<PAGE>
===============================================================================
As filed with the Securities and Exchange Commission on April 15, 1999
Registration No. 333-71137
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HARVARD INDUSTRIES, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 2522 21-0715310
------------------------------- ---------------------------- -------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
3 Werner Way, Lebanon, New Jersey 08833,
(908) 437-4100
(Address, including ZIP code, and
telephone number, including area code, of
the Registrant's principal executive offices)
DOEHLER-JARVIS, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 3490 34-1771418
------------------------------- ---------------------------- -------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
3 Werner Way, Lebanon, New Jersey 08833,
(908) 437-4100
(Address, including ZIP code, and
telephone number, including area code, of
the Registrant's principal executive offices)
HARVARD TRANSPORTATION CORPORATION
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Michigan 3714 38-2346867
------------------------------- ---------------------------- -------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
3 Werner Way, Lebanon, New Jersey 08833,
(908) 437-4100
(Address, including ZIP code, and
telephone number, including area code, of
the Registrant's principal executive offices)
DOEHLER-JARVIS GREENEVILLE, INC.
-----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 3490 62-1560084
------------------------------- ---------------------------- -------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
3 Werner Way, Lebanon, New Jersey 08833,
(908) 437-4100
(Address, including ZIP code, and
telephone number, including area code, of
the Registrant's principal executive offices)
<PAGE>
POTTSTOWN PRECISION CASTING, INC.
-------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 3490 23-2756073
------------------------------- ---------------------------- -------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
3 Werner Way, Lebanon, New Jersey 08833,
(908) 437-4100
(Address, including ZIP code, and
telephone number, including area code, of
the Registrant's principal executive offices)
DOEHLER-JARVIS TECHNOLOGIES, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 3490 34-1764722
------------------------------- ---------------------------- -------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
3 Werner Way, Lebanon, New Jersey 08833,
(908) 437-4100
(Address, including ZIP code, and
telephone number, including area code, of
the Registrant's principal executive offices)
DOEHLER-JARVIS TOLEDO, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 3490 34-1764769
------------------------------- ---------------------------- -------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
3 Werner Way, Lebanon, New Jersey 08833,
(908) 437-4100
(Address, including ZIP code, and
telephone number, including area code, of
the Registrant's principal executive offices)
HARMAN AUTOMOTIVE, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Michigan 3714 38-1181030
------------------------------- ---------------------------- -------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
3 Werner Way, Lebanon, New Jersey 08833,
(908) 437-4100
(Address, including ZIP code, and
telephone number, including area code, of
the Registrant's principal executive offices)
HAYES-ALBION CORPORATION
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Michigan 3714 38-0636070
------------------------------- ---------------------------- -------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
3 Werner Way, Lebanon, New Jersey 08833,
(908) 437-4100
(Address, including ZIP code, and
telephone number, including area code, of
the Registrant's principal executive offices)
<PAGE>
THE KINGSTON-WARREN CORPORATION
-----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
New Hampshire 3714 02-0212731
------------------------------- ---------------------------- -------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
3 Werner Way, Lebanon, New Jersey 08833,
(908) 437-4100
(Address, including ZIP code, and
telephone number, including area code, of
the Registrant's principal executive offices)
Roger G. Pollazzi
Chief Executive Officer
Harvard Industries, Inc.
3 Werner Way
Lebanon, New Jersey 08833
(908) 437-4100
------------------------------------------------------------------------
(Name, address, including ZIP code, and telephone number, including area
code, of agent for service)
Copy To:
Philip A. Haber, Esq.
Sonnenschein Nath & Rosenthal
1221 Avenue of the Americas
New York, New York 10020
(212) 768-6700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFER TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If 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. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Proposed Proposed
Amount maximum maximum Amount of
Title of each class of securities to be offering aggregate Registration
to be registered registered price per unit offering price Fee
---------------- ---------- --------------- -------------- ---
<S> <C> <C> <C> <C>
14 1/2% Senior Secured Notes due 2003 $25,000,000 100% $25,000,000 $6,950(1)
Guarantees of the 14 1/2% Senior
Secured Notes (2) (2) $25,000,000 (2)
====================================================================================================================================
</TABLE>
(1) Previously paid.
(2) This Registration Statement covers the guarantees to be issued by certain
subsidiaries of Harvard Industries, Inc. of its obligations under the 14 1/2%
Senior Secured Notes. Such guarantees are to be issued for no additional
consideration, and therefore no registration fee is required.
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, as amended, or until this registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT OFFER THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 15, 1999
Harvard Industries, Inc.
$25,000,000
Offer to Exchange New 14-1/2% Senior Secured Notes Due 2003
For All Outstanding 14-1/2% Senior Secured Notes Due 2003
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
The New Notes The Exchange Offer
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
o The terms of the new notes are substantially o We are offering $25,000,000 in
identical to the outstanding notes, except principal amount of our new 14 1/2% Senior
that the new notes will be freely tradable. Secured Notes due 2003 in exchange for all
$25,000,000 in principal amount of
o The following domestic subsidiaries will our outstanding 14 1/2% Senior Secured Notes
fully and unconditionally guarantee the notes due 2003.
on a joint and several basis: Doehler-Jarvis,
Inc., Harvard Transportation Corporation, o The exchange offer expires at 5:00 p.m., New
Doehler-Jarvis Greeneville, Inc., Pottstown York City time, on _________ __, 1999 unless
Precision Casting, Inc., Doehler-Jarvis extended.
