998 as President.
Prior to joining Anchor, Mr. Schiele served as Executive Vice President of
Alcoa's Closure Systems International Division, a global packaging company since
1994. Mr. Schiele served as President of HC Industries; Regional Manager for the
Americas, and Global Manager, Plastic Closures from 1984 to 1993.
Phyllis C. Best. Prior to becoming Chief Financial Officer of the Company,
Ms. Best was Senior Vice President, Finance and Controller of Anchor since 1995
and Vice President and Controller of Anchor since 1990.
Michael N. Red. Mr. Red joined Anchor in May 1998 as Senior Vice
President, Marketing. Mr. Red has more than 10 years of experience in the
plastic industry, including seven years with Closure Systems International as
Vice President Global Sales since 1992 and two years with Soft Alloy Extrusion
Division, Tifton, Georgia, as Vice President of Sales and Marketing.
T. Michael Bauer. Mr. Bauer joined Moll in October 1988 as General Manager
of the Company's Fort Smith division. Mr. Bauer has more than 23 years of
experience in plastics industry, including three years with Michigan Plastics
Company as Vice President of Manufacturing, one year with Grote Manufacturing
Company as Manager of Manufacturing Engineering Services and ten years with
Kusan Manufacturing Company.
Walter J. Masnyk. Mr. Masnyk is an Executive Vice President, Western
Operations of the Company. Mr. Masnyk joined Moll in September 1995 as General
Manager of Moll's Newberg, Oregon facility. Mr. Masnyk has more than 15 years
experience in the plastics industry, serving as General Manager of Consumer
Products and Vice President of Operations for various companies.
Geoffrey A. de Rohan. Prior to becoming Executive Vice President,
Cosmetics of the Company, Mr. de Rohan was a Director of Anchor and General
Manager of the Mid-State Plastics Division of Anchor since 1996 and Executive
Vice President of Anchor and General Manager of the Cosmetics Division of Anchor
since 1995. Prior to joining Anchor, Mr. de Rohan served as Vice President and
General Manager of Wheaton Injection Molding, President of Wheaton Plastic
Products, and Vice President of Development Health Care Market at Wheaton, Inc.
from 1986 to 1995.
Robert T. Parkey. Prior to becoming Executive Vice President, Oral Care of
the Company, Mr. Parkey was a Director and Executive Vice President of Anchor
and General Manager of the Brush Division of Anchor
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<PAGE> 58
since 1992 and was Senior Vice President of Anchor from 1990 to 1992. Mr. Parkey
joined Anchor in 1975 and was promoted to Vice President, Healthcare Division in
1978. Prior to joining Anchor, he was Vice President, Sales Manager with Husky
Industries, a division of Husky Oil Company.
Jean-Jacques de Boissieu. Mr. de Boissieu joined Moll as Executive Vice
President, France and Portugal in January 1998. Prior to joining Moll, Mr. de
Boissieu was a consultant at C.N.P.A. since 1996. Prior to such time, Mr. de
Boissieu served as Managing Director and General Manager US Filter Water
Treatment France, and was Automotive Development Engineer General Electric
Plastics France, Product Manager Europe General Electric Plastics Netherlands,
Managing Director of General Electric Silicones France, Spain and Portugal and
Manager Europe of General Electric Silicones building and construction,
Netherlands.
Mogens Andersen. Mr. Andersen is a Vice President, Germany of the Company.
Mr. Andersen joined Moll in August 1997. Prior to joining Moll, Mr. Andersen was
most recently employed by Alcoa Closure Systems International Europe where he
was controller.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to (i) the Company's Chairman and Chief Executive Officer during 1997, (ii)
and each of the Company's four most highly compensated executive officers (other
than the Chairman and Chief Executive Officer), and (iii) up to two additional
individuals, if any, for whom disclosures would have been provided pursuant to
clause (ii) above but for the fact that the individual was not serving as an
executive officer of the Company at the end of the last completed fiscal year
(the "Named Executive Officers") for 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- ------------
OTHER ANNUAL PAYOUTS(4) ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY BONUS COMPENSATION LTIP PAYOUTS COMPENSATION
---------------------------- -------- -------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
George T. Votis................... $ 0 $ 0 $1,300,000(2) $ 0 $ 0
Chairman and Chief Executive
Officer(1)
T. Michael Bauer.................. 142,133 122,000 0 -- 267(5)
Executive Vice President
Robert T. Parkey.................. 167,175 71,300 19,823(3) 540,168 0
Executive Vice President
Geoffrey A. de Rohan.............. 162,916 68,400 9,268(3) -- 0
Executive Vice President
Richard P. Fackler................ 578,655 560,000 1,650,000(2) 0 167,589(5)
Francis H. Olmstead, Jr.(6)....... 259,896 380,000 38,821(3) 760,800 0
</TABLE>
- ------------------------------
(1) Mr. Votis has never received any salary or bonus from the Company. However,
in 1997, the Company paid approximately $650,000 and approximately $742,000
in management fees to Galt Management, Inc. and Galt Industries, Inc.,
respectively, each of which is a Delaware corporation wholly owned by Mr.
Votis. On a going forward basis he will receive an annual salary and will be
part of a bonus plan to be established for the senior management of the
Company.
(2) Amounts represent tax distributions paid due to the flow through tax status
of Moll prior to the Transactions.
(3) Amounts consisted of Company reimbursements of certain taxes paid by the
Named Executive Officers shown above (except Messrs. Votis, Fackler and
Bauer), which were as follows: Mr. Olmstead, $38,821; Mr. Parkey, $19,823;
and Mr. de Rohan, $9,268.
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<PAGE> 59
(4) Amounts represent (i) dividends on 28,400 shares of restricted stock of
Anchor Holdings that were purchased pursuant to an option by Mr. Parkey and
(ii) dividends on 40,000 shares of restricted stock of Anchor Holdings that
were purchased pursuant to an option by Mr. Olmstead.
(5) Consist of insurance premiums with respect to term life insurance.
(6) Mr. Olmstead retired from the Company in connection with the acquisition of
Holdings in March 1998 by Anchor Acquisition Co.
AGGREGATED OPTIONS EXERCISED IN FISCAL YEAR 1997
AND 1997 FISCAL YEAR OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 1997 YEAR END AT 1997 YEAR END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Francis H. Olmstead, Jr..... 40,000 $740,000 0 0 0 0
Robert T. Parkey............ 28,400 525,400 0 0 0 0
Geoffrey A. de Rohan........ 0 0 0 10,000(2) 0 0
</TABLE>
- ------------------------------
(1) None of Holdings' capital stock is publicly traded. Market value of the
options was calculated on the basis of the fair market value of the
underlying securities at December 31, 1997 of $4.00 per share as determined
by Holdings' Board of Directors.
(2) Such options were cancelled in conjunction with the acquisition of Holdings
in March 1998 by Anchor Acquisition Co.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements, effective as of April 1,
1996 (the "Agreements"), with each of Robert T. Parkey, Geoffrey A. de Rohan and
Phyllis C. Best (each an "Employee" and, collectively, the "Employees").
The initial employment terms, the base salaries and maximum bonus amounts
(as a percentage of base salary) are set forth below:
<TABLE>
<CAPTION>
MAXIMUM
EMPLOYEE INITIAL TERM BASE SALARY BONUS(1)
-------- ------------ ----------- --------
<S> <C> <C> <C>
Robert T. Parkey.................................. 12/31/98 $161,000 40.0%
Geoffrey A. de Rohan.............................. 12/31/98 $145,000 40.0%
Phyllis C. Best................................... 12/31/98 $125,000 40.0%
</TABLE>
- ------------------------------
(1) The bonus will be computed on the Company's financial and other results and
the overall performance of the Employee as determined in the sole discretion
of the Board of Directors. The bonus will be paid, if at all, in the year
following the year in which it is earned.
Upon a termination of employment due to death or disability of the
Employee, the Employee, or his estate, as the case may be, shall be entitled to
one year's base salary plus the amount of the last full-year bonus, pro-rated to
the effective date of termination. Upon a termination of employment by the
Employee for Cause (as defined in the Agreements) or termination by the Company
without Cause, the Employee shall be entitled to an amount equal to base salary
and bonus (the amount of the last full-year bonus), both computed to the end of
the term. Upon a termination of employment by the Employee without Cause or
termination by the Company with Cause, the Company may pay, at its sole
discretion, one-half of one year's base salary as consideration for a one-year
non-competition agreement with the Employee. Upon a termination of employment
due to expiration of the term of employment Anchor may pay, at its sole
discretion, one year's base salary as consideration for a one-year
non-competition agreement with the Employee. All severance payments pursuant to
this paragraph will be paid in quarterly installments. Further, if the Employee
obtains other employment during the period in which the Company is obligated to
make severance payments, the
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<PAGE> 60
Company's obligation to make such payments will be reduced by an amount equal to
75% of the total earnings such Employee makes from such other employment.
SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFITS AGREEMENTS
Each of the persons listed above as parties to Employment Agreements is
also party to a Supplemental Executive Retirement Benefits Agreement (the "SERB
Agreements") with the Company. Under these agreements, the above-mentioned
Employees are, upon retirement (as defined in the SERB Agreements), entitled to
a life-time annual retirement benefit (distributed monthly) calculated based
upon the higher of two separate formulas (see note (3) below). The annual
retirement benefits under one of these formulas are calculated based upon years
of credited service (as defined in the SERB Agreements) and earnings (as defined
in the SERB Agreements is set forth in the table below. The annual retirement
benefits are subject to a reduction for the employee's vested accrued benefit
under the North American Philips Plan and any defined benefit plan maintained by
the Company. The SERB Agreements also provide for spousal survival benefit
options and for death benefits under certain circumstances. Lastly, in the event
of the sale or exchange of substantially all the assets of the Company or a
merger, reorganization, consolidation or a change of control, the Employee is
entitled to a lump sum payment in an amount equal to the actuarial equivalent of
the Employee's normal retirement benefit unless the successor entity or
resulting controlling entity expressly assumes in writing the obligations under
the SERB Agreements.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
------------------------------------------------------
EARNINGS 15 20 25 30 35
-------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000.............................. $ 20,625 $ 27,500 $ 34,375 41,250 48,125
150,000.............................. 24,750 33,000 41,250 49,500 57,750
175,000.............................. 28,875 38,500 48,125 57,750 67,375
200,000.............................. 33,000 44,000 55,000 66,000 77,000
250,000.............................. 41,250 55,000 68,750 82,500 96,250
300,000.............................. 49,500 66,000 82,500 99,000 115,500
400,000.............................. 66,000 88,000 110,000 132,000 154,000
450,000.............................. 74,250 99,000 123,750 148,500 173,250
500,000.............................. 82,500 110,000 137,500 165,000 192,500
</TABLE>
- ------------------------------
(1) The compensation covered by this plan is the average of the employee's
highest five years, selected from the last ten calendar years, of earnings,
which are defined under this plan as the total cash compensation paid to the
employee during a calendar year includible in the employee's gross income
under the Internal Revenue Code, excluding any expense reimbursements,
deferred compensation payments, lump sum severance payments, stock options,
or any distributions from any long-term incentive plan, or any long-term key
employee compensation program.
(2) The credited years of service under this plan for each of the following
persons as of June 1998 (except for Messrs. Votis, Fackler and Bauer) are as
follows: Mr. Olmstead, 14.5833; Mr. Parkey, 13; Mr. de Rohan, 3.5; Ms. Best,
18.6667.
(3) The annual retirement benefit is the higher of (i) the product of (a) the
average of employee's highest five years of earnings; (b) years of credited
service under the plan (to a maximum of 43); and (c) 1.1% and (ii) the sum
of (a) the product of (1) the average of employee's highest five years of
earnings; (2) years of credited service under the plan (to maximum of 43);
and (3) 1.0%; and (b) the product of (1) the amount by which the average of
employee's highest five years of earnings exceeds the Average Social
Security Taxable Wage Base; (2) years of credited service under the plan (to
a maximum of 35); and (3) 0.6%. For purposes of this plan, the "Average
Social Security Taxable Wage Base" is the average of the maximum limitation
on wages subject to social security tax for the preceding 35 calendar years.
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<PAGE> 61
CERTAIN BENEFICIAL OWNERS
AMM Holding, LLC owns all the outstanding capital stock of Holdings, which
owns all the outstanding capital stock of Anchor Holdings, which owns all the
outstanding capital stock of the Company. The following sets forth certain
information regarding the beneficial ownership of the membership interests of
AMM Holdings, LLC, which consist of Capital Units and Profit Units (each as
defined in the LLC Agreement and, together the "Units"), as of July 31, 1998 by
(i) each person who, to the knowledge of Holdings, beneficially owns more than
5% of each of the outstanding Capital Units and the outstanding Project Units;
(ii) the directors of Holdings; (iii) certain executive officers of Holdings;
and (iv) all directors and executive officers of Holdings as a group. None of
the Capital Units and the Project Units are presently listed or traded on any
securities exchange on securities market. The principal business address of AMM
Holdings, LLC is c/o Galt Industries, Inc., 767 Fifth Avenue, Suite 506, New
York, New York 10153, and its telephone number is (212) 758-0770.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF CAPITAL OUTSTANDING CAPITAL NUMBER OF PROFIT OUTSTANDING PROFIT
UNITS BENEFICIALLY UNITS BENEFICIALLY UNITS BENEFICIALLY UNITS BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED OWNED OWNED OWNED
------------------------ ------------------ ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
George T. Votis(1)................ 475 4.7% 1,075 10.8%
MPI(2)............................ 7,564 75.6 6,934 69.3
Charles B. Schiele................ 2 0.02 250 2.5
Richard Fackler................... 600 6.0 600 6.0
Montero, Inc...................... 1,355 13.5 531 5.3
Director and Officers of Holdings
as a group (10 persons)......... 479 4.7 1,325 13.3
</TABLE>
- ---------------
(1) Subject to the provisions of Section 15 of the LLC Agreement ("Section 15")
(discussed below), under Section 11 of the LLC Agreement each Member (as
defined in the LLC Agreement) has agreed, at Mr. Votis' request, to
transfer, pursuant to a bona fide sale to a person or entity, other than Mr.
Votis or an Affiliate (as defined in the LLC Agreement) or member of the
immediate family of Mr. Votis, the same proportion of its holdings of each
class, series or type of interests in AMM Holdings, LLC as Mr. Votis
transfers of his holdings of each class, series or type of interests in AMM
Holdings, LLC in such transaction. Subject to the provisions of Section 15,
under Section 10 of the LLC Agreement, if Mr. Votis determines to transfer,
all or a portion of his interests in AMM Holdings, LLC, other than, among
other things, a transfer after which Mr. Votis will continue to hold
beneficially a majority of the outstanding Units, each Member has the right
to include in such transfer the same proportion of its holdings of each
class, series or type of interests in AMM Holdings, LLC as Mr. Votis
transfers of his holdings of each class, series or type of interests in AMM
Holdings, LLC in such transaction. Section 15 provides that, except as
provided in, inter alia, Sections 10 and 11 of the LLC Agreement, other than
Permitted Transfers (as defined in the LLC Agreement), no Member may sell,
assign, give, pledge, hypothecate, encumber or otherwise transfer,
including, without limitation, any assignment or transfer by operation of
law or by order of court, such Member's interest in AMM Holdings, LLC or any
part thereof, or in all or any part of the assets of AMM Holdings, LLC,
without the consent of the Manager (currently Mr. Votis), which consent may
be given or withheld in the Manager's sole discretion, and any purported
assignment without such consent shall be null and void and of no effect
whatsoever. As a result of the foregoing provisions of the LLC Agreement,
Mr. Votis may be deemed to beneficially own the Units owned by the other
Members. However, Mr. Votis disclaims beneficial ownership of such Units,
other than the Units owned by MPI.
(2) George T. Votis owns all the outstanding capital stock of MPI and,
therefore, beneficially owns all the Capital Units and Profit Units owned by
MPI.
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<PAGE> 62
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At December 31, 1997, Moll had a note receivable of $390,000 from an
individual with ownership interest in certain entities that were partners of
Moll. The note is payable in three equal annual installments beginning February
1, 1999 and bears interest at 9%.
Moll paid management fees to certain related companies which are limited in
amount under Moll's debt agreements. Management fee expense was approximately
$1,363,000, $1,346,000 and $1,553,000 for 1995, 1996 and 1997, respectively. Of
this amount, approximately $150,000 was recorded as an accrued liability at
December 31, 1997.
The Company leases land and buildings in Germany from an entity owned by
certain entities that were partners of Moll. The lease expires on August 7,
1998, contains three automatic one year extensions and accrues rent at a rate of
790,000 Deutsche Marks ($439,000 per year based on the December 31, 1997
exchange rate). The Company recognized rent expense of $176,000 in 1997, which
is included in accounts payable at December 31, 1997.
From time to time, the Company leases warehouse space from Jack C. Lail, a
former Director and Executive Vice President of Anchor, near its facilities in
Seagrove, North Carolina. The Company paid a total of $64,000 for such warehouse
space in 1997.
Immediately prior to the Merger, Moll distributed its 69% Class B limited
partnership interest in Reliance Products to certain of Moll's limited partners.
Holdings used the proceeds of the Offering to fund (i) the Distribution to
Holdings stockholders of approximately $33 million, of which $2 million was
retained by Holdings stockholders and the remainder was used (a) to repay
approximately $15.6 million of indebtedness held by Textek LLC, an affiliate of
Holdings controlled by Mr. Votis, and (b) purchase the equity interests of a
former Moll partner for $15.4 million, and (ii) the Equity Contribution to the
Company of approximately $2 million. The Company will pay all of the fees and
expenses related to the Offering.
In connection with the acquisition by Mr. Votis of Anchor, Mr. Geoffrey A.
de Rohan was granted a discretionary bonus of $400,000 by the Company in April
1998, $150,000 of which was paid to Mr. de Rohan in April 1998 and the remainder
of which is expected to be paid over 12 months starting April 1998.
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<PAGE> 63
DESCRIPTION OF NOTES
GENERAL
The New Notes will be issued pursuant to an Indenture (the "Indenture")
between Holdings and State Street Bank and Trust Company, as trustee (the
"Trustee"), copies of which are filed as exhibits to the Registration Statement
of which this Prospectus constitutes a part. The New Notes are identical in all
material respects to the terms of the Old Notes, except for certain transfer
restrictions and registration rights relating to the Old Notes and except for
certain provisions providing for an increase in the interest rate on the Old
Notes under certain circumstances relating to the timing of the Exchange Offer.
See "-- Registration Rights; Liquidated Damages." The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the Trust Indenture Act for a statement thereof. The following summary of
the material provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. Copies of the Indenture and
Registration Rights Agreement are available as set forth below under
"--Additional Information." The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions."
The Old Notes are, and the New Notes will be, general unsecured obligations
of Holdings, the Old Notes rank and the New Notes will rank, pari passu in right
of payment with all existing and future senior unsecured Indebtedness of
Holdings and the Old Notes rank, and the New Notes will rank, senior in right of
payment to all existing and future subordinated Indebtedness of Holdings.
However, the Old Notes are, and the New Notes will be, (i) effectively
subordinated to all secured obligations of Holdings, to the extent of the assets
securing such obligations and (ii) structurally subordinated to all obligations
of Holdings' subsidiaries. As of March 31, 1998, on a pro forma basis after
giving effect to the Transactions, Holdings' subsidiaries would have had $329.6
million of outstanding liabilities (including trade payables). Subject to
certain conditions, approximately $48.8 million of capacity is available for
borrowing by the Company under the Revolving Credit Facility. The Indenture
permits the incurrence of additional Indebtedness in the future.
Any Old Notes that remain outstanding after the consummation of the
Exchange Offer, together with the New Notes issued in connection with the
Exchange Offer, will be treated as a single class of securities under the
Indenture.
The operations of Holdings are conducted through its subsidiaries and,
therefore, Holdings is dependent upon the cash flow of such subsidiaries to meet
its obligations, including its obligations under the Notes. For each Old Note
accepted for exchange, the holder of such Old Note will receive a New Note
having a principal amount equal to that of the surrendered Old Note. As of the
date of the Indenture, all of Holdings' subsidiaries are Restricted
Subsidiaries. However, under certain circumstances, Holdings will be able to
designate current or future subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $68.0 million at
maturity and will mature on July 1, 2009. Original issue discount on the Notes
will accrete at a rate of 13 1/2%, compounded semi-annually to an aggregate
principal amount of $68.0 million at July 1, 2003. Cash interest will not accrue
on the Notes prior to July 1, 2003. Commencing July 1, 2003, cash interest on
the Notes will accrue at the rate of 13 1/2% per annum, and will be payable
semiannually in arrears on January 1 and July 1 of each year, commencing January
1, 2004, to Holders of record on the immediately preceding May 15 and December
15. No cash interest will be payable on the Notes prior to January 1, 2004.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from July 1, 2003. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium and Liquidated Damages, if any, and interest on the Notes
will be payable at the office or agency of Holdings maintained for such purpose
within the City and State of New York or, at the option of Holdings, payment of
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<PAGE> 64
interest may be made by check mailed to the Holders of the Notes at their
respective addresses set forth in the register of Holders of Notes; provided
that all payments of principal, premium and Liquidated Damages, if any, and
interest with respect to Notes the Holders of which have given wire transfer
instructions to Holdings will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Until otherwise designated by Holdings, Holdings' office or agency in New York
will be the office of the Trustee maintained for such purpose. The Notes will be
issued in denominations of $1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
On or after July 1, 2003, the Notes will be subject to redemption at any
time at the option of Holdings, in whole or in part, upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on July 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003........................................................ 106.750%
2004........................................................ 104.500%
2005........................................................ 102.250%
2006 and thereafter......................................... 100.000%
</TABLE>
In addition, at any time prior to July 1, 2003, the Notes will be
redeemable at the option of Holdings, in whole but not in part, in cash at a
redemption price of 113.5% of the Accreted Value thereof (determined as of the
date of redemption), plus Liquidated Damages, if any, thereon to the redemption
date, with the net cash proceeds of a Public Equity Offering.
SELECTION AND NOTICE
If less than all the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 in principal amount or less shall be redeemed in part.
Notices of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders,"
Holdings is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require Holdings to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the Accreted Value thereof, plus Liquidated Damages, if any, to the
date of repurchase (if such date of repurchase is prior to July 1, 2003) or 101%
of the aggregate principal amount thereof, plus accrued and
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<PAGE> 65
unpaid interest and Liquidated Damages, if any, thereon to the date of
repurchase (if such date of repurchase is on or after July 1, 2003) (the "Change
of Control Payment"). The Indenture provides that prior to the mailing of the
notice referred to below, but in any event within 90 days following a Change of
Control, Holdings will covenant to repurchase the Notes pursuant to the
provisions described below. Holdings' failure to comply with this covenant shall
constitute an Event of Default described in clause (iv) and not in clause (iii)
under "--Events of Default" below.
Within 30 calendar days following any Change of Control, Holdings will mail
a notice to each Holder stating: (i) that the Change of Control Offer is being
made pursuant to the covenant entitled "Change of Control" and that all Notes
tendered will be accepted for payment; (ii) the purchase price and the purchase
date, which will be no earlier than 30 calendar days nor later than 60 calendar
days from the date such notice is mailed (the "Change of Control Payment Date");
(iii) that any Note not tendered will continue to accrue interest; (iv) that,
unless Holdings defaults in the payment of the Change of Control Payment, all
Notes accepted for payment pursuant to the Change of Control Offer will cease to
accrue interest after the Change of Control Payment Date; (v) that Holders
electing to have any Notes purchased pursuant to a Change of Control Offer will
be required to surrender the Notes, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date; (vi) that Holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the second Business Day preceding the Change
of Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes delivered
for purchase, and a statement that such Holder is withdrawing such Holder's
election to have such Notes purchased; and (vii) that Holders whose Notes are
being purchased only in part will be issued new Notes equal in principal amount
to the unpurchased portion of the Notes surrendered, which unpurchased portion
must be equal to $1,000 in principal amount or an integral multiple thereof.
Holdings will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Notes as
a result of a Change of Control.
On the Change of Control Payment Date, Holdings will, to the extent lawful,
(i) accept for payment all Notes or portions thereof properly tendered pursuant
to the Change of Control Offer, (ii) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all Notes or portions
thereof so tendered and (iii) deliver or cause to be delivered to the Trustee
the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by
Holdings. The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. Holdings will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that Holdings
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction. Finally, Holdings' ability to pay cash to the Holders of
Notes upon a repurchase may be limited by Holdings' then existing financial
resources. See "Risk Factors -- Limitations on Ability to Make Change of Control
Payment."
Holdings will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by Holdings and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
"Change of Control" means the occurrence of any of the following: (i) (a)
any transaction (including a merger or consolidation) the result of which is
that any "person" or "group" (each within the meaning of
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Sections 13(d) and 14(d)(2) of the Exchange Act), other than the Principals and
their Related Parties, becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of more than 50% of the total
voting power of all Capital Stock of Holdings, or a successor entity normally
entitled to vote in the election of directors, managers or trustees, as
applicable, calculated on a fully diluted basis, and (b) as a result of the
consummation of such transaction, any "person" or "group" (each as defined
above) becomes the "beneficial owner" (as defined above), directly or
indirectly, of more of the voting stock of Holdings than is at the time
"beneficially owned" (as defined above) by the Principals, or (ii) the first day
on which a majority of the members of the Board of Directors are not Continuing
Directors, or (iii) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Holdings and its
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than the Principals or their Related
Parties. For purposes of this definition, any transfer of an Equity Interest of
an entity that was formed for the purpose of acquiring voting stock of Holdings
shall be deemed to be a transfer of such percentage of such voting stock as
corresponds to the percentage of the equity of such entity that has been so
transferred.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Holdings and its Subsidiaries taken as a whole. Although there
is a developing body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Notes to require Holdings to repurchase
such Notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of Holdings and its Subsidiaries
taken as a whole to another Person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors who (i) was a member of such Board of Directors on the
date of the Indenture or (ii) was nominated for election or elected to such
Board of Directors with the approval of either (a) a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election or (b) a majority in interest of the Principals. For
purposes of the foregoing, a "majority in interest of the Principals" shall mean
any group of Principals who beneficially own in the aggregate more than 50% of
the Capital Stock of Holdings held by all of the Principals.
"Principals" means Mr. George T. Votis and Mr. Anastasios Votis.
"Related Party" with respect to any Principal means (i) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (ii) any trust
(including any related trustee), corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of such Principal and/or such
other Persons referred to in the immediately preceding clause (i).
Asset Sales
The Indenture provides that Holdings will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) Holdings (or
the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee with respect to any Asset Sale involving in excess of
$1.0 million) of the assets or Equity Interests issued or sold or otherwise
disposed of and (ii) at least 75% of the consideration therefor received by
Holdings or such Restricted Subsidiary is in the form of cash or Cash
Equivalents; provided that the amount of (x) any liabilities (as shown on
Holdings' or such Restricted Subsidiary's most recent balance sheet) of Holdings
or any Restricted Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the Notes or any guarantee thereof) that
are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases Holdings or such Restricted Subsidiary from
further liability and (y) any securities, notes or other obligations received by
Holdings or any such Restricted Subsidiary from such transferee that are
immediately
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<PAGE> 67
converted by Holdings or such Restricted Subsidiary into cash (to the extent of
the cash received), shall be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or its Restricted Subsidiary, as the case may be, may apply such Net
Proceeds from such Asset Sale to apply such Net Proceeds to repayment of
Indebtedness of a Restricted Subsidiary (in the case of Net Proceeds from an
Asset Sale effected by a Restricted Subsidiary) or to an investment in a
Restricted Subsidiary or in another business or capital expenditure or other
long-term/tangible assets, in each case, in the same or a similar line of
business as Holdings or any of its Restricted Subsidiaries were engaged in on
the date of the Indenture or in businesses reasonably related thereto. Pending
the final application of any such Net Proceeds, Holdings may temporarily reduce
Indebtedness under the Revolving Credit Facility or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $5.0 million, Holdings will be
required to make an offer to all Holders of Notes (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to (i) 100% of the
Accreted Value thereof, plus Liquidated Damages, if any, to the date of
repurchase (if such date of repurchase is prior to July 1, 2003) or (ii) 100% of
the aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of repurchase (if such date of
repurchase is prior to July 1, 2003), in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds,
Holdings may use any remaining Excess Proceeds for general corporate purposes.
If the Accreted Value or aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that Holdings will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of Holdings' or
any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
Holdings) or to the direct or indirect holders of Holdings' or any of its
Restricted Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of Holdings or such Restricted Subsidiary or dividends or distributions
payable to Holdings or any Restricted Subsidiary of Holdings); (ii) purchase,
redeem or otherwise acquire or retire for value any Equity Interests of Holdings
or any Affiliate of Holdings that is not a Subsidiary (other than any such
Equity Interests owned by Holdings or any Wholly Owned Restricted Subsidiary of
Holdings); (iii) make any principal payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value prior to a scheduled
mandatory sinking fund payment date or final maturity date any Indebtedness that
is pari passu with or subordinated to the Notes (other than the Notes); or (iv)
make any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) Holdings would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; and
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(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Holdings and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clause (ii) of the next succeeding paragraph), is less than the sum of (i)
50% of the Consolidated Net Income of Holdings for the period (taken as one
accounting period) from the first full Fiscal quarter after the date of the
Indenture to the end of Holdings' most recently ended fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is
a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
cash proceeds received by Holdings from the issue or sale since the date of
the Indenture of Equity Interests of Holdings (other than Disqualified
Stock) or of Disqualified Stock or debt securities of Holdings that have
been converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Restricted
Subsidiary of Holdings and other than Disqualified Stock or convertible
debt securities that have been converted into Disqualified Stock), plus
(iii) to the extent that any Restricted Investment that was made after the
date of the Indenture is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment.
The foregoing provisions will not prohibit (i) the payment of any dividend
or distribution within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Equity Interests of Holdings in exchange for, or out of the
net cash proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of Holdings) of, other Equity Interests of Holdings (other
than any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (c) (ii) of the
preceding paragraph; (iii) the defeasance, redemption, repurchase or other
acquisition of pari passu or subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness or the
substantially concurrent sale (other than to a Restricted Subsidiary of
Holdings) of Equity Interests of Holdings (other than Disqualified Stock); (iv)
the purchase, redemption or other acquisition prior to the stated maturity
thereof of Indebtedness that is subordinated to the Notes in exchange for or out
of the net cash proceeds of a substantially concurrent issue and sale (other
than to Holdings or any of its Restricted Subsidiaries) of new Indebtedness;
provided that (x) the principal amount of such new Indebtedness shall not exceed
the principal amount of Indebtedness so refinanced (plus the amount of such
reasonable expenses incurred in connection therewith), (y) such new Indebtedness
shall have a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being refinanced, and (z)
the new Indebtedness shall be subordinate in right of payment to the Notes; (v)
the repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of Holdings held by any member of Holdings' (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement or in connection with the
termination of employment of any employees or management of Holdings or its
Restricted Subsidiaries; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$2.0 million in the aggregate plus the aggregate cash proceeds received by
Holdings after the date of the Indenture from any reissuance of Equity Interests
by Holdings to members of management of Holdings and its Restricted Subsidiaries
and no Default or Event of Default shall have occurred and be continuing
immediately after any such transaction; (vi) Investments received by Holdings
and its Restricted Subsidiaries as non-cash consideration from Asset Sales to
the extent permitted by the covenant described under the caption "--Repurchase
at the Option of Holders--Asset Sales;" (vii) the payment of any dividend or
distribution by a Subsidiary of Holdings to the holders of its Common Equity
Interests on a pro rata basis; (viii) other Restricted Payments not to exceed
$3.0 million in the aggregate, and (ix) distributions to the former partners of
Moll for tax liabilities of such partners for periods prior to the date of the
Indenture in an amount not to exceed the product of (A) the taxable income of
Moll for the related period and (B) the maximum combined federal, state and
local income tax rates applicable to a resident of New York City.
The amount of all Restricted Payments (other than cash or Cash Equivalents)
shall be the fair market value (evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the
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Trustee) on the date of the Restricted Payment of the asset(s) proposed to be
transferred or issued by Holdings or such Restricted Subsidiary, as the case may
be, pursuant to the Restricted Payment. Not later than the date of making any
Restricted Payment, Holdings shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that Holdings will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that Holdings will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that Holdings may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if
the Fixed Charge Coverage Ratio for Holdings' most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 1.75 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by Holdings and its Restricted Subsidiaries of
Indebtedness under the Revolving Credit Facility; provided that the
aggregate principal amount of all revolving credit Indebtedness and letters
of credit of Holdings and its Subsidiaries outstanding under all Credit
Facilities after giving effect to such incurrence (with letters of credit
being deemed to have a principal amount equal to the maximum potential
liability of Holdings and its Subsidiaries thereunder) does not exceed the
greater of (x) $50.0 million or (y) the amount of the Borrowing Base as of
the date of such incurrence;
(ii) Guarantees of the Indebtedness under the Revolving Credit
Facility required by the Revolving Credit Facility and Guarantees permitted
under or required by the Indenture, the Company Notes Indenture and the
Senior Notes Indenture;
(iii) the incurrence by Holdings and its Restricted Subsidiaries of
the Existing Indebtedness;
(iv) the incurrence by Holdings of Indebtedness represented by (a) the
Notes and the Indenture and the incurrence by Restricted Subsidiaries of
Guarantees permitted to be incurred under the Indenture, (b) the Company
Notes and the Company Notes Indenture and the incurrence by Restricted
Subsidiaries of Guarantees required or permitted to be incurred under the
Company Notes Indenture and (c) the Senior Notes and the Senior Notes
Indenture and the incurrence by Restricted Subsidiaries of Guarantees
required or permitted to be incurred under the Senior Notes Indenture;
(v) the incurrence by Holdings or any of its Restricted Subsidiaries
of Capital Lease Obligations, mortgage financings or purchase money
obligations, in each case incurred for the purpose of financing all or any
part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of Holdings or such
Subsidiary, in an aggregate principal amount not to exceed $10.0 million at
any time outstanding;
(vi) the incurrence by Holdings or any of its Restricted Subsidiaries
of Indebtedness in connection with the acquisition of assets or a new
Subsidiary; provided that such Indebtedness was incurred by the prior owner
of such assets or such Subsidiary prior to such acquisition by Holdings or
one of its Restricted Subsidiaries and was not incurred in connection with,
or in contemplation of, such acquisition by Holdings or one of its
Restricted Subsidiaries; and provided, further that the principal amount
(or accreted value, as applicable) of such Indebtedness, together with any
other outstanding Indebtedness incurred pursuant to this clause (vi), does
not exceed $5.0 million;
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(vii) the incurrence by Holdings or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness that was
permitted by the Indenture to be incurred;
(viii) the incurrence by Holdings or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among Holdings and any
of its Wholly Owned Restricted Subsidiaries; provided, however, that (i) if
Holdings is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes and (ii)(A) any subsequent issuance
or transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than Holdings or a Wholly Owned Restricted
Subsidiary and (B) any sale or other transfer of any such Indebtedness to a
Person that is not either Holdings or a Wholly Owned Restricted Subsidiary
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by Holdings or such Restricted Subsidiary, as the case may be;
(ix) the incurrence by Holdings or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of Revolving Credit Facility or the
Indenture to be outstanding; and
(x) the Guarantee by Holdings of Indebtedness of a Restricted
Subsidiary of Holdings that was permitted to be incurred by another
provision of this covenant.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories described in clauses (i) through (x) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, Holdings shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be treated as
having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof. Accrual of interest, the accretion of accreted value and
the payment of interest in the form of additional Indebtedness will not be
deemed to be an incurrence of Indebtedness for purposes of this covenant.
Liens
The Indenture provides that Holdings will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien (other than Permitted Liens) upon any of their property
or assets, now owned or hereafter acquired, unless all payments due under the
Indenture and the Notes are secured on an equal and ratable basis with the
obligations so secured until such time as such obligations are no longer secured
by a Lien.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that Holdings will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to: (i)(a) pay dividends or make any
other distributions to Holdings or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to Holdings or any of
its Restricted Subsidiaries, (ii) make loans or advances to Holdings or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
Holdings or any of its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the date of the Indenture, (b) the Revolving Credit Facility as in
effect as of the date of the Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are no more restrictive with respect to such dividend and other
payment restrictions than those contained in the Revolving Credit Facility as in
effect on the date of the Indenture, (c) the Indenture and the Notes, (d) the
Company Notes and the Company Notes Indenture and the Senior Notes and the
Senior Notes Indenture, (e) applicable law, (f) any instrument governing
Indebtedness or Capital Stock of a Person acquired by Holdings or any of its
Restricted Subsidiaries as in
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effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be incurred; (g) by
reason of customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (h) purchase
money obligations or Capital Lease Obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, (i) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive than
those contained in the agreements governing the Indebtedness being refinanced,
(j) customary restrictions imposed on the transfer of copyrighted or patented
materials and customary provisions in agreements that restrict the assignees of
such agreements or any rights thereunder; (k) restrictions with respect to a
Subsidiary of Holdings imposed pursuant to a binding agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary; or (l) any restriction on the
ability of Holdings or any Restricted Subsidiary to transfer any property or
assets on account of a Permitted Lien.
Merger, Consolidation, or Sale of Assets
The Indenture provides that Holdings may not consolidate or merge with or
into (whether or not Holdings is the surviving corporation), or sell, assign,
transfer, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless (i) Holdings is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than Holdings)
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than Holdings) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of Holdings under the Notes and the Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) Holdings or the entity or Person formed by or surviving any
such consolidation or merger (if other than Holdings), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of Holdings immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock." The
Indenture also provides that Holdings may not, directly or indirectly, lease all
or substantially all of its properties or assets, in one or more related
transactions, to any other Person. The provisions of this covenant will not be
applicable to a sale, assignment, transfer, conveyance or other disposition of
assets between or among Holdings and its Wholly Owned Subsidiaries.
Transactions with Affiliates
The Indenture provides that Holdings will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to or enter into any other
transaction with, or for the benefit of, any Affiliate of Holdings (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is
on terms that are no less favorable to Holdings or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable transaction
by Holdings or such Restricted Subsidiary with an unrelated Person and (ii)
Holdings delivers to the Trustee (a) with respect to any Affiliate Transaction
or series of related Affiliate Transactions involving aggregate consideration in
excess of $1.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate
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Transaction has been approved by a majority of the disinterested members of the
Board of Directors and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; provided that (v) any leases
relating to real property in Germany between the Company and any of the
Principals, as in effect on the date of the Indenture, (w) any employment
agreement entered into by Holdings or any of its Restricted Subsidiaries in the
ordinary course of business and consistent with the past practice of Holdings or
such Restricted Subsidiary, (x) transactions between or among Holdings and/or
its Restricted Subsidiaries, (y) investment banking and management fees in an
aggregate amount no greater than $180,000 per annum plus reimbursement of
expenses to be paid by the Company to Galt Industries, Inc. or its successors
and assigns, and (z) Restricted Payments that are permitted by the provisions of
the Indenture described above under the caption "-- Restricted Payments," in
each case, shall not be deemed Affiliate Transactions.
Limitation on Issuances and Sales of Capital Stock of Wholly Owned Restricted
Subsidiaries
The Indenture provides that Holdings (i) will not, and will not permit any
Wholly Owned Restricted Subsidiary of Holdings to, transfer, convey, sell, lease
or otherwise dispose of any Capital Stock of any Wholly Owned Restricted
Subsidiary of Holdings to any Person (other than Holdings or a Wholly Owned
Restricted Subsidiary of Holdings), unless (a) such transfer, conveyance, sale,
lease or other disposition is of all the Capital Stock of such Wholly Owned
Restricted Subsidiary and (b) the cash Net Proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance with the
covenant described above under the caption "-- Asset Sales," and (ii) will not
permit any Wholly Owned Restricted Subsidiary of Holdings to issue any of its
Equity Interests (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person other than to Holdings
or a Wholly Owned Restricted Subsidiary of Holdings.
Limitations on Business Activities of Anchor Holdings
Holdings will not permit Anchor Holdings to engage in any business or make
any Investments, other than such businesses or Investments that Anchor Holdings
is engaged in or has made as of the date of the Indenture; provided, however,
that the foregoing shall not affect the ability of any Subsidiary of Anchor
Holdings, including, without limitation, the Company, to engage in any business
or make any Investments.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, Holdings will furnish to the Holders of Notes
(i) all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if Holdings
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by Holdings' certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if Holdings were required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, Holdings will file a copy of all such information and reports with
the Commission for public availability (unless the Commission will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on the
Notes; (ii) default in payment when due of the principal of or premium, if any,
on the Notes; (iii) failure by Holdings to comply with the provisions described
under the captions "-- Change of Control," "-- Asset Sales," "-- Restricted
Payments" or "-- Incurrence of Indebtedness and Issuance of Preferred Stock";
(iv) failure by Holdings for 60 days after notice to comply with any of
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its other agreements in the Indenture or the Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by
Holdings or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by Holdings or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, if such (a) default results in the acceleration of such Indebtedness
prior to its express maturity or shall constitute a default in the payment of
such Indebtedness at final maturity of such Indebtedness, and (b) the principal
amount of any such Indebtedness that has been accelerated or not paid at
maturity, when added to the aggregate principal amount of all other Indebtedness
that has been accelerated or not paid at maturity, exceeds $5.0 million; (vi)
failure by Holdings or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $5.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days; and (vii) certain events of bankruptcy or
insolvency with respect to Holdings or any of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately provided, that so long
as any Indebtedness permitted to be incurred pursuant to the Revolving Credit
Facility shall be outstanding, such acceleration shall not be effective until
the earlier of (i) an acceleration of any such Indebtedness under the Revolving
Credit Facility or (ii) five business days after receipt by Holdings of written
notice of such acceleration. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, with
respect to Holdings or any Restricted Subsidiary that is a Significant
Subsidiary, the principal of, and premium and Liquidated Damages, if any, and
any accrued and unpaid interest on all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
the Indenture or the Notes except as provided in the Indenture. In the event of
a declaration of acceleration of the Notes because an Event of Default has
occurred and is continuing as a result of the acceleration of any Indebtedness
described in clause (v) of the preceding paragraph, the declaration of
acceleration of the Notes shall be automatically annulled if the holders of any
Indebtedness described in clause (v) have rescinded the declaration of
acceleration in respect of such Indebtedness within 30 days of the date of such
declaration and if (a) the annulment of the acceleration of the Notes would not
conflict with any judgment or decree of a court of competent jurisdiction, and
(b) all existing Events of Default, except nonpayment of principal or interest
on the Notes that became due solely because of the acceleration of the Notes,
have been cured or waived.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of Holdings with the
intention of avoiding payment of the premium that Holdings would have had to pay
if Holdings then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs prior to July 1, 2003
by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of Holdings with the intention of avoiding the prohibition on redemption
of the Notes prior to such date, then the premium specified in the Indenture
shall also become immediately due and payable to the extent permitted by law
upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, premium, if any, or interest on the Notes.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
Holdings is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and Holdings is required upon becoming
aware of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Holdings, as
such, shall have any liability for any obligations of Holdings under the Notes
or the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws, and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Holdings may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due from the trust referred to below, (ii)
Holdings' obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and Holdings' obligations in connection therewith and (iv) the Legal
Defeasance provisions of the Indenture. In addition, Holdings may, at its option
and at any time, elect to have the obligations of Holdings released with respect
to certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not constitute
a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
Holdings must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Cash Equivalents,
or a combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding Notes on the
stated maturity or on the applicable redemption date, as the case may be, and
Holdings must specify whether the Notes are being defeased to maturity or to a
particular redemption date; (ii) in the case of Legal Defeasance, Holdings shall
have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (A) Holdings has received
from, or there has been published by, the Internal Revenue Service a ruling or
(B) since the date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, Holdings shall have delivered to the Trustee an opinion of counsel
in the United States reasonably acceptable to the Trustee con-firming that the
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under any material agreement or instrument (other
than the Indenture) to which Holdings or any of its Subsidiaries is a party or
by which Holdings or any of its Subsidiaries is bound; (vi) Holdings must have
delivered to the Trustee an opinion of counsel to the effect that after the 91st
day following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (vii) Holdings must deliver to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of Notes over the other creditors of
Holdings
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with the intent of defeating, hindering, delaying or defrauding creditors of
Holdings or others; and (viii) Holdings must deliver to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents, and Holdings may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. Holdings is not required to transfer or exchange any Note selected
for redemption. Also, Holdings is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders"), or (viii) make any change in
the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
Holdings and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of Holdings' obligations to Holders of Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of Holdings or any Affiliate of Holdings, to obtain
payment of claims in certain cases, or to realize on certain property received
in respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
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The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to AM Holdings, Inc., 1111 Northshore Drive, Suite
N-600, Knoxville, Tennessee 37919, Attention: Chief Financial Officer.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the Notes will initially be issued in the form
of one or more registered Notes in global form without coupons (each a "Global
Note"). Each Global Note will be deposited with, or on behalf of, DTC and
registered in the name of Cede & Co., as nominee of DTC, or will remain in the
custody of the Trustee pursuant to the FAST Balance Certificate Agreement
between DTC and the Trustee.
DTC has advised Holdings that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a member of the Federal
Reserve System, (iii) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (iv) a "Clearing Agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participation (collectively, the "Participants") and facilitates the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes to the accounts of its Participants, thereby
eliminating the need for physical transfer and delivery of certificates. DTC's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies (collectively, the "Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Holders who are not Participants may
beneficially own securities held by or on behalf of the Depository only through
Participants or Indirect Participants.
Holdings expects that pursuant to procedures established by DTC (i) upon
deposit of the Global Notes, DTC will credit the accounts of Participants
designated by the Initial Purchaser with an interest in the Global Note and (ii)
ownership of the Notes will be shown on, and the transfer of ownership thereof
will be effected only through, records maintained by DTC (with respect to the
interest of Participants), the Participants and the Indirect Participants. The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own and that security interest in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer Notes or to
pledge the Notes as collateral will be limited to such extent.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or holder
of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of certificated securities (the "Certificated Securities"), and will
not be considered the owners or Holders thereof under the Indenture for any
purpose, including with respect to giving of any directions, instruction or
approval to the Trustee thereunder. As a result, the ability of a person having
a beneficial interest in Notes represented by a Global Note to pledge or
transfer such interest to persons or entities that do not participate in DTC's
system or to otherwise take action with respect to such interest, may be
affected by the lack of a physical certificate evidencing such interest.
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Accordingly, each holder owning a beneficial interest in a Global Note must
rely on the procedures of DTC and, if such holder is not a Participant or an
Indirect Participant, on the procedures of the Participant through which such
holder owns its interest, to exercise any rights of a holder of Notes under the
Indenture or such Global Note. Holdings understands that under existing industry
practice, in the event Holdings requests any action of holders of Notes or a
holder that is an owner of a beneficial interest in a Global Note desires to
take any action that DTC, as the holder of such Global Note, is entitled to
take, DTC would authorize the Participants to take such action and the
Participant would authorize holders owning through such Participants to take
such action or would otherwise act upon the instruction of such holders. Neither
Holdings nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of Notes by DTC,
or for maintaining, supervising or reviewing any records of DTC relating to such
Notes.
Payments with respect to the principal of, premium, if any, and interest
on, any Notes represented by a Global Note registered in the name of DTC or its
nominee on the applicable record date will be payable by the Trustee to or at
the direction of DTC or its nominee in its capacity as the registered holder of
the Global Note representing such Notes under the Indenture. Under the terms of
the Indenture, Holdings and the Trustee may treat the persons in whose names the
Notes, including the Global Notes, are registered as the owners thereof for the
purpose of receiving such payment and for any and all other purposes whatsoever.
Consequently, neither Holdings nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of interest in the Global Note (including principal, premium, if any, and
interest), or to immediately credit the accounts of the relevant Participants
with such payment, in amounts proportionate to their respective holdings in
principal amount of beneficial interest in the Global Note as shown on the
records of DTC. Payments by the Participants and the Indirect Participants to
the beneficial owners of interests in the Global Note will be governed by
standing instructions and customary practice and will be the responsibility of
the Participants or the Indirect Participants and DTC.
Certificated Securities
If (i) DTC notifies Holdings in writing that it is no longer willing or
able to act as a depository or DTC ceases to be registered as a clearing agency
under the Exchange Act and Holdings is unable to locate a qualified successor
within 90 days, (ii) Holdings, at its option, notifies the Trustee in writing
that it elects to cause the issuance of Notes in definitive form under the
Indenture or (iii) upon the occurrence of certain other events, then, upon
surrender by DTC of its Global Notes, Certificated Securities will be issued to
each person that DTC identifies as the beneficial owner of the Notes represented
by the Global Notes. Upon any such issuance, the Trustee is required to register
such Certificated Securities in the name of such person or persons (or the
nominee of any thereof), and cause the same to be delivered thereto.
Neither Holdings nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).
Same Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available same day
funds to the accounts specified by the holder of interests in such Global Note.
With respect to Certificated Notes, Holdings will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available same day funds to the accounts specified by
the holders thereof or, if no such account is specified, by mailing a check to
each such holder's registered address. Holdings expects that secondary trading
in the Certificated Notes will also be settled in immediately available funds.
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Registration Rights; Liquidated Damages
Holdings and the Initial Purchaser entered into the Registration Rights
Agreement on the Closing Date. In the Registration Rights Agreement, Holdings
has agreed to file the Exchange Offer Registration Statement with the Commission
within 45 days of the Closing Date, and use its best efforts to have it declared
effective at the earliest possible time. Holdings has also agreed to use its
best efforts to cause the Exchange Offer Registration Statement to be effective
continuously, to keep the Exchange Offer open for a period of not less than 20
business days and cause the Exchange Offer to be consummated no later than the
30th business day after it is declared effective by the Commission. Pursuant to
the Exchange Offer, certain Holders of Notes which constitute Transfer
Restricted Securities (as defined below) may exchange their Transfer Restricted
Securities for registered Exchange Notes. To participate in the Exchange Offer,
each Holder must represent that it is not an affiliate of Holdings, it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the Exchange
Notes that are issued in the Exchange Offer, and that it is acquiring the
Exchange Notes in the Exchange Offer in its ordinary course of business.
If (i) the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any Holder of Notes which are Transfer Restricted Securities
notifies Holdings prior to the 20th business day following the consummation of
the Exchange Offer that (a) it is prohibited by law or Commission policy from
participating in the Exchange Offer, (b) it may not resell the Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus, and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by it, or (c) it is a
broker-dealer and holds Notes acquired directly from Holdings or any of
Holdings' affiliates, Holdings will file with the Commission a Shelf
Registration Statement to register for public resale the Transfer Restricted
Securities held by any such Holder who provide, Holdings with certain
information for inclusion in the Shelf Registration Statement.
For the purposes of the Registration Rights Agreement, "Transfer Restricted
Securities" means each (A) Note, until the earliest to occur of (i) the date on
which such Note is exchanged in the Exchange Offer for an Exchange Note which is
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Securities Act, (ii) the date on
which such Note has been disposed of in accordance with a Shelf Registration
Statement (and purchasers thereof have been issued Exchange Notes) or (iii) the
date on which such Note is distributed to the public pursuant to Rule 144 under
the Securities Act and each (B) Exchange note held by a Broker Dealer until the
date on which such Exchange Note is disposed of by a Broker Dealer pursuant to
the "Plan of Distribution" contemplated by the Exchange Offer Registration
Statement (including the delivery of the Prospectus contained therein).
The Registration Rights Agreement provides that (i) if Holdings fails to
file an Exchange Offer Registration Statement with the Commission on or prior to
the 45th day after the Closing Date, (ii) if the Exchange Offer Registration
Statement is not declared effective by the Commission on or prior to the 180th
day after the Closing Date, (iii) if the Exchange Offer is not consummated on or
before the 30th business day after the Exchange Offer Registration Statement is
declared effective (iv) if obligated to file the Shelf Registration Statement
and Holdings fails to file the Shelf Registration Statement with the Commission
on or prior to the 60th day after such filing obligation arises, (v) if
obligated to file a Shelf Registration Statement and the Shelf Registration
Statement is not declared effective on or prior to the 90th day after the
obligation to file a Shelf Registration Statement arises, or (vi) if the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, is declared effective but thereafter ceases to be effective or
useable in connection with resales of the Transfer Restricted Securities, for
such time of non-effectiveness or non-usability (each such event being a
Registration Default), Holdings agrees to pay to each Holder of Transfer
Restricted Securities affected thereby Liquidated Damages in an amount equal to
$0.05 per week per $1,000 in principal amount of Transfer Restricted Securities
held by such Holder for each week or portion thereof that the Registration
Default continues for the first 90 day period immediately following the
occurrence of such Registration Default. The amount of the Liquidated Damages
shall increase by an additional $0.05 per week per $1,000 in principal amount of
Transfer Restricted Securities with respect to each subsequent 90 day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $0.50 per week per $1,000 in principal amount of Transfer
Restricted Securities.
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Holdings shall not be required to pay Liquidated Damages for more than one
Registration Default at any given time. Following the cure of all Registration
Defaults, the accrual of Liquidated Damages will cease.
All accrued Liquidated Damages shall be paid by Holdings to Holders
entitled thereto by wire transfer to the accounts specified by them or by
mailing checks to their registered address if no such accounts have been
specified
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Accreted Value" means for each $1,000 of Notes, as of any date of
determination prior to July 1, 2003, the sum of (i) the initial offering price
of each Note and (ii) that portion of the excess of the principal amount of each
Note over such initial offering price which shall have been accreted thereon
through such date, such amount to be so accreted on a daily basis and compounded
semi-annually on each January 1 and July 1 at the rate of 13 1/2% per annum from
the date of issuance of the Notes through the date of determination.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control'
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Anchor Holdings" means Anchor Holdings, Inc. and all successors thereto.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of Holdings and its
Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "--Change of Control" and/or the
provisions described above under the caption "--Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by Holdings or any of its Restricted Subsidiaries of Equity
Interests of any of Holdings' Subsidiaries, in the case of either clause (i) or
(ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $1.0 million or (b) for net proceeds
in excess of $1.0 million. Notwithstanding the foregoing: (i) a transfer of
assets by Holdings to a Wholly Owned Restricted Subsidiary or by a Wholly Owned
Restricted Subsidiary to Holdings or to another Wholly Owned Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to Holdings or to another Wholly Owned Restricted Subsidiary, and
(iii) a Restricted Payment that is permitted by the covenant described above
under the caption "--Restricted Payments" will not be deemed to be Asset Sales.