Technologies, Inc., Doehler-Jarvis Toledo,
Inc., Harman Automotive, Inc., Hayes-Albion o The exchange offer is not subject to any
Corporation, The Kingston-Warren Corporation conditions other than that the exchange offer
not violate applicable law or any applicable
o The notes and the guarantees are secured by a interpretation of the staff of the Securities
second priority security interest in and Exchange Commission.
substantially all of our tangible and
intangible assets. o All outstanding notes that are validly
tendered and not validly withdrawn will be
o As of March 28, 1999, we had $63.6 million in exchanged.
outstanding senior debt secured by liens on
our assets that are senior to the liens o Tenders of outstanding notes may be withdrawn
securing the new notes. at any time prior to the expiration of the
exchange offer.
o We will not receive any proceeds from the
exchange offer.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Investment in the new notes involves risks. Consider carefully the risk
factors beginning on page 8 in this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is ___________ __, 1999.
<PAGE>
TABLE OF CONTENTS
Page
----
About This Prospectus ...................................................... ii
Prospectus Summary ......................................................... 1
Risk Factors ............................................................... 8
Forward-Looking Statements ................................................. 18
Use of Proceeds ............................................................ 20
Capitalization ............................................................. 21
Selected Historical Consolidated Financial And Operating Data .............. 22
The Exchange Offer ......................................................... 25
Description Of The Notes ................................................... 35
Description Of Indebtedness Under The Senior Credit Facility. .............. 72
Material Federal Income Tax Consequences ................................... 74
Plan Of Distribution. ...................................................... 77
Validity Of The Notes ...................................................... 78
Experts .................................................................... 78
Where You Can Find More Information ........................................ 78
Documents Incorporated by Reference ........................................ 78
About this Prospectus
This prospectus is part of a registration statement on Form S-4 that we
have filed with the SEC. This prospectus does not contain all of the information
set forth in the registration statement. For further information about us and
the exchange notes, you should refer to the registration statement. This
prospectus summarizes material provisions of contracts and other documents to
which we refer. Since these summaries may not contain all of the information
that you may find important, you should review the full text of these documents.
We have filed certain of these documents as exhibits to the registration
statement.
In addition, we have agreed that, even though the SEC may not require us to
do so, for so long as any notes remain outstanding, we will furnish to
noteholders and the trustee for the noteholders, and will file with the SEC all
such information, documents and reports as are specified in Section 13 or 15(d)
of the Securities Exchange Act.
You may request information from us, at no cost, at the following mailing
address and telephone number are: Harvard Industries, Inc., 3 Werner Way,
Lebanon, NJ 08833, Attn: Phyllis Morais, Telephone: (908) 437-4157. You should
direct any request for information at least 10 days before you tender your notes
in the exchange offer.
ii
<PAGE>
PROSPECTUS SUMMARY
Because this is a summary, it does not contain all the information about
Harvard that may be important to you. You should read the more detailed
information and the financial statements and related notes which are
incorporated by reference in this prospectus. You should read this entire
prospectus and carefully consider the information under the heading "Risk
Factors." The term "old notes" refers to the 14-1/2% Senior Secured Notes due
2003 that we issued on November 24, 1998. The term "new notes" refers to the
14-1/2% Senior Secured Notes due 2003 that have been registered under the
Securities Act and that we are offering in exchange for the old notes as
described in this prospectus, and the term "notes" refers to both the old notes
and the new notes.
Summary Of The Exchange Offer
The Exchange Offer........ We are offering to exchange $1,000 principal amount
of our new notes for each $1,000 principal amount
of our outstanding old notes. In order to be
exchanged, an old note must be properly presented
by you and accepted by us. All old notes that are
properly presented and not properly withdrawn will
be exchanged. When the exchange offer is complete,
the terms of the new notes will be identical in all
material respects to the terms of the old notes,
except that the new notes have been registered
under the Securities Act. Therefore, the new notes
will not bear certain legends restricting their
transfer.
Expiration Date............ The exchange offer will expire at 5:00 p.m., New
York City time, on ________ __, 1999, unless we
decide to extend the expiration date.
Conditions to the
Exchange Offer............ The exchange offer is subject only to the condition
that the exchange offer not violate applicable law
or any applicable interpretation of the Staff of
the SEC. The exchange offer is not subject to any
minimum amount of old notes being tendered for
exchange.
Withdrawal Rights......... Tenders may be withdrawn at any time before 5:00
p.m., New York City time, on the expiration date.
Federal Income Tax
Consequences.............. The exchange of notes will not be a taxable event
for United States federal income tax purposes. You
will not recognize any taxable gain or loss or any
interest income as a result of the exchange.
Procedures for Tendering
Old Notes.................. If you are a holder of old notes and wish to accept
the exchange offer, you must:
o complete, sign and date the accompanying letter
of transmittal, or a facsimile thereof, and mail
or otherwise deliver that documentation, together
with your old notes to the exchange agent at the
address set forth under "The Exchange Offer--
Exchange Agent;" or
o arrange for The Depository Trust Company to
transmit certain required information, including
an agent's message forming part of a book-entry
transfer in which you agree to be bound by the
terms of the letter of transmittal, to the
exchange agent in connection with a book-entry
transfer.
1
<PAGE>
We will accept old notes tendered in accordance
with the terms described in this prospectus
beginning on _______________, 1999 and ending on
_______________, 1999.
Special Procedures for
Beneficial Owners........ If you beneficially own old notes registered in the
name of a broker, dealer, commercial bank, trust
company or other nominee and you wish to tender
your old notes in the exchange offer, you should
contact the registered holder promptly and instruct
it to tender on your behalf. If you wish to tender
on your own behalf, you must, prior to completing
and executing the letter of transmittal and
delivering your old notes, either arrange to have
your old notes registered in your name or obtain a
properly completed bond power from the registered
holder. The transfer of registered ownership may
take considerable time.
Guaranteed Delivery
Procedures................ If you wish to tender your old notes and time will
not permit your required documents to reach the
exchange agent by the expiration date, or the
procedures for book-entry transfer cannot be
completed on time, you may tender your old notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery
Procedures."