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
85% of the face amount of all accounts receivable owned by the Company and its
Restricted Subsidiaries as of such date that are not more than 90 days past due,
plus (b) 50% of the book value of all inventory (excluding work in progress)
owned by the Company and its Restricted Subsidiaries as of such date, plus (c)
25% of the book value of all inventory owned by the Company and its Restricted
Subsidiaries as of such date that is work in progress, all calculated on a
consolidated basis and in accordance with GAAP. To the extent that information
is not
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available as to the amount of accounts receivable or inventory or trade payables
as of a specific date, the Company may utilize the most recent available
information for purposes of calculating the Borrowing Base.
"Business Day" means any day that is not a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation, a division of the McGraw-Hill Companies, Inc., and in each case
maturing within six months after the date of acquisition.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, without
duplication, (i) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income), plus (ii) provision for
taxes based on income or profits of such Person and its Restricted Subsidiaries
for such period, to the extent that such provision for taxes was included in
computing such Consolidated Net Income, plus (iii) consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior period
and deferred finance charges) and other non-cash charges of such Person and its
Restricted Subsidiaries for such period (excluding any such non-cash charges to
the extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash charges that was paid in a prior
period) to the extent that such depreciation, amortization and other non-cash
charges were deducted in computing such Consolidated Net Income. Notwithstanding
the foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent that a corresponding amount would be
permitted at the date of determination to be dividended to Holdings by such
Subsidiary without prior governmental approval (that has not been obtained), and
without direct or indirect restriction pursuant to the terms of its charter and
all judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Restricted Subsidiary
that is
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accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid in cash to Holdings or
any of its Wholly Owned Restricted Subsidiaries, (ii) the Net Income of any
Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Restricted Subsidiary of such
Person, (y) all investments as of such date in unconsolidated Restricted
Subsidiaries and in Persons that are not Restricted Subsidiaries (except, in
each case, Permitted Investments), and (z) all unamortized debt discount and
expense and unamortized deferred charges as of such date, all of the foregoing
determined in accordance with GAAP.
"Credit Facilities" means, with respect to Holdings, one or more debt
facilities or commercial paper facilities (including the Revolving Credit
Facility), in each case with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Existing Indebtedness" means up to $21.7 million in aggregate principal
amount of Indebtedness of Holdings and its Subsidiaries (other than Indebtedness
under the Revolving Credit Facility) in existence on the date of the Indenture,
until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest expense of such Person and its Restricted
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Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by such Person or
one of its Restricted Subsidiaries or secured by a Lien on assets of such Person
or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) the product of (a) all dividend payments, whether or not
in cash, on any series of preferred stock of such Person or any of its
Restricted Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of Holdings, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that Holdings
or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by Holdings or any of its Restricted Subsidiaries, including through
mergers or consolidations and including any related financing transactions,
during the four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date shall be deemed to have occurred on the
first day of the four-quarter reference period and Consolidated Cash Flow for
such reference period shall be calculated without giving effect to clause (iii)
of the proviso set forth in the definition of Consolidated Net Income, and (ii)
the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its Restricted
Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any Indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current
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payments of interest, and (ii) the principal amount thereof, together with any
interest thereon that is more than 30 days past due, in the case of any other
Indebtedness. Indebtedness shall include interest accruing after the filing of
any bankruptcy petition whether or not the claim for such interest is admitted
as a claim after such filing in such proceeding.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
Holdings for consideration consisting of common equity securities of Holdings
shall not be deemed to be an Investment. If Holdings or any Restricted
Subsidiary of Holdings sells or otherwise disposes of any Equity Interests of
any direct or indirect Restricted Subsidiary of Holdings such that, after giving
effect to any such sale or disposition, such Person is no longer a Restricted
Subsidiary of Holdings, Holdings shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Restricted Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Restricted Payments."
"Legal Holiday" means a Saturday, a Sunday or a day on which commercial
banks in the City of New York or at a place of payment are authorized or
required by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means the additional amounts (if any) payable by
Holdings in the event of a Registration Default under, and as defined in, the
Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by Holdings or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the Revolving Credit Facility) secured by a Lien
on the asset or assets that were the subject of such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither Holdings nor
any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that
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would constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise), or (c) constitutes the lender, and (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of Holdings
or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities (including any
amounts payable in respect of obligations to register securities of Holdings
under the Securities Act) payable under the documentation governing any
Indebtedness.
"Officers' Certificate" means a certificate signed on behalf of Holdings by
two Officers of Holdings, one of whom must be the principal executive officer,
the principal financial officer, the treasurer, or the principal accounting
officer of Holdings, that meets the requirements of the Indenture.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of the Indenture. The
counsel may be an employee of or counsel to Holdings (or any Guarantor, if
applicable), any Subsidiary of Holdings or the Trustee.
"Permitted Investments" means (a) any Investment in Holdings or in a
Restricted Subsidiary of Holdings that is engaged in the same or a similar line
of business as Holdings and its Restricted Subsidiaries were engaged in on the
date of the Indenture; (b) any Investment in Cash Equivalents; (c) any
Investment by Holdings or any Restricted Subsidiary of Holdings in a Person, if
as a result of such Investment (i) such Person becomes a Restricted Subsidiary
of Holdings that is engaged in the same or a similar line of business as
Holdings and its Subsidiaries were engaged in on the date of the Indenture or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
Holdings or a Restricted Subsidiary of Holdings that is engaged in the same or a
similar line of business as Holdings and its Restricted Subsidiaries were
engaged in on the date of the Indenture; (d) any Restricted Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales"; (e) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of Holdings; and (f) other Investments in any
Person having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (f)
that are at the time outstanding, not to exceed $5.0 million.
"Permitted Liens" means
(i) any Lien existing on property of Holdings or any Subsidiary on the
date of the Indenture securing Indebtedness outstanding on such date;
(ii) any Lien securing obligations under the Revolving Credit Facility
and any Guarantee thereof, which obligations or Guarantee are permitted by
the terms of the Indenture to be incurred and outstanding;
(iii) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or which are
being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP are being maintained;
(iv) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of
business which are not delinquent or which are being contested in good
faith and by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;
(v) Liens (other than any Lien imposed by ERISA) consisting of pledges
or deposits required in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other social security
legislation;
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(vi) Liens on property of Holdings or any Subsidiary securing (a) the
non-delinquent performance of bids, trade contracts (other than for
borrowed money), leases and statutory obligations, (b) surety bonds
(excluding appeal bonds and bonds posted in connection with court
proceedings or judgments) and (c) other non-delinquent obligations of a
like nature, including pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security legislation, in each case, incurred in
the ordinary course of business;
(vii) Liens consisting of judgment or judicial attachment Liens and
Liens securing contingent obligations on appeal bonds and other bonds
posted in connection with court proceedings or judgments; provided that the
enforcement of such Liens is effectively stayed and all such Liens in the
aggregate at any time outstanding for Holdings and its Subsidiaries do not
exceed $3.0 million;
(viii) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the businesses of Holdings and its
Subsidiaries taken as a whole;
(ix) purchase money security interests on any property acquired by
Holdings or any Subsidiary in the ordinary course of business, securing
Indebtedness incurred or assumed for the purpose of financing all or any
part of the cost of acquiring such property; provided that (a) any such
Lien attaches to such property concurrently with or within 90 days after
the acquisition thereof, (b) such Lien attaches solely to the property so
acquired in such transaction, (c) the principal amount of the Indebtedness
secured thereby does not exceed 100% of the cost of such property and (d)
the principal amount of the Indebtedness secured by all such purchase money
security interests shall not at any time exceed $5.0 million;
(x) Liens securing obligations in respect of Capital Lease Obligations
on assets subject to such leases, provided that such Capital Lease
Obligations are otherwise permitted hereunder;
(xi) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of setoff or similar rights
and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; provided that (a) such deposit account is
not a dedicated cash collateral account and is not subject to restrictions
against access by Holdings in excess of those set forth by regulations
promulgated by the Federal Reserve Board, and (b) such deposit account is
not intended by Holdings or any Subsidiary to provide collateral to the
depository institution;
(xii) Liens in favor of Holdings or any Wholly Owned Restricted
Subsidiary;
(xiii) Liens on property of a Person existing at the time such Person
becomes a Restricted Subsidiary or such Person is merged into or
consolidated with Holdings or any Restricted Subsidiary of Holdings;
provided that such Liens were in existence prior to the contemplation of
such merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with Holdings;
(xiv) Liens on property existing at the time of acquisition thereof by
Holdings or any Restricted Subsidiary of Holdings; provided that such Liens
were in existence prior to the contemplation of such acquisition;
(xv) extensions, renewals and replacements of Liens referred to in
clauses (i) through (xiv) above; provided that any such extension, renewal
or replacement Lien is limited to the property or assets covered by the
Lien extended, renewed or replaced and does not secure any Indebtedness in
addition to that secured immediately prior to such extension, renewal or
replacement; and
(xvi) Liens securing other Indebtedness of Holdings and its
Subsidiaries not expressly permitted by clauses (i) through (xv) above;
provided that the aggregate amount of the Indebtedness secured by Liens
permitted pursuant to this clause (xvi) does not exceed $3.0 million in the
aggregate and provided, further that such Indebtedness was permitted to be
incurred by the terms of the Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of Holdings or
any of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or
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refund other Indebtedness outstanding or available to be borrowed of Holdings or
any of its Restricted Subsidiaries; provided that: (i) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness outstanding or available to be borrowed so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness outstanding or
available to be borrowed being extended, refinanced, renewed, replaced, defeased
or refunded; (iii) if the Indebtedness outstanding or available to be borrowed
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness outstanding or available to be borrowed being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by Holdings or by the Restricted Subsidiary who
is the obligor on the Indebtedness outstanding or available to be borrowed being
extended, refinanced, renewed, replaced, defeased or refunded.
"Public Equity Offering" means a public offering of Equity Interests (other
than Disqualified Stock) of Holdings resulting in cash proceeds to Holdings of
at least $25.0 million.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any subsidiary of Holdings on the date of
this Indenture that is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the credit facility among the Company,
Anchor Holdings, the lenders party thereto in their capacities as lenders
thereunder and NationsBank, N.A., as agent, together with the related documents
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (provided that such increase in borrowings is
permitted by the covenant described under "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock")) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution,
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with Holdings or any Restricted Subsidiary of Holdings unless the
terms of any such agreement, contract, arrangement or understanding are no less
favorable to Holdings or such Restricted Subsidiary of Holdings than those that
might be obtained at the time from Persons who are not Affiliates of Holdings;
(c) is a Person with respect to which neither Holdings nor any of its Restricted
Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; and
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(d) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of Holdings or any of its Restricted Subsidiaries.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by filing with the Trustee a certified copy of the Board Resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described under the caption "--Certain Covenants--Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
Holdings as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," Holdings shall be in default of such covenant). The Board of Directors
of Holdings may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of Holdings of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under the covenant
described under the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock," and (ii) no Default or Event of Default would be
in existence following such designation.
"Securities Act" means the Securities Act of 1933, as amended.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such
Person.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of certain indebtedness of Holdings is subject to and
qualified in its entirety by reference to the detailed provisions of the
agreements and instruments to which the summary relates. Copies of such
agreements and instruments are available upon request.
COMPANY NOTES
The Company issued $130 million principal amount of 10 1/2% Senior
Subordinated Notes due 2008 pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. Interest on the Company Notes is payable semiannually on
each January 1 and July 1. The Old Notes are, and the New Notes will be, general
unsecured obligations of the Company, the Old Notes rank, and the New Notes will
rank, subordinate in right of payment to all Senior Debt (as defined in the
Company Notes Indenture) and the Old Notes rank, and the New Notes will rank,
senior or pari passu in right of payment to all existing and future subordinated
indebtedness of the Company. The Old Notes are, and the New Notes will be,
effectively subordinated to all liabilities, including trade payables, of the
Company's subsidiaries.
The Company Notes may be redeemed at the option of the Company in whole or
in part at any time on or after July 1, 2003 in cash at the redemption prices
set forth in the Company Notes Indenture, plus accrued and unpaid interest and
Liquidated Damages (as defined in the Company Notes Indenture), if any, thereon
to the date of redemption. In addition, at any time prior to July 1, 2003, the
Company may on any one or more occasions redeem up to 35% of the initially
outstanding aggregate principal amount of the Company Notes at a redemption
price equal to 110.5% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net proceeds of one or more Public Equity Offerings (as defined in the
Company Notes Indenture); provided that, in each case, at least 65% of the
initially outstanding aggregate principal amount of the Company Notes remains
outstanding immediately after the occurrence of any such redemption.
The Company Notes Indenture contains various restrictive covenants that
limit, among other things, the ability of the Company to: (i) pay dividends,
redeem capital stock or make certain other restricted payments or investments,
(ii) incur additional indebtedness or issue preferred equity interests, (iii)
merge, consolidate or sell all or substantially all of its assets, (iv) create
liens on assets and (v) enter into certain transactions with affiliates or
related persons.
Events of default under the Company Notes Indenture include, among other
things, (i) default for 30 days in the payment when due of interest on the
Company Notes; (ii) default in payment when due of the principal of or premium,
if any, on the Company Notes; (iii) failure by the Company to comply with the
covenants contained in the Company Notes Indenture, subject in certain instances
to grace periods; (iv) failure by the Company for 60 days after notice to comply
with any of its other agreements in the Indenture or the Notes; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness (as defined in the
Company Notes Indenture) for money borrowed by the Company or any of its
Restricted Subsidiaries (as defined in the Company Notes Indenture) (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Company Notes Indenture, if such (a) default results in
the acceleration of such Indebtedness prior to its express maturity or shall
constitute a default in the payment of such Indebtedness at final maturity of
such Indebtedness, and (b) the principal amount of any such Indebtedness that
has been accelerated or not paid at maturity, when added to the aggregate
principal amount of all other Indebtedness that has been accelerated or not paid
at maturity, exceeds $5.0 million; (vi) failure by the Company or any of its
Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries and (viii) except as permitted by
the Company Notes Indenture, any guarantee of the Company Notes issued by a
guarantor of such Company Notes shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any guarantor of the Company Notes or any Person acting on any such
guarantor shall deny or disaffirm its obligations under its quarantee.
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SENIOR NOTES
On March 27,1997, Anchor issued $100 million principal amount of 11 3/4%
Senior Notes due 2004 (the "Original Senior Notes") pursuant to exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. Anchor consummated an
exchange offer registered under the Securities Act to exchange the Original
Senior Notes for the Senior Notes, which have terms substantially identical in
all material respects to the Original Senior Notes. Interest is payable
semiannually on each April 1 and October 1. Immediately after the consummation
of the Merger, the Senior Notes have become unsecured obligations of the Company
senior to all subordinated debt of the Company and rank pari passu with all
other existing and future senior debt of the Company and mature on April 1,
2004. The Senior Notes are guaranteed on a senior basis (the "Senior Note
Guarantee") by Anchor Holdings (the "Senior Notes Guarantor"). The Senior Note
Guarantee is an unconditional obligation of the Senior Notes Guarantor. Pursuant
to the Senior Notes Indenture, the Senior Notes have also been guaranteed by
certain Restricted Subsidiaries (as defined in the Senior Note Indenture) of the
Company. Such guarantees are unconditional obligations of such Restricted
Subsidiaries.
The Senior Notes may be redeemed at the option of the Company in whole or
in part at any time on or after April 1, 2001 in cash at the redemption prices
set forth in the Senior Notes Indenture, plus accrued and unpaid interest and
Liquidated Damages (as defined in the Senior Notes Indenture), if any, thereon
to the date of redemption. In addition, at any time prior to April 1, 2000, the
Company may on any one or more occasions redeem up to 35% of the initially
outstanding aggregate principal amount of the Senior Notes at a redemption price
equal to 110.75% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net proceeds of one or more Public Equity Offerings (as defined in the
Senior Notes Indenture); provided that, in each case, at least 65% of the
initially outstanding aggregate principal amount of the Senior Notes remains
outstanding immediately after the occurrence of any such redemption.
The Senior Notes Indenture contains various restrictive covenants that
limit, among other things, the ability of the Company to: (i) pay dividends,
redeem capital stock or make certain other restricted payments or investments,
(ii) incur additional indebtedness or issue preferred equity interests, (iii)
merge, consolidate or sell all or substantially all of its assets, (iv) create
liens on assets and (v) enter into certain transactions with affiliates or
related persons.
Events of default under the Senior Notes Indenture include, among other
things, (i) default for 30 days in the payment when due of interest on the
Senior Notes; (ii) default in payment when due of the principal of or premium,
if any, on the Senior Notes; (iii) failure by the Company to comply with the
covenants contained in the Senior Notes Indenture, subject in certain instances
to grace periods; (iv) failure by the Company or the Senior Notes Guarantor for
60 days after notice to comply with any of its other agreements in the Senior
Notes Indenture, the Senior Notes or the Senior Note Guarantee; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness (as defined in the
Senior Notes Indenture) for money borrowed by the Company or any of its
Restricted Subsidiaries (as defined in the Senior Notes Indenture) (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Senior Notes Indenture, if such (a) default results in the
acceleration of such Indebtedness prior to its express maturity or shall
constitute a default in the payment of such Indebtedness at final maturity of
such Indebtedness, and (b) the principal amount of any such Indebtedness that
has been accelerated or not paid at maturity, when added to the aggregate
principal amount of all other Indebtedness that has been accelerated or not paid
at maturity, exceeds $5.0 million; (vi) failure by the Company or any of its
Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries; and (viii) except as permitted by
the Senior Notes Indenture, any Senior Note Guarantee issued by a Senior Notes
Guarantor shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Senior Notes Guarantor or any Person acting on behalf of any Senior Notes
Guarantor shall deny or disaffirm its obligations under its Senior Note
Guarantee.
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CONNECTICUT NOTES AND GRANT
The Company has issued a series of notes (the "Connecticut Notes") to the
Connecticut Development Authority in the aggregate principal amount of $605,000.
Each such note has a maturity of six years and bears interest at a rate of 5%
per annum. The Company has also received a grant of $1,000,000 from the State of
Connecticut, Department of Economic Development. Such grant is subject to
certain requirements, among other things, that the Company: (i) retain
operations in Connecticut for no less than 10 years and (ii) fund at least 50%
of the entire project. Failure to meet these conditions would require immediate
repayment of all amounts advanced to the Company ($1,479,928 as of December 31,
1997) and further, such failure would constitute an event of default under the
Connecticut Notes.
REVOLVING CREDIT FACILITY
General. Concurrently with the Offering, the Company amended its then
existing credit facility (as amended, the "Revolving Credit Facility") with
NationsBank, N.A., as Agent and sole lender. The Revolving Credit Facility
provides for revolving loans to the Company in an aggregate amount not to exceed
$50.0 million, with a $10.0 million sublimit for the issuance of standby and
commercial letters of credit. Additionally, Anchor Holdings has guaranteed the
Company's obligations under the Revolving Credit Facility. It is anticipated
that the Revolving Credit Facility will be syndicated.
Availability. Borrowings under the Revolving Credit Facility are subject
to a borrowing base equal to the sum of (a) 85% of "eligible receivables", (b)
50% of "eligible inventory" and (c) the lesser of $5,000,000 and 25% of
"eligible inventory" which is work in progress (as such terms are defined in the
Revolving Credit Facility), valued at the lesser of book value or fair market
value.
Security. The Revolving Credit Facility is secured by (i) a first priority
perfected security interest in (a) 100% of the equity interests in all domestic
subsidiaries of the Company, (b) in the event that any foreign subsidiary of the
Company which is a direct foreign subsidiary of the Company or any of its
domestic subsidiaries shall have 5% or more of consolidated total assets or
consolidated EBITDA, 65% of the equity interests in such foreign subsidiary, and
(c) all of the inventory, trademarks, trademark licenses, accounts receivable,
cash and cash equivalents maintained on deposit with the Agent and books and
records relating to the foregoing, of the Company and its domestic subsidiaries,
which assets shall not be subject to any other lien or encumbrance, except for
liens permitted under the Revolving Credit Facility, and (ii) a negative pledge
(subject to certain carve-outs) upon all other present and future assets and
properties of the Company and all of the domestic and foreign subsidiaries of
the Company (including, without limitation, accounts receivable, inventory, real
property, machinery, equipment, contracts, trademarks, copyrights, patents,
license agreements, and general intangibles).
The foregoing security shall ratably secure the Revolving Credit Facility
and any interest rate swap/foreign currency swap or similar agreements with a
lender (or any affiliate of a lender) under the Revolving Credit Facility.
Maturity. The Revolving Credit Facility will mature on June 30, 2003.
Interest Rate. The Revolving Credit Facility bears interest at a rate
equal to IBOR plus an applicable margin, which initially is 200 basis points or
the Base Rate (defined as the higher of (i) the prime rate of NationsBank, N.A.
and (ii) the Federal Funds rate plus 1/2%) plus an applicable margin, which
initially is 100 basis points. The Company may select interest periods of one,
two, three or six months for IBOR loans, subject to availability. A penalty rate
shall apply on all loans in the event of default at a rate per annum of 2% above
the applicable interest rate.
Covenants. The Revolving Credit Facility contains covenants customary for
working capital financings, including, without limitation: (i) maximum leverage
and interest coverage ratios and minimum net worth; (ii) restrictions on capital
expenditures, incurrence of additional indebtedness, dividends and redemptions;
and (iii) restrictions of mergers, acquisitions and sales of assets.
Events of Default. The Revolving Credit Facility contains events of
default customary for working capital financings, including, without limitation:
(i) non payment of principal, interest, fees or other amounts, (ii) violation of
covenants, and (iii) inaccuracy of representations and warranties.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States Federal income tax
consequences relevant to the purchase, ownership, and disposition of Notes by an
initial purchaser of Notes. This summary is based upon existing United States
Federal income tax law, which is subject to change, possibly retroactively. This
summary does not discuss all aspects of United States Federal income taxation
which may be important to particular Holders in light of their individual
investment circumstances, such as Notes held by investors subject to special tax
rules (e.g., financial institutions, insurance companies, broker-dealers, and
tax-exempt organizations) or to persons that will hold the Notes as a part of a
straddle, hedge, or synthetic security transaction for United States Federal
income tax purposes or that have a functional currency other than the United
States dollar, all of whom may be subject to tax rules that differ significantly
from those summarized below. In addition, this summary does not discuss any
foreign, state, or local tax considerations. This summary assumes that investors
will hold their Notes as "capital assets" (generally, property held for
investment) under the United States Internal Revenue Code of 1986, as amended
(the "Code"). Prospective investors are urged to consult their tax advisors
regarding the United States Federal, state, local, and foreign income and other
tax considerations of the purchase, ownership, and disposition of the Notes.
For purposes of this summary, a "U.S. Holder" is (i) an individual who is a
citizen or resident of the United States, (ii) a corporation, partnership, or
other entity created or organized under the laws of the United States or any
state or political subdivision thereof, (iii) an estate that is subject to
United States Federal income taxation without regard to the source of its
income, or (iv) a trust whose administration is subject to the primary
supervision of a United States court and which has one or more United States
persons who have the authority to control all substantial decisions of the
trust.
U.S. HOLDERS
The following discussion is limited to the federal income tax consequences
relevant to U.S. Holders. Certain federal income tax consequences relevant to a
Holder that, for United States Federal income tax purposes, is not a U.S. Holder
(a "Non-U.S. Holder") are discussed separately below. The federal income tax
consequences to Holders of the exchange of Notes for New Notes pursuant to the
Exchange Offer ("Tendering Holders") are also discussed separately below.
ORIGINAL ISSUE DISCOUNT
The Notes will be issued with original issue discount ("OID") for United
States Federal income tax purposes. All U.S. Holders will be required to include
OID in income as it accrues, regardless of such U.S. Holder's regular method of
accounting for federal income tax purposes, and in advance of the receipt of
cash attributable to that income. OID generally will be treated as interest
income to the U.S. Holder and will accrue on a yield-to-maturity basis over the
life of the Notes, as discussed below.
The amount of OID with respect to a Note will be an amount equal to the
excess of the "stated redemption price at maturity" of such Note over the "issue
price" of such Note. The issue price of a Note will be the initial price at
which a substantial portion of the Notes are sold (not including sales to bond
houses, brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers). Under applicable Treasury
regulations, all payments under a debt instrument are included in its stated
redemption price at maturity unless they are unconditionally required to be paid
at least annually at a single fixed rate over the term of the debt instrument.
Accordingly, because Holdings is not required to pay cash interest prior to July
1, 2003, all payments on the Notes will be included in the Notes' stated
redemption price at maturity, and the Notes will therefore bear significant OID.
The amount of OID accruing to a Holder with respect to any Note will be the
sum of the "daily portions" of OID with respect to such Note for each day during
the taxable year (or portion thereof) on which such Holder owns such Note
("accrued OID"). The daily portion is determined by allocating to each day in
any "accrual period" (in the case of the Notes, any six-month period, or longer
initial period, that ends on July 1 or January 1) the pro rata portion of the
OID allocable to that accrual period. The amount of OID accruing
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during any full accrual period with respect to a Note will be equal to the
product of the "adjusted issue price" of such Note at the beginning of that
accrual period, and the "yield to maturity" of such Note (taking into account
the length of the accrual period). The adjusted issue price of a Note at the
beginning of its first accrual period will be equal to its issue price. The
adjusted issue price at the beginning of any subsequent accrual period will be
equal to (i) the adjusted issue price at the beginning of the preceding accrual
period, plus (ii) the amount of OID accrued during the preceding accrual period,
minus (iii) any payments made on the Notes during the preceding accrual period
and on the first day of such subsequent accrual period. The yield to maturity of
a Note is the discount rate that, when used in computing the present value of
all payments to be made on a Note, produces an amount equal to the issue price
of the Note.
The general effect of the OID rules is that U.S. Holders, including those
holders that use a cash-basis method of accounting, will be required to accrue
OID as interest income with respect to the Notes over their term based on the
Notes' yield to maturity (which will differ from their stated interest rate).
Cash payments on the Notes will not be separately included in a U.S. Holders's
income as interest, but rather will be treated first as payments of previously
accrued OID and then as payments of principal.
In the event of a Change of Control, the Holders of Notes will have the
right to require Holdings to purchase their Notes. The Treasury Regulations
provide that the right of Holders of the Notes to require redemption of the
Notes upon the occurrence of a Change of Control will not affect the yield or
maturity date of the Notes unless, based on all the facts and circumstances as
of the Issue Date, it is more likely than not that a Change of Control giving
rise to the redemption right will occur. Holdings does not intend to treat this
redemption provision of the Notes as affecting the computation of the yield to
maturity of the Notes.
Holdings may redeem the Notes at any time on or after a certain date, and,
in certain circumstances, may redeem or repurchase all or a portion of the Notes
any time prior to the maturity date. Under the Treasury Regulations, Holdings is
deemed to exercise any option to redeem if the exercise of such option would
lower the yield of the debt instrument. Holdings believes, and intends to take
the position, that it will not be treated as having exercised an option to
redeem under these rules.
In certain cases, in the event Holdings does not comply with certain
covenants set forth in the Registration Rights Agreement, Holdings will be
obligated to pay specified liquidated damages to the Holders of the Notes.
Holdings believes the contingency that Holdings will pay such additional amounts
is "remote and incidental" within the meaning of the applicable Treasury
Regulations. On that basis, Holdings believes that the possibility that such
additional amounts may be paid should not be taken into account in computing
OID.
Holdings will furnish annually to the Internal Revenue Service (the
"Service") and to U.S. Holders the amount of OID that accrued on the Notes for
that year. Such information will be based on the accruals of OID as if the
holder were the original holder of the Notes. Accordingly, subsequent holders
may be required to adjust the amount of OID, if any, they are required to
report.
APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS
The Code provides rules that affect the tax treatment of certain high yield
discount instruments issued with "significant OID" ("AHYDOs"). As described
above, the Notes will bear significant OID and thus, will constitute AHYDOs
because their yield to maturity will exceed the applicable federal rate (the
"AFR") in effect for the calendar month in which they are issued plus five
percentage points. Under the AHYDO provisions, Holdings will not be entitled to
deduct OID that accrues with respect to the Notes and that is not attributable
to the "disqualified portion" (as described below), until amounts attributable
to such OID are paid in cash.
In addition, if the yield to maturity of the Notes exceeds the sum of the
relevant AFR plus six percentage points (such excess, the "Excess Yield"), then
(i) the disqualified portion of the OID accruing on the Notes will not be
deductible by Holdings, and may be treated as a dividend distribution for
purposes of the dividends received deduction with respect to U.S. Holders that
are corporations, and (ii) the remainder of the OID accruing on the Notes will
not be deductible by Holdings until paid in cash. In general, the disqualified
portion
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of OID for any accrual period will equal the product of (a) a percentage
determined by dividing the Excess Yield by the yield to maturity and (b) the OID
for the accrual period.
Assuming a corporate U.S. Holder satisfies the requirements of Sections
243, 246 and 246A of the Code, such holder will be entitled to a dividends
received deduction with respect to any disqualified portion of the accrued OID
to the extent that Holdings has sufficient current or accumulated "earnings and
profits." To the extent that Holdings' earnings and profits are insufficient,
any portion of the OID that otherwise would be characterized as a dividend for
purposes of the dividends received deduction will be taxed as ordinary interest
income in accordance with the rules described in "-- Original Issue Discount."
SALE, RETIREMENT OR OTHER TAXABLE DISPOSITION OF THE NOTES
Gain or loss upon a sale or other disposition of a Note will be measured by
the difference between the amount of cash and the fair market value of property
received with respect to such sale and the U.S. Holder's adjusted tax basis in
such Note. A U.S. Holder's adjusted tax basis in a Note generally will be equal
to the cost of the Note (i.e., in the case of an initial purchaser, the Note's
issue price) increased by the amount of OID that is included in such holder's
income prior to the date of sale or disposition and reduced by all payments
received by the holder with respect to the Note as of the date of sale or other
taxable disposition. Such gain or loss generally will be capital gain or loss,
and will be long-term capital gain or loss if the U.S. Holder held the Note for
more than one year. In the case of an individual U.S. Holder of a note, the
maximum federal income tax rate applicable to net long-term capital gains is
twenty-eight percent (28%) if the Note was held for greater than one year but
less than eighteen months and twenty percent (20%) if the Note was held for more
than eighteen months.
EXCHANGE OFFER
The exchange of Notes for New Notes pursuant to the Exchange Offer should
not be treated as an "exchange" for federal income tax purposes because the New
Notes will not differ materially in kind or extent from the Notes and because
the exchange will occur by operation of the terms of the Notes. As a result,
there should be no federal income tax consequences to Tendering Holders
exchanging Notes for New Notes pursuant to the Exchange Offer.
LIQUIDATED DAMAGES
Holdings intends to take the position that any Liquidated Damages described
above under "Description of Notes -- Registration Rights; Liquidated Damages"
will be taxable to a Holder of a Note as ordinary income at the time such
amounts are received or accrued in accordance with the Holder's usual method of
accounting for federal income tax purposes. The Service may take a different
position, however, which could affect the timing of the Holder's income with
respect to Liquidated Damages.
BACKUP WITHHOLDING
A U.S. Holder of Notes may be subject to "backup withholding" at a rate of
31% with respect to certain "reportable payments" including interest payments
and, under certain circumstances, principal payments on the Notes. These backup
withholding rules apply if the U.S. Holder, among other things, (i) fails to
furnish a social security number or other taxpayer identification number ("TIN")
certified under penalties of perjury within a reasonable time after the request
therefor, (ii) furnishes an incorrect TIN, (iii) fails to report properly
interest, or (iv) under certain circumstances, fails to provide a certified
statement, signed under penalties of perjury, that the TIN furnished is the
correct number and that such U.S. Holder is not subject to backup withholding. A
U.S. Holder who does not provide Holdings with its correct TIN also may be
subject to penalties imposed by the Service. Any amount withheld from a payment
to a U.S. Holder under the backup withholding rules is creditable against the
U.S. Holder's federal income tax liability, provided the required information is
furnished to the Service. Backup withholding will not apply, however, with
respect to payments made to certain U.S. Holders, including corporations and
tax-exempt organizations, provided their exemption from backup withholding is
properly established.
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Holdings will report to the U.S. Holders of Notes and to the Service the
amount of any "reportable payments" for each calendar year and the amount of tax
withheld, if any, with respect to such payments. U.S. Holders are advised to
consult their tax advisors regarding the applicability of the aforementioned
backup withholding rules to the U.S. Holder's particular situation.
NON-U.S. HOLDERS
PAYMENTS OF INTEREST
Interest (including OID) paid by Holdings to Non-U.S. Holders will not be
subject to United States Federal income or withholding tax if the requirements
of section 871(h) or 881(c) of the Code are satisfied as described below under
the heading "Owners Statement Requirement," and provided that (i) such holder
does not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of Holdings entitled to vote, and (ii) such holder
is not a controlled foreign corporation that is related to Holdings through
stock ownership, a foreign tax-exempt organization or foreign private foundation
for United States Federal income tax purposes. Notwithstanding the above, a
Non-U.S. Holder that is engaged in the conduct of a United States trade or
business will be subject to (i) United States Federal income tax on interest
that is effectively connected with the conduct of such trade or business and
(ii) if the Non-U.S. Holder is a corporation, a United States branch profits tax
equal to 30% of its "effectively connected earnings and profits" as adjusted for
the taxable year, unless the holder qualifies for an exemption from such tax or
a lower tax rate under an applicable treaty.
GAIN ON DISPOSITION
A Non-U.S. Holder will generally not be subject to United States Federal
income tax on gain recognized on a sale, redemption, or other disposition of a
Note unless (i) the gain is effectively connected with the conduct of a trade or
business within the United States by the Non-U.S. Holder or (ii) in the case of
a Non-U.S. Holder who is a nonresident alien individual, such holder is present
in the United States for 183 or more days during the taxable year and certain
other requirements are met. Any such gain that is effectively connected with the
conduct of a United States trade or business by a Non-U.S. Holder will be
subject to United States Federal income tax on a net income basis in the same
manner as if such holder were a United States person and, if such Non-U.S.
Holder is a corporation, such gain may also be subject to the 30% United States
branch profits tax described above.
FEDERAL ESTATE TAXES
A Note held by an individual who at the time of death is not a citizen or
resident of the United States will not be subject to United States Federal
estate tax as a result of such individual's death, provided that (i) the
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Holdings entitled to vote and
(ii) the interest accrued on the Note was not effectively connected with the
conduct of a United States trade or business.
OWNER'S STATEMENT REQUIREMENT
Sections 871(h) and 881(c) of the Code require that either the beneficial
owner of a Note or a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business (a "Financial Institution") and that holds a Note on behalf of such
owner file a statement with Holdings or its agent to the effect that the
beneficial owner is not a United States person in order to avoid withholding of
United States Federal income tax. Under current regulations, this requirement
will be satisfied if Holdings or its agent receives (i) a statement (an "Owner's
Statement") from the beneficial owner of a Note in which such owner certifies,
under penalties of perjury, that such owner is not a United States person and
provides such owner's name and address or (ii) a statement from the Financial
Institution holding the Note on behalf of the beneficial owner in which the
Financial Institution certifies, under penalties of perjury, that it has
received the Owner's Statement together with a copy of the Owner's Statement.
The
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beneficial owner must inform Holdings or its agent (or, in the case of a
statement described in clause (ii) of the immediately preceding sentence, the
Financial Institution) within 30 days of any change in information on the
Owner's Statement. The foregoing certifications may be made on Internal Revenue
Service Form W-8.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Current United States Federal income tax law provides that in the case of
payments of interest to Non-U.S. Holders, the 31% backup withholding tax will
not apply to payments made outside the United States by Holdings or a paying
agent on a Note if an Owner's Statement is received or an exemption has
otherwise been established; provided in each case that Holdings or the paying
agent, as the case may be, does not have actual knowledge that the payee is a
United States person.
Under current Treasury Regulations, payments of the proceeds of the sale of
a Note to or through a foreign office of a "broker" will not be subject to
backup withholding but will be subject to information reporting if the broker is
a United States person, a controlled foreign corporation for United States
Federal income tax purposes, or a foreign person 50% or more of whose gross
income is from a United States trade or business for a specified three-year
period, unless the broker has in its records documentary evidence that the
holder is not a United States person and certain conditions are met or the
holder otherwise establishes an exemption. Payment of the proceeds of a sale to
or through the United States office of a broker is subject to backup withholding
and information reporting unless the holder certifies its non-United States
status under penalties of perjury or otherwise establishes an exemption.
Recently, the Treasury Department has promulgated final regulations (the
"Final Regulations") regarding the withholding and information reporting rules
discussed above. In general, the Final Regulations do not significantly alter
the substantive withholding and information reporting requirements but unify
current certification procedures and forms and clarify reliance standards. Under
the Final Regulations, special rules apply which permit the shifting of primary
responsibility for withholding to certain financial intermediaries acting on
behalf of beneficial owners. The Final Regulations are generally effective for
payments made after December 31, 1998, subject to certain transition rules.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. Holdings has agreed that for a period one year from the
Consummation Deadline (as defined in the Registration Rights Agreement) or such
shorter period as will terminate when all Old Notes covered by the Registration
Statement of which this Prospectus forms a part have been said pursuant thereto
(such period being hereinafter referred to as the "Prospectus Delivery Period"),
it will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale.
Holdings will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
During the Prospectus Delivery Period, Holdings will promptly send
additional copies of the Prospectus and any amendment or supplement to this
Prospectus to any broker-dealer that requests such document. Holdings has agreed
to pay all expenses incident to the Exchange Offer other than commissions or
concessions of any brokers or dealers and will indemnify the holders of the
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
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LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
New Notes will be passed upon for Holdings by Skadden, Arps, Slate, Meagher &
Flom LLP, New York, New York, which has acted as counsel for the Company in
connection with the Exchange Offer.
EXPERTS
The audited consolidated financial statements included in this Prospectus
and elsewhere in the Registration Statement of which this Prospectus forms a
part of Anchor Holdings, Inc. for the years ended December 31, 1995, 1996 and
1997, have been audited by PricewaterhouseCoopers LLP, independent accountants,
as stated in their report with respect thereto, and are being included herein in
reliance upon authority of said firm as experts in giving said reports.
The audited consolidated financial statements included in the Prospectus
and elsewhere in the Registration Statement of which this Prospectus forms a
part of Moll PlastiCrafters Limited Partnership for the years ended December 31,
1995, 1996 and 1997, and the audited combined financial statements included in
the Prospectus and elsewhere in the Registration Statement of which this
Prospectus forms a part of The Hanning Companies for the years ended December
31, 1995 and 1996, have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their reports with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
The audited consolidated financial statements included in this Prospectus
and elsewhere in the Registration Statement of which this Prospectus forms a
part of Somomeca Industries for the years ended August 31, 1995, 1996 and 1997
and the four month period ended December 31, 1997, have been audited by Barbier,
Frinault & Associes, Member Firm of Andersen Worldwide, independent public
accountants, as stated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
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INDEX TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Basis of Presentation....................................... P-2
Unaudited Pro Forma Consolidated Balance Sheet as of March
31, 1998.................................................. P-3
Unaudited Pro Forma Consolidated Statement of Income for the
Year Ended December 31, 1997.............................. P-4
Unaudited Pro Forma Consolidated Statement of Income for the
Three Months Ended March 31, 1998......................... P-5
Notes to Unaudited Pro Forma Consolidated Financial
Statements................................................ P-6
</TABLE>
P-1
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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma consolidated financial statements of AMM
Holdings, Inc. ("Holdings," the parent of Anchor Holdings, Inc. ("Anchor
Holdings") and the indirect parent of Anchor Advanced Products, Inc. ("Anchor")
gives effect to the offering of Holdings' Senior Discount Notes ("Holdings
Offering"). They also give effect to the contribution of the interests in Moll
PlastiCrafters Limited Partnership ("Moll") to Holdings in exchange for common
shares of Holdings and subsequent merger of Moll into Anchor (the "Merger"). The
Merger occurred immediately prior to the consummation of the Holdings Offering
and the offering of Moll Industries, Inc. Senior Subordinated Notes (the
"Company Offering"). As the partners of Moll own a majority of the outstanding
shares of Holdings subsequent to the Merger, Moll is considered the accounting
acquiror in the Merger and will utilize purchase accounting to account for the
Merger.
In addition, the unaudited pro forma consolidated financial statements of
the Company also give effect to the following:
X the August 1997 purchase acquisition of the Hanning companies ("Hanning")
by Moll,
X the January 1998 purchase acquisition of Somomeca Industries ("Somomeca")
by Moll,
X the distribution of Moll's investment in Reliance Products, L.P.
("Reliance"), to certain of Moll's limited partners, and
X the purchase acquisition of Gemini Plastic Services, Inc. ("Gemini") by
the Company.
Collectively, these acquisitions are referred to as the "Acquisitions" and
the combined companies are referred to as the "Company".
The unaudited pro forma consolidated balance sheet of Holdings gives effect
to the Merger, the Moll Offering and the Holdings Offering and the application
of the proceeds therefrom as if they had occurred on March 31, 1998. The
unaudited pro forma consolidated statement of income of Holdings for the year
ended December 31, 1997 gives effect to these transactions as if they had
occurred on January 1, 1997. The unaudited pro forma consolidated statement of
income of Holdings for the three months ended March 31, 1998 gives effect to
these transactions as if they had occurred on January 1, 1998.
Holdings has identified certain savings which are expected to occur as a
result of the Merger. These savings have been reflected in the unaudited pro
forma consolidated financial statements of Holdings. Holdings has preliminarily
analyzed certain additional savings that it expects to be realized by
consolidating other operational and general and administrative functions as a
result of the Merger. Holdings has not and cannot quantify these savings until
completion of the Merger. Accordingly, these additional anticipated savings have
not been included in the unaudited pro forma consolidated financial statements
of Holdings.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. The pro forma financial data does not purport to represent
what Holdings' financial position or results of operations would actually have
been if such transactions in fact had occurred on those dates or to project
Holdings' financial position or results of operations for any future period.
Since the combined companies were not under common control or management,
historical combined results may not be comparable to, or indicative of, future
performance. The unaudited pro forma consolidated financial statements should be
read in conjunction with the other financial statements and notes thereto
included elsewhere in this Prospectus. See "Risk Factors" included elsewhere
herein.
P-2
<PAGE> 101
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31,1998
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------------------------------------- PRO FORMA
MOLL ANCHOR(A) GEMINI(B) RELIANCE(C) AMM HOLDINGS, INC.
------------ ------------ ----------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash....................... $ 7,140,808 $ 144,000 $ 692,922 $ (1,052,805) $ 16,674,000 (l) $ 25,598,925
2,000,000 (m)
Accounts receivable, net... 53,369,599 15,559,000 2,030,140 (3,233,816) 67,724,923
Inventories................ 24,621,674 26,379,000 1,686,550 (3,630,734) 49,056,490
Deposits on tooling........ 7,767,926 -- -- -- 7,767,926
Other current assets....... 2,877,548 3,123,000 59,557 (34,812) 6,025,293
------------ ------------ ----------- ------------ ------------
Total current
assets........... 95,777,555 45,205,000 4,469,169 (7,952,167) 156,173,557
------------ ------------ ----------- ------------ ------------
Property, plant and
equipment................ 78,276,002 94,392,000 5,720,830 (7,641,390) 7,806,428 (h) 132,825,612
(45,728,258) (h)
Accumulated depreciation... (15,548,145) (42,695,000) (3,033,258) 1,471,221 45,728,258 (h) (14,076,924)
------------ ------------ ----------- ------------ ------------
62,727,857 51,697,000 2,687,572 (6,170,169) 118,748,688
------------ ------------ ----------- ------------ ------------
Goodwill, net.............. 8,722,000 9,363,000 -- -- 17,981,659 (i) 36,066,659
Intangible and other
assets, net.............. 4,722,984 8,414,000 54,213 -- 7,550,000 (l) 16,216,755
(2,149,420) (i)
(2,375,022) (k)
Receivable from
affiliates............... 462,646 2,149,000 -- -- 2,611,646
------------ ------------ ----------- ------------ ------------
Total other
assets........... 13,907,630 19,926,000 54,213 -- 54,895,060
------------ ------------ ----------- ------------ ------------
$172,413,042 $116,828,000 $ 7,210,954 $(14,122,336) $329,817,305
============ ============ =========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Checks drawn in excess of
cash on deposit.......... $ 1,507,268 $ 929,000 $ -- $ -- $ $ 2,436,268
Short-term borrowings...... 23,726,000 -- -- -- (23,726,000) (l) --
Current portion of
long-term obligations.... 10,275,742 1,075,000 379,262 -- (5,400,000) (l) 6,330,004
Customer deposits on
tooling.................. 8,078,415 -- -- -- 8,078,415
Accounts payable........... 32,411,988 4,950,000 1,413,021 (1,690,525) 118,306 (g) 37,202,790
Accrued liabilities........ 11,304,203 4,328,000 360,760 (646,236) 15,346,727
Due to affiliates.......... 260,574 -- -- -- 260,574
------------ ------------ ----------- ------------ ------------
Total current
liabilities...... 87,564,190 11,282,000 2,153,043 (2,336,761) 69,654,778
------------ ------------ ----------- ------------ ---
Long-term obligations:
Term loans............... 53,850,000 -- -- -- (53,850,000) (l) --
11 3/4 Senior Notes...... -- 100,000,000 -- -- 100,000,000
Senior Subordinated
Notes.................. -- -- -- -- 130,000,000 (l) 130,000,000
Senior Discount Notes.... -- -- -- -- 35,321,920 (m) 35,321,920
Other.................... 20,136,638 -- 1,964,078 (6,399,887) 22,438,000 (j) 15,338,829
(22,800,000) (l)
------------ ------------ ----------- ------------ ------------ ------------
73,986,638 100,000,000 1,964,078 (6,399,887) 280,660,749
Deferred income taxes...... 3,175,593 1,595,000 420,500 -- 1,637,000 (h) 6,828,093
Deferred gain.............. 1,092,459 -- -- -- 1,092,459
Minority interest.......... 2,449,561 -- -- -- (2,449,561) (g) --
Other...................... -- 6,709,000 -- -- 6,709,000
------------ ------------ ----------- ------------ ------------
80,704,251 108,304,000 2,384,578 (6,399,887) 295,290,301
------------ ------------ ----------- ------------ ------------
Stock...................... -- 15,000 1,781 -- 15,000 (n) 15,000
(16,781) (f)
Additional paid-in
capital.................. -- -- 1,915,962 (4,408,199) (1,915,962) (f) --
4,408,199 (g)
Undistributed profits...... 4,723,076 (2,242,000) 755,590 (1,182,379) (3,054,433) (g) (34,043,299)
1,182,379 (g)
(2,375,022) (k)
1,486,410 (f)
(33,321,920) (m)
(15,000) (g)
Treasury stock............. -- (10,000) -- -- 10,000 (f) --
Accumulated other
comprehensive income..... -- (521,000) -- -- (521,000)
Exchange rate translation
adjustment............... (578,475) -- -- 204,890 (204,890) (g) (578,475)
------------ ------------ ----------- ------------ ------------
4,144,601 (2,758,000) 2,673,333 (5,385,688) (35,127,774)
------------ ------------ ----------- ------------ ------------
$172,413,042 $116,828,000 $ 7,210,954 $(14,122,336) $329,817,305
============ ============ =========== ============ ============
</TABLE>
P-3
<PAGE> 102
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------------------------------
MOLL ANCHOR(A) GEMINI(B) SOMOMECA(D) HANNING(E)
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales............................... $116,947,000 $161,161,000 $20,980,374 $88,502,000 $29,640,348
Cost of sales........................... 97,086,199 135,974,000 16,237,263 77,943,000 28,342,440
------------ ------------ ----------- ----------- -----------
Gross profit........................... 19,860,801 25,187,000 4,743,111 10,559,000 1,297,908
Selling, general and administrative
expenses............................... 10,757,773 12,497,000 3,580,361 5,469,000 2,596,750
Management fee to related parties....... 1,652,933 180,000 -- -- 126,662
Tooling income, net..................... (1,911,871) -- -- -- (1,113,673)
Loss on closure of facility............. 1,176,172 -- -- -- --
------------ ------------ ----------- ----------- -----------
Operating income (loss)................. 8,185,794 12,510,000 1,162,750 5,090,000 (311,831)
Interest expense........................ 3,430,505 11,165,000 221,579 2,654,000 290,623
Interest income......................... (25,119) -- (11,237) (263,000) (61,490)
Other (income) expense.................. (299,338) (287,000) 11,374 320,000 (293,432)
Minority interest in income (loss) of
subsidiary............................. 434,555 -- -- (95,000) --
------------ ------------ ----------- ----------- -----------
Income (loss) before taxes and
extraordinary item..................... 4,645,191 1,632,000 941,034 2,474,000 (247,532)
Income tax expense...................... 82,622 794,000 371,400 1,036,000 382,192
------------ ------------ ----------- ----------- -----------
Income (loss) before extraordinary
item................................... $ 4,562,569 $ 838,000 $ 569,634 $ 1,438,000 $ (629,724)
============ ============ =========== =========== ===========
EBITDA(1)...............................
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------- PRO FORMA
RELIANCE(C) AMM HOLDINGS, INC.
-------------- ------------------
<S> <C> <C> <C> <C>
Net sales............................... $(17,383,250) $(4,116,000) (o) $414,630,111
18,898,639 (u)
Cost of sales........................... (13,293,572) 15,976,085 (u) 354,582,415
808,000 (v)
(547,000) (s)
(4,193,000) (o)
249,000 (w)
------------ ----------------- ------------------
Gross profit........................... (4,089,678) 60,047,696
Selling, general and administrative
expenses............................... (2,277,814) 655,000 (x) 29,390,070
(2,429,000) (q)
(1,103,000) (r)
(356,000) (o)
Management fee to related parties....... (260,749) (1,498,846) (t) 200,000
Tooling income, net..................... -- 2,922,544 (u) --
103,000 (o)
Loss on closure of facility............. -- (1,176,172) (p) --
------------ ----------- --- ------------
Operating income (loss)................. (1,551,115) 30,457,626
Interest expense........................ (509,511) 5,254,000 (z) 31,380,196
8,874,000 (aa)
Interest income......................... -- (360,846)
Other (income) expense.................. (149,762) (172,000) (o) (870,158)
Minority interest in income (loss) of
subsidiary............................. -- (339,555) (y) --
------------ ------------
Income (loss) before taxes and
extraordinary item..................... (891,842) 308,434
Income tax expense...................... -- (629,000) (bb) 2,037,214
------------ ------------
Income (loss) before extraordinary
item................................... $ (891,842) $ (1,728,780)
============ ============
EBITDA(1)............................... $ 54,807,000
============
</TABLE>
P-4
<PAGE> 103
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------------------------------- PRO FORMA
MOLL ANCHOR(A) GEMINI(B) RELIANCE(C) AMM HOLDINGS, INC.
----------- ----------- ----------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $60,105,303 $39,303,000 $5,270,616 $(5,288,277) $1,348,276 (u) $100,738,918
Cost of sales.......... 50,738,439 32,695,000 4,042,166 (4,074,899) 105,000 (v) 84,328,863
(137,000) (s)
960,157 (u)
----------- ----------- ---------- ----------- ------------
Gross profit....... 9,366,864 6,608,000 1,228,450 (1,213,378) 16,410,055
Selling, general and
administrative
expenses............. 4,816,651 3,440,000 815,873 (610,939) 138,000 (x) 7,715,585
(608,000) (q)
(276,000) (r)
Management fee to
related parties...... 770,681 -- -- (79,324) (641,357) (t) 50,000
Tooling income, net.... (388,119) -- -- -- 388,119 (u) --
----------- ----------- ---------- ----------- ------------
Operating income....... 4,167,651 3,168,000 412,577 (523,115) 8,644,470
Interest expense....... 2,348,996 2,967,000 65,337 (97,876) 559,000 (z) 7,903,457
2,061,000 (aa)
Interest income........ (12,301) -- (5,014) 12,301 (5,014)
Other (income)
expense.............. 144,395 42,000 5,013 (13,128) 178,280
Minority interest in
income (loss) of
subsidiary........... 236,912 -- -- -- (236,912) (y) --
----------- ----------- ---------- ----------- ------------
Income loss before
taxes and
extraordinary item... 1,449,649 159,000 347,241 (424,412) 567,747
Income tax expense..... 92,411 78,000 -- -- 518,000 (bb) 840,411
----------- ----------- ---------- ----------- ------------
Income loss before
extraordinary item... $ 1,357,238 $ 81,000 $ 347,241 $ (424,412) $ (120,664)
=========== =========== ========== =========== ============
EBITDA(1).............. $ 13,315,000
============
</TABLE>
P-5
<PAGE> 104
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------
(1) EBITDA represents income before taxes plus interest expense, net,
depreciation and amortization. While EBITDA should not be construed as a
substitute for operating income, net income or cash flows from operating
activities in analyzing Holdings' operating performance, financial position
or cash flows, Holdings has included EBITDA because it is commonly used by
certain investors and analysts to analyze and compare companies on the basis
of operating performance, leverage and liquidity and to determine a
company's ability to service debt.
<TABLE>
<S> <C>
Pro Forma Adjustments
(a) Adjustment to include the Anchor Holdings historical cost
balances and operating activity for the respective periods
in the unaudited pro forma financial statements.
(b) Adjustment to include the Gemini historical cost balances
and operating activity for the respective periods in the
unaudited pro forma financial statements.
(c) Adjustment to eliminate the Reliance balances and operating
activity for the respective periods from the unaudited pro
forma financial statements.
(d) Adjustment to include the Somomeca historical operating
activity for the period of January 1 through December 31,
1997 in the unaudited pro forma financial statements.
(e) Adjustment to include the Hanning historical operating
activity for the period of January 1 through August 7, 1997
in the unaudited pro forma financial statements.
(f) Adjustment to eliminate the historical equity of Anchor
Holdings and Gemini which was accumulated prior to their
acquisition by the Company.
(g) Adjustment to eliminate Reliance's equity and associated
minority interest and to record the distribution of the
investment in Reliance to the owners of Moll.
(h) Adjustment to record the property, plant and equipment of
AMM Holdings and Gemini at their fair value and to record
the associated deferred tax liability.
(i) Adjustment to record goodwill of $9,254,000 and $8,728,000
for Moll's purchase of Holdings and Gemini, respectively.
(j) Adjustment to record debt of $6,600,000 and $15,838,000
incurred in connection with the acquisition of Holdings and
Gemini, respectively.
(k) Adjustment to write-off unamortized cost of $2,375,000
related to debt repaid with the proceeds of the Offering.
</TABLE>
P-6
<PAGE> 105
<TABLE>
<S> <C>
(l) Adjustment to record the proceeds and uses of the Company
Offering, as follows:
</TABLE>
<TABLE>
<S> <C> <C>
Proceeds............................................. $130,000,000
Uses:
Revolving credit facility....................... (7,100,000)
Somomeca revolving credit facility.............. (16,626,000)
-----------
(23,726,000)
Current portion of term debt.................... (5,400,000)
Long-term portion of term debt.................. (53,850,000)
Anchor acquisition debt......................... (6,600,000)
Gemini acquisition.............................. (13,038,000)
Gemini property debt............................ (2,800,000)
Other Gemini debt............................... (362,000)
-----------
(76,650,000)
Total debt repayment....................... (105,776,000)
Expenses of the Company Offering................ (7,550,000)
------------
Total uses................................. (113,326,000)
------------
Net cash proceeds from the Company Offering..... $ 16,674,000
============
</TABLE>
<TABLE>
<S> <C>
(m) Adjustment to record the proceeds and uses of the Holdings
Offering, as follows:
</TABLE>
<TABLE>
<S> <C>
Proceeds............................................... $ 35,321,920
Uses:
Distribution to stockholders......................... (33,321,920)
------------
Net cash proceeds from the Holdings Offering........... $ 2,000,000
============
</TABLE>
<TABLE>
<S> <C>
The distribution to the stockholders is to be used in part
to 1) repay approximately $15.6 million of indebtedness held
by Textek LLC, an affiliate of Holdings controlled by Mr.
Votis and 2) purchase the equity interest of a former Moll
partner for $15.4 million. See "Use of Proceeds".
(n) Adjustment to reclassify Moll's equity to match the legal
equity structure of Holdings.
(o) Adjustment to eliminate the operating results of the El Paso
facility, as it was closed in September 1997.
(p) Adjustment to eliminate non-recurring costs, consisting
primarily of future rental payments and losses on equipment
and inventory, incurred by Moll in the September 1997
closure of its El Paso facility.
(q) Adjustment to record the reduction of personnel at AMM
Holdings and Gemini. The reductions were made in executive
management and certain overhead functions at AMM Holdings
and management of Gemini.
(r) Adjustment to reflect the freezing by the Company of certain
AMM Holdings retirement plans which occurred on June 3,
1998. The estimated savings were based on historical costs
as compared to anticipated future costs which were
actuarially determined.
(s) Adjustment to eliminate the rent expense associated with the
building which houses the Gemini operation as the Company
purchased the building.
(t) Adjustment to reflect the future management fee of $200,000
per year.
(u) Adjustment to conform accounting policies regarding the
classification of revenues and expenses for tooling built
for and sold to consumers.
(v) Adjustment to record depreciation expense (i) for the
adjustment of property, plant and equipment to fair market
value in the acquisitions of Hanning, Somomeca, Holdings and
Gemini, and (ii) the purchase of the Gemini building.
</TABLE>
P-7
<PAGE> 106
<TABLE>
<S> <C>
(w) Adjustment to reflect rent expense for the period of January
1 through August 7, 1997 to be paid on land and buildings in
Germany distributed to the owners of Moll in August 1997.
(x) Adjustment to record amortization of additional goodwill
generated in the acquisitions of Somomeca, Holdings and
Gemini. The goodwill is being amortized over 20 years.
(y) Adjustment to eliminate the minority interest's portion of
the earnings of Somomeca and Reliance as the minority
interest of Somomeca was purchased in connection with Moll's
purchase of Somomeca and Reliance is no longer reflected as
a consolidated subsidiary of the Company.
(z) Adjustment to record interest expense incurred on the
increase in debt resulting from the acquisitions of Hanning,
Somomeca, Holdings and Gemini.
(aa) Adjustment to reflect interest on the net additional debt
incurred in connection with the Moll Offering and Holdings
Offering and to reflect the difference in interest rates
between the current debt instruments and the Notes to be
sold pursuant to the Company Offering and Holdings Offering.
(bb) Adjustment to reflect the tax impact of the pro forma
adjustments and to reflect Moll as a taxable entity using an
estimated effective tax rate of 40%.
</TABLE>
P-8
<PAGE> 107
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets as of December 31, 1996 and
1997, and April 4, 1998................................ F-3
Consolidated Statements of Operations for the Three Years
Ended December 31, 1997, and the Thirteen Weeks Ended
March 29, 1997 and April 4, 1998....................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the Three Years Ended December 31, 1997............ F-5
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1997 and the Thirteen Weeks Ended
March 29, 1997 and April 4, 1998....................... F-6
Notes to Consolidated Financial Statements................ F-7
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
Report of Independent Public Accountants.................. F-22
Consolidated Balance Sheets as of December 31, 1996 and
1997, and March 31, 1998............................... F-23
Consolidated Statements of Income for the Three Years
Ended December 31, 1997, and the Three Months Ended
March 31, 1997 and 1998................................ F-24
Consolidated Statements of Partners' Capital for the Three
Years Ended December 31, 1997.......................... F-25
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1997, and the Three Months Ended
March 31, 1997 and 1998................................ F-26
Notes to Consolidated Financial Statements................ F-28
SOMOMECA INDUSTRIES AND SUBSIDIARIES
Report of Independent Public Accountants.................. F-39
Consolidated Balance Sheets as of August 31, 1996 and 1997
and as of December 31, 1997............................ F-40
Consolidated Statements of Operations for the Three Years
Ended August 31, 1997 and the Four Month Period Ended
December 31, 1997...................................... F-41
Consolidated Statements of Stockholders' Equity for the
Three Years Ended August 31, 1997 and the Four Month
Period Ended December 31, 1997......................... F-42
Consolidated Statements of Cash Flows for the Three Years
Ended August 31, 1997 and the Four Month Period Ended
December 31, 1997...................................... F-43
Notes to Consolidated Financial Statements................ F-44
THE HANNING COMPANIES
Report of Independent Public Accountants.................. F-54
Combined Balance Sheets as of December 31, 1995 and
1996................................................... F-55
Combined Statements of Operations for the Years Ended
December 31, 1995 and 1996 and the Seven Months and
Seven Days Ended August 7, 1996 and 1997............... F-56
Combined Statements of Equity (Deficit) for the Years
Ended December 31, 1995 and 1996....................... F-57
Combined Statements of Cash Flows for the Years Ended
December 31, 1995 and 1996 and the Seven Months and
Seven Days Ended August 7, 1996 and 1997............... F-58
Notes to Financial Statements............................. F-59
</TABLE>
F-1
<PAGE> 108
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
Anchor Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Anchor
Holdings, Inc. and Subsidiaries as of December 31, 1996 and 1997, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Anchor
Holdings, Inc. and Subsidiaries as of December 31, 1996 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Knoxville, Tennessee
February 20, 1998
F-2
<PAGE> 109
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- APRIL 4,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 1,578 $ 6,914 $ 144
Accounts receivable, less allowance for doubtful accounts,
allowances, and returns of $998 in 1996 and $900 in
1997................................................... 21,400 15,574 15,559
Inventories............................................... 20,411 23,292 26,379
Prepaid expenses and other assets......................... 198 195 315
Refundable federal income taxes........................... 448 1,232 --
Deferred income taxes..................................... 2,023 2,080 2,808
-------- -------- --------
Total current assets.............................. 46,058 49,287 45,205
Property, plant, and equipment, net......................... 52,723 53,202 51,697
Goodwill, net............................................... 10,395 9,569 9,363
Other assets, net........................................... 6,087 8,781 10,563
-------- -------- --------
$115,263 $120,839 $116,828
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term liabilities............... $ 6,000 $ 832 $ 731
Current maturities of obligations under capital leases.... 480 382 344
Accounts payable.......................................... 6,120 6,119 4,950
Other accrued expenses and current liabilities............ 5,995 8,059 5,257
-------- -------- --------
Total current liabilities......................... 18,595 15,392 11,282
Long-term debt, less current maturities..................... 44,702 100,000 100,000
Related party long-term debt................................ 21,000 -- --
Accrued pension liability................................... 4,957 6,019 6,019
Deferred income taxes....................................... 2,906 1,542 1,595
Other long-term liabilities................................. 2,286 725 690
-------- -------- --------
Total liabilities................................. 94,446 123,678 119,586
-------- -------- --------
Commitments and contingencies (Notes 6, 7, 10, and 12)
Stockholders' equity (deficit):
Common stock--par value $.01 per share; authorized 2,000
shares; shares issued 1,018 and 1,551, respectively.... 10 15 15
Additional paid-in capital................................ 10,240 -- --
Retained earnings (deficit)............................... 11,145 (2,323) (2,242)
Additional pension liability, net of tax of $348 in 1996
and $319 in 1997....................................... (568) (521) (521)
Treasury stock at cost.................................... (10) (10) (10)
-------- -------- --------
Total stockholders' equity (deficit).............. 20,817 (2,839) (2,758)
-------- -------- --------
$115,263 $120,839 $116,828
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 110
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THIRTEEN WEEKS ENDED
-------------------------------- MARCH 29, APRIL 4,
1995 1996 1997 1997 1998
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales......................... $149,366 $156,858 $161,161 $41,546 $39,303
Cost of goods sold................ 125,028 129,221 135,974 34,653 32,695
-------- -------- -------- ------- -------
Gross profit...................... 24,338 27,637 25,187 6,893 6,608
Amortization expense.............. 1,662 1,530 1,698 343 426
Selling, general and
administrative expense.......... 9,409 11,358 10,979 2,615 3,014
-------- -------- -------- ------- -------
Operating income.................. 13,267 14,749 12,510 3,935 3,168
-------- -------- -------- ------- -------
Other income (expense):
Gain (loss) on disposal of fixed
assets....................... 23 (123) (62) (9) (26)
Interest expense, net........... (5,463) (4,931) (10,098) (1,271) (2 ,967)
Interest expense, related
party........................ (3,153) (3,193) (1,067) (801) --
Other, net...................... (997) (285) 349 (17) (16)
-------- -------- -------- ------- -------
Total other expense,
net................... (9,590) (8,532) (10,878) (2,098) (3,009)
-------- -------- -------- ------- -------
Income before income taxes and
extraordinary item.............. 3,677 6,217 1,632 1,837 159
Provision for income taxes........ 1,239 2,591 794 779 78
-------- -------- -------- ------- -------
Income before extraordinary
item............................ 2,438 3,626 838 1,058 81
Extraordinary item--loss on early
extinguishment of debt, net of
tax benefit of $742............. -- -- (1,210) -- --
-------- -------- -------- ------- -------
Net income (loss)............ $ 2,438 $ 3,626 $ (372) $ 1,058 $ 81
======== ======== ======== ======= =======
Earnings per share:
Basic Income before
extraordinary item........... $ 2.39 $ 3.56 $ 0.59 $ 1.04 $ .05
Extraordinary item........... 0.00 0.00 (0.85) -- --
-------- -------- -------- ------- -------
Income (loss)................ $ 2.39 $ 3.56 $ (0.26) $ 1.04 $ .05
======== ======== ======== ======= =======
Weighted average common
shares outstanding......... 1,018 1,018 1,418 1,018 1,551
======== ======== ======== ======= =======
Diluted Income (loss) before
extraordinary item........... $ 1.87 $ 2.65 $ 0.59 $ .77 $ .05
Extraordinary item........... 0.00 0.00 (0.85) -- --
-------- -------- -------- ------- -------
Income (loss)................ $ 1.87 $ 2.65 $ (0.26) $ .77 $ .05
======== ======== ======== ======= =======
Weighted average common shares
and assumed conversions
outstanding.................. 1,306 1,370 1,418 1,370 1,551
======== ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 111
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- ADDITIONAL RETAINED ADDITIONAL
SHARES PAID-IN EARNINGS TREASURY PENSION
ISSUED AMOUNT CAPITAL (DEFICIT) STOCK LIABILITY TOTAL
------ ------ ---------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994...... 1,018 $10 $ 10,240 $ 5,081 $ -- $(400) $ 14,931
Net income.................... -- -- -- 2,438 -- -- 2,438
Additional pension
liability.................. -- -- -- -- -- (96) (96)
Treasury stock acquired,
242.13 shares.............. -- -- -- -- (10) -- (10)
----- --- -------- -------- ---- ----- --------
BALANCE, December 31, 1995...... 1,018 10 10,240 7,519 (10) (496) 17,263
Net income.................... -- -- -- 3,626 -- -- 3,626
Additional pension
liability.................. -- -- -- -- -- (72) (72)
----- --- -------- -------- ---- ----- --------
BALANCE, December 31, 1996...... 1,018 10 10,240 11,145 (10) (568) 20,817
Net loss...................... -- -- -- (372) -- -- (372)
Exercise of warrants and
options.................... 533 5 5,061 -- -- -- 5,066
Dividend paid................. -- -- (15,301) (14,203) -- -- (29,504)
Tax benefit of exercise of
warrants and options....... -- -- -- 1,107 -- -- 1,107
Reduction of pension
liability.................. -- -- -- -- -- 47 47
----- --- -------- -------- ---- ----- --------
BALANCE, December 31, 1997...... 1,551 $15 $ -- $ (2,323) $(10) $(521) $ (2,839)
===== === ======== ======== ==== ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 112
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDING
YEARS ENDED DECEMBER 31, -------------------------
------------------------------ MARCH 29, APRIL 4,
1995 1996 1997 1997 1998
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................ $ 2,438 $ 3,626 $ (372) $1,058 $ 81
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Deferred income taxes................. 60 296 (1,421) 266 54
Depreciation and amortization......... 9,768 9,605 10,592 2,329 2,658
Provision for doubtful accounts....... 356 20 (98) -- 32
Provision for inventory
obsolescence........................ 450 (266) 287 87 81
(Gain) loss from disposal of fixed
assets.............................. (23) 123 62 9 --
Changes in assets and liabilities:
Accounts receivable................. (1,361) 337 5,924 (3,757) (17)
Inventories......................... (3,909) 794 (3,169) (1,274) (3,168)
Prepaid and other assets............ (1,634) (1,798) 3 1,265 384
Refundable federal income taxes..... 154 (32) (784)
Accounts payable, accrued expense
and other liabilities............ 2,523 371 5,013 (208) (4,900)
-------- -------- -------- ------ -------
Net cash provided by (used in)
operating activities........... 8,822 13,076 16,037 (225) (4,795)
-------- -------- -------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and
equipment............................. (6,932) (8,028) (8,413) (1,973) (580)
Proceeds from sale of fixed assets....... 479 14 -- -- --
Purchase of other long-term assets....... -- -- (434) -- --
Payments Made for Parent Company......... -- -- -- -- 2,149
-------- -------- -------- ------ -------
Net cash used in investing
activities..................... (6,453) (8,014) (8,847) (1,973) (2,729)
-------- -------- -------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt............. 9,886 8,647 101,529 -- --
Principal payments on long-term debt..... (12,569) (12,435) (73,231) (1,938) (101)
Principal payments on capital lease
obligations........................... (588) (480) (623) (142) (38)
Exercise of options and warrants......... -- -- 5,066 -- --
Payments of dividends.................... -- -- (29,504) -- --
Proceeds (payments) from other long-term
liabilities........................... 1,016 -- (939) -- --
Shares acquired in treasury.............. (10) -- -- -- --
Payment of bond issue costs.............. -- -- (4,152) -- --
Checks written in excess of bank
balances.............................. 2,808 929
Payments on other liabilities............ -- -- -- -- (36)
-------- -------- -------- ------ -------
Net cash (used in) provided by
financing activities........... (2,265) (4,268) (1,854) 728 754
NET INCREASE (DECREASE) IN CASH............ 104 794 5,336 (1,470) (6,770)
CASH AT BEGINNING OF PERIOD................ 680 784 1,578 1,578 6,914
-------- -------- -------- ------ -------
CASH AT END OF PERIOD...................... $ 784 $ 1,578 $ 6,914 $ 108 $ 144
======== ======== ======== ====== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid........................ $ 1,243 $ 1,945 $ 661 $ -- $ --
Interest paid............................ $ 8,172 $ 7,799 $ 9,701 $1,993 $ 2,818
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 113
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
Anchor Holdings, Inc. (the "Company") was incorporated March 9, 1990, under
the laws of the State of Delaware. The Company's subsidiaries manufacture and
sell: brushes used in medical and dental applications; plastic and metal
packaging for the cosmetics industry; and molded plastics products, including
assembly of plastic parts and construction of molds used in the injection
molding business. Substantially all sales are made on credit without collateral.
The Company manufactures dental products in the Morristown, Tennessee facility
and cosmetics products in three facilities: Matamoros, Mexico; Morristown,
Tennessee; and Waterbury, Connecticut. The majority of the cosmetics goods are
produced in a Matamoros facility. Molded plastics products are produced in four
separate plants in Seagrove, North Carolina as well as in a facility in Round
Rock, Texas. In addition to the manufacturing facilities, the Company operates
mold technology centers in Elk Grove, Illinois and Sanford, North Carolina.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company and its
subsidiaries in the presentation of their consolidated financial statements are
summarized below:
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of Anchor Holdings, Inc. the
parent holding company, its wholly owned subsidiaries Anchor Advanced Products
Foreign Sales Corporation and Anchor Advanced Products, Inc., and its Mexican
subsidiary, Cepillos de Matamoros, S.A. de C.V. All significant intercompany
balances and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers investments with a maturity 90 days or less when
purchased to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using standard costs which approximate the first-in, first-out method. Valuation
allowances are provided for adjustments related to carrying costs in excess of
estimated market value and potential obsolescence.
PROPERTY, PLANT, EQUIPMENT, AND DEPRECIATION
Property, plant, and equipment are recorded at cost. Assets under capital
leases are stated at the present value of minimum lease payments at the
inception of the lease. Depreciation and amortization are provided on the
straight-line basis over the estimated useful lives of the various properties as
follows:
<TABLE>
<S> <C>
Building and improvements....................... 30 years
Machinery and equipment......................... 10 years
Furniture and fixtures.......................... 10 years
Other........................................... 4-6 years
</TABLE>
INTANGIBLE ASSETS AND AMORTIZATION
Intangible assets represent goodwill, organizational expenses, loan costs,
and costs allocated to noncompete agreements arising principally from the
acquisition of the Company in 1990, and the acquisition of the assets of
Mid-State Plastics, Inc. in 1994. These assets are carried at cost and amortized
on a straight-line basis over their estimated useful lives ranging between two
and fifteen years.
F-7
<PAGE> 114
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PENSION PLANS
Pension costs for defined benefit plans are determined in accordance with
Statement of Financial Accounting Standard No. 87, and include current costs
plus the amortization of transition assets over a period of 21 years. The
Company funds pension costs in accordance with the plans and legal requirements.
The Company also has a defined contribution savings plan for all domestic
employees for which it matches one-half of employee contributions up to six
percent of employee compensation.
INCOME TAXES
Deferred tax liabilities and assets are determined based on the difference
between the financial statements and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse.
EARNINGS (LOSS) PER SHARE
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share. The standard replaces the
presentation of primary EPS with a presentation of basic EPS and replaces the
presentation of fully diluted EPS with diluted EPS. Basic income per share is
computed by dividing net income by the weighted average number of shares of
common stock outstanding. Diluted income per share is computed by dividing net
income by the weighted average number of shares of common stock and, dilutive
securities outstanding during the respective periods. Dilutive securities
represented by options and warrants outstanding have been included in the
computation. The Company uses the treasury stock method for calculating the
dilutive effect of options and warrants.
RECLASSIFICATIONS
Reclassifications have been made to certain previously reported amounts in
order to conform with the current year's presentations.
SIGNIFICANT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Significant estimates of the Company include the allowance
for doubtful accounts, inventory obsolescence reserves and certain self-insured
retained risks. Actual results could differ from these estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company follows Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of, which i) requires that long-lived assets to be held and used be
reviewed for impairment whenever events or circumstances indicate that the
carrying value of an asset may not be recoverable, ii) requires that long-lived
assets to be disposed of be reported at the lower of the carrying amount or the
fair value less costs to sell, and iii) provides guidelines and procedures for
measuring impairment losses that are different from previously existing
guidelines and procedures.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective December 31, 1997, the Company implemented Statement of Financial
Accounting Standards No. 129, Disclosure of Information about Capital Structure.
The Statement consolidates disclosures required
F-8
<PAGE> 115
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
by several existing pronouncements regarding an entity's capital structure. The
Company's disclosures are already in compliance with such pronouncements and,
accordingly, SFAS No. 129 does not require any change to existing disclosures.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures About Segments of an
Enterprise and Related Information. This Statement establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Statement is
effective for fiscal years beginning after December 31, 1997. In the initial
year of application, comparative information for earlier years is to be
restated. The Company is evaluating SFAS No. 131 to determine the impact, if
any, on its reporting and disclosure requirements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income. The
Statement establishes standards for reporting comprehensive income and its
components in a full set of financial statements. The Statement is effective for
fiscal years beginning after December 15, 1997. The Company currently reports
one item in stockholders' equity that would be classified as other comprehensive
income.
During February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits. The Statement revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. The Statement is effective
for fiscal years beginning after December 15, 1997. Restatement of disclosures
for earlier periods for comparative purposes is required. The Company is
evaluating SFAS No. 132 to determine the impact on its reporting and disclosure
requirements.
2. INVENTORIES
Inventories at December 31, 1996 and 1997 consist of:
<TABLE>
<CAPTION>
APRIL 4,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials............................... $ 9,508 $12,026 $ 10,240
Work in process............................. 6,254 6,306 7,241
Finished goods.............................. 5,954 6,553 10,572
------- ------- --------
21,716 24,885 28,053
Less valuation allowances................... (1,305) (1,593) (1,674)
------- ------- --------
$20,411 $23,292 $ 26,379
======= ======= ========
</TABLE>
F-9
<PAGE> 116
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at December 31, 1996 and 1997 consist of:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Land..................................................... $ 1,254 $ 1,254
Buildings and improvements............................... 17,019 17,906
Machinery and equipment.................................. 70,383 74,406
Furniture and fixtures................................... 3,331 3,997
Leasehold improvements................................... 938 132
Vehicles................................................. 140 119
------- -------
93,066 97,814
Less accumulated depreciation and amortization........... (40,737) (48,343)
------- -------
52,329 49,471
Construction in progress................................. 394 3,731
------- -------
$52,723 $53,202
======= =======
</TABLE>
Depreciation and amortization of property, plant and equipment was $7,787,
$7,756 and $7,875 for the years ended December 31, 1995, 1996 and 1997,
respectively.
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets at December 31, 1996 and 1997 consist of:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES 1996 1997
------------ ------- -------
<S> <C> <C> <C>
Intangible assets:
Grant fees........................................ 3 years $ 87 $ 87
Organizational expenses........................... 5-10 years 1,539 1,539
Loan costs........................................ 5 years 1,596 1,596
Noncompete agreement.............................. 3-5 years 1,250 250
Supply contract................................... 65 months 1,000 1,000
Acquisition costs................................. 5 years 1,043 1,043
Goodwill.......................................... 15 years 12,392 12,392
Intangible pension asset.......................... 37 years 2,004 2,004
Bond issue costs.................................. 7 years -- 4,152
------- -------
20,911 24,063
Less accumulated amortization..................... (6,551) (8,383)
------- -------
14,360 15,680
Other assets:
Cash value of life insurance...................... 2,105 2,670
Other assets...................................... 17 --
------- -------
$16,482 $18,350
======= =======
</TABLE>
Amortization expense related to intangibles totaled $1,662, $1,530 and
$2,398 for the years ended December 31, 1995, 1996 and 1997, respectively. The
1997 amortization expense includes a write-off of $700 associated with loan
costs which is included in the extraordinary loss and also includes a write-off
of $49
F-10
<PAGE> 117
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
associated with a noncompete agreement. Amortization of loan fees that were
charged to interest expense totaled $319, $319 and $319 for the years ended
December 31, 1995, 1996 and 1997, respectively.
The intangible pension asset represents prior service cost related to the
supplemental executive retirement plan and relates to the unrecognized net
obligation at the date of initial application as described in Note 7.
5. LONG-TERM DEBT
On April 2, 1997, Anchor Advanced Products, Inc. issued $100,000 of 11 3/4%
Senior Notes due 2004 (the "Senior Notes"). The Company has guaranteed the
Senior Notes fully and unconditionally. The net proceeds from the sale of the
Senior Notes was $96.6 million (after deducting discounts, commissions, fees and
expenses thereof) and were used: (i) to repay in full $51.5 million in
borrowings under the Revolving Credit and Term Loan Agreement, including all
accrued interest and fees payable upon such prepayment, (ii) to pay $22.3
million to redeem $9.0 million aggregate principal amount of Senior Subordinated
Notes and $12.0 million aggregate principal amount of Junior Subordinated Notes,
each due April 30, 2000, and (iii) to pay $22.8 million of a $29.5 million
dividend on the Company's common stock. All of the outstanding 380,000 warrants
and 153,300 options were exercised prior to the payment of the dividend. The
Company also entered into a credit facility which provided for revolving loans
not to exceed $15.0 million. The proceeds from the exercise of the warrants and
options and an additional borrowing of $1.5 million under the credit facility
were used to supplement the total dividend payment. The Company had no
outstanding debt under the credit facility as of December 31, 1997.
Long-term debt at December 31, 1996 and 1997, consists of:
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Borrowings under revolving credit agreement; floating rates
(a)....................................................... $15,952 $ --
Term note; floating rates(b)................................ 34,750 --
Senior subordinated notes, due April 30, 2000(c)............ 9,000 --
Junior subordinated notes due April 30, 2000(c)............. 12,000 --
Senior notes due April 1, 2004(d)........................... -- 100,000
------- --------
71,702 100,000
Less current maturities..................................... (6,000) --
------- --------
$65,702 $100,000
======= ========
</TABLE>
- ------------------------------
(a) This revolving credit agreement provided a number of options for variable
rate borrowings subject to potential limitations based on percentages of
inventories, receivables and outstanding letters of credit. The agreement
was paid in full during 1997.
(b) This term note was paid in full during 1997.
(c) This senior and junior subordinated debt was payable to certain stockholders
and was paid in full during 1997.
(d) This debt is payable to note holders, subsequent to a public debt offering
in 1997. Interest is paid semiannually on April 1 and October 1 at a fixed
rate of 11.75%. The Senior Notes mature on April 1, 2004, at which time the
full principal amount is due.
The Senior Notes contain restrictions on, among other things, change of
controlling interest or sale of the Company, payment of cash dividends,
redemption of capital stock, creation of liens on assets, acquisition or sale of
subsidiaries, issuance of additional debt, purchases of investments,
consolidating or selling substantially all assets, transaction with related
parties and so-called "junior" payments. The Company was in compliance with
these covenants at December 31, 1997.
F-11
<PAGE> 118
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LEASES
The Company leases a warehouse, land, and certain equipment under capital
leases that expire on various dates through December 2000. The net book value of
buildings, land, and equipment recorded under capital leases at December 31,
1996 and 1997, was $1,594 and $1,240, respectively. Amortization of assets held
under capital leases is included with depreciation expense.
The Company also has a noncancellable operating lease for two facilities
which requires the Company to pay all executory costs such as maintenance,
taxes, and insurance.
Future minimum lease payments under noncancellable operating leases with
initial or remaining lease terms in excess of one year and the present value of
future minimum capital lease payments as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year ending December 31:
1998...................................................... $ 438 $279
1999...................................................... 47 199
2000...................................................... -- 115
2001...................................................... -- 57
Thereafter.................................................. -- --
----- ----
Total minimum lease payments...................... 485 $650
====
Less amounts representing interest (at rates ranging from
10% to 11.7%)............................................. 62
-----
Present value of net minimum capital lease payments....... 423
Less current maturities of obligations under capital
leases.................................................... 382
-----
Obligations under capital leases excluding current
installments........................................... $ 41
=====
</TABLE>
Total rent expense for operating leases for the years ended December 31,
1995, 1996 and 1997 was $1,201, $1,779 and $943, respectively.
7. EMPLOYEE BENEFIT PLANS
The Company sponsors pension plans covering substantially all domestic
employees. Plans covering domestic salaried employees provide benefits that are
based on an employee's years of service and compensation during the five-year
period prior to retirement. The plan covering domestic hourly employees provides
benefits of stated amounts based on an employee's years of service. Annually,
the Company contributes to the plans covering domestic employees such amounts
which are actuarially determined to provide the plans with sufficient assets to
meet future benefit payment requirements. Foreign executives and employees are
covered by fully funded programs as legally required.
F-12
<PAGE> 119
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the funded status of the Company's domestic
defined benefit pension plans and related amounts recognized in the Company's
consolidated balance sheets at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
--------------- ---------------
SALARY HOURLY SALARY HOURLY
------ ------ ------ ------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Benefit obligations:
Vested........................................ $ 987 $1,901 $1,192 $2,194
Nonvested..................................... 58 41 72 105
------ ------ ------ ------
Accumulated benefit obligation................ $1,045 $1,942 $1,264 $2,299
====== ====== ====== ======
Projected benefit obligation for service rendered
to date.......................................... $1,756 $1,942 $2,142 $2,299
Plan assets at estimated fair value................ 1,419 1,732 1,782 2,296
------ ------ ------ ------
Excess of projected benefit obligation over plan
assets........................................... (337) (210) (360) (3)
Unrecognized transition amount..................... 488 7 458 6
Unrecognized prior service cost.................... -- 110 -- 104
Unrecognized net (gain) loss....................... (523) 916 (531) 841
Unrecognized net obligation........................ -- (1,033) -- (951)
------ ------ ------ ------
Accrued (prepaid) pension cost................ $ (372) $ 210 $ (433) $ 3
====== ====== ====== ======
</TABLE>
Plan assets consist of cash and temporary investments.
Net pension cost for the years ended December 31, 1995, 1996 and 1997
included the following components:
<TABLE>
<CAPTION>
1995 1996 1997
--------------- --------------- ---------------
SALARY HOURLY SALARY HOURLY SALARY HOURLY
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Service cost--benefits earned during
the period........................... $184 $168 $199 $182 $209 $197
Interest cost on projected benefit
obligation........................... 106 109 130 131 170 155
Estimated/actual return on plan
assets............................... (87) (111) (158) 14 (148) (266)
Net amortization and deferral.......... 22 38 84 (99) 12 150
---- ---- ---- ---- ---- ----
Net pension cost..................... $225 $204 $255 $228 $243 $236
==== ==== ==== ==== ==== ====
</TABLE>
Assumptions used in accounting for the pension plans as of December 31,
1995, 1996 and 1997 were:
<TABLE>
<CAPTION>
1995 1996 1997
--------------- --------------- ---------------
SALARY HOURLY SALARY HOURLY SALARY HOURLY
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Discount rate.......................... 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
Rate of increase in compensation
levels............................... 4.0% N/A 3.9% N/A 3.9% N/A
Expected long-term rate of return on
assets............................... 8.0% 9.0% 8.0% 9.0% 8.0% 8.0%
</TABLE>
In 1991, the Company entered into agreements with certain key executive
officers, providing for supplemental payments upon retirement, disability, or
death. The Company purchased life insurance policies to fund the liability under
these agreements, which also provide death benefits to the Company. The
following
F-13
<PAGE> 120
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
table sets forth the status of the supplemental executive retirement plan (SERP)
and related amounts recognized in the Company's consolidated balance sheets at
December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Actuarial present value of benefit
obligation--nonvested.................................. $ 4,263 $ 5,069
======= =======
Projected benefit obligation for services rendered to
date................................................... $ 7,401 $ 7,993
Plan assets.............................................. -- --
------- -------
Excess of projected benefit obligations over plan
assets.............................................. (7,401) (7,993)
Unrecognized transition amount........................... 4,746 4,401
Unrecognized net obligation at date of initial
application............................................ (1,608) (1,477)
------- -------
Accrued pension cost................................... $(4,263) $(5,069)
======= =======
</TABLE>
The Company intends to fund the plan through Company-owned life insurance,
which has a cash value of $2,670 at December 31, 1997; however, the insurance
policies are not considered plan assets for accounting purposes.
Net pension cost for the SERP for the years ended December 31, 1995, 1996
and 1997 consists of the following:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Service cost--benefits earned during the period............. $221 $431 $465
Interest cost on projected benefit obligations.............. 246 284 341
Net amortization............................................ 131 130 131
---- ---- ----
$598 $845 $937
==== ==== ====
</TABLE>
The Company also sponsors defined contribution savings plans for
substantially all domestic employees. Contributions for the years ended December
31, 1995, 1996 and 1997, approximated $456, $492 and $532, respectively.
Pension costs for the foreign subsidiary amounted to approximately $582,
$654 and $599 for the years ended December 31, 1995, 1996 and 1997,
respectively.
8. INCOME TAXES
The provision for income taxes for the years ended December 31, 1995, 1996
and 1997 consists of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Federal tax:
Current................................................ $ 939 $2,065 $1,284
Deferred............................................... 57 197 (985)
State:
Current................................................ 32 52 197
Deferred............................................... 3 99 (212)
Foreign tax.............................................. 208 178 510
------ ------ ------
Total tax expense attributable to continuing
operations............................................. $1,239 $2,591 $ 794
====== ====== ======
</TABLE>
F-14
<PAGE> 121
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income tax expense varies from the amount computed by applying the federal
corporate income tax rate of 34% to income before income taxes as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ----
<S> <C> <C> <C>
Computed "expected" income tax expense (benefit)........... $1,250 $2,144 $555
Increase (decrease) in income taxes resulting from:
Foreign sales corporation income......................... (190) (99) (119)
State income taxes, net of federal tax effect............ 23 99 (15)
Nondeductible portion of meals and entertainment......... 69 48 73
Foreign income taxes..................................... 208 178 510
Write off charitable contribution deferred asset......... -- 75 --
Other, net............................................... (121) 146 (210)
------ ------ ----
Actual income tax provision attributable to continuing
operations.......................................... $1,239 $2,591 $794
====== ====== ====
</TABLE>
The components of the net deferred income tax assets and liabilities as of
December 31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
--------------------- ---------------------
CURRENT NONCURRENT CURRENT NONCURRENT
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Deferred tax assets:
Estimate for doubtful accounts and returns....... $ 404 $ -- $ 310 $ --
Inventory allowances............................. 667 -- 796 --
Accrued expenses................................. 860 -- 793 --
Additional pension liability..................... -- 834 -- 1,228
Contributions carryforward....................... -- -- 73 --
Net operating loss carryforward.................. 46 -- -- 598
Alternative minimum tax credits.................. -- 1,332 -- 1,377
Other............................................ 46 495 162 1,157
------ ------- ------ -------
Total deferred tax assets................ 2,023 2,661 2,134 4,360
------ ------- ------ -------
Deferred tax liabilities:
Property, plant and equipment.................... -- 5,567 -- 5,902
Other............................................ -- -- 54 --
------ ------- ------ -------
Total deferred tax liabilities........... -- 5,567 54 5,902
------ ------- ------ -------
Net deferred tax asset (liability)....... $2,023 $(2,906) $2,080 $(1,542)
====== ======= ====== =======
</TABLE>
The Company has at December 31, 1997, $2,088 of federal and state net
operating losses available to either carryback or carryforward. Net operating
losses of approximately $1,466 remain to be carried forward to offset future
state taxable income. Approximately $1,332 of alternative minimum tax credits
may be carried forward indefinitely. The amount of unrecognized deferred tax
liability for temporary differences related to investments in foreign
subsidiaries that are essentially permanent in duration were $1,430 and $1,388
for the years ending December 31, 1996 and 1997, respectively.
F-15
<PAGE> 122
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. EMPLOYEE STOCK OPTIONS, WARRANTS, AND INCENTIVES
On October 29, 1990, the Company adopted the 1990 Time Accelerated
Restricted Stock Option Plan, as amended effective April 1, 1996 (the "1990
Plan"). A maximum of 163.3 thousand shares of the Company's common stock may be
issued pursuant to the 1990 Plan upon the exercise of options. Under the 1990
Plan, nonqualified stock options may be granted to members of senior management
of the Company and its subsidiaries. As of December 31, 1996, options to
purchase 163.3 thousand shares of the Company's common stock at exercise prices
of $9.50--$30.00 per share had been granted. The 153 thousand vested options had
been exercised as of December 31, 1997, at an exercise price of $9.50 per share.
On June 11, 1996, the Company adopted the 1995 Time Accelerated Restricted
Stock Option Plan (the "1995 Plan"). A maximum of twenty-five thousand shares of
the Company's common stock may be issued pursuant to the 1995 Plan upon the
exercise of options. Under the 1995 Plan, nonqualified stock options may be
granted to members of senior management of the Company and its subsidiaries who
were formerly employed by Mid-State and who, at the time of adoption of the 1995
Plan, were employed in the Company's Mid-State Plastics Division. As of December
31, 1997, all twenty-five thousand options previously granted had been forfeited
under the terms of the agreement.
Both plans are administered by the Board of Directors of the Company or a
Committee consisting of three or more directors. Subject to the provisions of
each Plan, the Board of Directors of the Company has the authority to select
optionees and determine the terms of the options granted, including (i) the
number of shares subject to such option, (ii) when the option becomes
exercisable and (iii) the exercise price of the option; provided, however, that
no option may have a term in excess of ten years and six months from the date of
grant.
The terms and conditions of an option grant are set forth in a related
option agreement. An option is not transferable by the optionee except by will
or by the laws of descent and distribution. Options granted under either plan
will terminated upon the earliest to occur of (a) ten years and six months have
elapsed since the date of the grant of the option, (b) 30 days following an
optionee's voluntary termination or termination for cause of employment with the
Company or any of its subsidiaries, or (c) 180 days following an optionee's
termination of employment without cause or due to death or disability of the
optionee.
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, Accounting for Stock Based Compensation (SFAS 123). As
permitted by SFAS 123, the Company has chosen to apply APB Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and related interpretations in
accounting for its Plans. No compensation expense is recognized for the granting
of options during 1996 or 1997, as calculated under APB 25. Had compensation
cost for the Company's Plans been determined based on the fair value at the
grant dates for awards under the Plans consistent with the method of SFAS 123,
the Company's net income (loss) and net income (loss) per diluted share would
have been reduced to the pro forma amounts of $3,594 and $2.53, respectively,
for 1996 and $(391) and $(0.26), respectively, for 1997. The fair value of each
option grant is estimated using the Minimum Value Method with the following
assumptions used for the 1990 and 1995 plans; risk-free interest rates of 6.46%
and 6.04%, respectively, and expected lives of ten years.
F-16
<PAGE> 123
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the status of the Company's 1990 Plan as of December 31, 1995,
1996 and 1997, and changes during the years ending on those dates is presented
below:
<TABLE>
<CAPTION>
1995 1996 1997
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of
year..................... 153 $9.50 153 $ 9.50 163 $10.76
Granted.................... -- 10 $30.00 -- --
Exercised.................. -- -- 153 9.50
Forfeited.................. -- -- --
--- ------ ---
Outstanding, end of year... 153 $9.50 163 $10.76 10 $30.00
=== ====== ===
Options exercisable at
year-end................. 153 153 --
Fair value of options
granted during the
year..................... $11.96
======
</TABLE>
A summary of the status of the Company's 1995 Plan as of December 31, 1996,
and changes during the year ending on that date is presented below:
<TABLE>
<CAPTION>
1995 1996 1997
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of
year...................... -- 25 $41.30 25 $41.30
Granted..................... 25 $41.30 -- --
Exercised................... -- -- --
Forfeited................... -- -- 25 41.30
----- --- --
Outstanding, end of year.... 25 $41.30 25 41.30 --
===== === ==
Options exercisable at
year-end.................. -- --
Fair value of options
granted during the year... $5.03
=====
</TABLE>
The following table summarizes information about the Plan's stock options
at December 31, 1997:
<TABLE>
<CAPTION>
NUMBER WEIGHTED-AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICE AT 12/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/97 EXERCISE PRICE
- -------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$30.00 10 10 $30.00 -- --
</TABLE>
The Company had issued to the ML-Lee Funds warrants to purchase 380
thousand shares of common stock exercisable at $9.50 per share. All of these
warrants had been exercised as of December 31, 1997. Affiliates of the ML-Lee
Funds comprise the majority holders of the Company's common stock.
10. CUSTOMER SUPPLY AGREEMENTS
On January 11, 1991, the Company entered into an agreement with a major
customer to supply product at certain agreed-upon levels through December 1992,
with an option for the customer to extend the contract for three additional one
year periods. The customer has extended the agreement through December 31, 1999.
The agreement guarantees certain gross margin percentages in varying amounts
over the term of the agreement based upon variable labor, material and overhead
costs. The agreement is cancellable by the customer; however, if such
cancellation occurs, the customer agrees to absorb a portion of the Company's
capital investment associated with the agreement in decreasing amounts over the
term of the contract.
F-17
<PAGE> 124
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On July 1, 1993, the Company entered into an agreement with another major
customer to supply product at certain agreed-upon levels through December 1997,
with an option for the customer to extend the contract for three additional one
year periods. The customer has extended the agreement through December 31, 1999.
The agreement guarantees certain gross margin percentages in varying amounts
over the term of the agreement based upon variable labor, material and overhead
costs. The agreement is cancellable by the customer; however, if such
cancellation occurs, the customer agrees to absorb a portion of the Company's
capital investment associated with the agreement in decreasing amounts over the
term of the contract.
In connection with the purchase of Mid-State Plastics, Inc., the Company
assumed a contract with a customer to maintain a manufacturing facility in Texas
for the production of injection molded plastic parts. The customer has the
exclusive right, unless otherwise agreed, to purchase the manufacturing capacity
of the facility. The agreement is effective until July 2000, with the customer
having the right to renew on a yearly basis. The customer guarantees the Company
80% of capacity and if not utilized, reimburses the Company based on a
predetermined rate. In the event that production exceeds the guarantee, the
Company owes the customer an amount computed at one-half the predetermined rate.
11. BUSINESS AND CREDIT CONCENTRATIONS
The Company's sales are generally made on account without collateral.
Repayment terms vary based on certain conditions. The Company maintains reserves
which management believes are adequate to provide for potential credit losses.
The majority of the Company's customer base spans the United States.
The Company had two customers at December 31, 1996, and three customers at
December 31, 1997, which individually had accounts receivable balances in excess
of 10% of the total accounts receivable balance. Management believes the total
accounts receivable due from these customers, which was approximately $6,748 and
$4,662 at December 31, 1996 and 1997, respectively, is fully collectible. The
respective percentage for each customer with sales in excess of 10% of the years
ended December 31, 1995, 1996 and 1997, was as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Customer A.............................................. 29% 24% 18%
Customer B.............................................. 14% 19% 24%
Customer C.............................................. 13% 10% 11%
</TABLE>
12. CONTINGENCIES
The Company is subject to claims, normally employment related, in the
ordinary course of business. Management does not believe the resolution of any
such claims will result in a material adverse effect on the future financial
condition, results of operations or cash flows of the Company.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating the fair values of its financial instruments:
CURRENT ASSET AND LIABILITIES
The carrying value of the Company's cash, accounts receivable, accounts
payable and accrued expenses approximate fair value because of the short
maturity of these instruments.
F-18
<PAGE> 125
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NONCURRENT LIABILITIES
The Company estimates that the fair value of the Senior Notes at December
31, 1997 is approximately $106,500, compared to the carrying value of $100,000.
In making such assessments, the Company utilized quoted market prices.
14. RELATED PARTY TRANSACTIONS
Transactions involving related parties not otherwise disclosed herein are
as follows:
Management fees of $180 each year have been paid to Thomas H. Lee Company
during 1995, 1996 and 1997, respectively, for management and other consulting
services provided to the Company. Affiliates of the Thomas H. Lee Company
comprise the majority holders of the Company's common stock.
The Company leases warehouse space (near its facilities in Seagrove, North
Carolina) from Jack C. Lail, a shareholder during 1997. The lease terms are
month-to-month, and rent paid under the lease totaled $64 in 1997.
15. INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT GEOGRAPHIC AREAS
The Company has significant operations in Mexico as well as the United
States. The operations in Mexico do not involve sales to unaffiliated customers.
All sales for the Mexican subsidiary are to the U.S. Company and are marked up
based on a contract price, which at December 31, 1997 was 6.83%. These sales
were $6,418, $6,081 and $9,363, respectively, for the years ending December 31,
1995, 1996 and 1997 and were eliminated in consolidation.
Identifiable assets in Mexico were $14,823 and $15,128, respectively, at
December 31, 1996 and 1997. These amounts include intercompany
receivables/payables of $835 and $1,586, which were eliminated in consolidation.
The Company had sales to customers in foreign countries of $11,249, $13,148
and $19,256 for the years ending December 31, 1995, 1996 and 1997.
16. ANCHOR ADVANCED PRODUCTS, INC. SEPARATE COMPANY FINANCIAL STATEMENTS
As described in footnote 5, Anchor Advanced Products, Inc. issued $100,000
of 11 3/4% Senior Notes due 2004. These notes have been guaranteed fully and
unconditionally by the parent company, Anchor Holdings, Inc. The separate
financial statements of Anchor Advanced Products, Inc. are not included herein
because management has determined that they are not materially different from
those of Anchor Holdings, Inc. Summarized financial information of Anchor
Advanced Products, Inc. for the years ended December 31, 1995, 1996 and 1997,
are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Current assets..................................... $ 45,680 $ 47,502 $ 49,087
Noncurrent assets.................................. 70,416 69,192 71,544
Current liabilities................................ 19,689 20,023 15,368
Noncurrent liabilities............................. 79,577 75,851 108,286
Equity............................................. 16,830 20,820 (3,023)
Net sales.......................................... 149,366 156,858 161,161
Gross profit....................................... 24,338 27,637 25,187
Income from operations before extraordinary
items............................................ 2,189 3,417 583
Net income (loss).................................. 2,189 3,417 (627)
</TABLE>
F-19
<PAGE> 126
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. EARNINGS PER SHARE
The following table sets forth for the periods indicated the calculation of
earnings (loss) per share included in the Company's Consolidated Statements of
Operations:
<TABLE>
<CAPTION>
THIRTEEN WEEKS
ENDED
YEAR ENDED DECEMBER 31, -------------------------
------------------------- MARCH 29, APRIL 4,
1995 1996 1997 1997 1998
------ ------ ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator:
Net income before extraordinary
item.......................... $2,438 $3,626 $ 838 $1,058 $ 81
Extraordinary item............... -- -- (1,210) -- --
------ ------ ------- ------ ------
Numerator for basic and diluted
earnings per share............... $2,438 $3,626 $ (372) $1,058 $ 81
====== ====== ======= ====== ======
Denominator:
Denominator for basic earnings
per share-- weighted-average
shares........................ 1,018 1,018 1,418 1,018 1,551
Potentially dilutive common
shares........................ 288 352 -- 352 --
------ ------ ------- ------ ------
Denominator for diluted earnings
per share--adjusted
weighted-average shares and
dilutive shares.................. 1,306 1,370 1,418 1,370 1,551
====== ====== ======= ====== ======
BASIC
Income before extraordinary
item.......................... $ 2.39 $ 3.56 $ 0.59 $ 1.04 $ 0.05
Extraordinary item............... -- -- (0.85) -- --
------ ------ ------- ------ ------
Net income....................... $ 2.39 $ 3.56 $ (0.26) $ 1.04 $ 0.05
====== ====== ======= ====== ======
DILUTED
Income before extraordinary
item.......................... $ 1.87 $ 2.65 $ 0.59 $ 0.77 $ 0.05
Extraordinary item............... -- -- (0.85) -- --
------ ------ ------- ------ ------
Net income....................... $ 1.87 $ 2.65 $ (0.26) $ 0.77 $ 0.05
====== ====== ======= ====== ======
</TABLE>
18. INTERIM BASIS OF PRESENTATION (UNAUDITED)
The quarterly condensed consolidated financial statements include the
accounts of Holdings and its wholly-owned subsidiaries (together the "Company"
or "Anchor"). The parent company is not consolidated and push down accounting
has not been applied since the Company had outstanding public debt at the time
of acquisition. All significant intercompany balances and transactions have been
eliminated in consolidation. The quarterly consolidated financial statements
have been prepared, without audit, in accordance with generally accepted
accounting principles, pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, the quarterly
consolidated financial statements include all adjustments which are necessary
for a fair presentation of the financial position and results of operations for
the interim periods presented, such adjustments being of a normal recurring
nature. Certain information and footnote disclosures have been condensed or
omitted pursuant to such rules and regulations. It is suggested that these
quarterly consolidated financial statements and notes thereto be read in
conjunction with the full consolidated financial statements and notes thereto
for the year ended December 31, 1997. Results of operations in interim periods
are not necessarily indicative of results to be expected for a full year.
F-20
<PAGE> 127
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
19. RECENT DEVELOPMENTS (UNAUDITED)
On March 19, 1998 Anchor Acquisition Co., a Delaware corporation
("Purchaser"), entered into a Stock Purchase Agreement (the "Purchase
Agreement") with ML-Lee Acquisition Fund II, L.P., ML-Lee Acquisition Fund
(Retirement Accounts) II, L.P. and Thomas H. Lee Equity Partners, L.P. The
closing of the transactions contemplated by the Purchase Agreement occurred
concurrent with the signing of the Purchase Agreement (the "Closing"). Pursuant
to the terms and conditions of the Purchase Agreement, at the Closing the
Purchaser acquired all of the issued and outstanding shares of capital stock of
Anchor Holdings, Inc., whose wholly owned subsidiary is Anchor Advanced
Products, Inc.
The purchase price was $4.00 per share, of which 1,551,217.66 shares of
common stock, $.01 par value per share, were issued and outstanding, for a total
purchase price of $6,204,870.04.
Upon the Closing, the officers and directors of Anchor Holdings, Inc. and
Anchor Advanced Products, Inc. resigned and the Purchaser caused new officers
and a new director of each of those entities to be elected.
On June 3, 1998, the Company froze the benefit accruals for the Anchor
Advanced Products, Inc. Hourly Pension Plan and the Anchor Advanced Products,
Inc. Salaried Pension Plan.