Transfer Restrictions
on New Notes............. By tendering your notes, you will be representing,
among other things, that:
o you are not one of our "affiliates", as defined
in SEC Rule 405;
o you are not engaged in, do not intend to engage
in, and have no arrangement or understanding with
any person to participate in, a distribution of
the new notes; and
o you are acquiring the new notes in the ordinary
course of your business.
Based on interpretations by the SEC set forth in
certain no-action letters issued to third parties,
we believe that the notes issued in the exchange
offer may be offered for resale, resold and
otherwise transferred by you without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that the
above representations are true.
If our belief is inaccurate and you transfer any
registered note issued to you without delivering a
prospectus meeting the requirements of the
Securities Act or without an exemption from
registration of your notes from such requirements,
you may incur liability under the Securities Act.
We do not assume or indemnify you against such
liability.
2
<PAGE>
Terms of The New Notes
New Notes Offered.......... $25 million aggregate principal amount of 14-1/2%
Senior Secured Notes due 2003.
Issuer..................... Harvard Industries, Inc.
Maturity................... September 1, 2003.
Interest................... Coupon interest accrues from November 24, 1998 at
the rate equal to the sum of 14-1/2% per annum on
the principal amount of notes outstanding, payable
semi-annually in arrears on each March 1 and
September 1, beginning on March 1, 1999. In
addition to coupon interest, cash flow
participation interest is paid semi-annually. Cash
flow participation interest is equal to the product
of our consolidated cash flow for the six month
period ending on December 1 (for interest payments
due March 1) or on June 30 (for interest payments
due September 1) multiplied by the applicable
percentage as set forth below:
Interest Payment Date Percentage
--------------------- ----------
March 1, 1999.................... 2.00%
September 1, 1999................ 2.00%
March 1, 2000.................... 2.50%
September 1, 2000................ 2.50%
March 1, 2001.................... 3.50%
September 1, 2001................ 3.50%
March 1, 2002.................... 4.50%
September 1, 2002................ 4.50%
March 1, 2003.................... 4.50%
September 1, 2003................ 4.50%
Ranking................... The new notes:
o are secured by a second priority security
interest in substantially all of our assets;
o rank equally in right of payment with all of our
existing and future senior debt including our
senior credit facility;
o will be senior in right of payment to any of our
future subordinated indebtedness; and
o will be effectively subordinated to our senior
credit facility up to the value of the working
capital and fixed assets securing the senior
credit facility.
Mandatory Redemption....... We will only be required to redeem the notes:
o with respect to a special redemption of
additional notes that may be issued later
(discussed in "Description of the Notes--
Principal, Maturity and Interest"); and
o upon a change of control, as set out under
"Change of Control" below.
3
<PAGE>
Optional Redemption........ Before September 1, 2001, we may redeem all or part
of the new notes, upon not less than 30 and no more
than 60 days' prior notice on any March 1, June 1,
September 1 or December 1 of any year at a
redemption price equal to 100% of the principal
amount, plus accrued and unpaid interest and
liquidated damages, if any, and an additional
premium calculated as described in "Description of
the Notes--Optional Redemption." On or after
September 1, 2001, we may redeem all or part of the
new notes, upon not less than 30 and not more than
60 days' prior notice, at the redemption prices as
set forth below:
o 107.250% of the principal amount plus accrued and
unpaid interest and liquidated damages if we
redeem the new notes during the twelve-month
period beginning on September 1, 2001; and
o 103.625% of the principal amount plus accrued and
unpaid interest and liquidated damages if we
redeem the new notes during the twelve-month
period beginning on September 1, 2002.
These terms are more fully described in this
prospectus under the heading "Description of the
Notes--Optional Redemption."
Change of Control.......... Upon a change of control of Harvard, we are
required to make an offer to purchase the new notes
from you at a purchase price in cash equal to 101%
of their aggregate principal amount, plus accrued
and unpaid interest to the date of purchase and
liquidated damages, if any.
Collateral................ The new notes are secured, subject to liens
permitted under the indenture, by a second priority
security interest in substantially all of our
working capital and fixed assets and all the
proceeds of these assets. These assets include all
accounts receivable, equipment, real property,
intellectual property, all of the capital stock of
our domestic subsidiaries and a portion of the
capital stock of one of our foreign subsidiaries.
Guarantees................. The new notes are fully and unconditionally
guaranteed on a joint and several basis by our
domestic subsidiaries. These guarantees:
o are secured on a second priority basis by
substantially all of the subsidiaries' tangible
and intangible assets;
o are senior obligations of the subsidiaries;
o rank equally in right of payment with all of the
existing and future senior debt of these
subsidiaries, including our senior credit
facility;
o will rank senior to any future subordinated debt
of such subsidiaries; and
o will be effectively subordinated to the senior
credit facility up to the value of the working
capital and fixed assets of the subsidiaries
securing the senior credit facility.
Covenants.................. The indenture under which the old notes have been
and the new notes are being issued contains certain
covenants for your benefit which, among other
things and subject to a number of exceptions,
restrict our ability and the ability of our
4
<PAGE>
subsidiaries to engage in transactions such as the
paying dividends, incurring of additional debt,
creating liens or selling assets. See "Description
of the Notes--Covenants" and "Description of
Indebtedness under the Senior Credit Facility."
The indenture also contains covenants which require
us to maintain a leverage ratio and an interest
coverage ratio as described under the section
"Description of the Notes--Covenants."
In addition, the indenture provides that under
specified circumstances, we will be required to
offer to purchase the notes with net cash sales and
other dispositions of assets at a price equal to
100% of the principal amount of the notes. This
requirement is discussed in this prospectus under
the section "Description of the Notes--Covenants"
and "--Repurchase at the Option of Holders--Asset
Sales."