F-21
<PAGE> 128
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Moll PlastiCrafters Limited Partnership:
We have audited the accompanying consolidated balance sheets of MOLL
PLASTICRAFTERS LIMITED PARTNERSHIP (A DELAWARE LIMITED PARTNERSHIP) AND
SUBSIDIARIES as of December 31, 1996 and 1997, and the related consolidated
statements of income, partners' capital and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Moll PlastiCrafters Limited
Partnership and Subsidiaries as of December 31, 1996 and 1997 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
March 19, 1998
F-22
<PAGE> 129
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- MARCH 31,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................. $ 877,893 $ 1,729,061 $ 7,140,808
Accounts receivable, net of reserves for doubtful
accounts of $561,000, $579,000, and $930,000
respectively.................................. 8,787,703 22,483,782 53,369,599
Inventories, net................................. 10,541,739 15,579,655 24,621,674
Deposits on tooling.............................. 2,720,730 6,877,297 7,767,926
Equipment held for sale.......................... -- 416,700 --
Other current assets............................. 565,363 392,357 2,877,548
------------ ------------ ------------
Total current assets..................... 23,493,428 47,478,852 95,777,555
------------ ------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land............................................. 377,242 1,624,443 1,977,443
Buildings........................................ 7,293,782 9,512,209 15,721,994
Machinery and equipment.......................... 34,265,843 37,732,863 60,576,565
Less: accumulated depreciation................... (12,950,756) (13,451,227) (15,548,145)
------------ ------------ ------------
Property, plant and equipment, net............ 28,986,111 35,418,288 62,727,857
------------ ------------ ------------
RECEIVABLE FROM AFFILIATES......................... 390,000 464,451 462,646
------------ ------------ ------------
INTANGIBLE AND OTHER ASSETS, NET................... 1,031,256 3,562,964 13,444,984
------------ ------------ ------------
Total assets............................. $ 53,900,795 $ 86,924,555 $172,413,042
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Checks drawn in excess of cash on deposit........ $ 644,864 $ 143,272 $ 1,507,268
Customer deposits on tooling..................... 3,141,118 7,411,548 8,078,415
Short-term borrowings............................ -- -- 23,726,000
Current portion of long-term obligations......... 6,026,626 5,059,450 10,275,742
Accounts payable................................. 4,231,673 16,587,519 32,411,988
Accrued liabilities.............................. 3,976,622 5,505,943 11,304,203
Due to affiliate................................. -- -- 260,574
------------ ------------ ------------
Total current liabilities................ 18,020,903 34,707,732 87,564,190
------------ ------------ ------------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION...... 27,614,197 42,872,953 73,986,638
------------ ------------ ------------
DEFERRED INCOME TAXES.............................. -- 10,377 3,175,593
------------ ------------ ------------
DEFERRED GAIN...................................... -- 1,157,358 1,092,459
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES...................... -- -- --
MINORITY INTEREST.................................. 1,849,755 2,212,675 2,449,561
------------ ------------ ------------
PARTNERS' CAPITAL:
General partner.................................. 1,026,260 648,632 171,373
Limited partners................................. 5,389,680 5,314,828 3,973,228
------------ ------------ ------------
Total partners' capital.................. 6,415,940 5,963,460 4,144,601
------------ ------------ ------------
Total liabilities and partners'
capital................................ $ 53,900,795 $ 86,924,555 $172,413,042
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-23
<PAGE> 130
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES................................ $90,875,746 $89,463,883 $116,947,000 $25,632,292 $60,105,303
COST OF SALES............................ 73,909,450 72,961,380 97,086,199 20,075,328 50,738,439
----------- ----------- ------------ ----------- -----------
Gross profit........................... 16,966,296 16,502,503 19,860,801 5,556,964 9,366,864
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................... 8,300,503 7,189,649 10,757,773 2,461,638 4,816,651
TOOLING INCOME, NET...................... (1,716,091) (706,947) (1,911,871) (360,434) (388,119)
MANAGEMENT AND CONSULTING FEE TO RELATED
PARTIES................................ 1,363,135 1,446,143 1,652,933 401,977 770,681
LOSS INCURRED ON CLOSURE OF FACILITY..... -- -- 1,176,172 -- --
----------- ----------- ------------ ----------- -----------
Operating income....................... 9,018,749 8,573,658 8,185,794 3,053,783 4,167,651
INTEREST EXPENSE, NET.................... 2,413,607 2,518,005 3,405,386 675,840 2,336,695
OTHER (INCOME) EXPENSE................... 119,727 50,307 (299,338) (110,553) 144,395
MINORITY INTEREST IN INCOME (LOSS) OF
SUBSIDIARY............................. -- (31,224) 434,555 319,083 236,912
----------- ----------- ------------ ----------- -----------
INCOME BEFORE TAXES AND EXTRAORDINARY
ITEM................................... 6,485,415 6,036,570 4,645,191 2,169,413 1,449,649
----------- ----------- ------------ ----------- -----------
PROVISION FOR INCOME TAXES
Current................................ -- -- 72,279 -- --
Deferred............................... -- -- 10,343 -- 92,411
----------- ----------- ------------ ----------- -----------
-- -- 82,622 -- 92,411
----------- ----------- ------------ ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM......... 6,485,415 6,036,570 4,562,569 2,169,413 1,357,238
EXTRAORDINARY ITEM LOSS ON EARLY
EXTINGUISHMENT OF DEBT................. -- -- -- -- 736,000
----------- ----------- ------------ ----------- -----------
NET INCOME............................... $ 6,485,415 $ 6,036,570 $ 4,562,569 $ 2,169,413 $ 621,238
=========== =========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<PAGE> 131
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL PARTNER LIMITED PARTNERS TOTAL
--------------- ---------------- ------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1994...................... $2,105,043 $10,609,508 $12,714,551
Net income.................................... 1,755,001 4,730,414 6,485,415
Distributions................................. (3,773,869) (12,537,593) (16,311,462)
----------- ------------ ------------
BALANCE, DECEMBER 31, 1995...................... 86,175 2,802,329 2,888,504
----------- ------------ ------------
Net income.................................... 1,671,224 4,365,346 6,036,570
Distributions................................. (731,139) (1,777,995) (2,509,134)
----------- ------------ ------------
BALANCE, DECEMBER 31, 1996...................... 1,026,260 5,389,680 6,415,940
----------- ------------ ------------
Net income.................................... 1,263,831 3,298,738 4,562,569
Distributions................................. (1,641,975) (3,375,570) (5,017,545)
Translation adjustment........................ 516 1,980 2,496
----------- ------------ ------------
BALANCE, DECEMBER 31, 1997...................... $ 648,632 $ 5,314,828 $ 5,963,460
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-25
<PAGE> 132
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................... $ 6,485,415 $ 6,036,570 $ 4,562,569 $ 2,169,413 $ 621,238
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization..... 4,417,590 4,148,148 5,399,573 1,233,979 2,138,864
Write-off of investment in
affiliate....................... 300,000 -- -- -- --
(Gain) loss on disposal of fixed
assets.......................... 119,727 50,307 (35,661) -- 5,168
Accrued loss on closure of
facility........................ -- -- 1,060,604 -- --
Deferred income taxes............. -- -- 10,343 -- 91,000
Minority interest in subsidiary
income (loss)................... -- (31,224) 434,555 319,083 236,912
Changes in assets and liabilities,
net of assets purchased:
Accounts receivable............. (1,318,658) 3,300,726 (8,347,044) (3,326,100) 2,868,909
Receivable from affiliates...... (390,000) -- (74,451) -- --
Inventories..................... (350,539) 672,096 527,008 (925,373) (1,532,483)
Other current assets............ (781,941) 938,771 181,065 (396,776) (557,434)
Deposits on tooling............. (3,245,354) 3,830,300 1,095,033 (553,375) (920,461)
Other assets.................... -- (251,035) (359,124) 61,460 (915,557)
Accounts payable................ (924,669) (2,559,947) 3,805,343 868,396 (1,965,532)
Accrued liabilities............. 1,535,307 (1,268,403) 84,746 (223,993) (3,034,484)
Customer deposits on tooling.... 3,894,672 (4,066,305) (2,337,203) 747,748 679,787
Checks drawn in excess of cash
on deposit................... (32,370) 2,261 (501,592) (2,796) 1,363,996
------------ ------------ ------------ ----------- ------------
Total adjustments............ 3,223,765 4,765,695 (943,195) (2,197,747) (1,541,315)
------------ ------------ ------------ ----------- ------------
Net cash provided by (used in)
operating activities......... 9,709,180 10,802,265 5,505,764 (28,334) (920,077)
------------ ------------ ------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................ (2,775,589) (1,387,297) (6,561,692) (334,786) (3,204,345)
Proceeds on disposal of fixed
assets............................ 222,947 57,765 267,530 100,269 416,700
Due from Lawson Mardon Packaging,
Inc. ............................. -- (110,609) 110,609 -- --
Purchase of assets of the Reliance
division of Lawson Mardon
Packaging, Inc. .................. -- (10,151,754) -- -- --
Purchase of Hanning................. -- -- (7,181,785) -- --
Purchase of Somomeca, net of cash
received.......................... -- -- (850,000) -- (11,737,470)
------------ ------------ ------------ ----------- ------------
Net cash used in investing
activities................... (2,552,642) (11,591,895) (14,215,338) (234,517) (14,525,115)
------------ ------------ ------------ ----------- ------------
</TABLE>
F-26
<PAGE> 133
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on)
revolving loan facility........... $ (1,388,269) $ 200,375 $ 10,170,694 $ 730,152 $ (9,802,543)
Proceeds from issuance of long-term
obligations....................... 14,267,877 9,597,130 12,513,382 729,567 56,308,024
Principal payments on long-term
obligations....................... (3,540,330) (7,581,902) (7,168,396) (1,297,297) (23,737,022)
Distributions....................... (16,311,462) (2,509,134) (5,017,545) (38,288) (1,859,121)
Financing costs..................... -- (251,032) (842,705) -- --
Minority partner contributions to
Reliance.......................... -- 1,880,979 -- -- --
Distributions to minority partners
of Reliance....................... -- -- (60,760) -- --
------------ ------------ ------------ ----------- ------------
Net cash provided by (used in)
financing activities......... (6,972,184) 1,336,416 9,594,670 124,134 20,909,338
------------ ------------ ------------ ----------- ------------
EFFECT OF EXCHANGE RATE CHANGES IN
CASH................................ -- -- (33,928) (11,109) (52,399)
------------ ------------ ------------ ----------- ------------
NET CHANGE IN CASH.................... 184,354 546,786 851,168 (149,826) 5,411,747
------------ ------------ ------------ ----------- ------------
BALANCE AT BEGINNING OF PERIOD........ 146,753 331,107 877,893 877,893 1,729,061
------------ ------------ ------------ ----------- ------------
BALANCE AT END OF PERIOD.............. $ 331,107 $ 877,893 $ 1,729,061 $ 728,067 $ 7,140,808
============ ============ ============ =========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.............. $ 2,225,115 $ 2,822,910 $ 3,414,407 $ 644,112 $ 1,446,297
============ ============ ============ =========== ============
Cash paid for income taxes.......... $ -- $ -- $ 21,590 $ -- $ --
============ ============ ============ =========== ============
</TABLE>
Non-cash transaction:
During 1997, the Partnership incurred a payable to the former owners of
Hanning of $1,500,000 for the purchase of Hanning.
During 1997, the Partnership terminated a capital lease which resulted in a
reduction of debt by $2,503,226 and reduction of fixed assets by $1,205,254.
The accompanying notes are an integral part of these consolidated financial
statements.
F-27
<PAGE> 134
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Moll PlastiCrafters Limited Partnership ("Moll" or the "Partnership") was
formed in July 1991 for the purpose of manufacturing and selling injection
molded plastic parts. Under the partnership agreement, the partnership is
scheduled to terminate on December 31, 2012. Moll operates manufacturing
facilities in the United States, Canada, Germany and the United Kingdom.
At December 31, 1997, Moll maintained investments in three wholly-owned
subsidiaries (Moll Industries, LLC; Moll PlastiCrafters UK, Ltd.; and Moll
PlastiCrafters, LLC) as well as a 69% ownership interest in Reliance Products
Limited Partnership.
Moll Industries, LLC ("Industries") was formed on December 30, 1997. At
December 31, 1997, Industries contained no operating activities.
Moll PlastiCrafters UK, Ltd. ("Moll UK") was formed in 1997 and contains
the United Kingdom operations of Hanning purchased in 1997 (see Note 3).
Moll PlastiCrafters, LLC ("Moll Germany") was formed in 1997 and contains
the German operations of Hanning purchased in 1997 (see Note 3).
Reliance Products Limited Partnership ("Reliance") was formed in 1996. Moll
owns a 69% limited partnership interest in Reliance through its holdings of
Class B partnership units (see Note 3). The minority partners of Reliance
contributed $1,880,979 to Reliance upon its formation. Reliance operates a
production facility in Canada. The Reliance partnership agreement establishes
priorities for allocations of income, as follows: first, to the holders of Class
A partnership units until each has received a 19.5% return on its unreturned
capital; second, to Moll and the general partner until each has received a 30%
return on its unreturned capital contribution; third, to the remaining holders
of Class B partnership units until each has received a 30% return on its
unreturned capital contribution and fourth, to each of the Class B partnership
unit holders in proportion to the number of units held.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Moll and its
majority owned subsidiaries (collectively, the "Partnership"). All significant
intercompany transactions and balances have been eliminated.
REVENUES AND ACCOUNTS RECEIVABLE
The Partnership's customers operate primarily in the home appliance,
business equipment and electronics industries. The Partnership generally grants
credit to customers on an unsecured basis. Revenues from sales are recognized at
the time products are shipped.
TOOLING
The Partnership enters into agreements with its customers to design and
produce certain customer owned plastic injection tooling (primarily molds).
Monies paid or received by the Partnership in connection with tooling that
remains undelivered at the end of an accounting period are included as Deposits
on Tooling or Customer Deposits on Tooling, respectively, in the accompanying
consolidated balance sheet. At the time of delivery of completed tooling, the
excess of revenues over costs incurred are recognized in the accompanying
consolidated statements of income as tooling revenue, net.
F-28
<PAGE> 135
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out (FIFO)
method) or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is valued at cost or allocated fair value at
time of acquisition. Depreciation is computed using the straight-line and
declining balance methods over the estimated useful lives of the assets, which
are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and building improvements................... 25
Machinery and equipment............................... 3-10
Furniture and fixtures................................ 10
Computer hardware and software........................ 3-10
Automobiles........................................... 3
</TABLE>
INTANGIBLE ASSETS
Loan costs are amortized over the term of the related loan using the
straight-line method. Organizational costs are amortized over five years using
the straight-line method. Covenants not to compete are amortized over the life
of the agreements using the straight-line method.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Partnership estimates the fair value of financial instruments using
quoted or estimated market prices based upon the current interest rate
environment and the remaining term to maturity. At December 31, 1997, there were
no material differences in the book values of the Partnership's financial
instruments and their related fair values.
INCOME TAXES
As Moll is a partnership, the earnings of Moll, including the earnings of
foreign subsidiaries attributable to Moll for United States income tax purposes,
are included in the tax returns of its partners. Accordingly, the consolidated
financial statements contain no provision for federal or state income taxes
related to these earnings.
Certain of the Partnership's subsidiaries formed in 1997 are taxable
entities. The Partnership has accounted for income taxes for these subsidiaries
using the liability method which requires recognition of deferred tax assets and
liabilities for the expected future consequences of events that have been
included in the financial statements or income tax returns.
The Partnership's taxable subsidiaries have no significant differences
between its financial reporting and tax basis except for its property, plant and
equipment, for which a deferred tax liability has been reflected in the
accompanying consolidated balance sheet. The Partnership's taxable subsidiaries
incurred current foreign income tax expense of $72,279 in 1997.
PARTNER'S CAPITAL
The income of the Partnership is allocated to the partners based on their
respective ownership percentages. Amounts classified as partners' capital are
subject to distribution at the discretion of the partners; however, the amount
of distributions is subject to limitations under certain of the Partnerships'
debt agreements (See Note 6).
F-29
<PAGE> 136
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Partnership's foreign subsidiaries are
translated to U.S. dollars at current exchange rates, while revenues and
expenses are translated at the average exchange rate prevailing during the
period. Translation adjustments are recorded as a component of partners'
capital.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
ACCRUED CLAIMS AND LITIGATION
The Partnership is partially self-insured for claims arising from public
liability, property damage, workers' compensation, and employee health benefits.
Excess insurance coverage is maintained for per-incident and cumulative
liability losses for these risks in amounts management considers adequate.
Amounts are accrued currently for the estimated cost of claims incurred,
including related expenses. Management considers the accrued liabilities for
unsettled claims to be adequate; however, there is no assurance that the amounts
accrued will not vary from the ultimate amounts incurred upon final disposition
of all outstanding claims. As a result, periodic adjustments to the reserves
will be made as events occur which indicate that changes are necessary.
LONG-LIVED ASSETS
When factors are present which indicate the cost of assets may not be
recovered, the Partnership evaluates the realizability of its long-lived assets,
based upon the anticipated future cash flows generated by the asset.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
INTERIM FINANCIAL STATEMENTS
The unaudited financial statements have been prepared on a basis consistent
with the audited financial statements. In the opinion of management, the
accompanying unaudited financial statements reflect all adjustments necessary to
present fairly the financial position as of March 31, 1998 and the results of
operations and cash flows for the three months ended March 31, 1997 and 1998.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures About Segments of an
Enterprise and Related Information. This Statement establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Statement is
effective for fiscal years beginning after December 15, 1997. The Partnership is
evaluating SFAS No. 131 to determine the impact, if any, on its reporting and
disclosure requirements.
F-30
<PAGE> 137
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income. The
Statement establishes standards for reporting comprehensive income and its
components in a full set of financial statements. The Statement is effective for
fiscal years beginning after December 15, 1997. The Partnership currently
reports one-item in partners' capital that would be classified as other
comprehensive income.
3. ACQUISITIONS
RELIANCE
Effective December 12, 1996, Reliance purchased the net assets of the
Reliance Division of Lawson Mardon Packaging, Inc. for cash of $10,151,754,
whose operations are located in Canada. The transaction has been accounted for
by the purchase method with the purchase price allocated based on the fair
values of the assets purchased and liabilities assumed, as follows:
<TABLE>
<S> <C>
Accounts receivable......................................... $ 2,153,935
Inventories................................................. 2,823,970
Prepaid expenses............................................ 68,495
Equipment................................................... 7,255,970
Liabilities assumed......................................... (2,150,616)
-----------
$10,151,754
===========
</TABLE>
HANNING
Effective August 8, 1997, Moll acquired a group of companies that had
previously been under common ownership ("Hanning"). The companies acquired, the
type of acquisition and the country of operations are as follows:
<TABLE>
<CAPTION>
TYPE OF COUNTRY OF
COMPANY ACQUISITION OPERATIONS
------- -------------------- --------------
<S> <C> <C>
Hanning Corporation............................ Assets United States
Hanning-Kunststoffe Beteilingungs-GmbH......... Stock Germany
Hanning-Kunststoffe GmbH & Co. ................ Partnership Interest Germany
Hanning Plastics, Ltd. ........................ Assets United Kingdom
Hanning Property Associates.................... Assets United States
PB Hanning GmbH & Co. ......................... Stock Germany
PB Hanning GmbH & Co. Handelsgesellschaft...... Partnership Interest Germany
</TABLE>
Moll paid $7,582,000 in cash and agreed to pay the sellers $1,500,000 over
four years. Additionally, Moll incurred expenses totaling approximately
$1,400,000 in connection with this acquisition. The purchase price is subject to
adjustment based on an evaluation of the assets purchased and liabilities
assumed which is currently in process. However, the purchase price, excluding
expenses, may not exceed $10,000,000.
F-31
<PAGE> 138
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The acquisition was accounted for using the purchase method of accounting.
The purchase price has been allocated to the assets acquired (net of $1,800,000
of assets which were distributed to partners of Moll) and liabilities assumed
based on information currently available as to their fair values as follows:
<TABLE>
<S> <C>
Accounts receivable......................................... $ 5,369,000
Inventories................................................. 5,790,000
Deposits on tooling......................................... 5,177,000
Prepaid expenses............................................ 140,000
Property, plant and equipment............................... 11,180,000
Other assets................................................ 21,000
Accounts payable............................................ (6,343,000)
Accrued liabilities and other current liabilities........... (2,270,000)
Customer deposits on tooling................................ (6,536,000)
Noncurrent liabilities...................................... (3,846,000)
-----------
$ 8,682,000
===========
</TABLE>
An evaluation of the acquired assets and liabilities is in progress. Upon
completion of the evaluation, net additions or reductions, if any, in the fair
values currently assigned will be credited or charged against long-term assets.
The results of operations of Reliance and Hanning have been included in the
consolidated financial statements since the effective date of each acquisition.
See Note 16 for unaudited pro forma information.
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets of the Partnership at December 31, 1996 and
1997 consist of the following:
<TABLE>
<CAPTION>
1996 1997
----------- ----------
<S> <C> <C>
Covenants not to compete................................... $ 1,740,678 $1,344,199
Acquisition costs on pending transactions.................. -- 1,065,778
Deposit on purchase of Somomeca............................ -- 850,000
Loan costs................................................. 455,060 842,705
Organization costs......................................... 327,108 --
Other...................................................... 226,055 456,513
----------- ----------
2,748,901 4,559,195
Less: accumulated amortization........................... (1,717,645) (996,231)
----------- ----------
$ 1,031,256 $3,562,964
=========== ==========
</TABLE>
5. INVENTORIES
Inventories of the Partnership at December 31, 1996 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Raw materials............................................. $ 4,696,804 $ 7,718,780
Work-in-progress.......................................... 999,307 1,413,502
Finished goods............................................ 5,656,377 7,614,110
Less: reserve for excess and obsolete inventory........... (810,749) (1,166,737)
----------- -----------
$10,541,739 $15,579,655
=========== ===========
</TABLE>
F-32
<PAGE> 139
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM OBLIGATIONS
Long-term obligations of the Partnership at December 31, 1996 and 1997
consist of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Revolving loan facility with a bank that provided for
borrowings up to the lesser of $10,950,000 or the sum of
85% of eligible accounts receivable and 50% of eligible
inventories. Interest was payable monthly at the bank's
reference rate plus 0.5% (9.25% at December 31, 1997).
This revolving loan facility was refinanced on January 8,
1998...................................................... $ 200,375 $10,720,543
Revolving credit agreement under which the Partnership can
obtain up to $12,300,000 (Canadian dollars, approximately
$8,600,000 U.S. dollars at December 31, 1997) in loans.
Loans bear interest at either the lender's floating rate
plus 0.5% or at a IBOR based rate at the option of the
Partnership (5.98% at December 31, 1997). The available
loan amount decreases by approximately $73,000 monthly and
expires on December 11, 1999.............................. 6,448,021 5,809,071
Term note payable to a bank. Interest payable monthly at a
range of LIBOR plus 2% (7.94% at December 31, 1997) to
8.75%. This note was refinanced on January 8, 1998. ...... 20,941,652 24,598,000
Industrial Development Revenue Bonds, payable in annual
principal installments of $190,000 to $220,000 through
December 1, 1999. Interest is payable bi-annually at 8.25%
to 8.625%. ............................................... 635,000 440,000
Note payable to former owner of Quality Plastics Company,
Inc. in annual installments of $448,569 beginning October
7, 1996 with the remaining balance due October 7, 1999.
Interest is payable semi-annually at 9%. This note was
refinanced on January 8, 1998. ........................... 1,794,228 1,345,708
Payable to former owners of Hanning. The payable is
denominated in Deutsche Marks. Principle is payable in
three equal annual payments beginning August 1999.
Interest is due annually at 8%. .......................... -- 1,500,000
Mortgage payable in monthly installments of $28,486. The
mortgage expires on December 1, 2012. Interest is payable
at 8.40%. ................................................ -- 2,901,884
----------- -----------
Total long-term debt.............................. 30,019,276 47,315,206
----------- -----------
Capitalized equipment sublease obligation, interest on the
sublease is 9.5%. The debt was extinguished in June
1997...................................................... 2,806,133 --
Other capitalized equipment leases.......................... 815,414 617,197
----------- -----------
Total capitalized lease obligations (see Note
7)............................................. 3,621,547 617,197
----------- -----------
Total long-term obligations............................... 33,640,823 47,932,403
Less current portion...................................... (6,026,626) (5,059,450)
----------- -----------
$27,614,197 $42,872,953
=========== ===========
</TABLE>
F-33
<PAGE> 140
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The amounts of all long-term obligations, excluding capital leases, to be
repaid for the years following December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................ $ 4,745,504
1999............................................ 10,239,904
2000............................................ 5,920,511
2001............................................ 5,931,032
2002............................................ 7,442,473
Thereafter...................................... 13,035,782
-----------
$47,315,206
===========
</TABLE>
DEBT REFINANCING
On January 8, 1997, the Partnership entered into a credit agreement
("Credit Agreement") with a group of lenders ("Lenders"), in which the Lenders
agreed to loan the Partnership $60,000,000 in term debt (under two equal
tranches) and make available a revolving credit facility of up to $10,000,000,
based on the level of eligible accounts receivable and inventory. The debt under
the Credit Agreement earns interest at a variable rate depending upon the market
rate and certain financial ratios of the Partnership. The effective interest
rate would have been approximately 8.25% if the debt had been outstanding at
December 31, 1997. Substantially all assets of the Partnership are pledged as
collateral on the Credit Agreement.
Tranche A and the revolving credit facility expire on December 31, 2003.
Tranche B expires on December 31, 2005. The term loans require varying,
quarterly principal payments beginning in 1998. These requirements have been
reflected in the debt maturities included above. Additionally, the Credit
Agreement requires prepayment of a portion of the term loans should the
Partnership generate a specified level of cash flows as defined in the Credit
Agreement. Any outstanding balance under the revolving credit facility is due at
expiration.
The Credit Agreement contains restrictions on the payment of dividends and
distributions, transactions with affiliated parties, purchase and sale of fixed
assets and limitations on the level of advances that can be made to certain
subsidiaries, among others. Additionally, it contains various financial
covenants, all of which the Partnership was in compliance with as of December
31, 1997.
The Partnership had deferred costs of $671,000 at December 31, 1997 related
to the previous credit agreement which will be expensed in 1998 in connection
with the refinancing.
LEASE RENEGOTIATION
On June 15, 1997, the Partnership renegotiated an agreement for the lease
of equipment. The terms of the original agreement required the lease to be
accounted for as a capital lease. However, the terms of the new agreement result
in the lease being accounted for as an operating lease. At the date of the
renegotiation, the difference between the net book value of the assets and the
related debt under the capital lease, $1,297,972, was reflected as a deferred
gain in the accompanying consolidated balance sheets at December 31, 1997.
F-34
<PAGE> 141
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. LEASE COMMITMENTS
The aggregate future minimum fixed lease obligations for the Partnership as
of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES - OPERATING
EQUIPMENT LEASES
---------------- ----------
<S> <C> <C>
1998..................................................... $362,732 $3,243,318
1999..................................................... 269,916 2,043,698
2000..................................................... 34,498 1,680,386
2001..................................................... 14,476 1,450,466
2002..................................................... 4,557 552,571
Thereafter............................................... -- 66,201
-------- ----------
Total minimum lease payments............................. 686,179 $9,036,640
==========
Less amounts representing interest....................... 68,982
--------
Present value of minimum capital lease payments.......... $617,197
========
</TABLE>
Total rent expense for the Partnership's operating leases was approximately
$1,375,000, $1,780,000 and $2,835,000 for 1995, 1996 and 1997, respectively.
8. RETIREMENT PLANS
The Partnership maintains profit-sharing plans covering substantially all
employees in the United States and Canada meeting the service requirements
defined in the plan. Under the provisions of the plans, employees may contribute
from 2% to 15% of their wages. The Partnership may make matching contributions
equal to a discretionary percentage, to be determined by the Partnership.
Matching contributions are subject to certain vesting requirements. The
Partnership contributed approximately $143,000, $165,000 and $233,000 to the
plans in 1995, 1996 and 1997, respectively.
9. RELATED PARTIES
At December 31, 1997, the Partnership has a note receivable of $390,000
from an individual with ownership interest in certain partners of Moll. The note
is payable in three equal annual installments beginning February 1, 1998 and
bears interest at 9%.
The Partnership pays management fees to certain related companies which are
limited in amount under the Partnership's debt agreements. Management fee
expense was approximately $1,363,000, $1,346,000 and $1,553,000 for 1995, 1996
and 1997, respectively. Of this amount, approximately $150,000 was recorded as
an accrued liability at December 31, 1997.
Under the terms of Moll's Partnership Agreement, effective September 1995,
Moll committed to pay consultant fees to a partner as defined in the Partnership
Agreement not to exceed $100,000 per year. The arrangement was for two years and
terminated in September 1997. Payments made in 1996 and 1997 were $100,000 per
year.
The Partnership leases land and buildings in Germany from an entity owned
by certain partners of the Partnership. The lease expires on August 7, 1998,
contains three automatic one year extensions and accrues rent at a rate of
790,000 Deutsche Marks ($439,000 per year based on the December 31, 1997
exchange rate). Payment of the accrued rent is subject to restrictions as
defined in the Credit Agreement (see Note 6). The Partnership recognized rent
expense of $176,000 in 1997, which is included in accounts payable at December
31, 1997.
F-35
<PAGE> 142
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. FACILITY CLOSURE
In September 1997, the Partnership closed its El Paso facility. The
expenses incurred in closing the facility are reflected as "Loss Incurred on
Closure of Facility" in the accompanying consolidated statements of income.
Liabilities and reserves of $1,061,000 are included in the accompanying December
31, 1997 consolidated balance sheet for anticipated future expenditures and
losses related to the closure. Equipment from the El Paso facility that was
disposed of in February 1998 is included in the accompanying consolidated
balance sheets as "Equipment Held for Sale" at its net realized value.
11. MAJOR CUSTOMERS
Two customers accounted for approximately 46%, 50% and 45% of the
Partnership's net sales in 1995, 1996 and 1997, respectively. In addition,
approximately 49% and 61% of the Partnership's total accounts receivable at
December 31, 1996 and 1997 were from these customers. Management believes the
credit risk associated with these customers is minimal.
12. CONTINGENCIES
The Partnership is a party to various lawsuits and claims in the normal
course of business. While the outcome of the lawsuits and claims against the
Partnership cannot be predicted with certainty, management believes that the
ultimate resolution of the matters will not have a material effect on the
financial position or results of operations of the Partnership.
13. SEGMENT INFORMATION
The Partnership operates in one industry segment. The following table
presents sales and other financial information by geographic region for the
years ended December 31, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Net sales:
United States............................ $90,875,746 $89,035,929 $ 87,584,479
Canada................................... -- 427,954 17,383,250
Europe................................... -- -- 11,979,271
----------- ----------- ------------
Total net sales.................. $90,875,746 $89,463,883 $116,947,000
=========== =========== ============
Operating income:
United States............................ $ 9,018,749 $ 8,626,800 $ 8,306,464
Canada................................... -- (53,142) 1,551,115
Europe................................... -- -- (1,671,785)
----------- ----------- ------------
Total operating income........... $ 9,018,749 $ 8,573,658 $ 8,185,794
=========== =========== ============
Identifiable assets:
United States............................ $51,287,835 $41,502,714 $ 60,529,356
Canada................................... -- 12,590,288 12,353,975
Europe................................... -- -- 15,146,654
Eliminations............................. -- (192,207) (1,105,430)
----------- ----------- ------------
Total assets..................... $51,287,835 $53,900,795 $ 86,924,555
=========== =========== ============
</TABLE>
F-36
<PAGE> 143
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Depreciation and amortization:
United States............................ $ 4,417,590 $ 4,087,803 $ 3,819,324
Canada................................... -- 60,345 1,158,082
Europe................................... -- -- 422,167
----------- ----------- ------------
Total............................ $ 4,417,590 $ 4,148,148 $ 5,399,573
=========== =========== ============
Capital expenditures:
United States............................ $ 2,775,589 $ 1,387,297 $ 5,965,381
Canada................................... -- -- 531,633
Europe................................... -- -- 64,678
----------- ----------- ------------
Total............................ $ 2,775,589 $ 1,387,297 $ 6,561,692
=========== =========== ============
</TABLE>
14. SOMOMECA ACQUISITION
Effective January 8, 1998, Industries, through its subsidiaries, purchased
100% of the outstanding shares of Somomeca Industries S.A.R.L. ("Somomeca").
Somomeca's operations are located primarily in France. Somomeca incurred a net
loss before taxes of $363,000 on revenues of $84,926,000 in their fiscal year
ended August 31, 1997. The Partnership paid $12,587,000 net of cash received and
assumed $68,377,000 of liabilities in the acquisition. The stock purchase
agreement allows for a reduction of the purchase price if the stockholders'
equity of Somomeca at the closing date is less than the similar amount on
February 28, 1997. An evaluation of the stockholders' equity at the closing date
is currently in process. Additionally, the stock purchase agreement requires the
payment of additional consideration of up to 13,000,000 French Franc ($2,135,000
at December 31, 1997 exchange rates) should Somomeca achieve specified operating
results for the twelve months ending August 31, 1998. See Note 15 for unaudited
pro forma information.
As discussed in Note 1, during 1997 and at December 31, 1997, Industries
did not contain any assets, liabilities, or operations. In the future, the
members of Industries, excluding Moll, are entitled to all distributions made by
Industries which are attributable to a) any distribution received by Industries
from any direct or indirect subsidiary organized under the laws of France (the
"French Companies") and b) proceeds from the sale or other disposition of the
equity interests in any of the French Companies.
Secondly, a member of Industries is entitled to a distribution equal to 5%
of the debt service paid to Industries by the French Companies on the initial
acquisition loan (agreed to be $13,000,000). However, no amount shall be paid
unless the manager of Industries concludes that the liquidation of Industries
would result in aggregate distributions to Moll that are in excess of the
acquisition debt amount.
Thirdly, a member of Industries is entitled to a distribution if
indebtedness of the French Companies to Industries exceeds $40 million. The
amount of the distribution equals 5% of the debt service on the indebtedness in
excess of $40 million.
Moll is entitled to all other distributions of Industries.
15. SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARIES
The following reflects the summarized combined financial data of Moll
PlastiCrafters GmbH and Moll Industries UK, Limited (formerly companies in the
Hanning Companies) and Moll Plastics SARL (formerly Somomeca Industries) since
the date of their acquisition by the Company. (See Notes 3 and 16) These
companies and all of their subsidiaries have guaranteed the $100,000,000 of
11 3/4% Senior Notes due 2004 issued by Anchor (See Note 16) and represent all
of the subsidiaries of the Company for the periods presented.
F-37
<PAGE> 144
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED
1997 MARCH 31, 1998
------------ --------------
(UNAUDITED)
<S> <C> <C>
STATEMENT OF INCOME DATA:
Net sales................................................... $11,979,000 $29,814,000
Gross margin................................................ (740,000) 3,048,000
Income (loss) from operations............................... (1,671,000) 980,000
Net loss.................................................... (1,607,000) (628,000)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1997 MARCH 31, 1998
------------ --------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Current assets.............................................. $ 9,528,000 $ 50,921,000
Total assets................................................ 17,591,000 115,574,000
Current liabilities......................................... 19,054,000 109,158,000
Total liabilities........................................... 19,089,000 118,210,000
Partners' deficit........................................... (1,498,000) (2,636,000)
</TABLE>
16. SUBSEQUENT EVENT AND PRO FORMA INFORMATION (UNAUDITED)
Effective June 26, 1998, the Partnership completed a series of transactions
as follows:
(i) the distribution by the Partnership of its 69% Class B limited
partnership interest in Reliance to certain of Moll's limited partners,
(ii) the merger of Moll into Anchor Advanced Products, Inc. ("Anchor")
in exchange for common shares of AMM Holdings, Inc. ("Holdings"--Anchor's
parent), to form Moll Industries, Inc.,
(iii) the issuance by Moll Industries, Inc. of $130,000,000 Senior
Subordinated Notes
(iv) the acquisition of Gemini Plastic Services, Inc. by Moll
Industries, Inc., and
(v) a capital contribution by AMM Holdings, Inc. to Moll Industries,
Inc. of $2,000,000.
The following unaudited statement of income data gives effect to these
transactions as well as the acquisitions of Reliance, Hanning, and Somomeca as
if they had occurred at the beginning of the respective periods.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
Net sales............................................... $421,683,000 $414,630,000
------------ ------------
Operating income........................................ $ 30,538,000 $ 30,458,000
------------ ------------
Income before taxes and extraordinary item.............. $ 3,668,000 $ 4,321,000
------------ ------------
</TABLE>
F-38
<PAGE> 145
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following unaudited balance sheet information gives effect to the
transactions as if they had occurred on March 31, 1998.
<TABLE>
<S> <C>
Current assets.............................................. $156,174,000
------------
Total assets................................................ $329,817,000
------------
Current liabilities......................................... $ 69,655,000
------------
Total liabilities........................................... $329,623,000
------------
Stockholders' equity........................................ $ 194,000
------------
</TABLE>
F-39
<PAGE> 146
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Somomeca Industries:
We have audited the accompanying consolidated balance sheets of SOMOMECA
INDUSTRIES (a French corporation) and subsidiaries as of December 31, 1997 and
as of August 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the four month period ended
December 31, 1997 and for each of the three years in the period ended August 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
SOMOMECA INDUSTRIES and subsidiaries as of December 31, 1997 and as of August
31, 1997 and 1996, and the results of their operations and their cash flows for
the four month period ended December 31, 1997 and for each of the three years in
the period ended August 31, 1997, in conformity with generally accepted
accounting principles in the United States.
BARBIER, FRINAULT & ASSOCIES
Member Firm of Andersen Worldwide
February 17, 1998
Paris, France
F-40
<PAGE> 147
SOMOMECA INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF US DOLLARS -- NOTE 2)
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1997 1997
---------- ---------- ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................... $ 851 $ 804 $ 428
Trade receivables, net of allowance of $91, $213 and
$104 respectively.................................... 21,223 25,752 26,623
Other receivables....................................... 1,235 1,667 1,193
Inventories............................................. 8,976 7,862 7,806
Prepaid expenses........................................ 1,030 502 730
Deferred tax assets..................................... 684 828 617
------- ------- -------
Total current assets............................ 33,999 37,415 37,397
------- ------- -------
PROPERTY, PLANT AND EQUIPMENT, NET........................ 23,676 21,304 22,438
------- ------- -------
OTHER ASSETS.............................................. 7,204 5,928 6,029
------- ------- -------
Total assets.................................... $64,879 $64,647 $65,864
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving lines of credit............................... $ 9,111 $17,841 $16,005
Current portion of long-term obligations................ 5,110 4,328 4,026
Accounts payable........................................ 17,764 16,459 18,221
Accrued liabilities..................................... 9,922 7,121 7,778
------- ------- -------
Total current liabilities....................... 41,907 45,749 46,030
------- ------- -------
DEFERRED INCOME TAXES..................................... 1,192 1,046 1,399
------- ------- -------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION............. 13,286 11,349 10,523
------- ------- -------
MINORITY INTEREST......................................... 2,065 1,430 1,513
------- ------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock (par value of $9.89; 500,000 shares
authorized and outstanding).......................... 4,943 4,943 4,943
Additional paid-in capital.............................. 1,848 1,848 1,848
Retained earnings (deficit)............................. (614) (775) 352
Accumulated foreign currency translation adjustment..... 252 (943) (744)
------- ------- -------
Total stockholders' equity...................... 6,429 5,073 6,399
------- ------- -------
Total liabilities and stockholders' equity...... $64,879 $64,647 $65,864
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE> 148
SOMOMECA INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF US DOLLARS--NOTE 2)
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE YEAR ENDED AUGUST 31, MONTHS ENDED
----------------------------- DECEMBER 31,
1995 1996 1997 1997
------- ------- ------- ------------
<S> <C> <C> <C> <C>
NET SALES....................................... $64,533 $81,983 $84,926 $32,414
COST OF SALES................................... 54,747 70,353 75,807 27,506
------- ------- ------- -------
Gross profit............................. 9,786 11,630 9,119 4,908
OPERATING EXPENSES
Selling and marketing......................... 1,494 1,403 1,690 394
General and administrative.................... 3,317 4,322 4,853 1,337
Other income (expense) net.................... (366) (121) (341) 244
------- ------- ------- -------
Total operating expenses.............. 5,177 5,846 6,884 1,975
------- ------- ------- -------
Operating income...................... 4,609 5,784 2,235 2,933
INTEREST INCOME (EXPENSE)
Interest income............................... 445 37 50 1
Interest expense.............................. (3,042) (3,189) (2,648) (806)
------- ------- ------- -------
Total interest income (expense)....... (2,597) (3,152) (2,598) (805)
------- ------- ------- -------
Income (loss) before income taxes..... 2,012 2,632 (363) 2,128
INCOME TAX (EXPENSE) BENEFIT
Current income tax............................ (679) (995) (74) (373)
Deferred income tax........................... (301) (178) 218 (563)
------- ------- ------- -------
Total income tax (expense) benefit.... (980) (1,173) 144 (936)
------- ------- ------- -------
Income (loss) before minority interest........ 1,032 1,459 (219) 1,192
MINORITY INTEREST............................... (108) (265) 272 (65)
------- ------- ------- -------
NET INCOME...................................... $ 924 $ 1,194 $ 53 $ 1,127
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE> 149
SOMOMECA INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA--NOTE 2)
<TABLE>
<CAPTION>
ACCUMULATED
FOREIGN
COMMON STOCK ADDITIONAL RETAINED CURRENCY TOTAL
----------------- PAID-IN EARNINGS TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT EQUITY
------- ------ ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE
AUGUST 31, 1994......... 500,000 $4,943 $1,848 $(2,693) $ -- $ 4,098
Net income................ -- -- -- 924 -- 924
Foreign currency
translation
adjustment.............. -- -- -- -- 348 348
------- ------ ------ ------- ------- -------
BALANCE
AUGUST 31, 1995......... 500,000 4,943 1,848 (1,769) 348 5,370
Dividends................. -- -- -- (39) -- (39)
Net income................ -- -- -- 1,194 -- 1,194
Foreign currency
translation
adjustment.............. -- -- -- -- (96) (96)
------- ------ ------ ------- ------- -------
BALANCE
AUGUST 31, 1996......... 500,000 4,943 1,848 (614) 252 6,429
Dividends................. -- -- -- (214) -- (214)
Net income................ -- -- -- 53 -- 53
Foreign currency
translation
adjustment.............. -- -- -- -- (1,195) (1,195)
------- ------ ------ ------- ------- -------
BALANCE
AUGUST 31, 1997......... 500,000 4,943 1,848 (775) (943) 5,073
Net income................ -- -- -- 1,127 -- 1,127
Foreign currency
translation
adjustment.............. -- -- -- -- 199 199
------- ------ ------ ------- ------- -------
BALANCE
DECEMBER 31, 1997....... 500,000 $4,943 $1,848 $ 352 $ (744) $ 6,399
======= ====== ====== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-43
<PAGE> 150
SOMOMECA INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF US DOLLARS--NOTE 2)
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE YEAR ENDED AUGUST 31, MONTHS ENDED
------------------------------ DECEMBER 31,
1995 1996 1997 1997
------- ------- -------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income..................................... $ 924 $ 1,194 $ 53 $ 1,127
Adjustments to reconcile net income to net cash
provided by operating activities.............
Depreciation and amortization.................. 3,324 5,693 6,386 1,971
Loss (gain) on sale of assets.................. (76) (244) (47) 24
Changes in operating assets and liabilities:
(Increase) decrease in inventories........... (80) (3,248) (603) 346
(Increase) decrease in trade and other
receivables............................... (5,164) (7,348) (11,235) 262
(Increase) decrease in other assets.......... 2,451 (1,944) 9 248
Increase (decrease) in accounts payable...... (984) 8,252 2,192 1,180
Increase (decrease) in other liabilities..... 5,177 (1,550) (814) 115
Minority interest............................ (28) (135) (282) 31
------- ------- -------- -------
Net cash provided by (used in) operating
activities........................... 5,544 670 (4,341) 5,304
------- ------- -------- -------
INVESTING ACTIVITIES
Purchase of additional ownership in
subsidiaries................................. -- (297) -- --
Purchase of property, plant and equipment...... (4,115) (6,956) (6,117) (1,771)
Proceeds from sales of property, plant and
equipment.................................... 547 1,728 495 --
------- ------- -------- -------
Net cash used in investing activities..... (3,568) (5,525) (5,622) (1,771)
------- ------- -------- -------
FINANCING ACTIVITIES
Proceeds from (repayment of) short-term
borrowings................................... 1,260 6,972 11,566 (2,512)
Repayment of capital lease obligations......... (4,446) (3,005) (3,085) (824)
Proceeds from issuance of long-term debt....... 2,333 1,656 3,750 --
Repayment of principal of long-term debt....... (773) (806) (1,903) (637)
Dividends...................................... -- (39) (214) --
------- ------- -------- -------
Net cash provided by (used in) financing
activities........................... (1,626) 4,778 10,114 (3,973)
------- ------- -------- -------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON
CASH......................................... 51 17 (198) 64
------- ------- -------- -------
NET INCREASE (DECREASE) IN CASH................ 401 (60) (47) (376)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD....................................... 510 911 851 804
------- ------- -------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD....... $ 911 $ 851 $ 804 $ 428
======= ======= ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest..................................... $ 2,995 $ 3,044 $ 2,577 $ 769
------- ------- -------- -------
Income taxes................................. $ 374 $ 1,304 $ 777 $ --
======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE> 151
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA--NOTE 2)
1. BASIS OF PRESENTATION
The SOMOMECA INDUSTRIES and subsidiaries (the Company) consolidated
financial statements include the following entities:
<TABLE>
<CAPTION>
CONSOLIDATED ENTITIES % OWNED BUSINESS
<S> <C> <C>
SOMOMECA INDUSTRIES................. Holdings
SOMOMECA INDUSTRIES owned
subsidiaries:
SAPI (SARL)....................... 100 Manufacturing and selling of
injection molded plastic parts
SOMOPLAST Lorraine................ 100 Manufacturing and selling of
injection molded plastic parts
BBI............................... 100 Manufacturing and selling of
injection molded plastic parts
SCI Bonnevalaise.................. 100 Building ownership
FINANCIERE SOMOMECA............... 73.7 Holdings
FINANCIERE SOMOMECA owned
subsidiaries:
STAPHANE.......................... 100 Manufacturing and selling of molds
for plastic injection
SERIM............................. 100 Manufacturing and selling of molds
for plastic injection and of
injection molded plastic parts
SOMOPLAST......................... 100 Manufacturing and selling of
injection molded plastic parts
SEMIP............................. 100 Manufacturing and selling of molds
for plastic injection
PROMOLDE.......................... 100 Manufacturing and selling of molds
for plastic injection
SCI TERREAU BRENOT................ 95 Building ownership
</TABLE>
The entities listed above were acquired on January 8, 1998 by Moll
PlastiCrafters Limited Partnership.
F-45
<PAGE> 152
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Before September 1995, the legal organization of the various companies
forming SOMOMECA INDUSTRIES was as follows:
<TABLE>
<CAPTION>
% OWNED
<S> <C>
SAPI
SAPI owned subsidiaries:
SCI Bonnevalaise.......................................... 100
BBI....................................................... 100
FINANCIERE SOMOMECA....................................... 16
SCP Staphane
FINANCIERE SOMOMECA....................................... 52
FINANCIERE SOMOMECA owned subsidiaries:
STAPHANE.................................................. 100
SOMOPLAST................................................. 100
SERIM..................................................... 100
SEMIP..................................................... 100
PROMOLDE.................................................. 100
SCI Terreau Brenot........................................ 95
</TABLE>
In September 1995, SAPI and SCP Staphane completed a restructuring which
led to the SOMOMECA INDUSTRIES current structure, as follows:
- SAPI and SCP STAPHANE were merged, to form SOMOMECA INDUSTRIES, holding
company owned by two individuals (the Staphane family).
- The molding activity of SAPI was contributed to a new company, SAPI
(SARL).
- The number of authorized common shares was set at 500,000, with a par
value of $9.89.
As the previous separate entities and newly formed entity were all under
common control, the restructuring has been reflected as if it occurred at
September 1, 1994, similar to a pooling of interest.
As of August 31, 1994, FINANCIERE SOMOMECA was partly directly held by the
two individuals. During the year ended August 31, 1995, the shares of FINANCIERE
SOMOMECA held by the Staphane family were contributed to the Company.
Accordingly, the investment of this family in FINANCIERE SOMOMECA has been
reflected in the position of stockholders' equity at August 31, 1994, as the
Companies were under common control.
SOMOPLAST LORRAINE (100% owned by SOMOMECA INDUSTRIES) was incorporated
during the year ended August 31, 1996. During the same year, SOMOMECA INDUSTRIES
acquired 5.7% of FINANCIERE SOMOMECA shares from CENTREST (a French company).
SOMOMECA INDUSTRIES and its subsidiaries manufacture and sell molds or
injection molded plastic parts to the automotive industry (car manufacturers and
equipment suppliers) and to other industries.
All companies, except PROMOLDE (Portugal), are located in France.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries, after elimination of intercompany balances
and transactions.
F-46
<PAGE> 153
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
GOODWILL
Goodwill, arising from the difference between the investment cost in
certain subsidiaries and their net assets value at the date of the acquisition,
are being amortized, from the acquisition date, over 20 years. The Company
evaluates on a continual basis, the realizability of goodwill using measurements
of earnings before amortization, as well as operating cash flows for the
respective acquired operations.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation and
amortization are provided over the following estimated useful lives, using the
straight-line method:
<TABLE>
<S> <C>
Buildings........................................ 20 years
Leasehold improvements........................... 5-10 years
Production equipment............................. 3-7 years
Other equipment.................................. 3-10 years
</TABLE>
REVENUE RECOGNITION
Revenue from sales is recognized at the time products are shipped or at the
time of the first use for molds sold to certain customers and used for
outsourced plastic parts production.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ form those estimates.
INVENTORIES
Inventories are valued at the lower of cost (using the weighted average
cost method) or market.
RETIREMENT INDEMNITIES OBLIGATIONS
Company personnel are granted payments, defined by law, at the time they
retire. The related retirement indemnities obligation has been accrued under the
criteria set forth by Statement of Financial Accounting Standards No. 87.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the company to
concentrations of credit risk consist principally of cash investments and trade
receivables. The Company has cash investment policies that limit investments to
short-term low risk instruments.
With respect to trade receivables, one customer accounted for approximately
17% of SOMOMECA Industries and subsidiaries sales in the four month period ended
December 31, 1997 (24% in 1997, 26% in 1996 and 30% in 1995). In addition,
approximately 18% of total trade receivables as of December 31, 1997 (28% as of
August 31, 1997, and 36% as of August 31, 1996) were from that customer.
Management believes the credit risk associated with this customer is minimal.
F-47
<PAGE> 154
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOREIGN CURRENCY TRANSLATION
The Company's functional currency is the French Franc. In the accompanying
financial statements, assets and liabilities are translated into US Dollars at
the current exchange rate as of the applicable balance sheet dates. Revenues and
expenses are translated at the average exchange rate prevailing during the
period. Gains and losses resulting from the translation into US Dollars are
reported in a separate component of stockholders' equity.
The functional currency for the Company's only foreign subsidiary (in
Portugal) is its local currency. Accordingly, all the assets and liabilities of
the subsidiary are translated into French Francs at the current exchange rate as
of the applicable balance sheet date. Revenues and expenses are translated at
the average exchange rate prevailing during the period. Gains and losses
resulting from the translation of the subsidiary financial statements were
insignificant as of December 31, 1997.
INCOME TAXES
Deferred taxes are provided utilizing the liability method whereby deferred
tax assets are recognized for deductible temporary differences and operating
loss carryforwards, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
AUGUST 31,
-------------------- DECEMBER 31,
1996 1997 1997
-------- -------- ------------
<S> <C> <C> <C>
Land............................................. $ 845 $ 666 $ 690
Buildings and leasehold improvements............. 14,968 11,973 12,403
Production equipment............................. 30,077 30,910 34,122
Other equipment.................................. 4,412 3,946 3,863
-------- -------- --------
Total cost....................................... 50,302 47,495 51,078
Less--accumulated depreciation................... (26,626) (26,191) (28,640)
-------- -------- --------
$ 23,676 $ 21,304 $ 22,438
======== ======== ========
</TABLE>
4. INVENTORIES
Inventories include the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Raw materials...................................... $ 3,350 $ 2,868 $ 3,294
Work in progress................................... 2,571 2,987 2,841
Finished products.................................. 3,055 2,007 1,671
------- ------- -------
$ 8,976 $ 7,862 $ 7,806
======= ======= =======
</TABLE>
F-48
<PAGE> 155
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. OTHER ASSETS
Other assets include the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Acquisition goodwill............................... $ 8,281 $ 6,753 $ 6,998
Less--amortization................................. (2,325) (2,232) (2,430)
------- ------- -------
5,956 4,521 4,568
Other assets....................................... 1,248 1,407 1,461
------- ------- -------
$ 7,204 $ 5,928 $ 6,029
======= ======= =======
</TABLE>
6. REVOLVING LINES OF CREDIT
Short term financing facilities include the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Authorized lines of credit......................... $31,620 $28,274 $29,314
======= ======= =======
Outstanding amounts under lines of credit.......... $ 9,111 $17,841 $16,005
======= ======= =======
Maximum balances outstanding....................... $20,751 $20,483 $24,247
======= ======= =======
Average balances outstanding....................... $18,355 $18,710 $20,903
======= ======= =======
</TABLE>
Interest rates on these lines of credit are generally based on reference
market rates (such as PIBOR 3 month) plus 1.5% (5% at December 31, 1997).
Lines of credit are secured by substantially all of the Company's assets.
7. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Long-term borrowings............................... $ 6,869 $ 7,033 $ 6,093
Capital leases..................................... 11,005 8,126 7,887
Retirement indemnities obligations................. 522 518 569
------- ------- -------
18,396 15,677 14,549
Less--current portion.............................. (5,110) (4,328) (4,026)
------- ------- -------
$13,286 $11,349 $10,523
======= ======= =======
</TABLE>
Long-term borrowings are secured by substantially all of the Company's
assets. These long-term borrowings did not include any individual loan of
significant amount for each of the periods.
F-49
<PAGE> 156
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest rates on long-term borrowings and capital leases can be summarized
as follows:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
RANGE OF INTEREST RATES 1996 1997 1997
------------------------- ------- ------- ------------
<S> <C> <C> <C> <C>
Fixed rate loans:
Loans.................... 6.31% to 12.75% $ 6,869 $ 7,033 $ 6,093
Capital leases........... 4.68% to 15.35% 8,472 6,441 6,736
Variable rate loans:
Capital leases........... TAM to TAM + 1.5% 2,533 1,685 1,151
------- ------- -------
$17,874 $15,159 $13,980
======= ======= =======
</TABLE>
Future payments on long-term loans are due as follows:
<TABLE>
<S> <C>
1998................................................ $2,021
1999................................................ 1,767
2000................................................ 1,168
2001................................................ 767
2002................................................ 200
Thereafter.......................................... 170
------
$6,093
======
</TABLE>
The Company leases certain equipment under capital leases which expire on
various dates through 2004. Future payments on capital leases are due as
follows:
<TABLE>
<S> <C>
1998............................................... $ 2,517
1999............................................... 1,999
2000............................................... 1,381
2001............................................... 834
2002............................................... 663
Thereafter......................................... 2,007
Less amount representing interest.................. (1,514)
-------
$ 7,887
=======
</TABLE>
8. RETIREMENT INDEMNITIES OBLIGATIONS
The Company maintains defined unfunded retirement indemnity plans which
cover substantially all of their employees.
In order to comply with US GAAP, the Company has applied SFAS No. 87
"Employers' Accounting for Pensions" and SFAS No. 88 "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits" as follows:
- the transition obligation or fund excess has been determined as of
September 1, 1994 as being the difference between the liabilities
accounted for under prior years' accounting policies and the funded
status of the plans resulting from actuarial calculations; the transition
obligation or fund excess, as determined at September 1, 1994 has been
deducted from retained earnings as if the Company had always applied SFAS
No. 87. Amortization of a transition obligation would have led to
expenses not significantly different from what has been accounted for;
F-50
<PAGE> 157
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- the actuarial method used is the projected unit credit method. However,
when the benefit formulas attribute more benefits to senior employees or
when the plans are integrated with social security systems or multi
employer plans, the Company has elected to apply the projected unit
credit service pro-rata method to avoid delayed recognition of pension
costs.
The status of pension plans determined in accordance with U.S. GAAP is as
follows:
<TABLE>
<CAPTION>
AUGUST 31,
------------ DECEMBER 31,
1996 1997 1997
---- ---- ------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................. $ -- $ -- $ --
Non-vested benefit obligation......................... 393 390 428
---- ---- ----
Accumulated benefit obligation.......................... 393 390 428
Effect of projected future salary increases............. 129 128 141
---- ---- ----
Projected benefit obligation............................ $522 $518 $569
==== ==== ====
</TABLE>
The pension liability is included in the accompanying balance sheets as a
component of long-term obligations.
The net periodic pension cost of the Company's retirement indemnity plans,
determined in accordance with US GAAP, includes the following components:
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE YEAR ENDED AUGUST 31, MONTHS ENDED
------------------------------ DECEMBER 31,
1995 1996 1997 1997
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Service cost............................... $ 40 $ 46 $ 42 $14
Interest cost on projected benefit
obligation............................... 38 33 31 10
Net amortization and deferrals............. 23 30 28 9
---- ---- ---- ---
Net pension cost........................... $101 $109 $101 $33
==== ==== ==== ===
</TABLE>
Average assumptions used in accounting for the Company's retirement
indemnities obligations under US GAAP are as follows:
<TABLE>
<CAPTION>
AUGUST 31,
------------ DECEMBER 31,
1996 1997 1997
---- ---- ------------
<S> <C> <C> <C>
Discount rate............................................. 6.0% 6.0% 6.0%
Rate of increase in compensation levels................... 2.5% 2.0% 2.0%
</TABLE>
9. OPERATING LEASES
The Company leases certain equipment under operating leases. Rent expense
was $261, $290, $155, and $37 for each of the years ended August 31, 1995, 1996
and 1997 and for the four month period ended December 31, 1997 respectively.
Future payments on operating leases were due as follows:
<TABLE>
<S> <C>
1998................................................... $64
1999................................................... 20
2000................................................... 2
---
$86
===
</TABLE>
F-51
<PAGE> 158
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
From time to time the Company is involved in certain legal actions arising
in the ordinary course of business. In the opinion of management, the outcome of
such actions will not have a material adverse effect on the Company's financial
position or results of operations.
11. INCOME TAXES
For income tax purposes, SOMOMECA INDUSTRIES and its subsidiaries formed
two distinct tax consolidation groups. The (provision) benefit for income taxes
consists of the following:
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE YEAR ENDED AUGUST 31, MONTHS ENDED
------------------------------ DECEMBER 31,
1995 1996 1997 1997
------- --------- ------ ------------
<S> <C> <C> <C> <C>
Current income tax.......................... $(679) $ (995) $(74) $(373)
Deferred income tax......................... (301) (178) 218 (563)
----- ------- ---- -----
Total (provision) benefit................... $(980) $(1,173) $144 $(936)
===== ======= ==== =====
</TABLE>
The reconciliation of the statutory income tax rate to the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE FOUR
AUGUST 31, MONTHS ENDED
-------------------- DECEMBER 31,
1995 1996 1997 1997
---- ---- ---- ------------
<S> <C> <C> <C> <C>
Statutory income tax rate........................ 33.3% 36.6% 36.6% 41.6%
Non-deductible expenses.......................... 15.4% 7.5% 3.1% 1.3%
Effect of the variation of statutory income tax
rate........................................... -- 0.4% -- 2.0%
---- ---- ---- -----
48.7% 44.5% 39.7% 44.9%
==== ==== ==== =====
</TABLE>
F-52
<PAGE> 159
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the deferred tax asset (liability) consisted of the
following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Current deferred tax asset
Temporary timing differences....................... $ 279 $ 221 $ 310
Other temporary differences between tax reporting
and US GAAP financial reporting:
--inventory pricing.............................. 171 337 139
--reserve for doubtful accounts.................. 33 78 43
--subsidies income recognition................... 59 89 --
--other, net..................................... 142 103 125
------- ------- -------
684 828 617
------- ------- -------
Non-current deferred tax asset (liability)
Net operating loss carry forward................... 119 178 --
Other temporary differences between tax reporting
and US GAAP financial reporting:
--retirement indemnities......................... 191 189 183
--capital leases................................. (1,092) (896) (861)
--accumulated engineering costs expensed in tax
reporting..................................... (410) (517) (721)
------- ------- -------
(1,192) (1,046) (1,399)
------- ------- -------
Net deferred tax liability......................... $ (508) $ (218) $ (782)
======= ======= =======
</TABLE>
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values of financial instruments is made in
accordance with the requirements of SFAS No. 107, Disclosures about Fair Value
of Financial Instruments. The estimated fair value amounts have been determined
by the Company using available market information and appropriate valuation
methodologies.
CASH, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
The carrying amounts of these items are a reasonable estimate of their fair
value due to their short-term nature.
LONG-TERM DEBT
The carrying amount of the revolving lines of credit approximates fair
value as the interest rate fluctuates with changes in market conditions. It is
estimated that the fair value of the long-term debt is $15,516.
F-53
<PAGE> 160
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. SALES GEOGRAPHICAL DATA
Sales to foreign countries represented 8%, 10%, 12% and 10% of Company
sales for the years ended August 31, 1995, 1996 and 1997 and for the four-month
period ended December 31, 1997 respectively, as follows:
<TABLE>
<CAPTION>
FOR THE FOUR
MONTHS ENDED
FOR THE YEAR ENDED AUGUST 31, DECEMBER 31,
-------------------------------------------------- --------------
1995 % 1996 % 1997 % 1997 %
------- --- ------- --- ------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
France............... $59,370 92 $73,784 90 $74,734 88 $29,173 90
Other EEC
countries.......... 5,163 8 8,199 10 10,192 12 3,241 10
------- --- ------- --- ------- --- ------- ---
Total...... $64,533 100 $81,983 100 $84,926 100 $32,414 100
======= === ======= === ======= === ======= ===
</TABLE>
F-54
<PAGE> 161
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Hanning Companies:
We have audited the accompanying combined balance sheets of the HANNING
COMPANIES (see Note 1) as of December 31, 1995 and 1996, and the related
combined statements of operations, equity (deficit) and cash flows for the years
then ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Hanning
Companies as of December 31, 1995 and 1996, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
May 19, 1998
F-55
<PAGE> 162
THE HANNING COMPANIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 112,408 $ 371,518
Accounts receivable, net of reserves for doubtful accounts
of $34,000 and $29,000, respectively................... 6,971,529 4,795,473
Inventories, net.......................................... 7,343,295 5,748,393
Deposits on tooling....................................... 3,183,587 3,227,968
Other receivables......................................... 159,274 45,225
Other assets.............................................. 460,350 262,871
----------- -----------
Total current assets.............................. 18,230,443 14,451,448
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land...................................................... 626,337 520,653
Buildings................................................. 5,166,315 3,665,318
Machinery and equipment................................... 6,172,294 6,968,976
Less: accumulated depreciation............................ (5,186,735) (6,116,331)
----------- -----------
Property, plant and equipment, net................ 6,778,211 5,038,616
DUE FROM AFFILIATES, NET.................................... 3,353,088 2,314,405
OTHER ASSETS................................................ 65,294 24,478
----------- -----------
Total assets...................................... $28,427,036 $21,828,947
=========== ===========
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Checks drawn in excess of cash on deposit................. $ 170,858 $ 321,070
Accounts payable.......................................... 10,419,740 8,986,502
Customer deposits on tooling.............................. 4,049,770 3,016,117
Short-term borrowings..................................... 953,343 1,597,777
Current portion of stockholder debt....................... 2,097,103 1,250,766
Current portion of long-term obligations.................. 1,065,374 1,907,866
Accrued liabilities....................................... 3,048,800 3,195,179
----------- -----------
Total current liabilities......................... 21,804,988 20,275,277
----------- -----------
STOCKHOLDER DEBT, NET OF CURRENT PORTION.................... 906,683 259,615
----------- -----------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION............... 3,650,201 1,573,441
----------- -----------
COMMITMENTS AND CONTINGENCIES
EQUITY (DEFICIT):
Capital................................................... 1,405,280 1,420,640
Additional paid-in capital................................ 6,269,319 7,599,372
Receivable from partners.................................. -- (1,000,000)
Translation adjustment.................................... 109,762 38,393
Retained deficit.......................................... (5,719,197) (8,337,791)
----------- -----------
Total equity (deficit)............................ 2,065,164 (279,386)
----------- -----------
Total liabilities and equity (deficit)............ $28,427,036 $21,828,947
=========== ===========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-56
<PAGE> 163
THE HANNING COMPANIES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SEVEN MONTHS AND SEVEN DAYS
FOR THE YEAR ENDED DECEMBER 31, ENDED AUGUST 7,
-------------------------------- ----------------------------
1995 1996 1996 1997
-------------- -------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES............................. $57,298,730 $54,062,809 $33,075,375 $29,640,348
COST OF SALES......................... 55,447,691 51,456,915 31,526,552 28,342,440
----------- ----------- ----------- -----------
Gross profit........................ 1,851,039 2,605,894 1,548,823 1,297,908
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................ 4,804,885 5,775,080 3,270,550 2,723,412
TOOLING REVENUE, NET.................. 348,795 957,467 540,610 1,113,673
----------- ----------- ----------- -----------
Operating loss...................... (2,605,051) (2,211,719) (1,181,117) (311,831)
INTEREST INCOME....................... 290,421 209,728 123,800 61,490
INTEREST EXPENSE...................... 727,899 570,847 409,604 290,623
OTHER (INCOME) EXPENSE................ 194,271 (171,104) (141,500) (293,432)
----------- ----------- ----------- -----------
Loss before income tax expense...... (3,236,800) (2,401,734) (1,325,421) (247,532)
----------- ----------- ----------- -----------
INCOME TAX EXPENSE.................... 18,578 216,860 126,545 382,192
----------- ----------- ----------- -----------
Net Loss............................ $(3,255,378) $(2,618,594) $(1,451,966) $ (629,724)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-57
<PAGE> 164
THE HANNING COMPANIES
COMBINED STATEMENTS OF EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ADDITIONAL RECEIVABLE
PAID-IN FROM TRANSLATION RETAINED
CAPITAL CAPITAL PARTNER ADJUSTMENT DEFICIT TOTAL
---------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1994.................. $1,405,280 $3,130,806 $ -- $ -- $(2,463,819) $ 2,072,267
Translation
adjustments........... -- -- -- 109,762 -- 109,762
Capital contribution.... -- 3,138,513 -- -- -- 3,138,513
Net loss................ -- -- -- -- (3,255,378) (3,255,378)
---------- ---------- ----------- -------- ----------- -----------
BALANCE, DECEMBER 31,
1995.................. 1,405,280 6,269,319 -- 109,762 (5,719,197) 2,065,164
Translation
adjustment............ -- -- -- (71,369) -- (71,369)
Receivable from
Partner............... -- -- (1,000,000) -- -- (1,000,000)
Capital contribution.... 15,360 1,330,053 -- -- -- 1,345,413
Net loss................ -- -- -- -- (2,618,594) (2,618,594)
---------- ---------- ----------- -------- ----------- -----------
BALANCE, DECEMBER 31,
1996.................. $1,420,640 $7,599,372 $(1,000,000) $ 38,393 $(8,337,791) $ (279,386)
========== ========== =========== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-58
<PAGE> 165
THE HANNING COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEVEN MONTHS AND SEVEN DAYS
DECEMBER 31, ENDED AUGUST 7,
-------------------------- ----------------------------
1995 1996 1996 1997
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................... $(3,255,378) $(2,618,594) $(1,451,966) $ (629,724)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization............ 1,653,439 1,347,843 883,205 640,714
Gain on disposal of fixed assets......... (174,711) (62,397) -- (23,999)
Changes in assets and liabilities:
Accounts receivable.................... (1,112,144) 1,837,848 933,877 (1,235,372)
Due from affiliates, net............... (3,119) 25,714 (97,703) 2,782,953
Inventories............................ 1,082,034 1,285,704 546,713 (739,036)
Deposits on tooling.................... (3,140,865) (146,677) 1,131,761 (4,299,084)
Other assets........................... (203,848) 218,472 (218,012) (148,967)
Other receivables...................... (11,720) 114,049 154,472 3,474
Accounts payable....................... 1,884,153 (938,846) (3,825,510) (1,992,673)
Accrued liabilities.................... (424,178) 339,433 1,301,398 (155,610)
Checks drawn in excess of cash on
deposit............................. (184,328) 150,212 610,906 (321,070)
Customer deposits on tooling........... 3,836,908 (926,547) 302,495 5,822,111
----------- ----------- ----------- -----------
Total adjustments................. 3,201,621 3,244,808 1,723,602 333,441
----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities............ (53,757) 626,214 271,636 (296,283)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment.............................. (945,461) (1,029,359) (438,201) (544,845)
Proceeds on disposal of fixed assets..... 174,711 1,248,344 1,163,812 23,999
----------- ----------- ----------- -----------
Net cash (used in) provided by
investing activities............ (770,750) 218,985 725,611 (520,846)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term borrowings...... 800,133 731,628 300,451 (1,387,662)
Partner contributions.................... 3,138,513 1,345,413 15,308 --
Receivable from partner.................. -- (1,000,000) (1,000,000) --
Net change in stockholder debt........... (2,533,096) (1,466,937) (9,495) 2,790,838
Principal payments on long-term
obligations............................ (569,951) (199,102) -- (705,343)
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities............ 835,599 (588,998) (693,736) 697,833
----------- ----------- ----------- -----------
EFFECT OF EXCHANGE RATE.................... 575 2,909 2,744 (3,839)
----------- ----------- ----------- -----------
NET CHANGE IN CASH......................... 11,667 259,110 306,255 (123,135)
BALANCE AT BEGINNING OF PERIOD............. 100,741 112,408 112,408 371,518
----------- ----------- ----------- -----------
BALANCE AT END OF PERIOD................... $ 112,408 $ 371,518 $ 418,663 $ 248,383
=========== =========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest................... $ 539,854 $ 465,585 $ 172,497 $ 241,773
=========== =========== =========== ===========
Cash paid for income taxes............... $ 19,078 $ 23,661 $ 14,000 $ 258,518
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-59
<PAGE> 166
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Hanning Companies (the "Company") consists of the following entities
which are under common ownership.
<TABLE>
<CAPTION>
TYPE OF COUNTRY OF
COMPANY ENTITY OPERATIONS
<S> <C> <C>
Hanning Corporation......................................... Corporation United States
Hanning--Kunststoffe Beteilingungs-GmbH..................... Corporation Germany
Hanning--Kumststoffe GmbH & Co. ............................ Partnership Germany
Hanning Plastics, Ltd. ..................................... Corporation United Kingdom
Hanning Property Associates................................. Corporation United States
PB Hanning GmbH & Co. ...................................... Corporation Germany
PB Hanning GmbH & Co. Handelsgesellschaft................... Partnership Germany
</TABLE>
The entities listed above were acquired through either asset or stock
purchases on August 8, 1997, by Moll PlastiCrafters Limited Partnership. The
Company manufactures custom injection molded parts which it sells primarily to
customers in the office equipment, home appliance and automotive industries.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of the combined
companies. All significant inter-company balances and transactions have been
eliminated in combination.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue from sales of injection molded plastic parts is recognized at the
time products are shipped.
TOOLING
The Company enters into agreements with its major customers to design and
produce certain customer owned plastic injection tooling (primarily molds).
Amounts paid or received by the Company in connection with this activity related
to tooling that remains undelivered at the end of an accounting period are
included as Deposits on Tooling or Customer Deposits on Tooling, respectively,
in the accompanying combined balance sheet. At the time of delivery of completed
tooling, the excess of revenues over costs are recognized in the accompanying
combined statements of operations as tooling revenue, net.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out (FIFO)
method) or market.
F-60
<PAGE> 167
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is valued at cost. Depreciation is computed
using straight-line and accelerated methods over the estimated useful lives of
the assets, as follows:
<TABLE>
<S> <C>
Buildings..................................... 40 to 50 years
Machinery and equipment....................... 3 to 10 years
</TABLE>
INCOME TAXES
Certain of the entities included in the Company are partnerships. The
earnings of the partnerships are included in the tax returns of its partners.
Accordingly, the combined financial statements contained no provision for
federal or state income taxes related to these earnings.
Certain of the entities included in the Company are taxable entities. As
such the Company has accounted for income taxes using the liability method which
requires recognition of deferred tax assets and liabilities for the expected
future consequences of events that have been included in the combined financial
statements or income tax returns.
Certain of the Company's incurred costs were not deductible for income tax
purposes. As a result, the Company incurred current income tax expense. At
December 31, 1996, the Company had net operating loss carryforwards available to
offset future taxable income. However, due to the Company's historical operating
results, it has not recognized a deferred tax asset in the accompanying combined
financial statements.
LONG-LIVED ASSETS
When factors are present which indicate the cost of long-lived assets may
not be recovered, the Company evaluates the realizability of its long-lived
assets, based upon the anticipated future cash flows generated by the asset.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company are translated to United States
dollars at current exchange rates, while revenues and expenses are translated at
the average rate prevailing during the period. Gains and losses resulting from
translation since January 1, 1995 are accumulated in a separate component of
equity (deficit).
INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited, interim financial
statements have been prepared on a basis consistent with the audited financial
statements and contain all adjustments necessary to present fairly the Company's
results of operations and cash flows for the seven months and seven days ended
August 7, 1996 and 1997.
F-61
<PAGE> 168
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Raw materials............................................... $4,341,883 $3,325,107
Work-in-process............................................. 1,137,132 694,188
Finished goods.............................................. 2,368,651 2,327,113
Reserve..................................................... (504,371) (598,015)
---------- ----------
$7,343,295 $5,748,393
========== ==========
</TABLE>
4. RELATED PARTIES
The Company has certain transactions with companies that are affiliated
through common ownership. At December 31, 1996, the Company has a net receivable
from these affiliated parties totaling $2,314,405 related to these transactions.
The Company pays management fees to a related company. Management fee
expense was approximately $262,000 and $264,000 for 1995 and 1996, respectively.
5. STOCKHOLDER DEBT
Stockholder debt consists of the following:
A note bearing interest at 7.5% per annum, payable semiannually (interest
expense totaled $155,868 and $83,428 in 1995 and 1996, respectively.) The note
matures on June 30, 1998 and requires repayment in Deutsche Marks. The
outstanding balance was DM 2,200,507 and DM 1,400,507 at December 31, 1995 and
1996, respectively ($1,534,079 and $908,123, respectively). Principle payments,
in U.S. dollars and stated at current exchange rates, are due as follows:
1997--$648,508 and 1998--$259,615. The note is unsecured and may be repaid at
any time without penalty.
A note bearing interest at a prime rate plus 1%, payable quarterly
(interest expense totaled $18,738 in 1996). The outstanding balance was $312,728
at December 31, 1996.
Additionally, the Company has payables to the stockholders totaling DM
2,108,295 and DM 337,174 at December 31, 1995 and 1996, respectively ($1,469,707
and $289,530, respectively). These payables do not bear interest and are due on
demand.
6. SHORT-TERM BORROWINGS
The Company has the following revolving loan facilities:
Facility with a bank which provides for borrowings up to DM 2,000,000
($1,300,000 at December 31, 1996). The Company had a balance outstanding of DM
1,080,672 and DM 2,458,499 at December 31, 1995 and 1996, respectively ($753,343
and $1,597,777, respectively). Interest is payable quarterly at a variable rate
(6.55% at December 31, 1996). The facility is secured by land and an office
building in Germany.
Facility with a bank which provides for borrowings up to $250,000. The
Company had a balance outstanding of $200,000 and $0 at December 31, 1995 and
1996, respectively. Interest is payable monthly at prime (8.25% at December 31,
1996). The facility is secured by all assets of the Company located in the
United States.
F-62
<PAGE> 169
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. LONG-TERM OBLIGATIONS
The Company has the following long-term debt obligations:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
Term loan payable to a bank, denominated in Deutsche
Marks, payable in annual installments of DM 1,200,000
($779,879 at December 31, 1996 exchange rates), matures
May 10, 1999. Interest payable quarterly at 6.92%.
Secured by land and office building in Germany. ........ $ 3,346,113 $ 2,339,463
Term loan payable to a bank, payable in annual
installments of $181,173 in addition to a balloon
payment of $920,000 due on December 15, 1997. Interest
is payable at the banks base rate plus 1% (9.25% at
December 31, 1996). .................................... 1,300,275 1,101,173
Capital lease obligations (see Note 8).................... 69,187 40,671
----------- -----------
4,715,575 3,481,307
Less current portion...................................... (1,065,374) (1,907,866)
----------- -----------
$ 3,650,201 $ 1,573,441
=========== ===========
</TABLE>
The amounts of all long-term obligations, excluding capital leases, to be
repaid for the years following December 31, 1996 are as follows:
<TABLE>
<S> <C> <C>
1997...................................................... $ 1,881,052
1998...................................................... 779,879
1999...................................................... 779,705
-----------
$ 3,440,636
===========
</TABLE>
8. LEASE COMMITMENTS
The aggregate future minimum fixed lease obligations for the Company as of
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPERATING
CAPITAL LEASES LEASES
-------------- ---------
<S> <C> <C>
1997........................................................ $28,181 $212,541
1998........................................................ 10,509 285,670
1999........................................................ 4,618 35,287
2000........................................................ 385 --
------- --------
Total minimum lease payments................................ 43,693 $533,498
========
Less amounts representing interest.......................... 3,022
-------
Present value of minimum capital lease payments............. $40,671
=======
</TABLE>
Total rent expense for the Company's operating leases for the years ended
December 31, 1995 and 1996 was approximately $180,839 and $654,354.
F-63
<PAGE> 170
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. RETIREMENT PLAN
The Company has a 401(k) deferred compensation plan covering substantially
all U.S. employees meeting the service requirements defined in the plan. Under
the provisions of the plan, employees may elect to contribute up to 15% of their
wages. The Company may make matching contributions equal to a discretionary
percentage, to be determined by the Company. The Company made no contributions
to the plan for the years ended December 31, 1995 and 1996.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values of financial instruments is disclosed
in accordance with the requirements of SFAS No. 107, Disclosures about Fair
Value of Financial Instruments. The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies.
Cash, accounts receivable, and accounts payable
The carrying amounts of these items are a reasonable estimate of their fair
value due to their short-term nature.
Short-term borrowings
The carrying amounts of the short-term borrowings approximates fair value
as the interest rates reflect market rates.
Long-term obligations
The fair value of the variable rate obligation approximates its fair value
since the interest rate reflects market rates. The fair value of the fixed rate
obligation is estimated to be $1,987,550 as compared to its carrying amount of
$2,339,463. The Company estimated the fair value based on estimated borrowing
rates for similar obligations with similar terms.
Note payable to stockholder
The carrying amount of the note payable approximates fair value based upon
current market rates and the remaining term to maturity.
11. CONTINGENCIES
The Company is a party to various lawsuits and claims in the normal course
of business. While the outcome of the lawsuits and claims against the Company
cannot be predicted with certainty, management believes that the ultimate
resolution of these matters will not have a material effect on the Company. The
Company is undergoing a tax audit covering the years 1993 to 1996. Management is
currently not able to determine the effects on the financial statements, if any.
12. MAJOR CUSTOMERS
Two customers accounted for approximately 86% and 91% of the Company's net
sales in 1995 and 1996, respectively. In addition, approximately 86% and 81% of
the Company's total accounts receivable at December 31, 1995 and 1996,
respectively, were from these customers. Management believes the credit risk
associated with these customers to be minimal.
F-64
<PAGE> 171
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
13. SEGMENT INFORMATION
The Company operates in one industry segment. The following table presents
sales and other financial information by geographic region for the years ended
December 31, 1995 and 1996.
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Net sales:
United States........................................... $ 8,599,770 $11,641,318
Europe.................................................. 48,698,960 42,421,491
----------- -----------
Total net sales................................. $57,298,730 $54,062,809
=========== ===========
Operating loss:
United States........................................... $ (322,310) $ 475,000
Europe.................................................. (2,616,741) (2,686,719)
Eliminations............................................ 334,000 --
----------- -----------
Total operating loss............................ $(2,605,051) $(2,211,719)
=========== ===========
Identifiable assets:
United States........................................... $ 8,882,549 $ 7,222,715
Europe.................................................. 20,018,870 16,236,720
Eliminations............................................ (474,383) (1,630,488)
----------- -----------
Total assets.................................... $28,427,036 $21,828,947
=========== ===========
Depreciation and amortization:
United States........................................... $ 618,297 $ 494,497
Europe.................................................. 1,035,142 853,346
----------- -----------
Total........................................... $ 1,653,439 $ 1,347,843
=========== ===========
Capital Expenditures:
United States........................................... $ 516,959 $ 474,874
Europe.................................................. 428,502 554,485
----------- -----------
Total........................................... $ 945,461 $ 1,029,359
=========== ===========
</TABLE>
F-65
<PAGE> 172
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY HOLDINGS OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF HOLDINGS SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information...................... 2
Prospectus Summary......................... 3
Risk Factors............................... 14
The Company................................ 20
The Transactions........................... 21
Use of Proceeds............................ 23
Capitalization............................. 24
Selected Historical Consolidated Financial
Data..................................... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 28
The Exchange Offer......................... 38
Business................................... 45
Management................................. 55
Certain Beneficial Owners.................. 59
Certain Relationships and Related
Transactions............................. 60
Description of Notes....................... 61
Description of Certain Indebtedness........ 86
Certain Federal Income Tax
Considerations........................... 89
Book Entry; Form...........................
Plan of Distribution....................... 94
Legal Matters.............................. 95
Experts.................................... 95
Index to Unaudited Pro Forma Consolidated
Financial Statements..................... P-1
Index to Financial Statements.............. F-1
</TABLE>
UNTIL , 1998 (90 DAYS FOLLOWING THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES WHETHER OR NOT PARTICIPATING IN
THE EXCHANGE OFFER MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS OBLIGATION IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS ON SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$68,000,000
AMM HOLDINGS, INC.
13 1/2% SENIOR
DISCOUNT NOTES
DUE 2009
------------------------
PROSPECTUS
------------------------
------------ , 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 173
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law ("DGCL"), as amended,
allows a corporation to eliminate the personal liability of directors of a
corporation to the corporation or its stockholders for monetary damages for a
breach of fiduciary duty as a director, except where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law or obtained an improper
personal benefit.
Section 145 of the DGCL, as amended, empowers a Delaware corporation to
indemnify any persons who are, or are threatened to be made, parties to any
threatened, pending or completed legal action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of such corporation), by reason of the fact that such person is or was
an officer, director, employee or agent of such corporation, or is or was
serving at the request of such corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided that
such officer or director acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests, and, for
criminal proceedings, had no reasonable cause to believe his conduct was
unlawful. A Delaware corporation may indemnify officers and directors against
expenses (including attorneys' fees) in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
CERTIFICATE OF INCORPORATION
Article Eight of the Certificate of Incorporation of Holdings provides in
relevant part as follows:
EIGHTH: A director shall have no personal liability to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director; however, the foregoing provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct of a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of
the State of Delaware or (iv) for any transaction from which the director
derived an improper personal benefit. If the General Corporation Law of the
State of Delaware is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of the State of Delaware,
as so amended from time to time.
II-1
<PAGE> 174
BY-LAWS
Article VIII of the By-laws of Holdings provides as follows:
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other Than
Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the
Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by the Board of directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders. To the extent, however, that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith, without the necessity of authorization
in the specific case.
Section 4. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
withstanding the absence of any determination thereunder, any director, officer,
employee or agent may apply to any court of competent jurisdiction in the State
of Delaware for indemnification to the extent otherwise permissible under
Sections 1 and 2 of this Article VIII. The basis of such indemnification by a
court shall be a determination by such court that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
has met the applicable standards of conduct set forth in Sections 1 or 2 of this
Article VIII, as the case may be. Notice of any application for
II-2
<PAGE> 175
indemnification pursuant to this Section 5 shall be given to the Corporation
promptly upon the filing of such application.
Section 5. Expenses Payable in Advance. Expenses incurred in defending or
investigating a threatened or pending action, suit or proceeding may be paid by
the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VIII.
Section 6. Non-exclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, it
being the policy of the Corporation that indemnification of the persons
specified in Sections 1 and 2 of this Article VIII shall be made to the fullest
extent permitted by law. The provisions of this Article VIII shall not be deemed
to preclude the indemnification of any person who is not specified in Sections 1
or 2 of this Article VIII but whom the Corporation has the power or obligation
to indemnify under the provisions of the General Corporation Law of the State of
Delaware, or otherwise.
Section 7. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee, or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VIII.
Section 8. Meaning of "Corporation" for Purposes of Article VIII. For
purposes of this Article VIII, references to "the Corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees, or agents, so that any person
who is or was a director, officer, employee, or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article VIII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
Section 9. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS. The following exhibits are filed as a part of this
Registration Statement:
<TABLE>
<S> <C>
3.1 Second Amended and Restated Certificate of Incorporation of
AMM Holdings, Inc. (formerly known as Anchor Acquisition
Co.)
3.2 By-Laws of AMM Holdings, Inc.
4.1 Indenture dated as of June 26, 1998 by and between AMM
Holdings, Inc. and State Street Bank and Trust Company, as
Trustee
4.2 Form of 13 1/2% Senior Discount Note due 2009 (included in
Exhibit 4.1)
4.3 Registration Rights Agreement dated as June 26, 1998 by and
between AMM Holdings, Inc. and the Initial Purchaser named
therein
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
10.1 Purchase Agreement dated as June 26, 1998 by and between AMM
Holdings, Inc. and the Initial Purchaser named therein
</TABLE>
II-3
<PAGE> 176
<TABLE>
<S> <C>
12.1 Computation of Ratio of Earnings to Fixed Charges, Ratio of
Earnings to Cash Interest Expense and Ratio of Net Debt to
EBITDA.
21.1 List of Subsidiaries of AMM Holdings, Inc.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Arthur Andersen LLP
24.1 Powers of Attorney for AMM Holdings, Inc. (contained on the
signature pages of this Registration Statement)
25.1 Statement of Eligibility and Qualification on Form T-1 of
Trustee
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Clients
99.4 Form of Letter to Brokers, Dealers, Trust Companies and
Other Nominees
99.5 Exchange Agent Agreement by and between AMM Holdings, Inc.
and State Street Bank and Trust Company
</TABLE>
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to between an underwriter
within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who may
be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) That every prospectus: (i) that is filed pursuant to paragraph
(1) immediately preceding, or (ii) that purports to meet the requirements
of Section 10(a)(3) of the Act and is used in connection with an offering
of securities subject to Rule 415, will be filed as a part of an amendment
to the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first-class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(4) To supply the means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-4
<PAGE> 177
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Tennessee, on August 7, 1998.
AMM HOLDINGS, INC.
By: /s/ GEORGE T. VOTIS
------------------------------------
Name: George T. Votis
Title: Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
EACH PERSON IN SO SIGNING, ALSO MAKES, CONSTITUTES AND APPOINTS PHYLLIS C. BEST
AND CHARLES B. SCHIELE, AND EACH OF THEM ACTING ALONE, HIS TRUE AND LAWFUL
ATTORNEY-IN-FACT, WITH FULL POWER OF SUBSTITUTION, TO EXECUTE AND CAUSE TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE REQUIREMENTS
OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), ANY AND ALL AMENDMENTS
AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT, WITH EXHIBITS
THERETO AND OTHER DOCUMENTS IN CONNECTION THEREWITH, AND ANY RELATED
REGISTRATION STATEMENT AND ITS AMENDMENTS AND POST-EFFECTIVE AMENDMENTS FILED
PURSUANT TO RULE 462(B) UNDER THE ACT, WITH EXHIBITS THERETO AND OTHER DOCUMENTS
IN CONNECTION THEREWITH, AND HEREBY RATIFIES AND CONFIRMS ALL THAT SAID
ATTORNEY-IN-FACT OR HIS SUBSTITUTE OR SUBSTITUTES MAY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GEORGE T. VOTIS Chairman and Chief Executive Officer August 7, 1998
- ------------------------------------------
George T. Votis
/s/ CHARLES B. SCHIELE President and Director August 7, 1998
- ------------------------------------------
Charles B. Schiele
/s/ PHYLLIS C. BEST Chief Financial Officer August 7, 1998
- ------------------------------------------
Phyllis C. Best
</TABLE>
II-5
<PAGE> 178
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.1 Second Amended and Restated Certificate of Incorporation of
AMM Holdings, Inc. (formerly known as Anchor Acquisition
Co.)
3.2 By-Laws of AMM Holdings, Inc.
4.1 Indenture dated as of June 26, 1998 by and between AMM
Holdings, Inc. and State Street Bank and Trust Company, as
Trustee
4.2 Form of 13 1/2% Senior Discount Note due 2009 (included in
Exhibit 4.1)
4.3 Registration Rights Agreement dated as June 26, 1998 by and
between AMM Holdings, Inc. and the Initial Purchaser named
therein
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
10.1 Purchase Agreement dated as June 26, 1998 by and between AMM
Holdings, Inc. and the Initial Purchaser named therein
12.1 Computation of Ratio of Earnings to Fixed Charges, Ratio of
Earnings to Cash Interest Expense and Ratio of Net Debt to
EBITDA.
21.1 List of Subsidiaries of AMM Holdings, Inc.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Arthur Andersen LLP
24.1 Powers of Attorney for AMM Holdings, Inc. (contained on the
signature pages of this Registration Statement)
25.1 Statement of Eligibility and Qualification on Form T-1 of
Trustee
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Clients
99.4 Form of Letter to Brokers, Dealers, Trust Companies and
Other Nominees
99.5 Exchange Agent Agreement by and between AMM Holdings, Inc.
and State Street Bank and Trust Company
</TABLE>
<PAGE> 1
EXHIBIT 3.1
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
AMM HOLDINGS, INC.
(Pursuant to Sections 245 and 241 of the
General Corporation Law of the State of Delaware)
AMM HOLDINGS, INC., a corporation duly organized and validly existing
under the laws of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY:
1. That the name of the Corporation is AMM HOLDINGS, INC.
2. That the Certificate of Incorporation of the Corporation was filed
in the Office of the Secretary of the State of Delaware on March 3, 1998 under
the name Anchor Acquisition Co., amended by an Amended and Restated Certificate
of Incorporation filed on March 18, 1998, and further amended by a Certificate
of Amendment filed on June 17, 1998 changing the Corporation's name to AMM
Holdings, Inc.
3. That pursuant to Sections 242 and 245 of the General corporation Law
of the State of Delaware, this Second Amended and Restated Certificate of
Incorporation restates and integrates and further amends the provisions of the
Certificate of Incorporation of the Corporation.
4. That this Second Amended and Restated Certificate of Incorporation
was duly adopted in accordance with the applicable provisions of Sections 242
and 245 of the General Corporation Law of the State of Delaware.
5. That the manner in which this Second Amended and Restated
Certificate of Incorporation was authorized is by written consent of the sole
stockholder and directors of the Corporation pursuant to Sections 242 and 245 of
the General Corporation Law of the State of Delaware.
6. That this Second Amended and Restated Certificate of Incorporation
is as follows:
FIRST: The name of the Corporation is AMM Holdings, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
Orange. The name of the registered agent of the Corporation at such address is
The Corporation Trust Company.
<PAGE> 2
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 3,000 shares of Common Stock, $.01
par value per share.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The management of the business and the conduct of the affairs of
the Corporation shall be vested in its Board of Directors. The Directors shall
have the power to adopt, amend, or repeal the By-Laws of the Corporation.
Election of Directors need not be by written ballot unless the By-Laws of the
Corporation so provide.
SEVENTH: The Corporation shall indemnify to the full extent authorized
or permitted by the laws of the State of Delaware any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, domestic or foreign,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding and shall advance expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding to the full extent
authorized or permitted by the laws of the State of Delaware upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized by Section 145 of the General Corporation Law of
the State of Delaware.
EIGHTH: A director shall have no personal liability to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director; however, the foregoing provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct of a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware
or (iv) for any transaction from which the director derived an improper personal
benefit. If the General Corporation Law of the State of Delaware is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director shall be eliminated or
limited to the fullest extent permitted by the General Corporation Law of the
State of Delaware, as so amended from time to time.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter
<PAGE> 3
prescribed by the laws of the State of Delaware, and all rights herein conferred
are granted subject to this reserved power.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed this 28 day of July, 1998.
AMM HOLDINGS, INC.
By: /s/ George T. Votis
_____________________________________
George T. Votis, Chairman & CEO
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
ANCHOR ACQUISITION CO.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
Section 1. Registered Office. The address of the Corporation's registered
office in the State of Delaware is 1209 Orange Street, City of Wilmington,
County of New Castle and the name of the Corporation's registered agent at such
address is Corporation Trust Company.
Section 2. Other Offices. The Corporation may also have such other offices
both within and without the State of Delaware as the Board of Directors from
time to time may designate.
ARTICLE II
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders shall be
held at such time and place as designated by the Board of Directors, for the
purpose of electing directors and for transacting such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
called by the President or by the Board of Directors and shall be called by the
President at the request in writing of a majority of the Board of Directors, or
at the request in writing of stockholders owning a majority of the capital stock
of the Corporation issued and outstanding and entitled to vote. Such request
shall state the purpose or purposes of the proposed meeting.
Section 3. Place of Meetings. Meetings of the stockholders shall be held at
such time and place, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 4. Notice of Meetings. Written notice of every meeting of the
stockholders stating the place, date and hour of the meeting and, in the case of
a special meeting, the purpose or purposes for which the meeting is called shall
be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting.
Section 5. Quorum. Except as otherwise provided by law or by the Certificate
of Incorporation, the holders of a majority of the capital stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business. If, however, such quorum shall not be present
<PAGE> 2
or represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder entitled to vote at the
meeting.
Section 6. Voting. Except as otherwise required by law or by the Certificate
of Incorporation, any matter brought before any meeting of stockholders shall be
decided by the vote of the holders of a majority of the stock represented and
entitled to vote thereat. Each stockholder represented at a meeting of
stockholders shall be entitled to cast one vote for each share of the capital
stock entitled to vote thereat held by such stockholder. Such votes may be cast
in person or by proxy but no proxy shall be voted on or after three years from
its date, unless such proxy provides for a longer period. The Board of
Directors, in its discretion, or the officer of the Corporation presiding at a
meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
Section 7. Action Without a Meeting. Except as otherwise provided by law or
by the Certificate of Incorporation, any action required or permitted to be
taken at any annual or special meeting of stockholders of the Corporation may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. General Powers. Except as otherwise provided by law or by the
Certificate of Incorporation, the business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors of the
Corporation.
Section 2. Number and Election. The Board of Directors shall consist of not
less than one, the exact number of which shall initially be fixed by the
Incorporator and thereafter from time to time by the Board of Directors. Except
as provided in Section 5 of this Article, directors shall be elected by a
plurality of the votes cast at annual meetings of stockholders, and each
director so elected shall hold office until the next annual meeting and until
his successor is duly elected and qualified, or until his earlier resignation or
removal. Directors need not be stockholders of the Corporation.
2
<PAGE> 3
Section 3. Resignations. Any director may resign at any time upon written
notice to the Corporation. Such resignation shall become effective at the time
or upon the happening of the condition, if any, specified therein or, if no such
time or condition is specified, upon its receipt.
Section 4. Removal. Except as otherwise provided by law, any director or the
entire Board of Directors may be removed, with or without cause, at any time by
the holders of a majority of the shares then entitled to vote at an election of
directors
Section 5. Vacancies. Any vacancy occurring in the Board of Directors by
death, resignation, removal or otherwise, and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified, or until their earlier resignation or removal.
Section 6. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. The first meeting of the Board of Directors following the
annual meeting of the stockholders shall be held without notice immediately
after and at the same place as the annual meeting of stockholders. Special
meetings of the Board of Directors may be called by the President, Secretary or
by any director. Written notice thereof stating the place, date and hour of the
meeting shall be given by the Secretary or any Assistant Secretary or by the
person calling the meeting to each director not less than forty-eight (48) hours
before the date of the meeting. Neither the purpose of or the business to be
transacted at any special meeting need be specified in the notice of such
meeting.
Section 7. Quorum. Except as otherwise provided by law or by the Certificate
of Incorporation, at any meeting of the Board of Directors, a majority of the
total number of directors fixed in the manner provided by these By-Laws shall
constitute a quorum for the transaction of business, and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors. If a quorum shall not be present at any meeting
of the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 8. Action Without a Meeting. Except as otherwise provided by the
Certificate of Incorporation, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all the members of the Board of Directors or committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes or proceedings of the Board of Directors or committee.
3
<PAGE> 4
Section 9. Meeting by Means of Telecommunications. Except as otherwise
provided by the Certificate of Incorporation, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors or such committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this Section 9 shall constitute presence in person at such meeting.
Section 10. Committees. The Board of Directors may, by resolution passed by
a majority of the total number of directors fixed in the manner provided by
these By-Laws, designate one or more committees, each committee to consist of
one or more directors of the Corporation. The Board of Directors may designate
one or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of any such committee. In the
absence or disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any absent or disqualified member. Any committee,
to the extent allowed by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation.
Each committee shall keep regular minutes and report to the Board of Directors
when required.
Section 11. Compensation. As fixed by resolution passed by a majority of the
total number of directors fixed in the manner provided by these By-Laws, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
ARTICLE IV
OFFICERS
Section 1. Enumeration and Qualifications. The officers of the Corporation
shall be chosen by the Board of Directors and shall consist of a President, a
Secretary and a Treasurer. The Board of Directors, in its discretion, may from
time to time also choose a Chairman of the Board of Directors (who must be a
director) and one or more Vice-Presidents, Assistant Secretaries, Assistant
Treasurers and other officers. Except as otherwise provided by law or by the
Certificate of Incorporation, the same person may hold at the same time any
number of offices. The officers of the Corporation need not be stockholders of
the Corporation and, except in the case of the Chairman of the Board of
Directors, need not be directors of the Corporation.
4
<PAGE> 5
Section 2. Elections and Term. The Board of Directors at its first meeting
held after each annual meeting of the stockholders shall elect the officers of
the Corporation, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the Board of Directors. All officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal.
Section 3. Resignations. Any officer may resign at any time upon written
notice to the Corporation. Such resignation shall become effective at the time
or upon the happening of the condition, if any, specified therein or, if no such
time or condition is specified, upon its receipt.
Section 4. Removal. Except as otherwise provided by law, any officer may be
removed, with or without cause, at any time by vote of a majority of the total
number of directors fixed in the manner provided by these By-Laws.
Section 5. Vacancies. Any vacancy occurring in any office of the Corporation
by death, resignation, removal or otherwise shall be filled by the Board of
Directors.
Section 6. Chairman of the Board of Directors. The Chairman of the Board of
Directors, if there be one, shall be the Chief Executive Officer of the
Corporation and, if present, shall preside at all meetings of the stockholders
and of the Board of Directors. Except where by law the signature of the
President is required, the Chairman of the Board of Directors shall possess the
same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him by these By-Laws or by the Board of Directors.
Section 7. President. The President shall have, subject to the control of
the Board of Directors and the Chairman of the Board, if there be one, general
supervision of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. The president
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these By-Laws. If there be no Chairman of the Board of Directors,
the President shall be the Chief Executive Officer of the Corporation and shall
preside at all meetings of the stockholders and the Board of Directors.
Section 8. Vice Presidents. If there be no Chairman of the Board of
Directors, at the request of the President or in his absence or in the event of
his inability or refusal to act, the Vice President or Vice Presidents, as
designated by the Board of Directors, shall perform the duties of the President
and when so acting shall have all the powers of and be subject to all the
restrictions
5
<PAGE> 6
upon the President. If there be no Chairman of the Board of Directors and no
Vice President, the Board of Directors shall designate the officer of the
Corporation who, at the President's request, absence, or inability or refusal to
act, shall perform all the duties of the President. When so acting, such officer
shall have all the powers of and be subject to all the restrictions upon the
President.
Section 9. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and shall record all the
proceedings thereat in a book or books to be kept for that purpose. The
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall see that the books, reports, statements,
certificates and other documents and records required by law to be kept or filed
are properly kept or filed, as the case may be.
Section 10. Treasurer. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation. The Treasurer shall deposit
all moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President, the Chairman of the Board of Directors if there be one,
and to the Board of Directors either at its regular meetings or when it so
requires, an account of all his transactions as Treasurer and of the financial
condition of the Corporation.
Section 11. Assistant Secretaries. Assistant Secretaries, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chairman of the Board of
Directors if there be one, the President, any Vice President if there be one, or
the Secretary. In the absence of the Secretary or in the event of his disability
or refusal to act, Assistant Secretaries shall perform the duties of the
Secretary and when so acting shall have all the powers of and be subject to all
the restrictions upon the Secretary.
Section 12. Assistant Treasurers. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chairman of the Board of
Directors if there be one, the President, any Vice President if there be one, or
the Treasurer. In the absence of the Treasurer or in the event of his disability
or refusal to act, Assistant Treasurers shall perform the duties of the
Treasurer and when so acting shall have all the powers of and be subject to all
the restrictions upon the Treasurer.
Section 13. Other Duties and Powers. Each officer, in addition to the duties
and powers specifically set forth by these By-Laws, shall also perform such
other duties and may exercise such other powers as from time to time may be
assigned to him by these By-Laws or by the Board of Directors.
6
<PAGE> 7
Section 14. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board of Directors, the President or a Vice-President
and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in the
manner prescribed by law and in these By-Laws. Transfers of stock shall be made
on the books of the Corporation only by the person named in the certificate or
by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be canceled before a new certificate shall be
issued.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporation action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose
7
<PAGE> 8
of any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty days nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a persons registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex, cable or facsimile transmission.
Section 2. Waiver of Notice. Whenever any notice is required by law, the
Certificate of Incorporation or these By-Laws to be given to any director,
member of a committee or stockholder, a waiver thereof in writing and signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, and may be
paid in cash, in property, or in shares of the capital stock. Before payment of
any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
8
<PAGE> 9
Section 2. Disbursements. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors. The by-laws may contain any provision, not
inconsistent with law or the certificate of incorporation, relating to the
business of the corporation and the conduct of its affairs. Title 8,
Section 109(b).
Section 4. Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the word
"Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other Than
Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the
Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
9
<PAGE> 10
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under this
Article VIII (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in Section 1 or Section
2 of this Article VIII, as the case may be. Such determination shall be made (i)
by the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the stockholders. To the extent, however, that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding described above, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
Section 4. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
withstanding the absence of any determination thereunder, any director, officer,
employee or agent may apply to any court of competent jurisdiction in the State
of Delaware for indemnification to the extent otherwise permissible under
Sections 1 and 2 of this Article VIII. The basis of such indemnification by a
court shall be a determination by such court that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
has met the applicable standards of conduct set forth in Sections 1 or 2 of this
Article VIII, as the case may be. Notice of any application for indemnification
pursuant to this Section 5 shall be given to the Corporation promptly upon the
filing of such application.
Section 5. Expenses Payable in Advance. Expenses incurred in defending or
investigating a threatened or pending action, suit or proceeding may be paid by
the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VIII.
10
<PAGE> 11
Section 6. Non-exclusivity of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by or granted pursuant
to this Article VIII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-Law, agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in Sections 1 and 2 of
this Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the General Corporation Law of the State of Delaware, or
otherwise.
Section 7. Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VIII.
Section 8. Meaning of "Corporation" for Purposes of Article VIII. For
purposes of this Article VIII, references to "the Corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees, or agents, so that any person
who is or was a director, officer, employee, or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article VIII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
Section 9. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
ARTICLE IX
AMENDMENTS
11
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Section 1. These By-Laws may be amended or repealed, in whole or in part, or
new By-Laws may be adopted by the stockholders of the Corporation, provided,
however, that notice of such amendment, repeal or adoption of new By-Laws be
contained in the notice of such meeting of stockholders. All such amendments
must be approved by the holders of a majority of the outstanding capital stock
entitled to vote thereon.
12
<PAGE> 1
EXHIBIT 4.1
AMM HOLDINGS, INC.
SERIES A AND SERIES B
13 1/2% SENIOR DISCOUNT NOTES DUE 2009
INDENTURE
Dated as of June 26, 1998
STATE STREET BANK AND TRUST COMPANY
Trustee
<PAGE> 2
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
310 (a)(1)..............................................................7.10
(a)(2)..................................................................7.10
(a)(3...................................................................N.A.
(a)(4)..................................................................N.A.
(a)(5)..................................................................7.10
(i)(b)..................................................................7.10
(ii)(c).................................................................N.A.
311(a)..................................................................7.11
(b).....................................................................7.11
(iii(c).................................................................N.A.
312(a)..................................................................2.05
(b)....................................................................12.03
(iv)(c)................................................................12.03
313(a)..................................................................7.06
(b)(2)..................................................................7.07
(v)(c)...........................................................7.06; 10.02
(vi)(d).................................................................7.06
314(a)...........................................................4.03; 10.02
(c)(1) ................................................................10.04
(c)(2).................................................................10.04
(c)(3)..................................................................N.A.
(vii)(e)...............................................................10.05
(f).......................................................................NA
315(a)..................................................................7.01
(b)..............................................................7.05, 10.02
(A)(c)..................................................................7.01
(d).....................................................................7.01
(e).....................................................................6.11
316 (a)(last sentence)..................................................2.09
(a)(1)(A)...............................................................6.05
(a)(1)(B)...............................................................6.04
(a)(2)..................................................................N.A.
(b).....................................................................6.07
(B)(c)..................................................................2.12
317 (a)(1)..............................................................6.08
(a)(2)..................................................................6.09
(b).....................................................................2.04
318 (a)................................................................10.01
(b).....................................................................N.A.
(c)....................................................................10.01
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE.................................................. 1
SECTION 1.01. Definitions.................................................................................. 1
SECTION 1.02. Other Definitions............................................................................ 15
SECTION 1.03 Incorporation of TIA Terms................................................................... 16
SECTION 1.04. Rules of Construction........................................................................ 16
ARTICLE 2
THE NOTES................................................. 17
SECTION 2.01. Form and Dating.............................................................................. 17
SECTION 2.02. Execution and Authentication................................................................. 18
SECTION 2.03. Registrar and Paying Agent................................................................... 18
SECTION 2.04. Paying Agent to Hold Money in Trust.......................................................... 19
SECTION 2.05. Holder Lists................................................................................. 19
SECTION 2.06. Transfer and Exchange........................................................................ 19
SECTION 2.07. Replacement Notes............................................................................ 32
SECTION 2.08. Outstanding Notes............................................................................ 32
SECTION 2.09. Treasury Notes............................................................................... 32
SECTION 2.10. Temporary Notes.............................................................................. 33
SECTION 2.11. Cancellation................................................................................. 33
SECTION 2.12. Defaulted Interest........................................................................... 33
ARTICLE 3.
AND PREPAYMENT............................................... 33
SECTION 3.01. Notices to Trustee........................................................................... 33
SECTION 3.02. Selection of Notes to Be Redeemed............................................................ 34
SECTION 3.03. Notice of Redemption......................................................................... 34
SECTION 3.04. Effect of Notice of Redemption............................................................... 35
SECTION 3.05. Deposit of Redemption Price.................................................................. 35
SECTION 3.06. Notes Redeemed in Part....................................................................... 35
SECTION 3.07. Optional Redemption.......................................................................... 35
SECTION 3.08. Mandatory Redemption......................................................................... 36
SECTION 3.09. Offer to Purchase by Application of Excess Proceeds.......................................... 36
ARTICLE 4.
COVENANTS................................................. 38
SECTION 4.01. Payment of Notes............................................................................. 38
SECTION 4.02. Maintenance of Office or Agency.............................................................. 38
SECTION 4.03. Reports...................................................................................... 39
SECTION 4.04. Compliance Certificate....................................................................... 39
SECTION 4.05. Taxes........................................................................................ 40
SECTION 4.06. Stay, Extension and Usury Laws............................................................... 40
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 4.07. Restricted Payments.......................................................................... 40
SECTION 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries............................... 42
SECTION 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock................................... 43
SECTION 4.10. Asset Sales.................................................................................. 44
SECTION 4.11. Transactions with Affiliates................................................................. 45
SECTION 4.12. Liens........................................................................................ 46
SECTION 4.13. Corporate Existence.......................................................................... 46
SECTION 4.14. Offer to Repurchase Upon Change of Control................................................... 46
SECTION 4.15. Limitations on Business Activities........................................................... 47
SECTION 4.16. Limitation on Issuances and Sales of Capital Stock of Wholly Owned Restricted Subsidiaries... 47
ARTICLE 5.
SUCCESSORS................................................. 48
SECTION 5.01. Merger, Consolidation, or Sale of Assets..................................................... 48
SECTION 5.02. Successor Corporation Substituted............................................................ 48
ARTICLE 6.
DEFAULTS AND REMEDIES........................................... 49
SECTION 6.01. Events of Default............................................................................ 49
SECTION 6.02. Acceleration................................................................................. 50
SECTION 6.03. Other Remedies............................................................................... 51
SECTION 6.04. Waiver of Past Defaults...................................................................... 51
SECTION 6.05. Control by Majority.......................................................................... 52
SECTION 6.06. Limitation on Suits.......................................................................... 52
SECTION 6.07. Rights of Holders of Notes to Receive Payment................................................ 52
SECTION 6.08. Collection Suit by Trustee................................................................... 52
SECTION 6.09. Trustee May File Proofs of Claim............................................................. 53
SECTION 6.10. Priorities................................................................................... 53
SECTION 6.11. Undertaking for Costs........................................................................ 53
ARTICLE 7.
TRUSTEE.................................................. 54
SECTION 7.01. Duties of Trustee............................................................................ 54
SECTION 7.02. Rights of Trustee............................................................................ 55
SECTION 7.03. Individual Rights of Trustee................................................................. 55
SECTION 7.04. Trustee's Disclaimer......................................................................... 55
SECTION 7.05. Notice of Defaults........................................................................... 56
SECTION 7.06. Reports by Trustee to Holders of the Notes................................................... 56
SECTION 7.07. Compensation and Indemnity................................................................... 56
SECTION 7.08. Replacement of Trustee....................................................................... 57
SECTION 7.09. Successor Trustee by Merger, etc............................................................. 58
SECTION 7.10. Eligibility; Disqualification................................................................ 58
SECTION 7.11. Preferential Collection of Claims Against Company............................................ 58
ARTICLE 8.
DEFEASANCE AND COVENANT DEFEASANCE..................................... 58
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 8.01. Option to Effect Legal Defeasance or Covenant Defeasance..................................... 58
SECTION 8.02. Legal Defeasance and Discharge............................................................... 58
SECTION 8.03. Covenant Defeasance.......................................................................... 59
SECTION 8.04. Conditions to Legal or Covenant Defeasance................................................... 59
SECTION 8.05. Deposited Money and Cash Equivalents to be Held in Trust; Other Miscellaneous Provisions..... 61
SECTION 8.06. Repayment to Company......................................................................... 61
SECTION 8.07. Reinstatement................................................................................ 61
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER...................................... 62
SECTION 9.01. Without Consent of Holders of Notes.......................................................... 62
SECTION 9.02. With Consent of Holders of Notes............................................................. 62
SECTION 9.03. Compliance with Trust Indenture Act.......................................................... 64
SECTION 9.04. Revocation and Effect of Consents............................................................ 64
SECTION 9.05. Notation on or Exchange of Notes............................................................. 64
SECTION 9.06. Trustee to Sign Amendments, etc.............................................................. 64
ARTICLE 10.