The indenture allows modification and amendment of
these and other covenants, with our agreement, by a
vote of holders of a majority in aggregate
principal amount of the notes. Also, holders of a
majority in aggregate principal amount of the notes
may waive our compliance with certain other
restrictive covenants in the indenture.
Form of New Notes......... The notes will be available initially in book-entry
form. We expect that the notes will be issued in
the form of a global note, which will be deposited
with, or on behalf of, The Depository Trust Company
and registered in its name or in the name of Cede &
Co., its nominee. Beneficial interests in the
global note representing the notes will be shown
on, and transfers thereof to qualified
institutional buyers will be effected through,
records maintained by The Depository Trust Company
and its participants. After the initial issuance of
the global note, notes in certificated form will be
issued in exchange for the global note on the terms
set forth in the indenture. See "Description of the
Notes--Book Entry, Delivery and Form."
Use of Proceeds............ We will not receive any proceeds from the exchange
offer.
For additional information regarding the notes, see "Description of the Notes"
and "Material Federal Income Tax Consequences."
5
<PAGE>
Harvard Industries, Inc.
Our corporate name is Harvard Industries, Inc. We are headquartered at 3
Werner Way in Lebanon, New Jersey, and are a direct supplier of components for
original equipment manufacturers producing cars and light trucks in North
America. In the fiscal year 1998, 82% of our sales were to General Motors
Corporation, Ford Motor Company and Chrysler Corporation.
On May 8, 1997, we filed a petition for relief under Chapter 11 of the
Bankruptcy Code with the United States Bankruptcy Court for the District of
Delaware. On November 24, 1998, we substantially consummated our plan of
reorganization under Chapter 11 of the Bankruptcy Code dated August 19, 1998 and
emerged from bankruptcy.
While we were in bankruptcy proceedings the Bankruptcy Court appointed
a creditors' committee. The creditors' committee retained Roger Pollazzi as an
automotive industry consultant. Mr. Pollazzi acted in this capacity until
November 1997, when, with the support of the creditors' committee, the Board of
Directors appointed him as our Chief Operating Officer. Prior to such
appointment, Mr. Pollazzi had served as Chairman of the Board and Chief
Executive Officer of The Pullman Company from 1992 to 1997. The creditors'
committee was disbanded on November 24, 1998.
Shortly after his appointment, Mr. Pollazzi hired approximately fifteen
professionals as employees of Harvard to assist him in analyzing our operations,
eliminating on-going negative cash flows associated with cash drains at several
of our operations and coordinating and implementing our restructuring efforts.
Since the effective date, our management team includes, in addition to Roger
Pollazzi, who now serves as Chief Executive Officer:
o James Gray, President of Harvard, an automotive executive who
previously ran Tenneco Automotive's European Operations as well as the
Clevite division of Pullman;
o Theodore Vogtman, Chief Financial Officer of Harvard, who has over
twenty years of industry experience including serving as Chief
Financial Officer of Pullman; and
o Vincent Toscano, Executive Vice President of Strategic Planning of
arvard, who was formerly the Vice President of Operations at Pullman
and has over 21 years of experience in the automotive industry.
<PAGE>
The Turnaround Business Strategy
In connection with our reorganization, our new management team has
outlined the following turnaround business strategies for restoring our
profitability:
o Close and/or Sell Underperforming Facilities: Since taking over in
late1997, the new management team has closed, sold, or is in the
process of selling manufacturing facilities that had a combined
negative cash flow of $46.7 million in fiscal 1997.
o Exit Unprofitable Lines of Business: We are exiting unprofitable lines
of business that management believes cannot meet their targeted
margins. For example:
-- We ceased production at our Harman subsidiary, exiting the
molded plastic and die-cast mirror business,
-- We sold the Greeneville, Tennessee plant of Doehler-Jarvis
Greeneville, Inc., and
6
<PAGE>
-- We have signed a letter of intent to divest the Tiffin, Ohio
plant of Hayes-Albion Corporation and we are negotiating an
agreement to sell the Toledo, Ohio plant of Doehler-Jarvis
Toledo, Inc.
o Diversify Product Mix and Customer Base: We are developing business
in those segments of the automotive aftermarket and industrial
markets where we can take advantage of our core manufacturing
competencies and achieve higher profit margins. We will focus on
(1) OEM automotive components (i.e., seat brackets, door modules,
steering assemblies (2) the industrial market (i.e., building
components, construction equipment, sealing systems, lawn and garden
maintenance machinery); and (3) the automotive replacement parts
market (i.e., bumper brackets, torque rods and Class-8 truck
components).
o Invest in Management Information Systems: We are in the process of
installing a new software package that will provide increased
flexibility and enhance our management's access to operating data on
a timely basis. Our management has allocated $16.7 million in fiscal
years 1998 and 1999 for this project, which will upgrade our
information systems and achieve Year 2000 compliance. We spent
approximately $7.7 million for Year 2000 compliance in fiscal 1998
and plan to spend approximately $6.3 million in fiscal 1999.
o Reduce Purchased Material Costs: Our management has been
consolidating our purchasing functions and reducing our supplier
base to gain economies of scale and significant discounts from our
largest suppliers.
The Financings
Upon our emergence from bankruptcy, we issued $25.0 million of 14 1/2%
Senior Secured Notes due September 1, 2003. We also entered into a $115.0
million senior secured credit facility with a group of lenders led by General
Electric Capital Corporation. This senior credit facility provide for up to
$50.0 million in term loan borrowings and up to $65.0 million of revolving
credit borrowings.