MISCELLANEOUS............................................... 65
SECTION 10.01. Trust Indenture Act Controls................................................................. 65
SECTION 10.02. Notices...................................................................................... 65
SECTION 10.03. Communication by Holders of Notes with Other Holders of Notes................................ 66
SECTION 10.04. Certificate and Opinion as to Conditions Precedent........................................... 66
SECTION 10.05. Statements Required in Certificate or Opinion................................................ 66
SECTION 10.06. Rules by Trustee and Agents.................................................................. 67
SECTION 10.07. No Personal Liability of Directors, Officers, Employees and Stockholders..................... 67
SECTION 10.08. Governing Law................................................................................ 67
SECTION 10.09. No Adverse Interpretation of Other Agreements................................................ 67
SECTION 10.10. Successors................................................................................... 67
SECTION 10.11. Severability................................................................................. 67
SECTION 10.12. Counterpart Originals........................................................................ 67
SECTION 10.13. Table of Contents, Headings, etc............................................................. 68
</TABLE>
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF IAI CERTIFICATE
<PAGE> 6
INDENTURE dated as of June 26, 1998 between AMM Holdings,
Inc., a Delaware corporation (the "Company"), and State Street Bank and Trust
Company, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the 13
1/2% Series A Senior Discount Notes due 2009 (the "Series A Notes") and the 13
1/2% Series B Senior Discount Notes due 2009 (the "Series B Notes" and, together
with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"144A Global Note" means a global note in the form of Exhibit A
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Accreted Value" means for each $1,000 of Notes, as of any date
of determination prior to , 2003, the sum of (i) the initial offering price
of each Note and (ii) that portion of the excess of the principal amount of each
Note over such initial offering price which shall have been accreted thereon
through such date, such amount to be so accreted on a daily basis and compounded
semi annually on each and at the rate of 13 1/2% per annum from the date of
issuance of the Notes through the date of determination.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
<PAGE> 7
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole will be governed by the provisions
of Section 4.14 and/or the provisions of Section 5.1 and not by the provisions
of Section 4.10), and (ii) the issue or sale by the Company or any of its
Restricted Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing, (i) a transfer of assets by the Company
to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, (ii)
an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to the
Company or to another Wholly Owned Restricted Subsidiary, and (iii) a Restricted
Payment that is permitted by Section 4.07 hereof shall not be deemed to be Asset
Sales.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company,
or any authorized committee of the Board of Directors.
"Borrowing Base" means, as of any date, an amount equal to the
sum of (a) 85% of the face amount of all accounts receivable owned by Moll and
its Restricted Subsidiaries as of such date that are not more than 90 days past
due, plus (b) 50% of the book value of all inventory (excluding work in
progress) owned by Moll and its Restricted Subsidiaries as of such date, plus
(c) 25% of the book value of all inventory owned by Moll and its Restricted
Subsidiaries as of such date that is work in progress, all calculated on a
consolidated basis and in accordance with GAAP. To the extent that information
is not available as to the amount of accounts receivable or inventory or trade
payables as of a specific date, Moll may utilize the most recent available
information for purposes of calculating the Borrowing Base.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than six months from the date of acquisition, (iii) certificates of
deposit
<PAGE> 8
and eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case with any domestic commercial
bank having capital and surplus in excess of $500 million and a Keefe Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation, a division of the McGraw-Hill Companies, Inc., and in each
case maturing within six months after the date of acquisition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(i) (a) any transaction (including a merger or consolidation) the result of
which is that any "person" or "group" (each within the meaning of Sections 13(d)
and 14(d)(2) of the Exchange Act), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of more than 50% of the total voting
power of all Capital Stock of the Company or a successor entity normally
entitled to vote in the election of directors, managers or trustees, as
applicable, calculated on a fully diluted basis, and (b) as a result of the
consummation of such transaction, any "person" or "group" (each as defined
above) becomes the "beneficial owner" (as defined above), directly or
indirectly, of more of the voting stock of the Company than is at the time
"beneficially owned" (as defined above) by the Principals, or (ii) the first day
on which a majority of the members of the Board of Directors are not Continuing
Directors, or (iii) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than the Principals or their Related
Parties. For purposes of this definition, any transfer of an Equity Interest of
an entity that was formed for the purpose of acquiring voting stock of the
Company shall be deemed to be a transfer of such percentage of such voting stock
as corresponds to the percentage of the equity of such entity that has been so
transferred.
"Company" means AMM Holdings, Inc. and any and all successors
thereto.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus,
without duplication, (i) an amount equal to any extraordinary loss plus any net
loss realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income), plus (ii) provision for
taxes based on income or profits of such Person and its Restricted Subsidiaries
for such period, to the extent that such provision for taxes was included in
computing such Consolidated Net Income, plus (iii) consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of
<PAGE> 9
prepaid cash expenses that were paid in a prior period and deferred finance
charges) and other non-cash charges of such Person and its Restricted
Subsidiaries for such period (excluding any such non-cash charges to the extent
that it represents an accrual of or reserve for cash charges in any future
period or amortization of a prepaid cash charges that was paid in a prior
period) to the extent that such depreciation, amortization and other non-cash
charges were deducted in computing such Consolidated Net Income. Notwithstanding
the foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent that a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Subsidiary without prior governmental approval (that has not been obtained), and
without direct or indirect restriction pursuant to the terms of its charter and
all judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Restricted
Subsidiary that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the Company or any of its Wholly Owned Restricted Subsidiaries, (ii) the
Net Income of any Restricted Subsidiary that is not a Wholly Owned Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of
any date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Restricted Subsidiaries as of such date plus
(ii) the respective amounts reported on such Person's balance sheet as of such
date with respect to any series of preferred stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date of this Indenture
in the book value of any asset owned by such Person or a consolidated Restricted
Subsidiary of such Person, (y) all investments as of such date in unconsolidated
Restricted Subsidiaries and in Persons that are not Restricted Subsidiaries
(except, in each case, Permitted Investments), and (z) all unamortized debt
discount and expense and unamortized deferred charges as of such date, all of
the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of either (a) a majority of
the Continuing Directors who were members of such Board of Directors at the time
of such nomination or election or (b) a majority in interest of the Principals.
For purposes of the foregoing, a "majority in interest of the Principals" shall
mean any group of Principals who beneficially own
<PAGE> 10
in the aggregate more than 50% of the Capital Stock of The Company held by all
of the Principals.
"Corporate Trust Office of the Trustee" shall be at the address
of the Trustee specified in Section 10.02 hereof or such other address as to
which the Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or
more debt facilities or commercial paper facilities (including the Revolving
Credit Facility), in each case with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time or
the giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof, in
the form of Exhibit A-1 hereto, except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued
in whole or in part in global form, the Person specified in Section 2.03 hereof
as the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to September
30, 2009.
"Distribution Compliance Period" means the 40-day restricted
period as defined in Regulation S.
"Equity Interests" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE> 11
"Exchange Notes" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth
in the Registration Rights Agreement.
"Existing Indebtedness" means up to $21.7 million in aggregate
principal amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Revolving Credit Facility) in existence on the date of
this Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period, and (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or one of
its Restricted Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) the product of (a) all dividend payments, whether or not in cash,
on any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with
<PAGE> 12
GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded, and (iii) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only to the
extent that the obligations giving rise to such Fixed Charges will not be
obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a
significant segment of the accounting profession.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether or
not such indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any Indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall be
(i) the accreted value thereof, in the case of any Indebtedness that does not
require current payments of interest, and (ii) the principal amount thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness. Indebtedness shall include interest accruing
after the filing of any bankruptcy petition whether or not the claim for such
interest is admitted as a claim after such filing in such proceeding.
<PAGE> 13
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Institutional Accredited Investor" means an institution that is
an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment. If the Company or any
Restricted Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Restricted Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Restricted Subsidiary not sold
or disposed of in an amount determined as provided in the final paragraph of
Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which
commercial banks in the City of New York, in Hartford, Connecticut or at a place
of payment are authorized or required by law, regulation or executive order to
remain closed. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means the additional amounts (if any)
payable by the Company in the event of a Registration Default under, and as
defined in, the Registration Rights Agreement.
"Moll" means Moll Industries, Inc., a Delaware corporation and
the indirect, wholly owned subsidiary of the Company.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends,
<PAGE> 14
excluding, however, (i) any gain (but not loss), together with any related
provision for taxes on such gain (but not loss), realized in connection with (a)
any Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (b) the disposition of any securities by such Person
or any of its Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Subsidiaries and (ii) any extraordinary or nonrecurring
gain (but not loss), together with any related provision for taxes on such
extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Indebtedness under the Revolving
Credit Facility) secured by a Lien on the asset or assets that were the subject
of such Asset Sale and any reserve for adjustment in respect of the sale price
of such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither
the Company nor any of its Restricted Subsidiaries (a) provides credit support
of any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender, and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities (including any
amounts payable in respect of obligations to register securities of the Company
under the Securities Act) payable under the documentation governing any
Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of
the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer, or the
principal accounting officer of the Company, that meets the requirements of
Section 10.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably
<PAGE> 15
acceptable to the Trustee, that meets the requirements of Section 10.05 hereof.
The counsel may be an employee of or counsel to the Company.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Investments" means (a) any Investment in the Company
or in a Restricted Subsidiary of the Company that is engaged in the same or a
similar line of business as the Company and its Restricted Subsidiaries were
engaged in on the date of this Indenture; (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (i) such Person
becomes a Restricted Subsidiary of the Company that is engaged in the same or a
similar line of business as the Company and its Subsidiaries were engaged in on
the date of this Indenture or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company that is engaged in the same or a similar line of business as the Company
and its Restricted Subsidiaries were engaged in on the date of this Indenture;
(d) any Restricted Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.10 hereof; (e) any acquisition of assets solely in exchange for
the issuance of Equity Interests (other than Disqualified Stock) of the Company;
and (f) other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (f) that are at the time outstanding, not to exceed
$5.0 million.
"Permitted Liens" means (i) any Lien existing on property of the
Company or any Subsidiary on the date of this Indenture securing Indebtedness
outstanding on such date; (ii) any Lien securing obligations under the Revolving
Credit Facility and any Guarantee thereof, which obligations or Guarantee are
permitted by the terms of this Indenture to be incurred and outstanding; (iii)
Liens for taxes, fees, assessments or other governmental charges which are not
delinquent or remain payable without penalty, or which are being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP are being maintained; (iv) carriers', warehousemen's,
mechanics', landlords', materialmen's, repairmen's or other similar Liens
arising in the ordinary course of business which are not delinquent or which are
being contested in good faith and by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property subject
thereto; (v) Liens (other than any Lien imposed by ERISA) consisting of pledges
or deposits required in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other social security
legislation; (vi) Liens on property of the Company or any Subsidiary securing
(a) the non-delinquent performance of bids, trade contracts (other than for
borrowed money), leases and statutory obligations, (b) surety bonds (excluding
appeal bonds and bonds posted in connection with court proceedings or judgments)
and (c) other non-delinquent obligations of a like nature, including pledges or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security
legislation, in each case, incurred in the ordinary course of business; (vii)
Liens consisting of judgment or judicial attachment Liens and Liens securing
contingent obligations on appeal bonds and other bonds posted in connection with
court proceedings or judgments; provided that the enforcement of such Liens is
effectively stayed and all such
<PAGE> 16
Liens in the aggregate at any time outstanding for the Company and its
Subsidiaries do not exceed $3.0 million; (viii) easements, rights-of-way,
restrictions and other similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount, and which do
not in any case materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the businesses of the Company
and its Subsidiaries taken as a whole; (ix) purchase money security interests on
any property acquired by the Company or any Subsidiary in the ordinary course of
business, securing Indebtedness incurred or assumed for the purpose of financing
all or any part of the cost of acquiring such property; provided that (a) any
such Lien attaches to such property concurrently with or within 90 days after
the acquisition thereof, (b) such Lien attaches solely to the property so
acquired in such transaction, (c) the principal amount of the Indebtedness
secured thereby does not exceed 100% of the cost of such property and (d) the
principal amount of the Indebtedness secured by all such purchase money security
interests shall not at any time exceed $5.0 million; (x) Liens securing
obligations in respect of Capital Lease Obligations on assets subject to such
leases, provided that such Capital Lease Obligations are otherwise permitted
hereunder; (xi) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of setoff or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (a) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the Federal Reserve Board, and (b) such deposit account is not intended by the
Company or any Subsidiary to provide collateral to the depository institution;
(xii) Liens in favor of the Company or any Wholly Owned Restricted Subsidiary;
(xiii) Liens on property of a Person existing at the time such Person becomes a
Restricted Subsidiary or such Person is merged into or consolidated with the
Company or any Restricted Subsidiary of the Company; provided that such Liens
were in existence prior to the contemplation of such merger or consolidation and
do not extend to any assets other than those of the Person merged into or
consolidated with the Company; (xiv) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
acquisition; (xv) extensions, renewals and replacements of Liens referred to in
clauses (i) through (xiv) above; provided that any such extension, renewal or
replacement Lien is limited to the property or assets covered by the Lien
extended, renewed or replaced and does not secure any Indebtedness in addition
to that secured immediately prior to such extension, renewal or replacement; and
(xvi) Liens securing other Indebtedness of the Company and its Subsidiaries not
expressly permitted by clauses (i) through (xv) above; provided that the
aggregate amount of the Indebtedness secured by Liens permitted pursuant to this
clause (xvi) does not exceed $3.0 million in the aggregate and provided,
further, that such Indebtedness was permitted to be incurred by the terms of
this Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness outstanding or available to be borrowed of the Company
or any of its Restricted Subsidiaries; provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness outstanding or available to be borrowed so
extended, refinanced, renewed, replaced,
<PAGE> 17
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness outstanding or available to be borrowed being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
outstanding or available to be borrowed being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness outstanding or available to be borrowed
being extended, refinanced, renewed, replaced, defeased or refunded; and (iv)
such Indebtedness is incurred either by the Company or by the Restricted
Subsidiary who is the obligor on the Indebtedness outstanding or available to be
borrowed being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principals" means Mr. George T. Votis and Mr. Anastasios Votis.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means a public offering of Equity
Interests (other than Disqualified Stock) of the Company resulting in cash
proceeds to the Company of at least $25.0 million.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of June 26, 1998, by and between the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global
Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global
Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global
Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Party" with respect to any Principal means (i) any
controlling stockholder, 80% (or more) owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal or (ii) any trust
(including any related trustee), corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling
<PAGE> 18
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (i).
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means any Investment other than a
Permitted Investment.
"Restricted Subsidiary" means any Subsidiary of the Company on
the date of this Indenture that is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the credit facility among Moll,
Anchor Holdings, Inc., the lenders party thereto in their capacities as lenders
thereunder and NationsBank, N.A., as agent, together with the related documents
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (provided that such increase in borrowings is
permitted by Section 4.09 hereof) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Note Indenture" means that certain indenture, dated as of
March 27, 1997, between Moll and State Street Bank and Trust Company, as
trustee, as amended or supplemented from time to time, relating to the Senior
Notes.
"Senior Notes" means Moll's 11 3/4% Senior Notes due 2004 issued
pursuant to the Senior Note Indenture.
<PAGE> 19
"Senior Subordinated Note Indenture" means that certain
indenture, dated as of the date hereof, between Moll and State Street Bank and
Trust Company, as trustee, as amended or supplemented from time to time,
relating to the Senior Subordinated Notes.
"Senior Subordinated Notes" means Moll's 10 1/2% Senior
Subordinated Notes due 2008 issued pursuant to the Senior Discount Note
Indenture.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
"Trustee" means the party named as such in the preamble to this
Indenture until a successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor serving
hereunder.
"Unrestricted Global Note" means a permanent global Note in the
form of Exhibit A-1 attached hereto that bears the Global Note Legend and that
has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes
that do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
of the Company than those that might be obtained at the time from Persons who
are not Affiliates of the Company; (c) is a Person with respect to which neither
the Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause
<PAGE> 20
such Person to achieve any specified levels of operating results; and (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant set forth in Section
4.09 hereof, the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
Section 4.09 hereof and (ii) no Default or Event of Default would be in
existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under
the Securities Act.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person and one or more Wholly Owned Subsidiaries
of such Person.
SECTION 1.02. Other Definitions.
Defined in
Term Section
"Affiliate Transaction"............................. 4.11
"Asset Sale Offer".................................. 3.09
"Authentication Order".............................. 2.02
"Change of Control Offer"........................... 4.14
"Change of Control Payment"......................... 4.14
"Change of Control Payment Date" ................... 4.14
"Covenant Defeasance"............................... 8.03
"Event of Default".................................. 6.01
"Excess Proceeds"................................... 4.10
"incur"............................................. 4.09
"Legal Defeasance" ................................. 8.02
<PAGE> 21
"Offer Amount"...................................... 3.09
"Offer Period"...................................... 3.09
"Other Indebtedness"................................ 4.17
"Paying Agent"...................................... 2.03
"Purchase Date"..................................... 3.09
"Registrar"......................................... 2.03
"Restricted Payments"............................... 4.07
SECTION 1.03. Incorporation of TIA Terms.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the Notes means the Company and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural,
and in the plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
<PAGE> 22
ARTICLE 2.
THE NOTES
SECTION 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto. The Notes
may have notations, legends or endorsements required by law, stock exchange rule
or usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Note conflicts with the express provisions of this Indenture,
the provisions of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form shall be substantially
in the form of Exhibits A-1 or A-2 attached hereto (including the Global Note
Legend thereon and the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Notes issued in definitive form shall be substantially in the
form of Exhibit A-1 attached hereto (but without the Global Note Legend thereon
and without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee in accordance
with instructions given by the Holder thereof as required by Section 2.06
hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Cedel Bank, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Distribution Compliance Period shall be
terminated upon the receipt by the Trustee of (i) a written certificate from the
Depositary, together with copies of certificates from Euroclear and Cedel Bank
certifying that they have received certification of non-United States beneficial
ownership of 100% of the aggregate principal amount of the Regulation S
Temporary Global Note (except to the extent of any beneficial owners thereof who
acquired an interest therein during the Distribution Compliance Period pursuant
to another exemption from registration under the Securities Act and who will
take delivery of a beneficial ownership interest in a 144A Global Note bearing a
Private Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof),
and (ii) an Officers' Certificate from the Company. Following the termination of
the Distribution Compliance Period, beneficial interests in the Regulation S
Temporary Global Note shall be exchanged for beneficial interests in Regulation
S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously
with the authentication of Regulation S Permanent Global Notes, the Trustee
shall cancel the Regulation S Temporary Global Note. The aggregate principal
<PAGE> 23
amount of the Regulation S Temporary Global Note and the Regulation S Permanent
Global Notes may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depositary or its nominee, as the case may
be, in connection with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of
the "Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
SECTION 2.02. Execution and Authentication.
One Officer shall sign the Notes for the Company by manual or
facsimile signature.
If the Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by
one Officer (an "Authentication Order"), authenticate Notes for original issue
up to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Restricted Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
<PAGE> 24
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Custodian with respect to the Global
Notes.
SECTION 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and will notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Restricted Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. All Global Notes will be
exchanged by the Company for Definitive Notes if (i) the Company delivers to the
Trustee notice from the Depositary that it is unwilling or unable to continue to
act as Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Distribution Compliance
Period and (y) the receipt by the Registrar of any certificates required
pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence
of either of the preceding events in (i) or (ii) above, Definitive Notes shall
be issued in such names as the Depositary shall instruct the Trustee. Global
Notes also may be exchanged or replaced, in whole or in part, as provided in
Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in
exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to
this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and
delivered in the form of, and shall be, a Global Note. A Global Note may not be
exchanged for another Note other than as provided in this Section 2.06(a),
however, beneficial interests in a Global Note may be transferred and exchanged
as provided in Section 2.06(b),(c) or (f) hereof.
<PAGE> 25
(b) Transfer and Exchange of Beneficial Interests in the Global
Notes. The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial
interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend;
provided, however, that prior to the expiration of the Distribution
Compliance Period, transfers of beneficial interests in the Temporary
Regulation S Global Note may not be made to a U.S. Person or for the
account or benefit of a U.S. Person (other than Donaldson, Lufkin &
Jenrette Securities Corporation). Beneficial interests in any
Unrestricted Global Note may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers
described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above,
the transferor of such beneficial interest must deliver to the
Registrar either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in the Global Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase or (B) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary
to the Registrar containing information regarding the Person in whose
name such Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Distribution Compliance Period and (y) the receipt by
the Registrar of any certificates required pursuant to Rule 903 under
the Securities Act. Upon consummation of an Exchange Offer by the
Company in accordance with Section 2.06(f) hereof, the requirements of
this Section 2.06(b)(ii) shall be deemed to have been satisfied upon
receipt by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture and the Notes or otherwise applicable under
the Securities Act, the Trustee shall adjust the principal amount of
the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof
<PAGE> 26
in the form of a beneficial interest in another Restricted Global Note
if the transfer complies with the requirements of Section 2.06(b)(ii)
above and the Registrar receives the following:
(A) if the transferee will take delivery in the
form of a beneficial interest in the 144A Global Note, then
the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (1)
thereof; and
(B) if the transferee will take delivery in the
form of a beneficial interest in the Regulation S Temporary
Global Note or the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the holder of the beneficial
interest to be transferred, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph
(D), if the Registrar so requests or if the
Applicable Procedures so require, an Opinion of
Counsel
<PAGE> 27
in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in
compliance with the Securities Act and that the
restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest in
a Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities
Act other than those listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth in Exhibit B
hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
<PAGE> 28
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear
the Private Placement Legend and shall be subject to all restrictions
on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C)
hereof, a beneficial interest in the Regulation S Temporary Global Note
may not be exchanged for a Definitive Note or transferred to a Person
who takes delivery thereof in the form of a Definitive Note prior to
(x) the expiration of the Distribution Compliance Period and (y) the
receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration requirements of
the Securities Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the holder of such
beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
<PAGE> 29
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Definitive
Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit
C hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in
the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph
(D), if the Registrar so requests or if the
Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the
Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer
required in order to maintain compliance with the
Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest
in an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive
Note, then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly pursuant
to Section 2.06(h) hereof, and the Company shall execute and the
Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant
to this Section 2.06(c)(iii) shall be registered in such name or names
and in such authorized denomination or denominations as the holder of
such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive
Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests
in Restricted Global Notes. If any Holder of a Restricted Definitive
Note proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive Notes
to a Person who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive
Note proposes to exchange such Note for a beneficial interest
in a Restricted Global Note, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications in
item (2)(b) thereof;
<PAGE> 30
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, in the case of clause (c)
above, the Regulation S Global Note, and in all other cases, the IAI
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests
in Unrestricted Global Notes. A Holder of a Restricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Restricted Definitive Note to a Person who
takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case of
an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
<PAGE> 31
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive
Notes proposes to exchange such Notes for a
beneficial interest in the Unrestricted Global Note,
a certificate from such Holder in the form of Exhibit
C hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Definitive
Notes proposes to transfer such Notes to a Person who
shall take delivery thereof in the form of a
beneficial interest in the Unrestricted Global Note,
a certificate from such Holder in the form of Exhibit
B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph
(D), if the Registrar so requests or if the
Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the
Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer
required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the
Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests
in Unrestricted Global Notes. A Holder of an
Unrestricted Definitive Note may exchange such Note
for a beneficial interest in an Unrestricted Global
Note or transfer such Definitive Notes to a Person
who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note at
any time. Upon receipt of a request for such an
exchange or transfer, the Trustee shall cancel the
applicable Unrestricted Definitive Note and increase
or cause to be increased the aggregate principal
amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive
Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance
with the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the
<PAGE> 32
requesting Holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions of
this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to
Rule 144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to
Rule 903 or Rule 904, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted
Definitive Notes. Any Restricted Definitive Note may be exchanged by
the Holder thereof for an Unrestricted Definitive Note or transferred
to a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case of
an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to
the Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Notes for
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof;
or
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such Notes to a
Person who shall take delivery thereof in the form of
an
<PAGE> 33
Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph
(D), if the Registrar so requests, an Opinion of
Counsel in form reasonably acceptable to the Company
to the effect that such exchange or transfer is in
compliance with the Securities Act and that the
restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted
Definitive Notes. A Holder of Unrestricted Definitive Notes may
transfer such Notes to a Person who takes delivery thereof in the form
of an Unrestricted Definitive Note. Upon receipt of a request to
register such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B)
below, each Global Note and each Definitive Note (and all
Notes issued in exchange therefor or substitution thereof)
shall bear the legend in substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL
<PAGE> 34
INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT
IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(A) (1), (2), (3) OR (7) OR REGULATION D
UNDER THE SECURITIES ACT (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE
COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES
ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI
THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE
FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND,
IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS
GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THIS INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f)
to this Section 2.06 (and all Notes issued in exchange
therefor or substitution thereof)
<PAGE> 35
shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a
legend in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN
THIS INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY
FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT
(I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE
REQUIRED PURSUANT TO SECTION 2.07 OF THIS INDENTURE, (II) THIS
GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT
TO SECTION 2.06(a) OF THIS INDENTURE, (III) THIS GLOBAL NOTE
MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THIS INDENTURE AND (IV) THIS GLOBAL NOTE MAY
BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The
Regulation S Temporary Global Note shall bear a legend in substantially
the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL
NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE
FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS
DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS
OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON."
(iv) Original Issue Discount Legend. Each Note shall bear
a legend in substantially the following form:
"FOR THE PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS SECURITY IS
BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000
PRINCIPAL AMOUNT OF THIS SECURITY, THE ISSUE PRICE IS $519.44,
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $480.56, THE ISSUE
DATE IS JUNE 26, 1998 AND THE YIELD TO MATURITY IS 13 1/2% PER
ANNUM."
(h) Cancellation and/or Adjustment of Global Notes. At such time
as all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any
<PAGE> 36
beneficial interest in a Global Note is exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note or for Definitive Notes, the principal amount of Notes represented
by such Global Note shall be reduced accordingly and an endorsement shall be
made on such Global Note by the Trustee or by the Depositary at the direction of
the Trustee to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note, such other Global Note
shall be increased accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary at the direction of the Trustee to
reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Global
Notes and Definitive Notes upon the Company's order or at the
Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than
any such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.14
and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such registration
of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 hereof and ending
at the close of business on the day of selection, (B) to register the
transfer of or to exchange any Note so selected for redemption in whole
or in part, except the unredeemed portion of any Note being redeemed in
part or (c) to register the transfer of or to exchange a Note between a
record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Notes and for all other purposes, and
none of the Trustee, any Agent or the Company shall be affected by
notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
SECTION 2.07. Replacement Notes.
<PAGE> 37
If any mutilated Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon receipt of an Authentication Order, shall authenticate a replacement Note
if the Trustee's requirements are met. If required by the Trustee or the
Company, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may suffer
if a Note is replaced. The Company may charge for its expenses in replacing a
Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
SECTION 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note; however, Notes held by the Company or a
Subsidiary of the Company shall not be deemed to be outstanding for purposes of
Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
SECTION 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery,
the Company may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that the
<PAGE> 38
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
ARTICLE 3.
AND PREPAYMENT
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased
in an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or in accordance with any
<PAGE> 39
other method the Trustee considers fair and appropriate. In the event of partial
redemption by lot, the particular Notes to be redeemed shall be selected, unless
otherwise provided herein, not less than 30 nor more than 60 days prior to the
redemption date by the Trustee from the outstanding Notes not previously called
for redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
<PAGE> 40
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to July 1, 2003. Thereafter, the Company shall have the option to redeem
the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on July 1 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003............................................ 106.750%
2004............................................ 104.500%
2005............................................ 102.250%
2006 and thereafter............................. 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, at any time prior to
<PAGE> 41
July 1, 2001, the Notes will be redeemable at the option of the Company, in
whole but not in part, in cash at a redemption price of 113.500% of the Accreted
Value thereof (determined as of the date of redemption), plus Liquidated
Damages, if any, thereon to the redemption date, with the net cash proceeds of a
Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
SECTION 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an offer to all Holders to purchase Notes
(an "Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice,
which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
<PAGE> 42
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, the Depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if
the Company, the Depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee, upon written request from the Company shall authenticate
and mail or deliver such new Note to such Holder, in a principal amount equal to
any unpurchased portion of the Note surrendered. Any Note not so accepted shall
be promptly mailed or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Asset Sale Offer on the
Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. Payment of Notes.
<PAGE> 43
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.03. Reports.
(a) Whether or not required by the rules and regulations of the
SEC, so long as any Notes are outstanding, the Company shall furnish to the
Holders of Notes (i) all quarterly and annual financial information that would
be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
the Company were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the SEC on Form 8-K if the Company were required to
file such reports, in each case, within the time periods specified in the SEC's
rules and regulations. In addition, following consummation of the Exchange
Offer, whether or not required by the rules and regulations of the SEC, the
Company shall file a copy of all such information and reports with the SEC for
public availability
<PAGE> 44
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall at
all times comply with TIA Section 314(a).
(b) For so long as any Notes remain outstanding, the Company shall
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
SECTION 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.05. Taxes.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
SECTION 4.06. Stay, Extension and Usury Laws.
<PAGE> 45
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Company) or to the direct or indirect holders of the Company's or any of its
Restricted Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or such Restricted Subsidiary or dividends or
distributions payable to the Company or any Restricted Subsidiary of the
Company); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Affiliate of the Company that is not a
Subsidiary (other than any such Equity Interests owned by the Company or any
Wholly Owned Restricted Subsidiary of the Company); (iii) make any principal
payment on or with respect to, or purchase, redeem, defease or otherwise acquire
or retire for value prior to a scheduled mandatory sinking fund payment date or
final maturity date any Indebtedness that is pari passu with or subordinated to
the Notes (other than the Notes); or (iv) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted Payments
permitted by clause (ii) of the next succeeding paragraph), is less than the sum
of (i) 50% of the Consolidated Net Income of the Company for the period (taken
as one accounting period) from the first full fiscal quarter after the date of
this Indenture to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Company from the issue or sale since the date of this
Indenture of Equity Interests of the Company (other than Disqualified Stock) or
of Disqualified Stock or debt securities of the Company that have been converted
into such Equity Interests (other than Equity Interests (or Disqualified Stock
or convertible debt securities) sold to a Restricted Subsidiary of the Company
and other than Disqualified Stock or convertible debt securities that have been
converted into Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was
<PAGE> 46
made after the date of this Indenture is sold for cash or otherwise liquidated
or repaid for cash, the lesser of (A) the cash return of capital with respect to
such Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment.
The foregoing provisions shall not prohibit: (i) the payment of
any dividend or distribution within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of this Indenture; (ii) the redemption, repurchase, retirement,
defeasance or other acquisition of any Equity Interests of the Company in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Company) of, other Equity
Interests of the Company (other than any Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase or other acquisition of pari passu or subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness
or the substantially concurrent sale (other than to a Restricted Subsidiary of
the Company) of Equity Interests of the Company (other than Disqualified Stock);
(iv) the purchase, redemption or other acquisition prior to the stated maturity
thereof of Indebtedness that is subordinated to the Notes in exchange for or out
of the net cash proceeds of a substantially concurrent issue and sale (other
than to the Company or any of its Restricted Subsidiaries) of new Indebtedness;
provided that (x) the principal amount of such new Indebtedness shall not exceed
the principal amount of Indebtedness so refinanced (plus the amount of such
reasonable expenses incurred in connection therewith), (y) such new Indebtedness
shall have a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being refinanced, and (z)
the new Indebtedness shall be subordinate in right of payment to the Notes; (v)
the repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company held by any member of the Company's (or any of
its Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement or in connection with the
termination of employment of any employees or management of the Company or its
Restricted Subsidiaries; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$2.0 million in the aggregate plus the aggregate cash proceeds received by the
Company after the date of this Indenture from any reissuance of Equity Interests
by the Company to members of management of the Company and its Restricted
Subsidiaries and no Default or Event of Default shall have occurred and be
continuing immediately after any such transaction; (vi) Investments received by
the Company and its Restricted Subsidiaries as non-cash consideration from Asset
Sales to the extent permitted by Section 4.10 hereof; (vii) the payment of any
dividend or distribution by a Subsidiary of the Company to the holders of its
Common Equity Interests on a pro rata basis; (viii) other Restricted Payments
not to exceed $3.0 million in the aggregate, and (ix) distributions to the
former partners of Moll PlastiCrafters Limited Partnership for tax liabilities
of such partners for periods prior to the date of this Indenture in an amount
not to exceed the product of (A) the taxable income of Moll PlastiCrafters
Limited Partnership for the related period and (B) the maximum combined federal,
state and local income tax rates applicable to a resident of New York City.
The amount of all Restricted Payments (other than cash or Cash
Equivalents) shall be the fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) on the date of the Restricted Payment of the asset(s) proposed to be
transferred or issued by the Company or such Restricted Subsidiary, as the case
may be, pursuant to the Restricted Payment. Not later than the date of making
any Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of
<PAGE> 47
any fairness opinion or appraisal required by this Indenture.
SECTION 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to: (i)(a) pay dividends or make any other distributions
to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries, except for such encumbrances
or restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the date of this Indenture, (b) the Revolving Credit Facility as in
effect as of the date of this Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are no more restrictive with respect to such dividend and other
payment restrictions than those contained in the Revolving Credit Facility as in
effect on the date of this Indenture, (c) this Indenture and the Notes, (d) the
Senior Subordinated Notes and the Senior Subordinated Notes Indenture and the
Senior Notes and the Senior Notes Indenture, (e) applicable law, (f) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of this Indenture to be incurred; (g) by reason of customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (h) purchase money obligations or
Capital Lease Obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (iii) above
on the property so acquired, (i) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced, (j) customary
restrictions imposed on the transfer of copyrighted or patented materials and
customary provisions in agreements that restrict the assignees of such
agreements or any rights thereunder; (k) restrictions with respect to a
Subsidiary of the Company imposed pursuant to a binding agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary; or (l) any restriction on the
ability of the Company or any Restricted Subsidiary to transfer any property or
assets on account of a Permitted Lien.
SECTION 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company shall not issue any
Disqualified Stock and shall not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal
<PAGE> 48
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 1.75 to 1, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
The foregoing provisions shall not apply to:
(i) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness under the Revolving Credit Facility;
provided that the aggregate principal amount of all revolving credit
Indebtedness and letters of credit of the Company and its Subsidiaries
outstanding under all Credit Facilities after giving effect to such
incurrence (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company and its
Subsidiaries thereunder) does not exceed the greater of (x) $50.0
million or (y) the amount of the Borrowing Base as of the date of such
incurrence;
(ii) Guarantees of the Indebtedness under the Revolving
Credit Facility required by the Revolving Credit Facility and
Guarantees permitted under or required by this Indenture, the Senior
Subordinated Notes Indenture and the Senior Notes Indenture;
(iii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness
represented by (a) the Notes and this Indenture and the incurrence by
Restricted Subsidiaries of Guarantees required or permitted to be
incurred under this Indenture, (b) the Senior Subordinated Notes and
the Senior Subordinated Notes Indenture and the incurrence by
Restricted Subsidiaries of Guarantees required or permitted to be
incurred under the Senior Subordinated Notes Indenture and (c) the
Senior Notes and the Senior Notes Indenture and the incurrence by
Restricted Subsidiaries of Guarantees required or permitted to be
incurred under the Senior Notes Indenture;
(v) the incurrence by the Company or any of its
Restricted Subsidiaries of Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $10.0 million at any time outstanding;
(vi) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness in connection with the
acquisition of assets or a new Subsidiary; provided that such
Indebtedness was incurred by the prior owner of such assets or such
Subsidiary prior to such acquisition by the Company or one of its
Restricted Subsidiaries and was not incurred in connection with, or in
contemplation of, such acquisition by the Company or one of it
Restricted Subsidiaries; and provided, further that the principal
amount (or accreted value, as applicable) of such Indebtedness,
together with any other outstanding Indebtedness incurred pursuant to
this clause (vi), does not exceed $5.0 million;
(vii) the incurrence by the Company or any of its
Restricted Subsidiaries of Permitted
<PAGE> 49
Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness that was
permitted by this Indenture to be incurred;
(viii) the incurrence by the Company or any of its
Restricted Subsidiaries of intercompany Indebtedness between or among
the Company and any of its Wholly Owned Restricted Subsidiaries;
provided, however, that (A) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes
and (B)(1) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Wholly Owned Restricted Subsidiary and (2) any sale or
other transfer of any such Indebtedness to a Person that is not either
the Company or a Wholly Owned Restricted Subsidiary shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the
Company or such Restricted Subsidiary, as the case may be;
(ix) the incurrence by the Company or any of its
Restricted Subsidiaries of Hedging Obligations that are incurred for
the purpose of fixing or hedging interest rate risk with respect to any
floating rate Indebtedness that is permitted by the terms of Revolving
Credit Facility or this Indenture to be outstanding; and
(x) the Guarantee by the Company of Indebtedness of a
Restricted Subsidiary of the Company that was permitted to be incurred
by another provision of this Section 4.09.
For purposes of determining compliance with this Section 4.09,
in the event that an item of Indebtedness meets the criteria of more than one of
the categories described in clauses (i) through (x) above or is entitled to be
incurred pursuant to the first paragraph of this Section 4.09, the Company
shall, in its sole discretion, classify such item of Indebtedness in any manner
that complies with this covenant and such item of Indebtedness will be treated
as having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph of this Section 4.09. Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes
of this Section 4.09.
SECTION 4.10. Asset Sales.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or
the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee with respect to any Asset Sale involving in excess of
$1.0 million) of the assets or Equity Interests issued or sold or otherwise
disposed of and (ii) at least 75% of the consideration therefor received by the
Company or such Restricted Subsidiary is in the form of cash or Cash
Equivalents; provided that the amount of (x) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability and (y) any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are immediately converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this Section 4.10.
<PAGE> 50
Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company or its Restricted Subsidiary, as the case may be, may
apply such Net Proceeds from such Asset Sale to apply such Net Proceeds to
repayment of Indebtedness of a Restricted Subsidiary (in the case of Net
Proceeds from an Asset Sale effected by a Restricted Subsidiary) or to an
investment in a Restricted Subsidiary or in another business or capital
expenditure or other long-term/tangible assets, in each case, in the same or a
similar line of business as the Company or any of its Restricted Subsidiaries
were engaged in on the date of this Indenture or in businesses reasonably
related thereto. Pending the final application of any such Net Proceeds, the
Company may temporarily reduce Indebtedness under the Revolving Credit Facility
or otherwise invest such Net Proceeds in any manner that is not prohibited by
this Indenture. Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the first sentence of this paragraph shall be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $5.0 million, the Company shall be required to make an offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to (i) 100% of the Accreted Value thereof, plus
Liquidated Damages, if any, to the date of repurchase (if such date of
repurchase is prior to July 1, 2003) or (ii) 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the date of repurchase (if such date of repurchase is on or after July 1,
2003), in accordance with the procedures set forth in Section 3.09 hereof. To
the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the Accreted Value of aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
SECTION 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to or enter into any other
transaction with, or for the benefit of, any Affiliate of the Company (each of
the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; provided that (v) any leases
relating to real property in Germany between the Company and any of the
Principals, as in effect on the date of this Indenture, (w) any employment
agreement entered into by the Company or any of its Restricted Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Restricted Subsidiary, (x) transactions between or among the
Company and/or its Restricted Subsidiaries, (y) investment banking and
management fees in an aggregate amount no greater than $180,000 per annum plus
reimbursement of expenses to be paid by the Company to Galt Industries, Inc. or
its successors and assigns, and (z) Restricted Payments that are permitted by
Section 4.07 hereof,
<PAGE> 51
in each case, shall not be deemed Affiliate Transactions.
SECTION 4.12. Liens.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien (other than Permitted Liens) upon any of their property
or assets, now owned or hereafter acquired, unless all payments due under this
Indenture and the Notes are secured on an equal and ratable basis with the
obligations so secured until such time as such obligations are no longer secured
by a Lien.
SECTION 4.13. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of its Subsidiaries, if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.14. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall
make an offer to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of each Holder's Notes (the "Change of Control Offer") at an
offer price in cash equal to 101% of the Accreted Value thereof, plus Liquidated
Damages, if any, to the date of repurchase (if such date of repurchase is prior
to July 1, 2003) or 101% of the aggregate principal amount thereof plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the date of
repurchase(if such date of repurchase is on or after July 1, 2003) (the "Change
of Control Payment"). Within 30 calendar days following any Change of Control,
the Company shall mail a notice to each Holder stating: (i) that the Change of
Control Offer is being made pursuant to this Section 4.14 and that all Notes
tendered will be accepted for payment; (ii) the purchase price and the purchase
date, which shall be no earlier than 30 calendar days nor later than 60 calendar
days from the date such notice is mailed (the "Change of Control Payment Date");
(iii) that any Note not tendered will continue to accrue interest; (iv) that,
unless the Company defaults in the payment of the Change of Control Payment, all
Notes accepted for payment pursuant to the Change of Control Offer will cease to
accrue interest after the Change of Control Payment Date; (v) that
Holders electing to have any Notes purchased pursuant to a Change of Control
Offer will be required to surrender the Notes, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying
Agent at the address specified in the notice prior to the close of business on
the third Business Day preceding the Change of Control Payment Date; (vi) that
Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing such Holder's election to have such Notes purchased; and (vii) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the
<PAGE> 52
unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof. The Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to
the extent lawful, (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (iii) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.14,
the Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 4.14 and Section 3.09 hereof and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
SECTION 4.15. Limitations on Business Activities.
The Company will not permit Anchor Holdings, Inc. to engage in
any business or make any Investments other than such businesses or Investments
that Anchor Holdings, Inc. is engaged in or has made as of the date of this
Indenture; provided, however, that the foregoing shall not affect the ability of
any Subsidiary of Anchor Holdings, Inc., including, without limitation, Moll, to
engage in any business or make any Investments.
SECTION 4.16. Limitation on Issuances and Sales of Capital Stock of Wholly
Owned Restricted Subsidiaries.
The Company (i) shall not, and shall not permit any Wholly
Owned Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly Owned Restricted Subsidiary
of the Company to any Person (other than the Company or a Wholly Owned
Restricted Subsidiary of the Company), unless (a) such transfer, conveyance,
sale, lease or other disposition is of all the Capital Stock of such Wholly
Owned Restricted Subsidiary and (b) the cash Net Proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance Section
4.10 hereof; and (ii) shall not permit any Wholly Owned Restricted Subsidiary of
the Company to issue any of its Equity Interests (other than, if necessary,
shares of its Capital Stock constituting directors' qualifying shares) to any
Person other than to the Company or a Wholly Owned Restricted Subsidiary of the
Company.
<PAGE> 53
ARTICLE 5.
SUCCESSORS
SECTION 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not consolidate or merge with or into
(whether or not the Company is the surviving corporation), or sell, assign,
transfer, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Notes and this
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof. The
Company shall not, directly or indirectly, lease all or substantially all of its
properties or assets, in one or more related transactions, to any other Person.
The provisions of this Section shall not be applicable to a sale, assignment,
transfer, conveyance or other disposition of assets between or among the Company
and its Wholly Owned Restricted Subsidiaries.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default.
<PAGE> 54
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes and such default continues for a
period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption (including in connection with an offer to purchase) or
otherwise;
(c) the Company fails to comply with any of the provisions of Section
4.07, 4.09, 4.10 or 4.14 hereof;
(d) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the Notes for
60 days after notice to the Company by the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes then outstanding voting as a
single class;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, if (i) such default results in the
acceleration of such Indebtedness prior to its express maturity or shall
constitute a default in the payment of such Indebtedness at final maturity of
such Indebtedness, and (ii) the principal amount of any such Indebtedness that
has been accelerated or not paid at maturity, when added to the aggregate
principal amount of all other Indebtedness that has been accelerated or not paid
at maturity, exceeds $5.0 million;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Restricted Subsidiaries and such judgment or judgments remain
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all such undischarged
judgments exceeds $5.0 million;
(g) the Company, any of its Restricted Subsidiaries that qualifies as a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, pursuant to or within the
meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law
<PAGE> 55
that:
(i) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an involuntary
case;
(ii) appoints a Custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days.
SECTION 6.02. Acceleration.
If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately; provided, that so
long as any Indebtedness permitted to be incurred pursuant to the Revolving
Credit Facility shall be outstanding, such acceleration shall not be effective
until the earlier of (i) an acceleration of any such Indebtedness under the
Revolving Credit Facility or (ii) five business days after receipt by the
Company of written notice of such acceleration. Notwithstanding the foregoing,
in the case of an Event of Default specified in clause (g) or (h) of Section
6.01 hereof occurs with respect to the Company or any Restricted Subsidiary that
qualifies as a Significant Subsidiary, the principal of, and premium and
Liquidated Damages, if any, and any accrued and unpaid interest on all
outstanding Notes shall become due and payable without further action or notice.
The holders of a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may on behalf of all of the holders
rescind an acceleration and its consequences if (a) the annulment of the
acceleration of the Notes would not conflict with any judgment or decree of a
court of competent jurisdiction, and (b) all existing Events of Default, except
nonpayment of principal or interest on the Notes that became due solely because
of the acceleration of the Notes, have been cured or waived. In the event of a
declaration of acceleration of the Notes because an Event of Default has
occurred and is continuing as a result of the acceleration of any Indebtedness
described Section 6.01(e) hereof, the declaration of acceleration of the Notes
shall be automatically annulled if the holders of any Indebtedness described in
Section 6.01(e) hereof have rescinded the declaration of acceleration in respect
of such Indebtedness within 30 days of the date of such declaration and if (a)
the annulment of the acceleration of the Notes would not conflict with any
judgment or decree of a court of competent jurisdiction, and (b) all existing
Events of Default, except nonpayment of principal or interest on the Notes that
became due solely because of the acceleration of the Notes, have been cured or
waived.
If an Event of Default occurs on or after July 1, 2003 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to July 1,
<PAGE> 56
2003 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable in an amount, for each of the years beginning on July 1 of the years set
forth below, as set forth below (expressed as a percentage of the Accreted Value
of Notes that would otherwise be due but for the provisions of this sentence,
plus Liquidated Damages, if any, to the date of payment):
YEAR PERCENTAGE
1998............................................................ 118.000%
1999............................................................ 115.750%
2000............................................................ 113.500%
2001............................................................ 111.250%
2002............................................................ 109.000%
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05. Control by Majority.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
<PAGE> 57
SECTION 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the respective
due dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel) and
the Holders of the Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Notes), its creditors or its property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to
<PAGE> 58
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
<PAGE> 59
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or
<PAGE> 60
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after it occurs. Except
in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice if
and so long as a
<PAGE> 61
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
SECTION 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if no
event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail
all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Notes are listed
on any stock exchange.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture,
including the costs and expenses of enforcing this Indenture against the Company
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Company or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need not
pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified
<PAGE> 62
in Section 6.01(g) or (h) hereof occurs, the expenses and the compensation for
the services (including the fees and expenses of its agents and counsel) are
intended to constitute expenses of administration under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then outstanding Notes
may remove the Trustee by so notifying the Trustee and the Company in writing.
The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
<PAGE> 63
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE 8.
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in
<PAGE> 64
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due, (b) the Company's obligations with respect to such Notes
under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and the Company's obligations in
connection therewith and (d) this Article Eight. Subject to compliance with this
Article Eight, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof.
SECTION 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.14, 4.15 and 4.16 hereof with respect to the outstanding
Notes on and after the date the conditions set forth in Section 8.04 are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.01 hereof of
the option applicable to this Section 8.03 hereof, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through
6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable Cash
Equivalents, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium and Liquidated Damages, if any, and interest on
the outstanding Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the
<PAGE> 65
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. Deposited Money and Cash Equivalents to be Held in Trust; Other
Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable
Cash Equivalents (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
<PAGE> 66
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or non-callable
Cash Equivalents deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the request of the Company any money or non-callable Cash Equivalents
held by it as provided in Section 8.04 hereof which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company
makes any payment of principal of, premium, if any, or interest on any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. Without Consent of Holders of Notes.
<PAGE> 67
Notwithstanding Section 9.02 of this Indenture, the Company
and the Trustee may amend or supplement this Indenture, the Note Guarantees or
the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes by a successor to the Company pursuant to Article 5 or
Article 11 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and
the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10
and 4.14 hereof) and the Notes with the consent of the Holders of at least a
majority in principal amount of the Notes (including Additional Notes, if any)
then outstanding voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of this Indenture or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
(including Additional Notes, if any) voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes). Section 2.08 hereof shall determine which Notes are
considered to be "outstanding" for purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02
hereof, the Trustee shall join with the Company in the execution of such amended
or supplemental Indenture unless such amended or supplemental Indenture directly
affects the Trustee's own rights, duties or immunities under this
<PAGE> 68
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding voting as a single class may waive compliance in a particular
instance by the Company with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment or waiver
under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the Notes
except as provided above with respect to Sections 3.09, 4.10 and 4.14 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes (including Additional Notes, if
any) and a waiver of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Sections 3.09, 4.10 and 4.14); or
(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with the
TIA as then in effect.
<PAGE> 69
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall, upon receipt
of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 10.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
SECTION 10.02. Notices.
Any notice or communication by the Company or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address
If to the Company:
<PAGE> 70
AMM Holdings, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
Telecopier No.: (423) 450-5379
Attention: Chief Financial Officer
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopier No.: (212) 735-2000
Attention: Robert M. Chilstrom, Esq.
If to the Trustee:
State Street Bank and Trust Company
Goodwin Square, 225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Telecopier No.: (860) 244-1889
Attention: Corporate Trust Department
The Company or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Section 313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 10.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to
<PAGE> 71
their rights under this Indenture or the Notes. The Company, the Trustee, the
Registrar and anyone else shall have the protection of TIA Section 312(c).
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 10.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
SECTION 10.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 10.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 10.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee,
incorporator or stockholder of the Company, as such, shall have any liability
for any obligations of the Company under the Notes or this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
<PAGE> 72
SECTION 10.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 10.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 10.10. Successors.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 10.11. Severability.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 10.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 10.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE> 73
SIGNATURES
Dated as of June 26, 1998
AMM Holdings, Inc.
By: /s/ George T. Votis
-------------------
Name: George T. Votis
Title: Chairman and Chief Executive Officer
STATE STREET BANK AND TRUST COMPANY
as Trustee
By: /s/ Steven Cimalore
-------------------
Name: Steven Cimalore
Title: Vice President
<PAGE> 74
EXHIBIT A-1
(Face of Note)
FOR THE PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT;
FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE ISSUE PRICE IS $519.44,
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $480.56, THE ISSUE DATE IS JUNE 26,
1998 AND THE YIELD TO MATURITY IS 13 1/2% PER ANNUM.
CUSIP/CINS
13 1/2% [Series A] [Series B] Senior Discount Notes due 2009
No. $
AMM HOLDINGS, INC.
promises to pay to Cede & Co. or registered assigns, the principal sum of
______________ Dollars on July 1, 2009.
Interest Payment Dates: January 1 and July 1
Record Dates: December 15, and June 15
DATED: JUNE 26, 1998
AMM Holdings, Inc.
By:
Name:
Title:
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY
as Trustee
By:
(Authorized Signatory)
<PAGE> 75
(Back of Note)
13 1/2% [Series A] [Series B] Senior Discount Notes due 2009
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(A) (1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN
"IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN
AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY)
OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO
<PAGE> 76
THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS NOTE IN VIOLATION OF THE FOREGOING.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Cash interest will not accrue on the Notes prior
to July 1, 2003. Prior to July 1, 2003, original issue discount on the Notes
will accrete at a rate of 13 1/2%, compounded semi-annually to an aggregate
principal amount of $68,000,000 on July 1, 2003. AMM Holdings, Inc., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 13 1/2% per annum from July 1, 2003 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on January 1 and July 1 of each year, or if any such day
is not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"). Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from July 1,
2003; provided that if there is no existing Default in the payment of interest,
and if this Note is authenticated between a record date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such next succeeding Interest Payment Date; provided, further, that the first
Interest Payment Date shall be January 1, 2004. The Company will pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at a rate
that is 1% per annum in excess of the rate then in effect; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the December 15 or June
15 next preceding the Interest Payment Date, even if such Notes are cancelled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank
and Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of
<PAGE> 77
June 26, 1998 (the "Indenture") between the Company and the Trustee. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $68.0 million
in aggregate principal amount at maturity, plus amounts, if any, issued to pay
Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph
5, the Company shall not have the option to redeem the Notes prior to July 1,
2003. Thereafter, the Company shall have the option to redeem the Notes, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on July 1 of the years indicated below:
YEAR PERCENTAGE
2003......................................................... 106.750%
2004......................................................... 104.500%
2005......................................................... 102.250%
2006 and thereafter.......................................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this
paragraph 5, at any time prior to July 1, 2001, the Notes will be redeemable at
the option of the Company, in whole but not in part, in cash at a redemption
price of 113.5% of the Accreted Value thereof (determined as of the date of
redemption), plus Liquidated Damages, if any, to the redemption date, with the
net cash proceeds of a Public Equity Offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall
not be required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the Accreted Value thereof plus Liquidated
Damages thereon, if any, to the date of repurchase (if such date of repurchase
is prior to July 1, 2003) or to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of repurchase (if such date of repurchase is on or after July 1, 2003)(the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Company shall mail a notice to each Holder setting forth the procedures
governing the Change of Control Offer as required by the Indenture.
<PAGE> 78
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales, within five days of each date on which the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company will commence an offer to all
Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes (including any
Additional Notes) that may be purchased out of the Excess Proceeds at an offer
price in cash in an amount equal to 100% of (i) the Accreted Value thereof plus
Liquidated Damages, if any, to the date of repurchase (if such date of
repurchase is prior to July 1, 2003) or (ii) the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of repurchase (if such date of repurchase is on or after July 1, 2003), in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes (including any Additional Notes) tendered pursuant
to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Restricted Subsidiary) may use such deficiency for general corporate purposes.
If the aggregate principal amount of Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Holders of Notes that are the subject of an offer
to purchase will receive an Asset Sale Offer from the Company prior to any
related purchase date and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes and Additional Notes, if any, voting as a single class, and
any existing default or compliance with any provision of the Indenture or the
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Notes and Additional Notes, if any, voting as a
single class. Without the consent of any Holder of a Note, the Indenture or the
Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's obligations
to Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of
<PAGE> 79
the Notes or that does not adversely affect the legal rights under the Indenture
of any such Holder, and to comply with the requirements of the Commission in
order to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest on the Notes (whether or
not prohibited by the subordination provisions of the Indenture); (ii) default
in payment when due of the principal of or premium, if any, on the Notes
(whether or not prohibited by the subordination provisions of the Indenture);
(iii) failure by the Company to comply with the provisions described under
Sections 4.07, 4.09, 4.10 or 4.14 of the Indenture (whether or not prohibited by
Article 10 of the Indenture); (iv) failure by the Company for 60 days after
notice to comply with any of its other agreements in the Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Restricted Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Restricted Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the date
of the Indenture, if such (a) default results in the acceleration of such
Indebtedness prior to its express maturity or shall constitute a default in the
payment of such Indebtedness at final maturity of such Indebtedness, and (b) the
principal amount of any such Indebtedness that has been accelerated or not paid
at maturity, when added to the aggregate principal amount of all other
Indebtedness that has been accelerated or not paid at maturity, exceeds $5.0
million; (vi) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $5.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days; and (vii) certain events
of bankruptcy or insolvency with respect to the Company or any of its Restricted
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
<PAGE> 80
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of June 26, 1998, between the Company and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
AMM Holdings, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
Attention: Chief Financial Officer
<PAGE> 81
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of this Note)
SIGNATURE GUARANTEE.
<PAGE> 82
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
Section 4.10 Section 4.14
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $________
Date: Your Signature:
(Sign exactly as your name appears on the Note)
Tax Identification No:
SIGNATURE GUARANTEE.
<PAGE> 83
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(1)
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Amount of
increase Principal Amount
Amount of in Principal at maturity of Signature of
decrease in Amount at this Global Note authorized
Principal Amount maturity following officer of Trustee
at maturity of of such decrease or
Date of Exchange this Global Note this Global Note (or increase) Note Custodian
- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------
(1) This should be included only if the Note is issued in global form.
<PAGE> 84
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
FOR THE PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT;
FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE ISSUE PRICE IS $519.44,
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $480.56, THE ISSUE DATE IS JUNE 26,
1998 AND THE YIELD TO MATURITY IS 13 1/2% PER ANNUM.
CUSIP/CINS
13 1/2% [Series A] [Series B] Senior Discount Notes due 2009
No. $
AMM HOLDINGS, INC.
promises to pay to Cede & Co. or registered assigns, the principal sum of
________________ Dollars on July 1, 2009.
Interest Payment Dates: January 1 and July 1
Record Dates: December 15, and June 15
DATED: JUNE 26, 1998
AMM HOLDINGS, INC.
By:
Name:
Title:
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY
as Trustee
By:
(Authorized Signatory)
<PAGE> 85
(Back of Regulation S Temporary Global Note)
13 1/2% [Series A] [Series B] Senior Discount Notes due 2009
THIS REGULATION S TEMPORARY GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN
THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF
THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS REGULATION S TEMPORARY GLOBAL NOTE MAY BE DELIVERED TO THE
TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(A) (1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN
"IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN
AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY)
OR (G) PURSUANT TO AN EFFECTIVE
<PAGE> 86
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Cash interest will not accrue on Notes prior to
July 1, 2003. Prior to July 1, 2003, original issue discount on the Notes will
accrete at a rate of 13 1/2%, compounded semi-annually to an aggregate principal
amount of $68,000,000 on July 1, 2003. AMM Holdings, Inc., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 13 1/2% per annum from July 1, 2003 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on January 1 and July 1 of each year, or if any such day
is not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"). Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from July 1,
2003; provided that if there is no existing Default in the payment of interest,
and if this Note is authenticated between a record date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such next succeeding Interest Payment Date; provided, further, that the first
Interest Payment Date shall be January 1, 2004. The Company will pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at a rate
that is 1% per annum in excess of the rate then in effect; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for
one or more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Senior Subordinated Notes under the Indenture.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the December 15 or June
15 next preceding the Interest Payment Date, even if such Notes are cancelled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest,
<PAGE> 87
premium and Liquidated Damages on, all Global Notes and all other Notes the
Holders of which shall have provided wire transfer instructions to the Company
or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank
and Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of June 26, 1998 (the "Indenture") between the Company and the Trustee.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms,
and Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $68.0 million
in aggregate principal amount at maturity, plus amounts, if any, issued to pay
Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph
5, the Company shall not have the option to redeem the Notes prior to July 1,
2003. Thereafter, the Company shall have the option to redeem the Notes, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on July 1 of the years indicated below:
YEAR PERCENTAGE
2003......................................................... 106.750%
2004......................................................... 104.500%
2005......................................................... 102.250%
2006 and thereafter.......................................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this
paragraph 5, at any time prior to July 1, 2001, the Notes will be redeemable at
the option of the Company, in whole but not in part, in cash at a redemption
price of 113.5% of the Accreted Value thereof (determined as of the date of
redemption), plus Liquidated Damages, if any, to the redemption date, with the
net cash proceeds of a Public Equity Offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall
not be required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
<PAGE> 88
(a) If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the Accreted Value thereof plus Liquidated
Damages thereon, if any, to the date of repurchase (if such date of repurchase
is prior to July 1, 2003) or to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of repurchase (if such date of repurchase is on or after July 1, 2003)(the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Company shall mail a notice to each Holder setting forth the procedures
governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales, within five days of each date on which the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company will commence an offer to all
Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes (including any
Additional Notes) that may be purchased out of the Excess Proceeds at an offer
price in cash in an amount equal to 100% of (i) the Accreted Value thereof plus
Liquidated Damages, if any, to the date of repurchase (if such date of
repurchase is prior to July 1, 2003) or (ii) the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of repurchase (if such date of repurchase is on or after July 1, 2003), in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes (including any Additional Notes) tendered pursuant
to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Restricted Subsidiary) may use such deficiency for general corporate purposes.
If the aggregate principal amount of Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Holders of Notes that are the subject of an offer
to purchase will receive an Asset Sale Offer from the Company prior to any
related purchase date and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
This Regulation S Temporary Global Note is exchangeable in
whole or in part for one or more Global Notes only (i) on or after the
termination of the 40-day restricted period (as defined in
<PAGE> 89
Regulation S) and (ii) upon presentation of certificates (accompanied by an
Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon
exchange of this Regulation S Temporary Global Note for one or more Global
Notes, the Trustee shall cancel this Regulation S Temporary Global Note.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes and Additional Notes, if any, voting as a single class, and
any existing default or compliance with any provision of the Indenture or the
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Notes and Additional Notes, if any, voting as a
single class. Without the consent of any Holder of a Note, the Indenture or the
Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's obligations
to Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, and to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest on the Notes (whether or
not prohibited by the subordination provisions of the Indenture); (ii) default
in payment when due of the principal of or premium, if any, on the Notes
(whether or not prohibited by the subordination provisions of the Indenture);
(iii) failure by the Company to comply with the provisions described under
Sections 4.07, 4.09, 4.10 or 4.14 of the Indenture (whether or not prohibited by
Article 10 of the Indenture); (iv) failure by the Company for 60 days after
notice to comply with any of its other agreements in the Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Restricted Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Restricted Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the date
of the Indenture, if such (a) default results in the acceleration of such
Indebtedness prior to its express maturity or shall constitute a default in the
payment of such Indebtedness at final maturity of such Indebtedness, and (b) the
principal amount of any such Indebtedness that has been accelerated or not paid
at maturity, when added to the aggregate principal amount of all other
Indebtedness that has been accelerated or not paid at maturity, exceeds $5.0
million; (vi) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $5.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days; and (vii) certain events
of bankruptcy or insolvency with respect to the Company or any of its Restricted
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the
<PAGE> 90
payment of principal or interest) if it determines that withholding notice is in
their interest. The Holders of a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of the Holders of
all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Notes. The Company is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Company is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of June 26, 1998, between the Company and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
AMM Holdings, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
Attention: Chief Financial Officer
<PAGE> 91
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of this Note)
SIGNATURE GUARANTEE.
<PAGE> 92
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate
box below:
Section 4.10 Section 4.14
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $___________
Date: Your Signature:
(Sign exactly as your name appears on the Note)
Tax Identification No.:
SIGNATURE GUARANTEE.
<PAGE> 93
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S
Temporary Global Note for an interest in another Global Note, or of other
Restricted Global Notes for an interest in this Regulation S Temporary Global
Note, have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of increase at maturity of this
decrease in in Principal Global Note Signature of
Principal Amount Amount following such authorized officer
at maturity of at maturity of decrease (or of Trustee or Note
Date of Exchange this Global Note this Global Note increase) Custodian
- ---------------------- ----------------------- ---------------------- ----------------------- --------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 94
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
AMM Holdings, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Re: 13 1/2% Senior Discount Notes due 2009
Reference is hereby made to the Indenture, dated as of June
26, 1998 (the "Indenture"), between AMM Holdings, Inc., as issuer (the
"Company"), and State Street Bank and Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
______________, (the "Transferor") owns and proposes to
transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in
the principal amount of $___________ in such Note[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A
GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being
effected pursuant to and in accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the beneficial interest or Definitive
Note is being transferred to a Person that the Transferor reasonably believed
and believes is purchasing the beneficial interest or Definitive Note for its
own account, or for one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A and such Transfer is in compliance with
any applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the 144A Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
2. CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
<PAGE> 95
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act, (iii) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act and (iv) if the
proposed transfer is being made prior to the expiration of the Restricted
Period, the transfer is not being made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed on
the Regulation S Global Note and/or the Definitive Note and in the Indenture and
the Securities Act.
3. CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST
IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE
SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being
effected in compliance with the transfer restrictions applicable to beneficial
interests in Restricted Global Notes and Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act and any applicable blue
sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount of Notes
at the time of transfer of less than $250,000, an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the IAI Global Note and/or the Definitive Notes and
in the Indenture and the Securities Act.
<PAGE> 96
4. Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
Insert Name of Transferor]
By:
Name:
Title:
Dated: ,
<PAGE> 97
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) a beneficial interest in the:
(i) 144A Global Note (CUSIP ), or
(ii) Regulation S Global Note (CUSIP ), or
(iii) IAI Global Note (CUSIP ); or
(b) a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) a beneficial interest in the:
(i) 144A Global Note (CUSIP ), or
(ii) Regulation S Global Note (CUSIP ), or
(iii) IAI Global Note (CUSIP ); or
(iv) Unrestricted Global Note (CUSIP ); or
(b) a Restricted Definitive Note; or
(c) an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
<PAGE> 98
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
AMM Holdings, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Re: 13 1/2% Senior Discount Notes due 2009
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of June
26, 1998 (the "Indenture"), between AMM Holdings, Inc., as issuer (the
"Company"), and State Street Bank and Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
____________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
<PAGE> 99
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(c) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED
GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES
(a) CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] 144A Global Note, Regulation S Global Note,
IAI Global Note with an equal principal amount, the Owner hereby certifies (i)
the beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant Restricted
Global Note and in the Indenture and the Securities Act.
<PAGE> 100
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
[Insert Name of Owner]
By:
Name:
Title:
Dated: ________________, ____
<PAGE> 101
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
AMM Holdings, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Re: 13 1/2% Senior Discount Notes due 2009
Reference is hereby made to the Indenture, dated as of June
26, 1998 (the "Indenture"), between AMM Holdings, Inc., as issuer (the
"Company"), and State Street Bank and Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) a beneficial interest in a Global Note, or
(b) a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or
any interest therein is subject to certain restrictions and conditions set forth
in the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and, if such
transfer is in respect of a principal amount of Notes, at the time of transfer
of less than $250,000, an Opinion of Counsel in form reasonably acceptable to
the Company to the effect that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of
<PAGE> 102
Rule 144(k) under the Securities Act or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any person purchasing the Definitive Note or beneficial interest in a Global
Note from us in a transaction meeting the requirements of clauses (A) through
(E) of this paragraph a notice advising such purchaser that resales thereof are
restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect. We further understand that any
subsequent transfer by us of the Notes or beneficial interest therein acquired
by us must be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
[Insert Name of Accredited Investor]
By:
Name:
Title:
Dated: __________________, ____
<PAGE> 1
EXHIBIT 4.3
AMM HOLDINGS, INC.
$68,000,000
13 1/2% SENIOR DISCOUNT NOTES DUE 2009
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JUNE 26, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of June 26, 1998, by and among AMM Holdings, Inc., a Delaware
corporation (the "COMPANY"), and Donaldson, Lufkin & Jenrette Securities
Corporation (the "INITIAL PURCHASER"), who has agreed to purchase the Company's
13 1/2% Senior Discount Notes due 2009 (the "SENIOR DISCOUNT NOTES") pursuant to
the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated June
23, 1998 (the "PURCHASE AGREEMENT"), by and among the Company and the Initial
Purchaser. In order to induce the Initial Purchaser to purchase the Senior
Discount Notes, the Company has agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchaser set forth in Section 9(j)
of the Purchase Agreement. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to them in the Indenture, dated June 26,
1998, between the Company and State Street Bank and Trust Company, as Trustee
(the "TRUSTEE"), relating to the Senior Discount Notes and the New Senior
Discount Notes (the "INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the New Senior Discount Notes to be issued in the Exchange Offer,
(b) the maintenance of such Exchange Offer Registration Statement continuously
effective and the keeping of the Exchange Offer open for a period not less than
the period required pursuant to Section 3(b) hereof and (c) the delivery by the
Company to the Registrar under the Indenture of New Senior Discount Notes in the
same aggregate principal amount as the aggregate principal amount of Senior
Discount Notes tendered by Holders thereof
<PAGE> 3
pursuant to the Exchange Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EFFECTIVENESS DEADLINE: As defined in Section 3(a) and 4(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The exchange and issuance by the Company of a principal
amount of New Senior Discount Notes (which shall be registered pursuant to the
Exchange Offer Registration Statement) equal to the outstanding principal amount
of Senior Discount Notes that are tendered by such Holders in connection with
such exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchaser
proposes to sell the Senior Discount Notes to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act (a "QIB") and to
certain institutional "accredited investors," as such term is defined in Rule
501(a)(1), (2), (3) and (7) of Regulation D under the Act (an "IAI").
FILING DEADLINE: As defined in Section s 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
NEW SENIOR DISCOUNT NOTES: The Company's 13 1/2% Senior Discount Notes
due 2008 to be issued pursuant to the Indenture: (i) in the Exchange Offer or
(ii) as contemplated by Section 4 hereof.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
relating to (a) an offering of New Senior Discount Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) that is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including
<PAGE> 4
post-effective amendments) and all exhibits and material incorporated by
reference therein.
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Senior Subordinated Note, until
the earliest to occur of (a) the date on which such Senior Subordinated Note is
exchanged in the Exchange Offer for a New Senior Subordinated Note which is
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Act, (b) the date on which such
Senior Subordinated Note has been disposed of in accordance with a Shelf
Registration Statement (and the purchasers thereof have been issued New Senior
Discount Notes), or (c) the date on which such Senior Subordinated Note is
distributed to the public pursuant to Rule 144 under the Act (and purchasers
thereof have been issued New Senior Discount Notes) and each New Senior
Subordinated Note held by a Broker-Dealer until the date on which such New
Senior Subordinated Note is disposed of by a Broker-Dealer pursuant to the "Plan
of Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company shall (i) cause the Exchange Offer Registration
Statement to be filed with the Commission as soon as practicable after the
Closing Date, but in no event later than 45 days after the Closing Date (such
45th day being the "FILING DEADLINE"), (ii) use its best efforts to cause such
Exchange Offer Registration Statement to become effective at the earliest
possible time, but in no event later than 180 days after the Closing Date (such
180th day being the "EFFECTIVENESS DEADLINE"), (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration
<PAGE> 5
Statement pursuant to Rule 430A under the Act and (C) cause all necessary
filings, if any, in connection with the registration and qualification of the
New Senior Discount Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the New Senior Discount Notes to
be offered in exchange for the Senior Discount Notes that are Transfer
Restricted Securities and (ii) resales of New Senior Discount Notes by
Broker-Dealers that tendered into the Exchange Offer Senior Discount Notes that
such Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Senior Discount Notes
acquired directly from the Company or any of its Affiliates) as contemplated by
Section 3(c) below.
(b) The Company shall use its best efforts to cause the Exchange
Offer Registration Statement to be effective continuously, and shall keep the
Exchange Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; provided, however, that in no event shall such period be less than 20
Business Days. The Company shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the New
Senior Discount Notes shall be included in the Exchange Offer Registration
Statement. The Company shall use its best efforts to cause the Exchange Offer to
be Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
business days thereafter (such 30th day being the "CONSUMMATION DEADLINE").
(c) The Company shall include a "Plan of Distribution" section in
the Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Broker-Dealer who holds Transfer Restricted Securities
that were acquired for the account of such Broker-Dealer as a result of
market-making activities or other trading activities (other than Senior Discount
Notes acquired directly from the Company or any Affiliate of the Company), may
exchange such Transfer Restricted Securities pursuant to the Exchange Offer.
Such "Plan of Distribution" section shall also contain all other information
with respect to such sales by such Broker-Dealers that the Commission may
require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Transfer Restricted Securities held by any such Broker-Dealer, except to the
extent required by the Commission as a result of a change in policy, rules or
regulations after the date of this Agreement. See the Shearman & Sterling
no-action letter (available July 2, 1993).
Because such Broker-Dealer may be deemed to be an "underwriter"
within the meaning of the Act and must, therefore, deliver a prospectus meeting
the requirements of the Act in connection with its initial sale of any New
Senior Discount Notes received by such Broker-Dealer in the Exchange Offer, the
Company shall permit the use of the Prospectus contained
<PAGE> 6
in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy
such prospectus delivery requirement. To the extent necessary to ensure that the
prospectus contained in the Exchange Offer Registration Statement is available
for sales of New Senior Discount Notes by Broker-Dealers, the Company agrees to
use its best efforts to keep the Exchange Offer Registration Statement
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Section 6(a) and (c) hereof and in conformity with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
one year from the Consummation Deadline or such shorter period as will terminate
when all Transfer Restricted Securities covered by such Registration Statement
have been sold pursuant thereto. The Company shall provide sufficient copies of
the latest version of such Prospectus to such Broker-Dealers, promptly upon
request, and in no event later than one day after such request, at any time
during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not
permitted by applicable law or Commission policy (after the Company has complied
with the procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of
Transfer Restricted Securities shall notify the Company within 20 Business Days
following the Consummation Deadline that (A) such Holder was prohibited by law
or Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the New Senior Discount Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the Prospectus contained
in the Exchange Offer Registration Statement is not appropriate or available for
such resales by such Holder or (C) such Holder is a Broker-Dealer and holds
Senior Discount Notes acquired directly from the Company or any of its
Affiliates, then the Company shall:
(i) cause to be filed, on or prior to 60 days after the
earlier of (i) the date on which the Company determines that the
Exchange Offer Registration Statement cannot be filed as a result of
clause (a)(i) above and (ii) the date on which the Company receives the
notice specified in clause (a)(ii) above, (such earlier date, the
"FILING DEADLINE"), a shelf registration statement pursuant to Rule 415
under the Act (which may be an amendment to the Exchange Offer
Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating
to all Transfer Restricted Securities, and
(ii) shall use its best efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after
the Filing Deadline for the Shelf Registration Statement (such 90th day
the "EFFECTIVENESS DEADLINE").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law (i.e.,
clause (a)(i) above), then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above;
provided that, in such event, the Company shall remain obligated to meet the
Effectiveness Deadline set forth in clause (y).
<PAGE> 7
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company shall
use its best efforts to keep any Shelf Registration Statement required by this
Section 4(a) continuously effective, supplemented, amended and current as
required by and subject to the provisions of Sections 6(b) and (c) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i)) following
the Closing Date, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Shelf Registration Statement have been
sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within 2 days by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective within 5 days of filing such
post-effective amendment to such Registration Statement (each such event
referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the
Company hereby agrees to pay to each Holder of Transfer Restricted Securities
affected thereby liquidated damages in an amount equal to $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities held by such Holder
for each week or portion thereof that the Registration Default continues for the
first 90-day period immediately following the occurrence of such Registration
Default. The amount of the liquidated damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages of $.50 per week
per $1,000 in principal amount of Transfer Restricted Securities; provided that
the
<PAGE> 8
Company shall in no event be required to pay liquidated damages for more than
one Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which liquidated damages
are due cease to be Transfer Restricted Securities, all obligations of the
Company to pay liquidated damages with respect to securities shall survive until
such time as such obligations with respect to such securities shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall (x) comply with all applicable provisions of
Section 6(c) below, (y) use its best efforts to effect such exchange and to
permit the resale of New Senior Discount Notes by Broker-Dealers that tendered
in the Exchange Offer Senior Discount Notes that such Broker- Dealer acquired
for its own account as a result of its market making activities or other trading
activities (other than Senior Discount Notes acquired directly from the Company
or any of its Affiliates) being sold in accordance with the intended method or
methods of distribution thereof, and (z) comply with all of the following
provisions:
(i) If, following the date hereof there has been announced
a change in Commission policy with respect to exchange offers such as
the Exchange Offer, that in the reasonable opinion of counsel to the
Company raises a substantial question as to whether the Exchange Offer
is permitted by applicable federal law, the Company hereby agrees to
seek a no-action letter or other favorable decision from the Commission
allowing the Company to Consummate an Exchange Offer for such Transfer
Restricted Securities. The Company hereby agrees to pursue the issuance
of such a decision to the Commission staff level. In connection with
the foregoing, the Company hereby agrees to take all such other actions
as may be requested by the Commission or otherwise required in
connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need
<PAGE> 9
not be favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange
Offer, each Holder of Transfer Restricted Securities (including,
without limitation, any Holder who is a Broker Dealer) shall furnish,
upon the request of the Company, prior to the Consummation of the
Exchange Offer, a written representation to the Company (which may be
contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an
Affiliate of the Company, (B) it is not engaged in, and does not intend
to engage in, and has no arrangement or understanding with any person
to participate in, a distribution of the New Senior Discount Notes to
be issued in the Exchange Offer and (C) it is acquiring the New Senior
Discount Notes in its ordinary course of business. As a condition to
its participation in the Exchange Offer each Holder using the Exchange
Offer to participate in a distribution of the New Senior Discount Notes
shall acknowledge and agree that, if the resales are of New Senior
Discount Notes obtained by such Holder in exchange for Senior Discount
Notes acquired directly from the Company or an Affiliate thereof, it
(1) could not, under Commission policy as in effect on the date of this
Agreement, rely on the position of the Commission enunciated in Morgan
Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including, if applicable, any no-action
letter obtained pursuant to clause (i) above), and (2) must comply with
the registration and prospectus delivery requirements of the Act in
connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a supplemental letter
to the Commission (A) stating that the Company is registering the
Exchange Offer in reliance on the position of the Commission enunciated
in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley and Co., Inc. (available June 5, 1991) as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and, if
applicable, any no-action letter obtained pursuant to clause (i) above,
(B) including a representation that the Company has not entered into
any arrangement or understanding with any Person to distribute the New
Senior Discount Notes to be received in the Exchange Offer and that, to
the best of the Company's information and belief, each Holder
participating in the Exchange Offer is acquiring the New Senior
Discount Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the New Senior Discount Notes received in the Exchange
Offer and (C) any other undertaking or representation required by the
Commission as set forth in any no-action letter obtained pursuant to
clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
<PAGE> 10
Registration Statement, the Company shall:
(i) comply with all the provisions of Section 6(c) below
and use its best efforts to effect such registration to permit the sale
of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof),
and pursuant thereto the Company will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the
sale of the Transfer Restricted Securities in accordance with the
intended method or methods of distribution thereof within the time
periods and otherwise in accordance with the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of
Senior Discount Notes covered by any Shelf Registration Statement
contemplated by this Agreement, New Senior Discount Notes having an
aggregate principal amount equal to the aggregate principal amount of
Senior Discount Notes sold pursuant to the Shelf Registration Statement
and surrendered to the Company for cancellation; the Company shall
register New Senior Discount Notes on the Shelf Registration Statement
for this purpose and issue the New Senior Discount Notes to the
purchaser(s) of securities subject to the Shelf Registration Statement
in the names as such purchaser(s) shall designate.
(c) General Provisions. In connection with any Registration
Statement and any related Prospectus required by this Agreement, the Company
shall:
(i) use its best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain an untrue statement of material fact or omit to
state any material fact necessary to make the statements therein not
misleading or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Company shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use its best efforts to cause such amendment to be declared
effective as soon as practicable.
(ii) prepare and file with the Commission such amendments
and post-effective amendments to the applicable Registration Statement
as may be necessary to keep such Registration Statement effective for
the applicable period set forth in Section 3 or 4 hereof, as the case
may be; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act, and to comply fully with Rules 424, 430A and
462, as applicable, under the Act in a timely manner; and comply with
the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable
period in accordance with the intended method or methods of
<PAGE> 11
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise each Selling Holder promptly and, if requested
by such Holder, confirm such advice in writing, (A) when the Prospectus
or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to any applicable Registration Statement or
any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus
or for additional information relating thereto, (C) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement in order
to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Company shall use its best
efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to each Holder in connection with such exchange
or sale, if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Holders in connection with
such sale, if any, for a period of at least three Business Days, and
the Company will not file any such Registration Statement or Prospectus
or any amendment or supplement to any such Registration
<PAGE> 12
Statement or Prospectus (including all such documents incorporated by
reference) to which such Holders shall reasonably object within three
Business Days after the receipt thereof. A Holder shall be deemed to
have reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not
misleading or fails to comply with the applicable requirements of the
Act;
(vi) promptly prior to the filing of any document that is
to be incorporated by reference into a Registration Statement or
Prospectus, provide copies of such document to each Holder in
connection with such exchange or sale, if any, make the Company's
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such Holders may reasonably
request;
(vii) make available, at reasonable times, for inspection by
each Holder and any attorney or accountant retained by such Holders,
all financial and other records, pertinent corporate documents of the
Company and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such Holder,
attorney or accountant in connection with such Registration Statement
or any post-effective amendment thereto subsequent to the filing
thereof and prior to its effectiveness;
(viii) if requested by any Holders in connection with such
exchange or sale, promptly include in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such Holders may reasonably request to
have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities; and make all required filings of such Prospectus supplement
or post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(ix) furnish to each Holder in connection with such
exchange or sale without charge, at least one copy of the Registration
Statement, as first filed with the Commission, and of each amendment
thereto, including all documents incorporated by reference therein and
all exhibits (including exhibits incorporated therein by reference);
(x) deliver to each Holder without charge, as many copies
of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may request;
the Company hereby consents to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each selling
Holder in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
<PAGE> 13
(xi) upon the request of any Holder, enter into such
agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any applicable
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder in connection with any sale or
resale pursuant to any applicable Registration Statement. In such
connection, the Company shall:
(A) upon request of any Holder, furnish (or in the case
of paragraphs (2) and (3), use its best efforts to cause to be
furnished) to each Holder, upon Consummation of the Exchange Offer
or upon the effectiveness of the Shelf Registration Statement, as
the case may be:
(1) a certificate, dated such date, signed on
behalf of the Company by (x) the President or any Vice
President and (y) a principal financial or accounting officer
of the Company, confirming, as of the date thereof, the
matters set forth in Section s 6(y), 9(a) and 9(b) of the
Purchase Agreement and such other similar matters as such
Holders may reasonably request;
(2) an opinion, dated the date of Consummation of
the Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for
the Company covering matters similar to those set forth in
Exhibit A to the Purchase Agreement and such other matter as
such Holder may reasonably request, and in any event
including a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company, representatives of the
independent public accountants for the Company and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness
of such statements; and that such counsel advises that, on
the basis of the foregoing (relying as to materiality to the
extent such counsel deems appropriate upon the statements of
officers and other representatives of the Company) and
without independent check or verification), no facts came to
such counsel's attention that caused such counsel to believe
that the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment
thereto became effective and, in the case of the Exchange
Offer Registration Statement, as of the date of Consummation
of the Exchange Offer, contained an untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of
<PAGE> 14
the opinion dated the date of Consummation of the Exchange
Offer, as of the date of Consummation, contained an untrue
statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made,
not misleading. Without limiting the foregoing, such counsel
may state further that such counsel assumes no responsibility
for, and has not independently verified, the accuracy,
completeness or fairness of the financial statements, notes
and schedules and other financial data included in any
Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the
case may be, from the Company's independent accountants, in
the customary form and covering matters of the type
customarily covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming the
matters set forth in the comfort letters delivered pursuant
to Section 9(g) of the Purchase Agreement; and
(B) deliver such other documents and certificates as
may be reasonably requested by the selling Holders to evidence
compliance with the matters covered in clause (A) above and with
any customary conditions contained in the any agreement entered
into by the Company pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided, however, that the
Company shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the selling Holders may request at
least two Business Days prior to such
<PAGE> 15
sale of Transfer Restricted Securities;
(xiv) use its best efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement to
be registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof
to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (xii) above;
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xvi) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the effective
date of the Registration Statement (as such term is defined in
paragraph (c) of Rule 158 under the Act);
(xvii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use its best efforts to
cause the Trustee to execute, all documents that may be required to
effect such changes and all other forms and documents required to be
filed with the Commission to enable such Indenture to be so qualified
in a timely manner; and
(xviii) provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of
a Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT
DATE"). Each Holder receiving a Suspension Notice hereby agrees
<PAGE> 16
that it will either (i) destroy any Prospectuses, other than permanent file
copies, then in such Holder's possession which have been replaced by the Company
with more recently dated Prospectuses or (ii) deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
Holder's possession of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of the Suspension Notice. The
time period regarding the effectiveness of such Registration Statement set forth
in Section 3 or 4 hereof, as applicable, shall be extended by a number of days
equal to the number of days in the period from and including the date of
delivery of the Suspension Notice to the date of delivery of the Recommencement
Date.
SECTION 7. REGISTRATION EXPENSES
(a) All reasonable expenses incident to the Company's performance
of or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation, in each case, upon written request and upon presentation of
satisfactory invoices: (i) all reasonable registration and filing fees and
expenses; (ii) all reasonable fees and expenses of compliance with federal
securities and state Blue Sky or securities laws; (iii) all reasonable expenses
of printing (including printing certificates for the New Senior Discount Notes
to be issued in the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all reasonable fees and disbursements of
counsel for the Company and the Holders of Transfer Restricted Securities; (v)
all reasonable application and filing fees in connection with listing the New
Senior Discount Notes on a national securities exchange or automated quotation
system pursuant to the requirements hereof; and (vi) all reasonable fees and
disbursements of independent certified public accountants of the Company
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities who are
tendering Senior Discount Notes into in the Exchange Offer and/or selling or
reselling Senior Discount Notes or New Senior Discount Notes pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Latham & Watkins,
unless another firm shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
<PAGE> 17
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder,
its directors, officers and each Person, if any, who controls such Holder
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act),
from and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto) provided by the Company to any Holder
or any prospective purchaser of New Senior Discount Notes or registered Senior
Discount Notes, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by an untrue statement or omission or
alleged untrue statement or omission that is based upon information relating to
any of the Holders furnished in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company and its
directors and officers, and each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company,
to the same extent as the foregoing indemnity from the Company set forth in
section (a) above, but only with reference to information relating to such
Holder furnished in writing to the Company by or on behalf of such Holder
expressly for use in any Registration Statement. In no event shall any Holder,
its directors, officers or any Person who controls such Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages that such Holder, its directors, officers or any Person who controls
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
of the commencement thereof; but the failure to so notify the indemnifying party
(i) will not relieve it from liability under Section 8(a) or 8(b) unless and to
the extent it did not otherwise learn of such action and such failure results in
the forfeiture by the indemnifying party of substantial rights and defenses and
(ii) will not, in any event, relieve the indemnifying party from any obligations
to any indemnified party other than the indemnification obligation provided in
Section 8(a) or 8(b). Such indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel, as
incurred (except that in the case of any action in respect of which indemnity
may be sought pursuant to
<PAGE> 18
both Section s 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred upon written request and upon presentation of satisfactory
invoices. Such firm shall be designated in writing by a majority of the Holders,
in the case of the parties indemnified pursuant to Section 8(a), and by the
Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if the settlement is entered into more
than twenty business days after the indemnifying party shall have received a
request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company, on
the one hand, and the
<PAGE> 19
Holders, on the other hand, from their sale of Transfer Restricted Securities or
(ii) if the allocation provided by clause 8(d)(i) is unavailable for any reason,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause 8(d)(i) above but also the relative fault of the Company,
on the one hand, and of the Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Holder, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or by the Holder, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
judgments referred to above shall be deemed to include, subject to the
limitations set forth in the second paragraph of Section 8(a), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total discounts and commissions received by such Holder with respect
to the sale of Transfer Restricted Securities pursuant to a Registration
Statement exceeds (i) the amount paid by such Holder for such Transfer
Restricted Securities and (ii) the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' respective obligations to contribute pursuant to
this Section 8 are several in proportion to the respective principal amount of
Transfer Restricted Securities held by each Holder hereunder and not joint.
The remedies provided for in this Section 8 are not exclusive and shall
not limit any rights or remedies that may otherwise be available to any
indemnified party at law or in equity.
SECTION 9. RULE 144A and RULE 144
<PAGE> 20
The Company agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, to such Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Transfer Restricted Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company acknowledge and agree that any failure
by the Company to comply with its obligations under Section s 3 and 4 hereof may
result in material irreparable injury to the Initial Purchaser or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchaser or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Section s 3 and
4 hereof. The Company further agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The Company has not
previously entered into any agreement granting any registration rights with
respect to its securities to any Person. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's securities under any agreement in
effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless (i) in the case of
Section 5 hereof and this Section 10(c)(i), the Company has obtained the written
consent of Holders of all outstanding Transfer Restricted Securities and (ii) in
the case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
<PAGE> 21
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchaser, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records
of the Registrar under the Indenture, with a copy to the Registrar
under the Indenture; and
(ii) if to the Company:
Moll Industries, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
Telecopier No.: (423) 450-5379
Attention: Chief Financial Officer
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopier No.: (212) 735-2000
Attention: Robert M. Chilstrom, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery. Copies of all such notices,
demands or other communications shall be concurrently delivered by the Person
giving the same to the Trustee at the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders; provided, that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Transfer Restricted
Securities in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Transfer Restricted
Securities in any manner, whether by operation of law or otherwise, such
Transfer Restricted Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Transfer
<PAGE> 22
Restricted Securities such Person shall be conclusively deemed to have agreed to
be bound by and to perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such Person shall be entitled to receive
the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AMM HOLDINGS, INC.
By: /s/ George T. Votis
--------------------------------------------
Name: George T. Votis
Title: Chairman and Chief Executive Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Maximillian Justicz
--------------------------------------------
Name: Maximillian Justicz
Title: Vice President
<PAGE> 1
EXHIBIT 5.1
August 7, 1998
AMM Holdings, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919-4048
Re: AMM Holdings, Inc.
Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as special counsel to AMM Holdings, Inc., a
Delaware corporation (the "Company"), in connection with the public offering of
$68,000,000 aggregate principal amount at maturity of the Company's 13 1/2%
Senior Discount Notes due 2009 (the "Notes"). The Notes are to be issued
pursuant to an exchange offer (the "Exchange Offer") in exchange for a like
principal amount at maturity of the issued and outstanding 13 1/2% Senior
Discount Notes due 2009 of the Company (the "Old Notes") under the Indenture,
dated as of June 26, 1998 (the "Indenture"), by and between the Company and
State Street Bank and Trust Company, as Trustee (the "Trustee"), as contemplated
by the Registration Rights Agreement, dated June 26, 1998 (the "Registration
Rights Agreement"), by and between the Company and Donaldson, Lufkin & Jenrette
Securities Corporation.
This opinion is being furnished in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of
1933, as amended (the "Act").
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Registration Statement on Form S-4 as filed with the Securities and Exchange
Commission (the
<PAGE> 2
AMM Holdings, Inc.
August 7, 1998
Page 2
"Commission") on August 7, 1998 under the Act (the "Registration Statement");
(ii) an executed copy of the Registration Rights Agreement; (iii) an executed
copy of the Indenture; (iv) the Restated Certificate of Incorporation of the
Company, as amended to date; (v) the By-Laws of the Company, as amended to date;
(vi) certain resolutions adopted by the Board of Directors of the Company
relating to the Exchange Offer, the issuance of the Old Notes and the Notes, the
Indenture and related matters; (vii) the Form T-1 of the Trustee filed as an
exhibit to the Registration Statement; and (viii) the form of the Notes. We have
also examined originals or copies, certified or otherwise identified to our
satisfaction, of such records of the Company and such agreements, certificates
of public officials, certificates of officers or other representatives of the
Company and others, and such other documents, certificates and records as we
have deemed necessary or appropriate as a basis for the opinions set forth
herein.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. In making our
examination of documents executed or to be executed by parties other than the
Company, we have assumed that such parties had or will have the power, corporate
or other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity and
binding effect thereof. As to any facts material to the opinions expressed
herein which we have not independently established or verified, we have relied
upon statements and representations of officers and other representatives of the
Company and others.
Members of our firm are admitted to the bar in the State of
New York, and we do not express any opinion as to the laws of any other
jurisdiction other than the General Corporation Law of the State of Delaware
(the "Delaware General Corporation Law").
In rendering the opinion set forth below, we have assumed that
the execution, authentication and delivery by the Company of the Notes do not
and will not violate, conflict with or constitute a default under (i) any
agreement or instrument to which the Company or its properties is subject
(except that we do not make the
<PAGE> 3
AMM Holdings, Inc.
August 7, 1998
Page 3
assumption set forth in this clause (i) with respect to the Company's Restated
Certificate of Incorporation, the Company's By-Laws, the Indenture, or the
Registration Rights Agreement), (ii) any law, rule, or regulation to which the
Company is subject (except that we do not make the assumption set forth in this
clause (ii) with respect to the Delaware General Corporation Law and those laws,
rules and regulations of the State of New York and the United States of America,
in each case, which, in our experience, are normally applicable to transactions
of the type contemplated by the Exchange Offer (other than the United States
federal securities laws, state securities or Blue Sky laws, antifraud laws and
the rules and regulations of the National Association of Securities Dealers,
Inc.), but without our having made any special investigation with respect to
any other laws, rules or regulations), (iii) any judicial or regulatory order or
decree of any governmental authority or (iv) any consent, approval, license,
authorization or validation of, or filing, recording or registration with any
governmental authority.
Based upon and subject to the foregoing, we are of the opinion
that when the Notes have been duly executed and authenticated in accordance with
the terms of the Indenture and have been delivered upon consummation of the
Exchange Offer in accordance with the terms of the Exchange Offer, the Notes
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except to the extent that
enforcement thereof may be limited by (1) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and (2) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. We also consent to the
reference to our firm under the caption "Legal Matters" in the Registration
Statement. In giving this consent, we do not thereby admit that we are included
in the category of persons whose consent is required under Section 7 of the Act
or the rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
--------------------------------------------
Skadden, Arps, Slate, Meagher & Flom LLP
<PAGE> 1
EXHIBIT 10.1
AMM HOLDINGS, INC.
$68,000,000.00
13 1/2% Senior Discount Notes due 2009
Purchase Agreement
June 23, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE> 2
$68,000,000
13 1/2% Senior Discount Notes due 2009
of
AMM HOLDINGS, INC.
PURCHASE AGREEMENT
June 23, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
AMM HOLDINGS, INC., a Delaware corporation (the "COMPANY"), proposes to
issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation (the
"INITIAL PURCHASERS") an aggregate of $68,000,000 in principal amount at
maturity of its 13 1/2% Senior Discount Notes due 2009 (the "SENIOR DISCOUNT
NOTES") generating gross proceeds to the Company of approximately $35.3 million,
subject to the terms and conditions set forth herein. The Senior Discount Notes
are to be issued pursuant to the provisions of an indenture (the "INDENTURE"),
to be dated as of the Closing Date (as defined below), among the Company and
State Street Bank and Trust Company, as trustee (the "TRUSTEE"). The Senior
Discount Notes and the New Senior Discount Notes (as defined below) issuable in
exchange therefor are collectively referred to herein as the "NOTES."
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
1. OFFERING MEMORANDUM. The Senior Discount Notes will be offered and
sold to the Initial Purchaser pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"ACT"). The Company has prepared a preliminary offering memorandum, dated June
11, 1998 (the "PRELIMINARY OFFERING MEMORANDUM") and a final offering
memorandum, dated July 23, 1998 (the "OFFERING MEMORANDUM"), relating to the
Senior Discount Notes.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Senior Discount Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall
<PAGE> 3
bear the following legend:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (the "ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (I) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT) (A "QIB"), (II)
IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE ACT, OR (III) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3), OR (7) OR REGULATION D UNDER THE ACT (AN
"IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
NOTE EXCEPT (i) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES,
(ii) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (iii) IN
AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR 904 OF THE ACT, (iv) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE ACT, (v) TO AN iai THAT,
PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED
FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE ACT, (vi) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY) OR (vii) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND
<PAGE> 4
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE
TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company all of the Senior Discount Notes at a purchase price
equal to 49.886% of the principal amount at maturity thereof (the "PURCHASE
PRICE").
3. TERMS OF OFFERING. The Initial Purchaser has advised the Company
that the Initial Purchaser will make offers (the "EXEMPT RESALES") of the Senior
Discount Notes purchased hereunder on the terms set forth in the Offering
Memorandum, as amended or supplemented, solely to (i) persons whom the Initial
Purchaser reasonably believes to be "qualified institutional buyers" as defined
in Rule 144A under the Act ("QIBS"), and (ii) to persons permitted to purchase
the Senior Discount Notes in offshore transactions in reliance upon Regulation S
under the Act (each, a "REGULATION S PURCHASER") (such persons specified in
clauses (i) and (ii) being referred to herein as the "ELIGIBLE PURCHASERS"). The
Initial Purchaser will offer the Senior Discount Notes to Eligible Purchasers
initially at a price equal to 51.944% of the principal amount at maturity
thereof. Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Senior Discount
Notes will have the registration rights set forth in the registration rights
agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date,
in substantially the form of Exhibit A hereto, for so long as such Senior
Discount Notes constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company will agree to file with the Securities and Exchange Commission (the
"COMMISSION") under the circumstances set forth therein, (i) a registration
statement under the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating
to the Company's 13 1/2% Senior Discount Notes Due 2008 (tHE "NEW SENIOR
DISCOUNT NOTES"), to be offered in exchange for the Senior Discount
<PAGE> 5
Notes (such offer to exchange being referred to as the "EXCHANGE OFFER") and
(ii) a shelf registration statement pursuant to Rule 415 under the Act (the
"SHELF REGISTRATION STATEMENT" and, together with the Exchange Offer
Registration Statement, the "REGISTRATION STATEMENTS") relating to the resale by
certain holders of the Senior Discount Notes and to use its best efforts to
cause such Registration Statements to be declared and remain effective and
usable for the periods specified in the Registration Rights Agreement and to
consummate the Exchange Offer. This Agreement, the Indenture, the Notes and the
Registration Rights Agreement are hereinafter sometimes referred to collectively
as the "OPERATIVE DOCUMENTS."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the Senior
Discount Notes shall be made at the offices of Latham & Watkins, 885 Third
Avenue, Suite 1000, New York, New York 10022 or such other location as may be
mutually acceptable. Such delivery and payment shall be made at 9:00 a.m. New
York City time, on June 26, 1998 or at such other time on the same date or such
other date as shall be agreed upon by the Initial Purchaser and the Company in
writing. The time and date of such delivery and the payment for the Senior
Discount Notes are herein called the "CLOSING DATE."
(b) One or more of the Senior Discount Notes in definitive global
form, registered in the name of Cede & Co., as nominee of the Depository Trust
Company ("DTC"), having an aggregate principal amount corresponding to the
aggregate principal amount of the Senior Discount Notes (collectively, the
"GLOBAL NOTE"), shall be delivered by the Company to the Initial Purchaser (or
as the Initial Purchaser directs) in each case with any transfer taxes thereon
duly paid by the Company against payment by the Initial Purchaser of the
Purchase Price thereof by wire transfer in same day funds to the order of the
Company. The Global Note shall be made available to the Initial Purchaser for
inspection not later than 9:30 a.m., New York City time, on the business day
immediately preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY. The Company hereby agrees with the
Initial Purchaser as follows:
(a) To advise the Initial Purchaser promptly and, if requested by
the Initial Purchaser, confirm such advice in writing, (i) of the issuance by
any state securities commission of any stop order suspending the qualification
or exemption from qualification of any Senior Discount Notes for offering or
sale in any jurisdiction designated by the Initial Purchaser pursuant to Section
5(e) hereof, or the initiation of any proceeding by any state securities
commission or any other federal or state regulatory authority for such purpose
and (ii) of the happening of any event during the period referred to in Section
5(c) below that makes any statement of a material fact
<PAGE> 6
made in the Preliminary Offering Memorandum or the Offering Memorandum untrue or
that requires any additions to or changes in the Preliminary Offering Memorandum
or the Offering Memorandum in order to make the statements therein not
misleading. The Company shall use its best efforts to prevent the issuance of
any stop order or order suspending the qualification or exemption of any Senior
Discount Notes under any state securities or Blue Sky laws and, if at any time
any state securities commission or other federal or state regulatory authority
shall issue an order suspending the qualification or exemption of any Senior
Discount Notes under any state securities or Blue Sky laws, the Company shall
use its best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish the Initial Purchaser and those persons identified
by the Initial Purchaser to the Company as many copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, as the Initial Purchaser may reasonably request for the
time period specified in Section 5(c). Subject to the Initial Purchaser's
compliance with its representations and warranties and agreements set forth in
Section 7 hereof, the Company consents to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto required pursuant hereto, by the Initial Purchaser in connection with
Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchaser an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser (i) not to make any
amendment or supplement to the Offering Memorandum of which the Initial
Purchaser shall not previously have been advised or to which the Initial
Purchaser shall reasonably object within five business days after being so
advised and (ii) to prepare promptly upon the Initial Purchaser's reasonable
request, any amendment or supplement to the Offering Memorandum which may be
necessary or advisable in connection with such Exempt Resales.
(d) If, during the period referred to in Section 5(c) above, any
event shall occur or condition shall exist as a result of which, in the opinion
of counsel to the Initial Purchaser, it becomes necessary to amend or supplement
the Offering Memorandum in order to make the statements therein, in the light of
the circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchaser, it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare an appropriate amendment or
supplement to such Offering Memorandum so that the statements therein, as so
amended or supplemented, will not, in the light of the circumstances when it is
so delivered, be misleading, or so that such Offering Memorandum will comply
with applicable law, and to furnish to the Initial Purchaser and such other
persons as the Initial Purchaser may designate such number of copies thereof as
the Initial Purchaser may reasonably request.
<PAGE> 7
(e) Prior to the sale of all Senior Discount Notes pursuant to
Exempt Resales as contemplated hereby, to cooperate with the Initial Purchaser
and counsel to the Initial Purchaser in connection with the registration or
qualification of the Senior Discount Notes for offer and sale to the Initial
Purchaser and pursuant to Exempt Resales under the securities or Blue Sky laws
of such jurisdictions as the Initial Purchaser may request and to continue such
registration or qualification in effect so long as required for Exempt Resales
and to file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification; provided,
however, that the Company shall not be required in connection therewith to
qualify as a foreign corporation in any jurisdiction in which it is not now so
qualified or to take any action that would subject it to general consent to
service of process or taxation other than as to matters and transactions
relating to the Preliminary Offering Memorandum, the Offering Memorandum or
Exempt Resales, in any jurisdiction in which it is not now so subject.
(f) So long as the Notes are outstanding, (i) to mail and make
generally available as soon as practicable after the end of each fiscal year to
the record holders of the Notes a financial report of the Company and its
subsidiaries on a consolidated basis (and a similar financial report of all
unconsolidated subsidiaries, if any), all such financial reports to include a
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified by
the Company's independent public accountants and (ii) to mail and make generally
available as soon as practicable after the end of each quarterly period (except
for the last quarterly period of each fiscal year) to such holders, a
consolidated balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows (and similar financial reports of all
unconsolidated subsidiaries, if any) as of the end of and for such period, and
for the period from the beginning of such year to the close of such quarterly
period, together with comparable information for the corresponding periods of
the preceding year.
(g) So long as the Notes are outstanding, to furnish to the
Initial Purchaser as soon as available copies of all reports or other
communications furnished by the Company to its security holders or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company and/or its subsidiaries as the Initial
Purchaser may reasonably request.
(h) So long as any of the Senior Discount Notes remain
outstanding and during any period in which the Company is not subject to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), to make available to any holder of Senior Discount Notes in connection
with any sale thereof and any prospective purchaser of such Senior Discount
Notes from such holder, the information ("RULE 144A INFORMATION") required by
Rule 144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of the Company under
this Agreement, including: (i) the fees, disbursements and expenses of counsel
to the Company and accountants of the Company in connection with the sale and
delivery of the Senior Discount Notes to the Initial Purchaser and pursuant to
Exempt Resales, and all other fees and expenses in connection with the
preparation, printing, filing and distribution of the Preliminary Offering
Memorandum, the Offering Memorandum and all amendments and supplements to any of
the foregoing (including financial statements), including the mailing and
delivering of copies thereof to the Initial Purchaser and persons designated by
it in the quantities specified herein, (ii) all costs and expenses related to
the transfer and delivery of the Senior Discount Notes to the Initial Purchaser
and pursuant to Exempt Resales, including any transfer or other taxes payable
thereon, (iii) all costs of printing or producing this Agreement, the other
Operative Documents and any other agreements or documents in connection with the
offering, purchase, sale or delivery of the Senior Discount Notes, (iv) all
expenses in connection with the registration or qualification of the Senior
Discount Notes for offer and sale under the securities or Blue Sky laws of the
several states and all costs of printing or producing any preliminary and
supplemental Blue Sky memoranda in connection therewith (including the filing
fees and fees and disbursements of counsel for the Initial Purchaser in
connection with such registration or qualification and memoranda relating
thereto), (v) the cost of printing certificates representing the Senior Discount
Notes, (vi) all expenses and listing fees in connection with the application for
quotation of the Senior Discount Notes in the National Association of Securities
Dealers, Inc. ("NASD") Automated Quotation System - PORTAL ("PORTAL"), (vii) the
fees and expenses of the Trustee and the Trustee's counsel in connection with
the Indenture and the Notes, (viii) the costs and charges of any transfer agent,
registrar and/or depositary (including DTC), (ix) any fees charged by rating
agencies for the rating of the Notes, (x) all costs and expenses of the Exchange
Offer and any Registration Statement, as set forth in the Registration Rights
Agreement, and (xi) and all other costs and expenses incident to the performance
of the obligations of the Company hereunder for which provision is not otherwise
made in this Section .
(j) To use its best efforts to effect the inclusion of the Senior
Discount Notes in PORTAL and to maintain the listing of the Senior Discount
Notes on PORTAL for so long as the Senior Discount Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of the
Notes, and to comply with all of its agreements set forth in the representation
letters of the Company to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer.
<PAGE> 8
(l) During the period beginning on the date hereof and continuing
to and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of the Company or any
warrants, rights or options to purchase or otherwise acquire debt securities of
the Company substantially similar to the Notes (other than (i) the Notes and
(ii) commercial paper issued in the ordinary course of business), without the
prior written consent of the Initial Purchaser.
(m) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Senior Discount Notes to the Initial
Purchaser or pursuant to Exempt Resales in a manner that would require the
registration of any such sale of the Senior Discount Notes under the Act.
(n) Not to voluntarily claim, and to actively resist any attempts
to claim, the benefit of any usury laws against the holders of any Notes.
(o) To cause the Exchange Offer to be made in the appropriate form
to permit New Senior Discount Notes registered pursuant to the Act to be offered
in exchange for the Senior Discount Notes and to comply with all applicable
federal and state securities laws in connection with the Exchange Offer.
(p) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(q) To use its best efforts to do and perform all things required
or necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Senior Discount Notes.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. As of
the date hereof, the Company represents and warrants to, and agrees with, the
Initial Purchaser that:
(a) The Preliminary Offering Memorandum, at the date thereof, did
not contain any untrue statement of a material fact or omit to state any
material fact (other than pricing terms and other financial terms intentionally
left blank) necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Offering
Memorandum, at the date hereof, does not, and at the Closing Date will not (and
any amendment or supplement thereto, at the date thereof and at the Closing
Date, will not), contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that the Company makes no representation or warranty as to the information
contained in, or omitted from, the Preliminary Offering Memorandum or the
Offering
<PAGE> 9
Memorandum, or any amendment or supplement thereto, in reliance upon and in
conformity with information relating to any Initial Purchaser furnished in
writing to the Company by or on behalf of the Initial Purchaser specifically for
inclusion therein. To the Company's knowledge, as of the date hereof, no stop
order preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(b) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation and, where applicable, in
good standing, under the laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business, as it is currently being
conducted, and to own, lease and operate its properties, in each case, as
described in the Preliminary Offering Memorandum and the Offering Memorandum,
and each is duly qualified and, where applicable, is in good standing, as a
foreign corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified or, where applicable,
in good standing, would not have a material adverse effect on the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT").
(c) The Company and its affiliates and all persons acting on their
behalf (other than the Initial Purchaser, as to whom the Company makes no
representation) have complied with and will comply in all material respects with
the offering restrictions requirements of Regulation S in connection with the
offering of the Senior Discount Notes outside the United States and, in
connection therewith, the Offering Memorandum will contain the disclosure
required by Rule 902(h).
(d) The Company is not a "reporting issuer" as defined in Rule 902
under the Act.
(e) Except as disclosed in the Preliminary Offering Memorandum and
the Offering Memorandum, all outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid, and
non-assessable.
(f) The entities listed on Schedule I hereto are the only
subsidiaries, direct or indirect, of the Company. All of the outstanding shares
of capital stock of each of the Company's subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable, and are owned by the
Company, directly or indirectly through one or more subsidiaries, free and clear
of any security interest, claim, lien, encumbrance or adverse interest of any
nature (each, a "LIEN").