The combined proceeds from the issuance of the senior secured notes and
the term loan borrowings under the senior credit facility were used to:
o refinance the senior and junior debtor-in-possession credit
facilities that provided financing to Harvard while we were in
bankruptcy proceedings;
o pay administrative expenses due under the plan of reorganization and
pay related fees and expenses;
o provide cash for working capital purposes; and
o provide funds for general corporate purposes.
The $65.0 million revolving credit portion of the senior credit
facility will be used to finance working capital and other general corporate
purposes.
Risk Factors
See "Risk Factors" immediately following this summary for a discussion
of certain factors that you should consider in connection with your investment
in the new notes to be issued in the exchange offer.
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RISK FACTORS
Before you tender your old notes for the new notes offered in this
prospectus, you should carefully consider the following risk factors as well as
the other information contained and incorporated by reference in this
prospectus. Additional risks and uncertainties not presently known to us or that
we currently believe to be immaterial may also impair our business operations.
Old notes not exchanged in the exchange offer will be subject to transfer
restrictions and may have a more limited market.
If you do not exchange your old notes for new notes under the exchange
offer, your old notes will continue to be subject to the restrictions on
transfer of such old notes set forth in the legend printed on the old notes. In
general, you may not offer or sell old notes except under an exemption from, or
in a transaction not subject to, the registration requirements of the Securities
Act and applicable state securities laws. Except under certain limited
circumstances, we do not intend to register the old notes under the Securities
Act.
In addition, if old notes are tendered and accepted in the exchange
offer, the trading market, if any, for the old notes not tendered and the price
at which they may be sold, could be adversely affected. See "The Exchange
Offer."
You cannot be sure that an active trading market will develop for the new notes.
The old notes were offered to a small number of institutional buyers
and are eligible for trading in the PORTAL Market. The new notes will be a new
issue of securities for which there is no existing trading market. We cannot
assure you as to the liquidity of markets that may develop for the new notes,
your ability to sell the new notes or the price at which you would be able to
sell the new notes. If such markets were to exist, the new notes could trade at
prices that may be lower than their principal amount or purchase price depending
on many factors, including prevailing interest rates and the markets for similar
securities. We do not intend to apply for listing of the new notes on any
national securities exchange or on NASDAQ. The liquidity of, and trading market
for, the new notes also may be adversely affected by changes in the market for
high yield securities and by changes in our financial performance or prospects
or in the prospects for companies in our industry generally. As a result, you
cannot be sure that an active trading market will develop for the new notes.
The price of the notes may be volatile.
Historically, the market for non-investment grade debt has been subject
to disruptions that have caused substantial volatility in the prices of
securities similar to the notes. Even if a market for the new notes were to
develop, we cannot assure you that such a market would not be subject to similar
disruptions.
Our leverage limits our flexibility and increases our risk of default.
Our high degree of leverage could have important consequences to you,
such as:
o making it more difficult for us to satisfy our obligations
with respect to the new notes;
o limiting our flexibility in planning for, or reacting to,
changes in our business and the industries in which we compete
and increasing our vulnerability to general adverse economic
and industry conditions;
o limiting our ability to obtain additional financing we may
need to fund future working capital, capital expenditures or
other corporate requirements;
o imposing a higher interest expense in the event of an increase
in interest rates because certain of our borrowings will be
based on variable interest rates;
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o requiring the dedication of a substantial portion of our cash
flow from operations to the payment of principal of and
interest on our debt. This will reduce the availability of
such cash flow to fund working capital, capital expenditures
or other general corporate purposes;
o restricting our ability to acquire other businesses in the
future; and
o placing us at a competitive disadvantage compared to
competitors who are less leveraged and have greater financial
and other resources.
In addition, the indenture and the senior credit facility contain
financial and other restrictive covenants that limit our ability to, among other
things, borrow additional funds. Our failure to comply with these covenants
could result in an event of default. If we do not cure or have waived the event
of default, we could suffer a material adverse effect. In addition, the degree
to which we are leveraged could prevent us from repurchasing all of the notes
tendered to us upon a change of control of Harvard. See "Description of
Indebtedness Under the Senior Credit Facility" and "Description of the
Notes--Repurchase at the Option of Holders--Change of Control."
As of March 28, 1999, we had total indebtedness of $88.6 million, of
which $63.6 million consisted of indebtedness under our senior credit facility
and $25 million consisted of the notes, and equity of approximately $160
million. Our earnings were insufficient to cover fixed charges for our fiscal
years ended September 30, 1998, September 30, 1997 and September 30, 1996 by
$49,497, $398,367 and $53,062, respectively.
The notes are secured by a second priority security interest; in case of a
default, there may not be sufficient available collateral to satisfy our
obligations under the notes.
The notes are secured by a second priority interest in our assets,
while indebtedness outstanding under our senior credit facility is secured by a
first priority security interest in our assets. As of March 28, 1999, the total
outstanding amount of indebtedness under the senior credit facility was $63.6
million. The proceeds from the sale of such collateral, in the event there is a
default and foreclosure on the collateral, may not be sufficient to satisfy our
obligations under both the notes and the indebtedness outstanding under the
senior credit facility. This is because proceeds from the sale of the collateral
would be distributed first to satisfy certain outstanding secured obligations
and then to satisfy our obligations under the senior credit facility before they
would be distributed to holders of the notes. Accordingly, we cannot assure you
that there will be sufficient funds available to repay the notes after payment
in full of debt outstanding under the senior credit facility. See "Description
of the Notes--Collateral" and "--Intercreditor Agreement."
You should not rely upon the book value of the collateral as a measure
of the value of such collateral in the event of a foreclosure sale, and we have
not had any appraisals of the collateral prepared in connection with the
exchange offer. The amount to be received upon a sale of the collateral would
depend on a number of factors, including the timing and the manner of the sale.
By its nature, certain portions of the collateral will be liquid and may have no
readily ascertainable market value. As a result, we cannot assure you that the
collateral can be sold in a short period of time. In addition, a significant
portion of the collateral includes assets which may only be usable as part of
our existing operating businesses. Accordingly, any such sale of the collateral,
including any real property portion, separate from the sale of certain of our
operating businesses, may not be possible. In addition, if third parties enjoy
liens permitted by the terms of the notes and the indenture these parties may
have rights and remedies with respect to the property that, if exercised, could
adversely affect the value or availability of the collateral. See "Description
of the Notes--Covenants--Liens."
The remedies selected by the agent for our senior lenders in the event of a
foreclosure on the collateral may not serve the interests of the noteholders.
Under (1) the intercreditor agreement among Harvard, the administrative
agent under our senior credit facility and the trustee, and (2) the collateral
agreement among Harvard, the other borrowers under the senior
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credit facility and the administrative agent, the loan collateral agent, who
acts on behalf of the lenders and not the noteholders, controls
o foreclosure proceedings;
o the enforcement and amendment of the collateral agreement; and
o the right to take other action with respect to the collateral.
Under conditions specified in the intercreditor agreement and the collateral
agreement, the loan collateral agent can release the collateral, which will
automatically release the collateral as security for the new notes.
Our recent bankruptcy has had and could continue to have adverse effects on our
business.
We emerged from bankruptcy on November 24, 1998, the effective date of
our plan of reorganization. Our experience in and recent emergence from
bankruptcy may affect our ability to negotiate favorable trade terms with
manufacturers and other vendors. Our experience in bankruptcy may also adversely
affect our ability to obtain new purchase orders from current and prospective
customers. The failure to obtain favorable terms from suppliers or new business
from current and prospective customers could have a material adverse effect on
our operations, business or financial condition.
In particular, the fact that we have been in bankruptcy has had a
negative impact on our results of operations and may also negatively affect our
ability to win new business in the future. In general, there is a delay of
between two to four years after an OEM supplier is awarded a contract to supply
components for a new OEM platform to the time when they make sales of the
components. During this period of delay, automotive component suppliers must
bear considerable design and development costs associated with the new platform.
Because of these considerable costs and our having been in bankruptcy, OEMs have
been reluctant to award new business to us until we demonstrate that our
reorganization has been successfully completed and that our reorganization
allows for our long term viability. As a result, we have not been awarded
contracts for new platforms that we might otherwise have been able to win had we
not been in bankruptcy.
A future bankruptcy by Harvard could impair the collateral agents exercise of
remedies on your behalf.
The collateral agent's right to repossess and dispose of the collateral
upon the occurrence of an event of default is likely to be significantly
impaired if we commence, or have commenced against us, a future bankruptcy
proceeding prior to the collateral agent having repossessed and disposed of the
collateral. Under the Bankruptcy Code, the collateral agent cannot repossess its
security from us in a bankruptcy case or dispose of security repossessed from us
without bankruptcy court approval. Moreover, the Bankruptcy Code permits us to
continue to retain and to use the collateral even though we are in default under
our severed financings, provided that the collateral agent is given "adequate
protection" as such term is interpreted by the relevant bankruptcy court.
Because the term "adequate protection" is not given a precise definition and
varies according to the circumstances and in view of the broad discretionary
powers of a bankruptcy court, it is impossible to predict:
o how long payments under the indenture could be delayed
following the start of a bankruptcy case;
o whether or when the collateral agent could repossess or
dispose of the collateral; or
o whether or to what extent you would be compensated for any
delay in payment or loss of value of the collateral through
the requirement of "adequate protection."
In addition, any disposition of the collateral would also
require approval of the Bankruptcy Court.
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A future bankruptcy by our subsidiaries could adversely affect the value of our
subsidiaries guarantees of our obligations under the notes.
Our operations are substantially conducted through our subsidiaries,
and, therefore, we are dependent on the cash flow of our subsidiaries to meet
our obligations, including our obligations under the notes. Our obligations
under the notes are guaranteed by each of our domestic subsidiaries on a senior
basis. If one of the subsidiary guarantors undergoes a bankruptcy, liquidation
or reorganization, holders of that subsidiary guarantor's senior indebtedness
will have a claim to the assets of such subsidiary that is equal with the
interest of the holders of the new notes in those assets. Under certain limited
conditions, the indenture and the senior credit facility permit us to incur
additional indebtedness, up to a maximum amount of $5.0 million, including $2.5
million in debt secured by liens permitted under the senior credit facility,
$2.0 million in debt of Harvard's Canadian subsidiary Trim Trends Canada Ltd.
and $0.5 million in other debt. See "Description of the
Notes--Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock"
and "Description of Indebtedness Under the Senior Credit Facility."
Enforcement of the new notes could be subject to fraudulent conveyance laws.
Any debt that we issue or the guarantees issued by the subsidiary
guarantors may be subject to review under relevant state and federal fraudulent
conveyance laws if a bankruptcy case or lawsuit is commenced against us or our
subsidiary guarantors by or on behalf of unpaid creditors. A court may find that
after giving effect to the sale of the new notes:
o we issued the new notes with the intent of hindering, delaying
or defrauding current or future creditors, or contemplated
insolvency with a design to prefer one or more creditors to
the exclusion in whole or in part of others; or
o we received less than reasonable equivalent value or fair
consideration for incurring such debt and any one of the
following occur:
-- we were insolvent or were rendered insolvent by
reason of the issuances to date, in the case of
Harvard, or the guarantees, in the case of our
subsidiary guarantors;
-- we were engaged, or about to engage, in a business or
transaction for which our remaining assets
constituted unreasonably small capital;
-- we intended to incur, or believed that we would
incur, debts that were beyond our ability to pay when
they matured, as the relevant fraudulent transfer or
conveyance statutes define or interpret all of the
above mentioned terms; or
-- we were a defendant in an action for money damages,
or had a judgment for money damages docketed against
us, if unsatisfied after final judgment.