<PAGE> 10
(g) This Agreement has been duly authorized, executed and
delivered by the Company.
(h) The Indenture has been duly authorized by the Company and when
duly executed and delivered by the Company and duly authorized, executed and
delivered by the Trustee will be the valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms; except to
the extent that (i) the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act of 1939, as amended (the
"TIA" or "TRUST INDENTURE ACT"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(i) The Senior Discount Notes have been duly authorized by the
Company, and when (i) the Senior Discount Notes have been duly executed and
authenticated in accordance with the terms of the Indenture, (ii) the Senior
Discount Notes have been delivered to and paid for by the Initial Purchaser as
contemplated by this Agreement and (iii) the Indenture has been duly executed
and delivered by the Company (assuming the due authorization, execution and
delivery thereof by the Trustee), the Senior Discount Notes will be valid and
legally binding obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their terms,
except to the extent that (i) the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
(j) On the Closing Date, the New Senior Discount Notes will have
been duly authorized by the Company. When the New Senior Discount Notes are
issued, executed and authenticated in accordance with the terms of the Exchange
Offer and the Indenture, the New Senior Discount Notes will be entitled to the
benefits of the Indenture and will be the valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, except
as (i) the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and (ii) rights of acceleration and the availability of equitable remedies may
be limited by equitable principles of general applicability.
(k) The Registration Rights Agreement has been duly authorized by
the Company and when duly executed and delivered by the Company (assuming the
due authorization, execution and delivery thereof by the Initial Purchaser),
will be the valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except to the extent that (i) the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
<PAGE> 11
moratorium or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
(l) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws or in default in the performance
of any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument in each case
that is material to the Company and its subsidiaries, taken as a whole, to which
the Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or their respective property is bound.
(m) The execution, delivery and performance of this Agreement and
the other Operative Documents by the Company, compliance by the Company with all
material provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states), (ii) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the charter or
by-laws of the Company or any of its subsidiaries or any indenture, loan
agreement, mortgage, lease or other agreement or instrument in each case that is
material to the Company and its subsidiaries, taken as a whole, to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective property is bound, (iii) violate or
conflict with any applicable law or any rule, regulation, judgment, order or
decree of any court or any governmental body or agency having jurisdiction over
the Company, any of its subsidiaries or their respective property, (iv) result
in the imposition or creation of (or the obligation to create or impose) a Lien
under, any agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective property is bound, or (v) result in the termination, suspension
or revocation of any Authorization (as defined below) of the Company or any of
its subsidiaries or result in any other impairment of the rights of the holder
of any such Authorization.
(n) Except as otherwise set forth in the Preliminary Offering
Memorandum and the Offering Memorandum, there are no material legal or
governmental proceedings pending or, to the knowledge of the Company, threatened
to which the Company or any of its subsidiaries is a party or to which any of
their respective property is subject, which, to the knowledge of the Company, if
determined adversely to the Company or any of its subsidiaries, might result,
singly or in the aggregate, in a Material Adverse Effect.
(o) Neither the Company nor any of its subsidiaries has violated
any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes,
<PAGE> 12
pollutants or contaminants ("ENVIRONMENTAL LAWS"), any provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any
provisions of the Foreign Corrupt Practices Act or the rules and regulations
promulgated thereunder, except for such violations which, singly or in the
aggregate, would not have a Material Adverse Effect.
(p) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a Material Adverse Effect.
(q) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "AUTHORIZATION") of, and has made all material filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without limitation,
under any applicable Environmental Laws, as are currently necessary to be
procured by them in order to engage in the respective businesses currently
conducted by each of them and to own, lease, license and operate its respective
properties each as set forth in the Preliminary Offering Memorandum and the
Offering Memorandum, except where the failure to have any such Authorization or
to make any such filing or notice would not, singly or in the aggregate, have a
Material Adverse Effect. Each such Authorization is valid and in full force and
effect and each of the Company and its subsidiaries is in compliance with all
the material terms and conditions thereof and with the rules and regulations of
the authorities and governing bodies having jurisdiction with respect thereto;
and no event has occurred (including, without limitation, the receipt of any
notice from any authority or governing body) which allows or, after notice or
lapse of time or both, would allow, revocation, suspension or termination of any
such Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; and, except as described in the Preliminary Offering Memorandum
and the Offering Memorandum, such Authorizations contain no restrictions that
are burdensome to the Company or any of its subsidiaries; except where such
failure to be valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction would not,
singly or in the aggregate, have a Material Adverse Effect.
(r) The accountants, Arthur Andersen, L.L.P., that have certified
the financial statements included in the Preliminary Offering Memorandum and the
Offering Memorandum are independent public accountants with respect to the
Company, as required by the Act and the Exchange Act.
(s) The historical financial statements, together with related
<PAGE> 13
notes forming part of the Offering Memorandum (and any amendment or supplement
thereto), present fairly in all material respects the consolidated financial
position, results of operations and changes in financial position of the Company
and its subsidiaries on the basis stated in the Offering Memorandum at the
respective dates or for the respective periods to which they apply; such
statements and related notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein and except that the unaudited interim
financial statements are subject to normal year end adjustments; and the other
financial and statistical information and data set forth in the Offering
Memorandum (and any amendment or supplement thereto) are, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company.
(t) The pro forma financial statements included in the Preliminary
Offering Memorandum and the Offering Memorandum have been prepared on a basis
consistent with the historical financial statements of the Company and its
subsidiaries and give effect to assumptions used in the preparation thereof on a
reasonable basis and in good faith and present fairly in all material respects
the historical and proposed transactions contemplated by the Preliminary
Offering Memorandum and the Offering Memorandum; and such pro forma financial
statements comply as to form in all material respects with the requirements
applicable to pro forma financial statements included in registration statements
on Form S-1 under the Act. The other pro forma financial and statistical
information and data included in the Offering Memorandum are, in all material
respects, accurately presented and prepared on a basis consistent with the pro
forma financial statements.
(u) The Company is not and, after giving effect to the offering
and sale of the Senior Discount Notes and the application of the net proceeds
thereof as described in the Offering Memorandum, will not be, an "investment
company," as such term is defined in the Investment Company Act of 1940, as
amended.
(v) Other than the Registration Rights Agreement, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company or to
require the Company to include such securities with the Notes registered
pursuant to any Registration Statement.
(w) Neither the Company nor any of its subsidiaries nor any agent
thereof acting on the behalf of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the Senior
Discount Notes to violate Regulation T (12 C.F.R. Part 220), Regulation U (12
C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors
of the Federal Reserve System.
<PAGE> 14
(x) No "nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed the Company that it is considering imposing) any
condition (financial or otherwise) on the Company's retaining any rating
assigned to the Company, any securities of the Company or (ii) has indicated to
the Company that it is considering (a) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (b) any change in
the outlook for any rating of the Company or any securities of the Company.
(y) Since the respective dates as of which information is given
in the Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change in the
condition, financial or otherwise, or the earnings, business, management or
operations of the Company and its subsidiaries, taken as a whole, (ii) there has
not been any material adverse change in the capital stock or in the long-term
debt of the Company or any of its subsidiaries and (iii) neither the Company nor
any of its subsidiaries has incurred any material liability or obligation,
direct or contingent.
(z) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
(aa) When the Senior Discount Notes are issued and delivered
pursuant to this Agreement, the Senior Discount Notes will not be of the same
class (within the meaning of Rule 144A under the Act) as any security of the
Company that is listed on a national securities exchange registered under
Section 6 of the Exchange Act or that is quoted in a United States automated
inter-dealer quotation system.
(bb) No form of general solicitation or general advertising (as
defined in Regulation D under the Act) was used by the Company or any of their
respective representatives (other than the Initial Purchaser, as to whom the
Company makes no representation) in connection with the offer and sale of the
Senior Discount Notes in the United States. No securities of the same class as
the Senior Discount Notes have been issued and sold by the Company within the
six-month period immediately prior to the date hereof.
(cc) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.
(dd) Neither the Company nor any of its respective affiliates or
any person acting on its or their behalf (other than the Initial Purchaser, as
to whom the Company makes no representation) has engaged or will engage in any
directed selling
<PAGE> 15
efforts within the meaning of Regulation S under the Act ("REGULATION S") with
respect to the Senior Discount Notes.
(ee) The Senior Discount Notes offered and sold in reliance on
Regulation S have been and will be offered and sold only in offshore
transactions.
(ff) The sale of the Senior Discount Notes pursuant to Regulation
S is not part of a plan or scheme to evade the registration provisions of the
Act.
(gg) No registration under the Act of the Senior Discount Notes is
required for the sale of the Senior Discount Notes to the Initial Purchaser as
contemplated hereby or for the Exempt Resales assuming the accuracy of the
Initial Purchaser's representations and warranties and agreements set forth in
Section 7 hereof.
(hh) Each certificate signed by any officer of the Company and
delivered to the Initial Purchaser or counsel for the Initial Purchaser shall be
deemed to be a representation and warranty by the Company to the Initial
Purchaser as to the matters covered thereby.
The Company acknowledges that the Initial Purchaser and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchaser will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.
7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Initial
Purchaser represents and warrants to, and agrees with, the Company:
(a) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Senior Discount Notes.
(b) Such Initial Purchaser (A) is not acquiring the Senior
Discount Notes with a view to any distribution thereof or with any present
intention of offering or selling any of the Senior Discount Notes in a
transaction that would violate the Act or the securities laws of any state of
the United States or any other applicable jurisdiction and (B) will be
reoffering and reselling the Senior Discount Notes only to (i) QIBs in reliance
on the exemption from the registration requirements of the Act provided by Rule
144A, and (ii) in offshore transactions in reliance upon Regulation S under the
Act.
(c) Such Initial Purchaser agrees that it has not offered or sold
and will not offer or sell the Senior Discount Notes in the United States or to,
or for the
<PAGE> 16
benefit or account of, a U.S. Person, in each case, as defined in Rule 902 under
the Act (i) as part of its distribution at any time or (ii) otherwise until 40
days after the later of the commencement of the offering of the Senior Discount
Notes pursuant hereto and the Closing Date, other than in accordance with
Regulation S of the Act or another exemption from the registration requirements
of the Act. Such Initial Purchaser agrees that, during such 40-day restricted
period, it will not cause any advertisement with respect to the Senior Discount
Notes (including any "tombstone" advertisement) to be published in any newspaper
or periodical or posted in any public place and will not issue any circular
relating to the Senior Discount Notes, except such advertisements as permitted
by and include the statements required by Regulation S.
(d) Such Initial Purchaser agrees that, at or prior to
confirmation or a sale of Senior Discount Notes by it to any distributor, dealer
or person receiving a selling concession, fee or other remuneration during the
40-day distribution compliance period referred to in rule 902(f) under the Act,
it will send to such distributor, dealer or person receiving a selling
concession, fee or other remuneration a confirmation or notice to substantially
the following effect:
The Senior Discount Notes covered hereby have not
been registered under the U.S. Securities Act of
1933, as amended (the "ACT"), and may not be offered
and sold within the United States or to, or for the
account or benefit of, U.S. persons (i) as part of
your distribution at any time or (ii) otherwise
until 40 days after the later of the commencement of
the Offering and the Closing Date, except in either
case in accordance with Regulation S under the Act
(or Rule 144A or to Accredited Institutions in
transactions that are exempt from the registration
requirements of the Act), and in connection with any
sale by you of the Senior Discount Notes covered
hereby in reliance on Regulation S during the period
referred to above to any distributor, dealer or
person receiving a selling concession, fee or other
remuneration, you must deliver a notice to
substantially the foregoing effect. Terms used above
have the meanings assigned to them in Regulation S.
(e) Such Initial Purchaser agrees that the Senior Discount Notes
offered and sold in reliance on Regulation S will be represented upon issuance
by a global security that may not be exchanged for definitive securities until
the expiration of the 40-day distribution compliance period referred to in Rule
902(f) of the Act and only upon certification of beneficial ownership of such
Senior Discount Notes by non-U.S. persons or U.S. persons who purchased such
Senior Discount Notes in transactions that were exempt from the registration
requirements of the Act.
(f) Such Initial Purchaser agrees that no form of general
<PAGE> 17
solicitation or general advertising (within the meaning of Regulation D under
the Act) has been or will be used by such Initial Purchaser or any of its
Affiliates or any person acting on its or their behalf in connection with the
offer and sale of the Senior Discount Notes pursuant hereto, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(g) Such Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the Senior Discount
Notes only from, and will offer to sell the Senior Discount Notes only to,
Eligible Purchasers. Such Initial Purchaser further agrees that it will offer to
sell the Senior Discount Notes only to, and will solicit offers to buy the
Senior Discount Notes only from (A) Eligible Purchasers that the Initial
Purchaser reasonably believes are QIBs and (B) Regulation S Purchasers, in each
case, that agree that (x) the Senior Discount Notes purchased by them may be
resold, pledged or otherwise transferred within the time period referred to
under Rule 144(k) (taking into account the provisions of Rule 144(d) under the
Act, if applicable) under the Act, as in effect on the date of the transfer of
such Senior Discount Notes, only (I) to the Company or any of its subsidiaries,
(II) to a person whom the seller reasonably believes is a QIB purchasing for its
own account or for the account of a QIB in a transaction meeting the
requirements of Rule 144A under the Act, (III) in an offshore transaction (as
defined in Rule 902 under the Act) meeting the requirements of Rule 904 of the
Act, (IV) in a transaction meeting the requirements of Rule 144 under the Act,
(V) to an IAI that, prior to such transfer, furnishes the Trustee a signed
letter containing certain representations and agreements relating to the
registration of transfer of such Senior Subordinated Note (the form of which may
be obtained from the Trustee) and, if such transfer is in respect of an
aggregate principal amount of Senior Discount Notes less than $250,000, an
opinion of counsel acceptable to the Company that such transfer is in compliance
with the Act, (VI) in accordance with another exemption from the registration
requirements of the Act (and based upon an opinion of counsel acceptable to the
Company) or (VII) pursuant to an effective registration statement and, in each
case, in accordance with the applicable securities laws of any state of the
United States or any other applicable jurisdiction and (y) they will deliver to
each person to whom such Senior Discount Notes or an interest therein is
transferred a notice substantially to the effect of the foregoing.
(h) Such Initial Purchaser and its affiliates or any person acting
on its or their behalf have not engaged or will not engage in any directed
selling efforts within the meaning of Regulation S with respect to the Senior
Discount Notes.
(i) The Senior Discount Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S have been and will be
offered and sold only in offshore transactions.
(j) The sale of the Senior Discount Notes offered and sold by
<PAGE> 18
such Initial Purchaser pursuant hereto in reliance on Regulation S is not part
of a plan or scheme to evade the registration provisions of the Act.
Such Initial Purchaser acknowledges that the Company and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchaser will rely
upon the accuracy and truth of the foregoing representations and the Initial
Purchaser hereby consents to such reliance.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the Initial
Purchaser, its directors, its officers and each person, if any, who controls
such Initial Purchaser within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments (including, without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action, that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto), the Preliminary Offering Memorandum or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Initial Purchaser furnished in
writing to the Company by the Initial Purchaser; provided, however, that the
foregoing indemnity agreement with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of the Initial Purchaser if the
Initial Purchaser failed to deliver an Offering Memorandum (as then amended or
supplemented, provided by the Company to the Initial Purchaser in the requisite
quantity and on a timely basis to permit proper delivery on or prior to the
Closing Date) to the person asserting any losses, claims, damages and
liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Memorandum,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such material misstatement or omission or alleged material
misstatement or omission was cured in the Offering Memorandum.
(b) The Initial Purchaser agrees to indemnify and hold harmless
the Company, and its directors, its officers and each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company, to the same extent as the foregoing indemnity from
the Company to the Initial Purchaser but only with reference to information
relating to such Initial Purchaser furnished in writing to the Company by or on
behalf of such Initial Purchaser expressly for use in the Preliminary Offering
Memorandum or the Offering Memorandum (or any
<PAGE> 19
amendment or supplement thereto).
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
of the commencement thereof, but the failure to so notify the indemnifying party
(i) will not relieve it from liability under Section 8(a) or 8(b) unless and to
the extent it did not otherwise learn of such action and such failure results in
the forfeiture by the indemnifying party of substantial rights and defenses and
(ii) will not, in any event, relieve the indemnifying party from any obligations
to any indemnified party other than the indemnification obligation provided in
Section 8(a) or 8(b). Such indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel, as
incurred (except that in the case of any action in respect of which indemnity
may be sought pursuant to both Section s 8(a) and 8(b), the Initial Purchaser
shall not be required to assume the defense of such action pursuant to this
Section 8(c), but may employ separate counsel and participate in the defense
thereof, but the fees and expenses of such counsel, except as provided below,
shall be at the expense of the Initial Purchaser). Any indemnified party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such counsel shall
have been specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred upon
written request and upon presentation of satisfactory invoices. Such firm shall
be designated in writing by the Initial Purchaser, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and
hold harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from
<PAGE> 20
the indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party shall
have failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent the indemnification provided for in this Section
8 is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Initial Purchaser, on the other hand, from the
offering of the Senior Discount Notes or (ii) if the allocation provided by
clause 8(d)(i) above is unavailable for any reason, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company, on the one hand, and
the Initial Purchaser, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and the Initial Purchaser, on
the other hand, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Senior Discount Notes (after underwriting
discounts and commissions, but before deducting expenses) received by the
Company, and the total discounts and commissions received by the Initial
Purchaser, bear to the total price to investors of the Senior Discount Notes, in
each case as set forth in the table on the cover page of the Offering
Memorandum. The relative fault of the Company, on the one hand, and the Initial
Purchaser, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or the Initial Purchaser, on the other
hand, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims,
<PAGE> 21
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, the Initial
Purchaser shall not be required to contribute any amount in excess of the amount
by which the total discounts and commissions received by the Initial Purchaser
exceeds the amount of any damages which the Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligations of
the Initial Purchaser to purchase the Senior Discount Notes under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
on the Closing Date with the same force and effect as if made on and as of the
Closing Date.
(b) On or after the date hereof, (i) there shall not have occurred
any downgrading, suspension or withdrawal of, nor shall any notice have been
given of any potential or intended downgrading, suspension or withdrawal of, or
of any review (or of any potential or intended review) for a possible change
that does not indicate the direction of the possible change in, any rating of
the Company or any securities of the Company (including, without limitation, the
placing of any of the foregoing ratings on credit watch with negative or
developing implications or under review with an uncertain direction) by any
"nationally recognized statistical rating organization" as such term is defined
for purposes of Rule 436(g)(2) under the Act, (ii) there shall not have occurred
any material adverse change, nor shall any notice have been given of any
potential or intended material adverse change, in the outlook for any rating of
the Company or any securities of the Company by any such rating organization and
(iii) no such rating organization shall have given notice that it has assigned
(or is considering assigning) a lower rating to the Notes than that on which the
Notes were marketed.
(c) Since the respective dates as of which information is given in
the Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any change or any development
involving a prospective change in the condition, financial or otherwise, or the
earnings, business,
<PAGE> 22
management or operations of the Company and its subsidiaries, taken as a whole,
(ii) there shall not have been any change or any development involving a
prospective change in the capital stock or in the long-term debt of the Company
or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause 9(c)(i),
9(c)(ii) or 9(c)(iii), in the judgment of the Initial Purchaser, is so material
and adverse as to make it impracticable to market the Senior Discount Notes on
the terms and in the manner contemplated in the Offering Memorandum.
(d) The Initial Purchaser shall have received on the Closing Date
a certificate dated the Closing Date, signed by the President and the Chief
Financial Officer of the Company, confirming the matters set forth in Section s
6(y), 9(a) and 9(b) and stating that the Company has complied with all the
agreements and satisfied all of the conditions herein contained and required to
be complied with or satisfied on or prior to the Closing Date.
(e) The Initial Purchaser shall have received on the Closing Date
the opinions (satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers), dated the Closing Date, of each of (i) Skadden, Arps, Slate,
Meagher & Flom LLP, special counsel for the Company, in substantially the form
attached hereto as Annex A and (ii) Skadden, Arps, Slate, Meagher & Flom LLP, as
special French counsel for the Company, in substantially the form attached
hereto as Annex B.
(f) The Initial Purchaser shall have received on the Closing Date
an opinion, dated the Closing Date, of Latham & Watkins, counsel for the Initial
Purchaser, in form and substance reasonably satisfactory to the Initial
Purchaser.
(g) The Initial Purchaser shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date hereof or
the Closing Date, as the case may be, in form and substance satisfactory to the
Initial Purchaser from Arthur Andersen, L.L.P., independent public accountants
for the Company and Coopers & Lybrand L.L.P., independent public accountants for
Anchor, containing the information and statements of the type ordinarily
included in accountants' "comfort letters" to the Initial Purchaser with respect
to the financial statements and certain financial information contained in the
Offering Memorandum.
(h) The Senior Discount Notes shall have been approved by the NASD
for trading and duly listed in PORTAL.
(i) The Initial Purchaser shall have received a counterpart,
conformed as executed, of the Indenture which shall have been entered into by
the Company and the Trustee.
(j) The Company shall have executed the Registration Rights
Agreement and the Initial Purchaser shall have received an original copy
thereof, duly
<PAGE> 23
executed by the Company.
(k) The Company shall not have failed at or prior to the Closing
Date to perform or comply with any of the agreements herein contained and
required to be performed or complied with by the Company, as the case may be, at
or prior to the Closing Date.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Initial Purchaser by written notice to the Company if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in the judgment
of the Initial Purchaser, is material and adverse and, in the judgment of the
Initial Purchaser, makes it impracticable to market the Senior Discount Notes on
the terms and in the manner contemplated in the Offering Memorandum, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which, in the opinion of the Initial
Purchaser, materially and adversely affects, or will materially and adversely
affect, the business, prospects, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole, (v) the declaration of a
banking moratorium by either federal or New York State authorities or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in the opinion of DLJ Securities
Corporation has a material adverse effect on the financial markets in the United
States.
11. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to AMM Holdings,
Inc., 1111 Northshore Drive, Suite N-600, Knoxville, TN 37919-4048, (423)
450-5300 and (ii) if to the Initial Purchaser, to Donaldson, Lufkin & Jenrette
Securities Corporation, 277 Park Avenue, New York, New York 10172, Attention:
Syndicate Department, or in any case to such other address as the person to be
notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the Initial Purchaser set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect,
<PAGE> 24
and will survive delivery of and payment for the Senior Discount Notes,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of the Initial Purchaser, the officers or directors of the
Initial Purchaser, any person controlling the Initial Purchaser, the Company,
the officers or directors of the Company, or any person controlling the Company,
(ii) acceptance of the Senior Discount Notes and payment for them hereunder and
(iii) termination of this Agreement.
If for any reason the Senior Discount Notes are not delivered by or on
behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Company agrees to
reimburse the Initial Purchaser for all reasonable out-of-pocket expenses
(including reasonable fees and disbursements of counsel) incurred by them in
connection with the proposed purchase and sale of Senior Discount Notes against
appropriate receipts therefor. Notwithstanding any termination of this
Agreement, the Company shall be liable for all expenses which it has agreed to
pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse the
Initial Purchaser and its officers, directors and each person, if any, who
controls such Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act for reasonable fees and expenses (including
without limitation reasonable fees and expenses of counsel) incurred by them in
connection with enforcing their rights under this Agreement (including without
limitation its rights under Section 8) against appropriate receipts therefor.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Initial
Purchaser, the Initial Purchaser's directors and officers, any controlling
persons referred to herein, the directors of the Company and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Senior Discount Notes from the Initial Purchaser merely because of
such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the Initial Purchaser.
<PAGE> 25
The foregoing Purchase Agreement is
hereby confirmed and accepted as of the
date first above written.
AMM HOLDINGS, INC.
By: /s/ George T. Votis
-------------------------------------
Name: George T. Votis
Title: Chairman and Chief Executive
Officer
<PAGE> 26
The foregoing Purchase Agreement is
hereby confirmed and accepted as of the
date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Maximillian Justicz
-------------------------------------
Name: Maximillian Justicz
Title: Vice President
<PAGE> 27
SCHEDULE I
SUBSIDIARIES
Anchor Holdings, Inc.
Moll Industries, Inc.
Moll Industries UK, Limited
Moll Industries Paderborn GmbH & Co. KG
Cepillos De Matamoros S.A. de C.V.
Anchor Advanced Products Foreign Sales Corporation
Moll Industries, LLC
Hanning-Kunstoffe GmbH & Co.
Hanning-Kunstoffe Beteiligungs-GmbH & Co.
PB Hanning GmbH
PB Hanning GmbH & Co. Handelsgesellschaft
Moll Plastics, LLC
Moll Plastics SARL
Somomeca Industries SARL
Sapi SARL
Somoplast Lorraine SARL
2BI SARL
Somoplast SARL
Serim SARL
Semip SARL
Staphane SARL
<PAGE> 28
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE> 1
EXHIBIT 12.1
<TABLE>
<CAPTION>
AMM HOLDINGS
CALCULATION OF RATIOS
Year-end Quarter end
1993 1994 1995 1996 1997 Mar-97 Mar-98
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGE RATIO
Moll PlastiCrafters:
Fixed Charges:
Interest expense, net 1,613,590 1,940,937 2,413,607 2,518,005 3,405,386 675,840 2,336,695
1/3 of rent expense 342,667 390,400 458,333 593,333 945,000 194,945 297,629
Total 1,956,257 2,331,337 2,871,940 3,111,338 4,350,386 870,785 2,634,324
Net Income 2,469,959 6,472,528 6,485,415 6,036,570 4,645,191 2,169,413 1,449,649
Fixed Charges 1,956,257 2,331,337 2,871,940 3,111,338 4,350,386 870,785 2,634,324
4,426,216 8,803,865 9,357,355 9,147,908 8,995,577 3,040,198 4,083,973
Fixed Charge Ratio 2.3 3.8 3.3 2.9 2.1 3.5 1.6
Anchor Advanced Products:
Fixed Charges:
Interest expense, net 5,385,000 5,984,000 8,616,000 8,124,000 11,165,000 2,072,000 2,967,000
1/3 of rent expense 129,000 248,000 400,000 593,000 314,000 79,000 79,000
Total 5,514,000 6,232,000 9,016,000 8,717,000 11,479,000 2,151,000 3,046,000
Net Income 5,830,000 3,617,000 3,677,000 6,217,000 1,632,000 1,837,000 159,000
Fixed Charges 5,514,000 6,232,000 9,016,000 8,717,000 11,479,000 2,151,000 3,046,000
11,344,000 9,849,000 12,693,000 14,934,000 13,111,000 3,988,000 3,205,000
Fixed Charge Ratio 2.1 1.6 1.4 1.7 1.1 1.9 1.1
Fixed Charges:
Interest expense, net 31,019,350
1/3 of rent expense 1,700,625
Total 32,719,975
Net Income 308,434
Fixed Charges 32,719,975
33,028,409
Fixed Charge Ratio 1.0
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Year-end
RATIO OF EBITDA TO CASH INTEREST EXPENSE: 1997
Calculation of Pro Forma EBITDA:
<S> <C>
Net income before extraordinary items (1,728,780)
Depreciation and amortization 23,479,519
Interest, net 31,019,350
Taxes 2,037,214
54,807,303
Calculation of cash interest expense:
Interest, net 31,019,350
Less amortization of debt costs (1,074,000)
29,945,350
Ratio of EBITDA to Cash Interest Expense 1.8
RATIO OF NET DEBT TO EBITDA:
Calculation of Net Debt:
Debt 286,990,753
Cash (25,598,925)
261,391,828
Ratio of Net Debt to EBITDA 4.8
</TABLE>
2
<PAGE> 1
EXHIBIT 21.1
JURISDICTION OF
SUBSIDIARIES OF AMM HOLDINGS, INC. INCORPORATION
-------------
Anchor Holdings, Inc. Delaware
Moll Industries, Inc. Delaware
Moll Industries, LLC Delaware
Moll Plastics, LLC Delaware
Moll Plastics SARL France
Somomeca Industries SARL France
SAPI SARL France
SERIM SARL France
Somoplast Lorraine SARL France
Somoplast SARL France
2BI SARL France
Semip SARL France
SCI Bonnevalaise France
IAC SARL France
SCI Terreau Brenot France
Promolde LDA Portugal
Staphane SARL France
Moll PlastiCrafters GmbH Germany
Hanning-Kunststoffe Beteiligungs - GmbH Germany
Hanning-Kunststoffe GmbH & Co. Germany
"PB" Hanning GmbH Germany
"PB" Hanning GmbH & Co. Handelsgesellschaft Germany
Moll Industries U.K., Limited United Kingdom
Cepillos De Matamaros S.A. de C.V. Mexico
Anchor Advanced Products Foreign Sales Corporation Barbados
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to use in the Prospectus constituting part of this
Registration Statement on Form S-4 of AMM Holdings, Inc. of our report dated
February 20, 1998 relating to the final statements of Anchor Holdings, Inc.,
which appears in such Prospectus. We also consent to the references to us under
the heading "Experts" in such prospectus.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Knoxville, Tennessee
August 3, 1998
<PAGE> 1
EXHIBIT 23.2
[Letterhead of Arthur Andersen LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
on the financial statements of Moll PlastiCrafters Limited Partnership, The
Hanning Companies and Somomeca Industries, and to all references to our firm
included in or made a part of this registration statement of AMM Holdings, Inc.,
relating to the registration if its 13.5% Senior Discount Notes due 2009.
/s/ Arthur Andersen LLP
Nashville, Tennessee
August 3, 1998
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
AMM HOLDINGS, INC
(Exact name of obligor as specified in its charter)
DELAWARE 52-2088661
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1111 NORTHSHORE DRIVE
KNOXVILLE, TN 37919-4048
(Address of principal executive offices) (Zip Code)
13 -1/2% SENIOR DISCOUNT NOTES DUE 2009
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with
the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated herein
by reference thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of HARTFORD and The
STATE OF CONNECTICUT, on the JULY 20, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Michael M. Hopkins
________________________________
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by AMM
HOLDINGS, INC of its 13 -1/2% SENIOR DISCOUNT NOTES DUE 2009, we hereby consent
that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Michael M. Hopkins
_____________________________________
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
DATED: JULY 20, 1998
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin....................... 1,144,309
Interest-bearing balances................................................ 9,914,704
Securities...................................................................... 10,062,052
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ..................................... 8,073,970
Loans and lease financing receivables:
Loans and leases, net of unearned income ................................ 6,433,627
Allowance for loan and lease losses ..................................... 88,820
Allocated transfer risk reserve.......................................... 0
Loans and leases, net of unearned income and allowances.................. 6,344,807
Assets held in trading accounts................................................. 1, 117,547
Premises and fixed assets ...................................................... 453,576
Other real estate owned......................................................... 100
Investments in unconsolidated subsidiaries...................................... 44,985
Customers' liability to this bank on acceptances outstanding.................... 66,149
Intangible assets............................................................... 263,249
Other assets.................................................................... 1,066,572
----------
Total assets.................................................................... 38,552,020
==========
LIABILITIES
Deposits:
In domestic offices...................................................... 9,266,492
Noninterest-bearing.............................................. 6,824,432
Interest-bearing................................................. 2,442,060
In foreign offices and Edge subsidiary................................... 14,385,048
Noninterest-bearing.............................................. 75,909
Interest-bearing................................................. 14,309,139
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary...................................... 9,949,994
Demand notes issued to the U.S. Treasury and Trading Liabilities ............... 171,783
Trading liabilities............................................................. 1,078,189
Other borrowed money............................................................ 406,583
Subordinated notes and debentures............................................... 0
Bank's liability on acceptances executed and outstanding........................ 66,149
Other liabilities............................................................... 878,947
Total liabilities .............................................................. 36,203,185
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................... 0
Common stock 29,931
Surplus ................................................................. 450,003
Undivided profits and capital reserves/
Net unrealized holding gains (losses)........................................... 1,857,021
Net unrealized holding gains (losses)
on available-for-sale securities................................................ 18,136
Cumulative foreign currency translation adjustments............................. (6,256)
Total equity capital............................................................ 2,348,835
----------
Total liabilities and equity capital............................................ 38,552,020
----------
</TABLE>
4
<PAGE> 6
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
AMM HOLDINGS, INC.
OFFER FOR ALL OUTSTANDING
13 1/2% SENIOR DISCOUNT NOTES DUE 2009
IN EXCHANGE FOR
13 1/2% SENIOR DISCOUNT NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO THE PROSPECTUS, DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT P.M. NEW YORK CITY TIME,
ON [ ], 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN PRIOR TO [ ] P.M.,
NEW YORK CITY TIME, ON THE EXPIRATION DATE.
DELIVERY TO: STATE STREET BANK AND TRUST COMPANY, EXCHANGE AGENT
<TABLE>
<S> <C>
By Mail: By Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
Kellie Mullen Kellie Mullen
By Hand: in New York (as Drop Agent) By Hand: in Boston
State Street Bank and Trust Company, N.A. State Street Bank and Trust Company
61 Broadway, 15th Floor Two International Place
Corporate Trust Window Fourth Floor, Corporate Trust
New York, New York 10006 Boston, Massachusetts 02110
Attention: Corporate Trust Department
Kellie Mullen
</TABLE>
For Information Call:
(617) 664-5587
By Facsimile Transmission
(for Eligible Institutions only):
(617) 664-5290
Attention: Corporate Trust Department
Confirm by Telephone:
(617) 664-5587
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
The undersigned acknowledges that he has received and reviewed the
Prospectus, dated [ ], 1998 (the "Prospectus"), of AMM Holdings,
Inc., a Delaware corporation ("Holdings"), and this Letter of Transmittal (the
"Letter"), which together constitute Holdings' offer (the "Exchange Offer") to
exchange up to $68,000,000 aggregate principal amount at maturity of Holdings'
13 1/2% Senior Discount Notes due 2009 (the "New Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount at maturity of Holdings' issued and outstanding
13 1/2% Senior Discount Notes due 2009 (the "Old Notes") from the registered
holders thereof (the "Holders").
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The Old Notes were issued at a substantial discount from their
principal amount at maturity. Original issue discount on the Notes will accrete
at a rate of 13 1/2%, compounded semi-annually to an aggregate principal amount
$68.0 million at July 1, 2003. Cash interest will not accrue on the Notes prior
to July 1, 2003. Commencing July 1, 2003, cash interest on the Notes will accrue
at the rate of 13 1/2% per annum, and will be payable semiannually in arrears on
January 1 and July 1 of each year, commencing January 1, 2004, to Holders of
record on the immediately preceding
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
AMM HOLDINGS, INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of AMM Holdings, Inc., a Delaware corporation ("Holdings") made
pursuant to the Prospectus, dated [ ], 1998 (the "Prospectus"), if
certificates for the outstanding 13 1/2% Senior Discount Notes due 2009 of
Holdings (the "Old Notes") are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach State Street Bank and Trust Company, as
exchange agent (the "Exchange Agent") prior to [ ] P.M., New York City time,
on the Expiration Date of the Exchange Offer. Such form may be delivered or
transmitted by facsimile transmission, mail or hand delivery to the Exchange
Agent as set forth below. In addition, in order to utilize the guaranteed
delivery procedure to tender Old Notes pursuant to the Exchange Offer, a
completed, signed and dated Letter of Transmittal (or facsimile thereof) must
also be received by the Exchange Agent prior to [ ] P.M., New York City
time, on the Expiration Date. Capitalized terms not defined herein are defined
in the Prospectus.
DELIVERY TO: STATE STREET BANK AND TRUST COMPANY, EXCHANGE AGENT
<TABLE>
<S> <C>
By Mail: By Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
Kellie Mullen Kellie Mullen
By Hand: in New York (as Drop Agent) By Hand: in Boston
State Street Bank and Trust Company, N.A. State Street Bank and Trust Company
61 Broadway, 15th Floor Two International Place
Corporate Trust Window Fourth Floor, Corporate Trust
New York, New York 10006 Boston, Massachusetts 02110
Attention: Corporate Trust Department
Kellie Mullen
</TABLE>
For Information Call:
(617) 664-5587
By Facsimile Transmission
(for Eligible Institutions only):
(617) 664-5290
Attention: Corporate Trust Department
Confirm by Telephone:
(617) 664-5587
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
<PAGE> 1
EXHIBIT 99.3
AMM HOLDINGS, INC.
OFFER FOR ALL OUTSTANDING
13 1/2% SENIOR DISCOUNT NOTES DUE 2009
IN EXCHANGE FOR
13 1/2% SENIOR DISCOUNT NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933,
AS AMENDED
TO OUR CLIENTS:
Enclosed for your consideration is a Prospectus, dated [ ], 1998
(the "Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of AMM Holdings,
Inc., a Delaware corporation ("Holdings") to exchange up to $68,000,000
aggregate principal amount at maturity of its 13 1/2% Senior Discount Notes due
2009 (the "New Notes"), which have been registered under the Securities Act of
1933, as amended, for a like principal amount at maturity of its issued and
outstanding 13 1/2% Senior Discount Notes due 2009 (the "Old Notes"), upon the
terms and subject to the conditions described in the Prospectus and the Letter
of Transmittal. The Exchange Offer is being made in order to satisfy certain
obligations of Holdings contained in the Registration Rights Agreement dated
June 26, 1998, by and among Holdings, and the initial purchaser referred to
therein.
This material is being forwarded to you as the beneficial owner of the Old
Notes held by us for your account but not registered in your name. A TENDER OF
SUCH OLD NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at [ ]
P.M., New York City time, on [ ], 1998, unless extended by Holdings.
Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in
the Prospectus in the section captioned "The Exchange Offer-Certain
Conditions to the Exchange Offer."
3. Any transfer taxes incident to the transfer of Old Notes from the
holder to Holdings will be paid by Holdings, except as otherwise provided
in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at [ ] P.M., New York City time, on
[ ], 1998, unless extended by Holdings.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY
AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD NOTES.
<PAGE> 1
EXHIBIT 99.4
AMM HOLDINGS, INC.
OFFER FOR ALL OUTSTANDING
13 1/2% SENIOR DISCOUNT NOTES DUE 2009
IN EXCHANGE FOR
13 1/2% SENIOR DISCOUNT NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933,
AS AMENDED
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
AMM Holdings, Inc., a Delaware corporation ("Holdings") is offering, upon
and subject to the terms and conditions set forth in the Prospectus, dated
[ ], 1998 (the "Prospectus"), and the enclosed Letter of
Transmittal (the "Letter of Transmittal") (which together constitute the
"Exchange Offer"), to exchange up to $68,000,000 aggregate principal amount at
maturity of its 13 1/2% Senior Discount Notes due 2009, which have been
registered under the Securities Act of 1933, as amended, for a like principal
amount at maturity of its issued and outstanding 13 1/2% Senior Discount Notes
due 2009 (the "Old Notes"). The Exchange Offer is being made in order to satisfy
certain obligations of Holdings contained in the Registration Rights Agreement
dated June 26, 1998, by and among Holdings and the initial purchaser referred to
therein.
We are requesting that you contact your clients for whom you hold Old Notes
regarding the Exchange Offer. For your information and for forwarding to your
clients for whom you hold Old Notes registered in your name or in the name of
your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated [ ], 1998;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available or time
will not permit all required documents to reach the Exchange Agent prior to
the Expiration Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose
account you hold Old Notes registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to State Street Bank and Trust Company,
the Exchange Agent for the Exchange Offer.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT [ ]
P.M., NEW YORK CITY TIME, ON [ ], 1998, UNLESS EXTENDED BY
HOLDINGS (THE "EXPIRATION DATE"). OLD NOTES TENDERED PURSUANT TO THE EXCHANGE
OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Old Notes should be delivered
to the Exchange Agent, all in accordance with the instructions set forth in the
Letter of Transmittal and the Prospectus.
If a registered holder of Old Notes desires to tender, but such Old Notes
are not immediately available, or time will not permit such holder's Old Notes
or other required documents to reach the Exchange Agent
<PAGE> 2
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected by following the
guaranteed delivery procedures described in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures."
Holdings will, upon request, reimburse brokers, dealers, commercial banks
and trust companies for reasonable and necessary costs and expenses incurred by
them in forwarding the Prospectus and the related documents to the beneficial
owners of Old Notes held by them as nominee or in a fiduciary capacity. Holdings
will pay or cause to be paid all stock transfer taxes applicable to the exchange
of Old Notes pursuant to the Exchange Offer, except as set forth in Instruction
6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed State Street
Bank and Trust Company, the Exchange Agent for the Exchange Offer, at its
address and telephone number set forth on the front of the Letter of
Transmittal.
Very truly yours,
AMM HOLDINGS, INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF HOLDINGS OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
2
<PAGE> 1
EXHIBIT 99.5
EXCHANGE AGENT AGREEMENT
July 31, 1998
State Street Bank and Trust Company
Corporate Trust Administration
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Ladies and Gentlemen:
AMM Holdings, Inc. (the "Company") proposes to make an offer (the
"Exchange Offer") to exchange its 13 1/2% Senior Discount Notes due 2009 (the
"Old Notes") for its 13 1/2% Senior Discount Notes due 2009 which have been
registered under the Securities Act of 1933, as amended (the "New Notes"). The
terms and conditions of the Exchange Offer as currently contemplated are set
forth in a prospectus, dated _____, 1998 (the "Prospectus"), proposed to be
distributed to all record holders of the Old Notes. The Old Notes and the New
Notes are collectively referred to herein as the "Notes". Any capitalized terms
used herein and not otherwise defined herein shall have the meanings ascribed to
such terms in the Prospectus.
The Company hereby appoints State Street Bank and Trust Company to act as
exchange agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "you" shall refer to State Street Bank and Trust
Company.
The Exchange Offer is expected to be commenced by the Company on or
about _____, 1998. The Letter of Transmittal accompanying the Prospectus is to
be used by the holders of the Old Notes to accept the Exchange Offer, and
contains instructions with respect to the delivery of certificates for Old Notes
tendered.
The Exchange Offer shall expire at 5:00 P.M., New York City time, on
______, 1998, or on such later date or time to which the
<PAGE> 2
Company may extend the Exchange Offer (the "Expiration Date"). Subject to the
terms and conditions set forth in the Prospectus, the Company expressly reserves
the right to extend the Exchange Offer from time to time and may extend the
Exchange Offer by giving oral (confirmed in writing) or written notice to you
before 9:00 A.M., New York City time, on the business day following the
previously scheduled Expiration Date.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified in the Prospectus under the caption "The Exchange Offer -- Certain
Conditions to the Exchange Offer." The Company will give oral (confirmed in
writing) or written notice of any amendment, termination or nonacceptance to you
as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer" or as specifically set forth herein; provided, however, that in no way
will your general duty to act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the Old Notes at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Exchange Offer within two business days after the date of the Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of the Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into your account in
accordance with the Book-Entry Transfer Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Old Notes (or confirmation of book-entry transfer into your
account at
<PAGE> 3
the Book-Entry Transfer Facility) and any other documents delivered or mailed to
you by or for holders of the Old Notes to ascertain whether: (i) the Letters of
Transmittal and any such other documents are duly executed and properly
completed in accordance with instructions set forth therein and (ii) the Old
Notes have otherwise been properly tendered. In each case where the Letter of
Transmittal or any other document has been improperly completed or executed or
any of the certificates for Old Notes are not in proper form for transfer or
some other irregularity in connection with the acceptance of the Exchange Offer
exists, you will endeavor to inform the presenters of the need for fulfillment
of all requirements and to take any other action as may be necessary or
advisable to cause such irregularity to be corrected.
4. With the approval of the President, Chief Financial Officer or any
Vice President of the Company (such approval, if given orally, to be confirmed
in writing) or any other party designated by such an officer in writing, you are
authorized to waive any irregularities in connection with any tender of Old
Notes pursuant to the Exchange Offer.
5. Tenders of Old Notes may be made only as set forth in the Letter of
Transmittal and in the section of the Prospectus captioned "The Exchange Offer
- --Procedures for Tendering Old Notes," and Old Notes shall be considered
properly tendered to you only when tendered in accordance with the procedures
set forth therein.
Notwithstanding the provisions of this paragraph 5, Old Notes which the
President, Chief Financial Officer or any Vice President of the Company shall
approve as having been properly tendered pursuant to paragraph 4 above shall be
considered to be properly tendered (such approval, if given orally, shall be
confirmed in writing).
6. You shall advise the Company with respect to any Old Notes received
subsequent to the Expiration Date and accept its instructions with respect to
disposition of such Old Notes (such advice, if given orally, shall be confirmed
in writing).
7. You shall accept tenders:
(a) in cases where the Old Notes are
<PAGE> 4
registered in two or more names, only if signed by all named holders;
(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity,
only when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Old Notes
provided that customary transfer requirements, including the payment by such
persons of any applicable transfer taxes, are fulfilled.
8. Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will notify you (such notice if given orally, to be confirmed
in writing) of its acceptance, promptly after the Expiration Date, of all Old
Notes properly tendered and you, on behalf of the Company, will exchange such
Old Notes for New Notes and cause such Old Notes to be cancelled. Delivery of
New Notes will be made on behalf of the Company by you at the rate of $1,000
principal amount at maturity of New Notes for each $1,000 principal amount at
maturity of the corresponding series of Old Notes tendered promptly after notice
(such notice if given orally, to be confirmed in writing) of acceptance of said
Old Notes by the Company; provided, however, that in all cases, Old Notes
tendered pursuant to the Exchange Offer will be exchanged only after timely
receipt by you of certificates for such Old Notes (or confirmation of book-entry
transfer into your account at the Book-Entry Transfer Facility), a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) with
any required signature guarantees and any other required documents. You shall
issue New Notes only in denominations of $1,000 or any integral multiple
thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except that,
subject to the terms and upon the conditions set forth in the Prospectus and the
Letter of Transmittal, Old Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date.
<PAGE> 5
10. The Company shall not be required to exchange any Old Notes
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company not to exchange any Old Notes tendered
shall be given (and confirmed in writing) by the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not accept for
exchange all or part of the Old Notes tendered because of an invalid tender, the
occurrence of certain other events set forth in the Prospectus under the caption
"The Exchange Offer -- Certain Conditions of the Exchange Offer" or otherwise,
you shall as soon as practicable after the expiration or termination of the
Exchange Offer return those certificates for unaccepted Old Notes (or effect
appropriate book-entry transfer), together with any related required documents
and the Letters of Transmittal relating thereto that are in your possession, to
the persons who deposited them.
12. All certificates for reissued Old Notes, unaccepted Old Notes or
for New Notes shall be forwarded by (a) first-class certified mail, return
receipt requested under a blanket surety bond protecting you and the Company
from loss or liability arising out of the non-receipt or non-delivery of such
certificates or (b) registered mail insured separately for the replacement value
of each of such certificates.
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons or
to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth in the Prospectus or set forth herein or as may be
subsequently agreed to in writing by you and the Company;
(b) will be regarded as making no representations and having
no responsibilities as to the validity, sufficiency, value or genuineness of any
of the certificates or the Old Notes represented thereby deposited with you
pursuant to the Exchange Offer, and will not be required to and will make no
representation
<PAGE> 6
as to the validity, value or genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal action hereunder
which might in your reasonable judgment involve any expense or liability, unless
you shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be protected in acting in
reliance upon any certificate, instrument, opinion, notice, letter, telegram or
other document or security delivered to you and reasonably believed by you to be
genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement, request, comment,
agreement or other instrument whatsoever not only as to its due execution and
validity and effectiveness of its provisions, but also as to the truth and
accuracy of any information contained therein, which you shall in good faith
believe to be genuine or to have been signed or represented by a proper person
or persons;
(f) may rely on and shall be protected in acting upon written
or oral instructions from any officer of the Company;
(g) may consult with your counsel with respect to any
questions relating to your duties and responsibilities and the advice or opinion
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by you hereunder in
good faith and in accordance with the advice or opinion of such counsel; and
(h) shall not advise any person tendering Old Notes pursuant
to the Exchange Offer as to the wisdom of making such tender or as to the market
value or decline or appreciation in market value of any Old Notes.
15. You shall take such action as may from time to time be requested by
the Company or its counsel (and such
<PAGE> 7
other action as you may reasonably deem appropriate) to furnish copies of the
Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery (as
defined in the Prospectus) or such other forms as may be approved from time to
time by the Company, to all persons requesting such documents and to accept and
comply with telephone requests for information relating to the Exchange Offer,
provided that such information shall relate only to the procedures for accepting
(or withdrawing from) the Exchange Offer. The Company will furnish you with
copies of such documents at your request. All other requests for information
relating to the Exchange Offer shall be directed to the Company, Attention:
[Phyllis Best, Chief Financial Officer].
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to [Phyllis Best, Chief Financial
Officer], of the Company and such other person or persons as it may request,
daily (and more frequently during the week immediately preceding the Expiration
Date and if otherwise requested) up to and including the Expiration Date, as to
the number of Old Notes which have been tendered pursuant to the Exchange Offer
and the items received by you pursuant to this Agreement, separately reporting
and giving cumulative totals as to items properly received and items improperly
received. In addition, you will also inform, and cooperate in making available
to, the Company or any such other authorized person or persons upon oral request
made from time to time prior to the Expiration Date of such other information as
it or he or she reasonably requests. Such cooperation shall include, without
limitation, the granting by you to the Company and such person as the Company
may request of access to those persons on your staff who are responsible for
receiving tenders, in order to ensure that immediately prior to the Expiration
Date, the Company shall have received information in sufficient detail to enable
it to decide whether to extend the Exchange Offer. You shall prepare a final
list of all persons whose tenders were accepted, the aggregate principal amount
at maturity of Old Notes tendered, the aggregate principal amount at maturity of
Old Notes accepted and deliver said list to the Company.
17. Letters of Transmittal and Notices of Guaranteed Delivery shall be
stamped by you as to the date and the time of receipt thereof and shall be
preserved by you for a period of time at least equal to
<PAGE> 8
the period of time you preserve other records pertaining to the transfer of
securities. You shall dispose of unused Letters of Transmittal and other surplus
materials by returning them to the Company.
18. You hereby expressly waive any lien, encumbrance or right of
set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or
credit agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation as set forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal and further acknowledge that you have examined each of them. Any
inconsistency between this Agreement, on the one hand, and the Prospectus and
the Letter of Transmittal (as they may be amended from time to time), on the
other hand, shall be resolved in favor of the latter two documents, except with
respect to the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.
21. The Company covenants and agrees to indemnify and hold you harmless
in your capacity as Exchange Agent hereunder against any loss, liability, cost
or expense, including reasonable attorneys' fees and expenses, arising out of or
in connection with any act, omission, delay or refusal made by you in reliance
upon any signature, endorsement, assignment, certificate, order, request,
notice, instruction or other instrument or document reasonably believed by you
to be valid, genuine and sufficient and in accepting any tender or effecting any
transfer of Old Notes reasonably believed by you in good faith to be authorized,
and in delaying or refusing in good faith to accept any tenders or effect any
transfer of Old Notes; provided, however, that the Company shall not be liable
for indemnification or otherwise for any loss, liability, cost or expense to
the
<PAGE> 9
extent arising out of your gross negligence or willful misconduct. In no case
shall the Company be liable under this indemnity with respect to any claim
against you unless the Company shall be notified by you, by letter or cable or
by facsimile confirmed by letter, of the written assertion of a claim against
you or of any other action commenced against you, promptly, but in any event
within enough time to file an answer to such claim, after you shall have
received any such written assertion or notice of commencement of action. Failure
to so notify the Company shall not relieve the Company of any liability which it
may have otherwise than on account of this Agreement except such liability which
is a result of your failure to notify promptly. The Company shall be entitled to
participate at its own expense in the defense of any such claim or other action,
and, if the Company so elects, the Company shall assume the defense of any suit
brought to enforce any such claim. In the event that the Company shall assume
the defense of any such suit, the Company shall not be liable for the fees and
expenses of any additional counsel retained by you, which fees and expenses are
incurred thereafter, so long as the Company shall retain counsel reasonably
satisfactory to you to defend such suit except for any reasonable fees and
expenses of your counsel incurred in representing you that are necessary and
appropriate as a result of the need to have separate representation because the
Company's counsel has reasonably determined a conflict of interest exists
between the Company and you.
22. You shall arrange to comply with all requirements under the tax
laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required to deduct 31% on
payments to holders who have not supplied their correct Taxpayer Identification
Number or required certification. Such funds will be turned over to the Internal
Revenue Service in accordance with applicable regulations.
23. You shall deliver or cause to be delivered, in a timely manner to
each governmental authority to which any transfer taxes are payable in respect
of the exchange of Old Notes, your check in the amount of all transfer taxes so
payable, and the Company shall reimburse you for the amount of any and all
transfer taxes payable in respect of the exchange of Old Notes; provided,
however,
<PAGE> 10
that you shall reimburse the Company for amounts refunded to you in respect of
your payment of any such transfer taxes, at such time as such refund is received
by you.
24. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the laws of the State of New
York applicable to agreements made and to be performed entirely within such
state, and without regard to conflicts of law principles, and shall inure to the
benefit of, and the obligations created hereby shall be binding upon, the
successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
26. In case any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
27. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party to be
charged. This Agreement may not be modified orally.
28. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed to it, at its
address or telecopy number set forth below:
If to the Company:
AMM Holdings, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, TN 37919-4048
Facsimile: (423) 450-5379
Attention: Phyllis C. Best
<PAGE> 11
With a copy to:
Robert M. Chilstrom
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile: 212-735-2000
If to the Exchange Agent:
State Street Bank and Trust Company
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Facsimile: (860) 244-1896
Attention: Corporate Trust Administration
29. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Paragraphs 19, 21, and 23 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver to
the Company any certificates for Notes, funds or property then held by you as
Exchange Agent under this Agreement.
30. This Agreement shall be binding and effective as of the date
hereof. Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
<PAGE> 12
AMM HOLDINGS, INC.
By: /s/ George T. Votis
_______________________________
Name: George T. Votis
Title: Chairman and Chief Executive Officer
Accepted as of the date first above written:
STATE STREET BANK AND TRUST COMPANY, as Exchange Agent
By: /s/ Elizabeth C. Hammer
_____________________________
Name: Elizabeth C. Hammer
Title: Vice President
<PAGE> 13
SCHEDULE I
FEES