In such event, the court could avoid or subordinate the amounts owing
under the new notes, in the case of Harvard, or the guarantees, in case of the
subsidiary guarantors, to existing and future debt of Harvard or the subsidiary
guarantors. The court could also take other actions detrimental to the holders
of the new notes.
The measure of insolvency for purposes of the above listed
considerations will vary depending upon the law of the jurisdiction that is
being applied. Generally, however, an entity would be considered insolvent if,
at the time it took on additional debt, either:
o the sum of its debts (including contingent
liabilities) is greater than its assets, at a fair
valuation, or
o the value of its assets is less than the amount
required to pay the probable liability on its total
existing debts and liabilities (including contingent
liabilities) as they become due.
<PAGE>
Also, if federal bankruptcy or state insolvency proceedings were
commenced within 90 days after a payment by us or our subsidiary guarantors with
respect to the new notes, or if we or our subsidiary guarantors anticipated
becoming insolvent at the time of payment, all or a portion of such payment
could be voided as a preferential transfer and the recipient of such payment
could be required to return the payment.
We cannot assure you what standards a court would use to determine
whether we or our subsidiary guarantors were solvent at the time of the issuance
of any of the notes or guarantees. Whatever standard was used, we cannot assure
you that the new notes or the guarantees would not be avoided or subordinated on
one of the other grounds listed above. In giving their opinions in connection
with the exchange offer, counsel will not express any opinion as to the
applicability of Federal or state fraudulent transfer and conveyance laws.
Our indebtedness prevents us from engaging in certain activities.
The indenture and the senior credit facility contain covenants that
restrict, among other things, our ability to:
o incur additional debt;
o pay dividends;
o make investments and capital expenditures;
o enter into transactions with affiliates;
o allow our subsidiaries to make specified payments;
o make asset sales;
o merge or consolidate with, or transfer substantially all of
our assets to another person;
o encumber assets; or
o restrict dividends and other payments from our subsidiaries.
Under the senior credit facility and the indenture, we are also
required to maintain specific financial covenants, including a maximum
unconsolidated leverage ratio of 4.50 (decreasing to 3.50 by September 30,
2000), a minimum consolidated interest coverage ratio of 2.00 (increasing to
2.75 by September 30, 2000) and a minimum consolidated fixed charge coverage
ratio of 1.10 (increasing to 2.75 by September 30, 2001 and then decreasing to
1.00 on December 31, 2001). As of January 3, 1999, we were in compliance with
such financial covenants. However, we cannot assure you that our future
operating results will be sufficient to enable us to comply with such covenants.
We also cannot assure you that if we do default on such covenants that we will
be able to remedy such default. See "Description of Indebtedness Under the
Senior Credit Facility" and "Description of the Notes--Covenants."
We may not have sufficient funds to repay the new notes upon a change of control
In the event a third party acquires control of Harvard, you will have
the right to require us to purchase all or a portion of your notes at a price
equal to 101% of the aggregate principal amount plus any accrued and unpaid
interest and liquidated damages. If we are involved in a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction that
does not result in a change of control under the indenture, the provisions of
the indenture may not protect you. The definition of "change of control"
includes a phrase relating to the sale, assignment, conveyance, transfer, lease
or other disposition of "all or substantially all" of the assets of Harvard and
its subsidiaries. Although there is a developing body of case law interpreting
the phrase "substantially all," there is not a precise or established definition
of the phrase under applicable law. Accordingly, the ability of a holder of the
notes to require Harvard to repurchase such notes as a result of a sale,
assignment, conveyance, transfer, lease or other disposition of less than all of
the assets of Harvard and its subsidiaries to another person or group may be
uncertain.
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A change in control may result in a default under the senior credit
facility. Upon a default under the senior credit facility or other future senior
debt, the lenders involved could prohibit us from repurchasing the notes. They
could also require the payment in full of all such senior debt before allowing
us to repurchase the notes and, if we are not able to make such payment, they
could judge against their collateral the indenture requires that prior to a
repurchase of the notes upon a change of control, we must either repay all
outstanding indebtedness under the senior credit facility or obtain any required
consent to such a repurchase. If we do not obtain such consent or repay our
outstanding indebtedness under the senior credit facility, we would be
prohibited from offering to purchase the notes. In such case, our failure to
offer to purchase the notes could become an event of default under the
indenture. If a change of control were to occur, we cannot assure you that we
would have sufficient financial resources or that we would be able to arrange
financing to repay all of our obligations under the senior credit facility, the
indenture and other debt that may become payable upon the occurrence of such
change of control. See "Description of Indebtedness Under the Senior Credit
Facility" and "Description of the Notes--Repurchase at the Option of
Holders--Change of Control."
Our use of net operating losses and built-in losses will be limited.
Under the Internal Revenue Code of 1986, our use of net operating loss
carry forwards against future taxable income is subject to limitation if we
experienced an "ownership change" as defined in the Code in connection with the
plan of reorganization.
As a result of the implementation of the plan of reorganization, we
believe that we underwent an "ownership change" (generally, a greater than 50
percentage point change in ownership). As a result, our ability to use all of
our net operating losses and "recognized built-in losses," if any, in taxable
years beginning after the effective date of the plan or reorganization, and a
portion of the taxable year which includes the effective date, is subject to
limitation. Under this limitation, the income that may be offset by net
operating loss carryovers that occured prior to the effective date should
generally be limited to the product of:
o a rate set by the U.S. Treasury Department (5.02% on the
effective date) and
o the lower of (a) the value of Harvard's assets immediately
prior to the ownership change, determined without regard to
liabilities, or (b) the aggregate new stock value immediately
after the ownership change.
The limitation may also apply to the use of "recognized built-in
losses" to offset other income during the five-year period after the effective
date. The built-in loss limitation will apply if the excess of our tax basis in
our assets over the fair market value of such assets as of the effective date
exceeded the lesser of $10.0 million or 15% of the fair market value of the
assets before the ownership change. Our ability to take depreciation or
amortization charges with respect to its built-in loss assets would also be
subject to this built-in loss limitation. The annual limitation on our ability
to use our net operating losses, and recognized built-in losses, if any, may be
significant.
Income attributable to cancellation of indebtedness may limit our ability to
carry forward net operating losses to reduce future income taxes.
Cancellation of indebtedness income that arises in a case under the
Bankruptcy Code is not includible in gross income but it does reduce tax
attributes of the taxpayer, including net operating losses. The plan of
reorganization discharged certain general unsecured claims, in particular our
12% Senior Notes due 2004 and 11 1/8% Senior Notes due 2005. This discharge will
result in the realization of cancellation of indebtedness income, which will
reduce our tax attributes by the difference between the fair market value of the
consideration paid and the amount of the discharged indebtedness. The exchange
of old notes for new notes under the exchange offer will not result in the
recognition of cancellation of indebtedness income to Harvard.
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There will be no ability to meaningfully compare our results of operations and
financial condition after the effective date of the exchange offer to prior
periods.
We will be unable to meaningfully compare information reflecting our
results of operations and financial condition after the effective date to prior
periods due to:
o the replacement of the management team and the restructuring
of our core operations and general and administrative
activities;
o our bankruptcy proceedings, including the costs and expenses
of these proceedings as well as the effect of settlements of
certain related liabilities; and
o our application of Fresh Start Reporting in accordance with
AICPA Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code" (SOP
90-7).
Under SOP 90-7, our equity will be restated at "reorganization equity
value," a value which was determined by the financial advisors to the creditors'
committee under the plan of reorganization. In addition, because we have been in
a restructuring phase and have continued to incur costs and expenses relating to
our bankruptcy proceedings, the results of operations since May 1997 may not
indicate our future performance.
The execution of our turnaround business strategy may not be successful.
Our turnaround business strategy includes a substantial restructuring
of our revenue and customer base. As a result, our value and profitability
depend on our ability to successfully implement the turnaround business
strategy. We cannot assure you that the turnaround business strategy will be
successful. Also, we may be unable to operate profitably even if the turnaround
business strategy is successfully implemented. If the turnaround business
strategy is not successful we may be unable to generate sufficient operating
funds to pay our outstanding obligations, including principal and interest in
respect of the notes and indebtedness under the senior credit facility. If this
is the case, the alternative financing we need may not be available at the time
we require it. In addition, that financing may only be available on terms that
we find unacceptable.
Our success will also depend on our ability to do each of the following
in a timely manner:
o terminate existing unprofitable contracts and purchase orders;
o attract new business or customers;
o produce and sell new products at projected margins and at
competitive prices;
o attract key new personnel for our manufacturing facilities;
o dispose of old customer orders, enabling us to utilize
capacity for new business efficiently;
o develop or acquire a distribution network for after-market and
industrial products; and
o appropriately measure the impact of our turnaround business
strategy on relations with current customers.
For fiscal years 1998, 1997 and 1996 we had net losses of $56 million,
$389 million and $69 million, respectively. These losses have been primarily due
to operating inefficiencies and losses associated with our operations that we
had designated for sale or wind-down. If we continue to experience net losses,
or if our cash flow and capital resources are insufficient to pay for our debt
obligations, we may be forced to reduce or delay planned expansion or capital
expenditures, sell assets, obtain additional equity capital or restructure our
indebtedness. However, we cannot assure you that any of these remedies will be
available or satisfactory. We also cannot assure you that our operating results,
cash flow and capital resources will be sufficient for payment of our debt in
the future. This includes the notes and our other liquidity needs. We may need
to refinance all or a portion of the principal of the notes on or prior to their
maturity. We cannot assure you that we will be
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able to refinance the notes. If we are able to refinance the notes, we cannot
assure you it will be on commercially reasonable terms.
We have significant capital investment and capital expenditure requirements that
have not been and in the future may not be met.
We operate in an industry which requires significant capital
investment. We are also required to make capital expenditures to upgrade our
facilities. We believe that our competition will continue to invest heavily to
achieve increased production efficiencies and to improve product quality. Our
ability to compete in such a competitive environment will depend on our ability
to make major capital expenditures over the next several years. These
expenditures are necessary to service existing business, enter new markets and
remain competitive in existing markets. During the past few years, Harvard has
put off certain capital expenditures because of financial constraints. Our
ability to make necessary capital expenditures may be adversely affected if (1)
we are unable to produce sufficient cash flows from our operations, or (2) we
are unable to raise sufficient debt or equity capital on terms that we consider
acceptable. Our capital expenditures totalled approximately $24.9 million in
1998, and we expect, based on current information, that our capital expenditures
will total approximately $20 million in 1999. In addition, through the year 2002
(including the year 1998), we expect that capital expenditures will be
approximately $110 million.
We might not be able to comply with current or future sourcing procedures of
U.S. automakers.
In the late 1980's and early 1990's, U.S. automakers made a number of
significant changes in their sourcing procedures which have placed greater
business and financial risk on us as automotive component suppliers.
Increasing focus on suppliers' costs and improving quality performance.
Some of our products are sold under agreements that require us to
provide annual cost reductions to OEMs by certain percentages each year. These
reductions come directly through price reductions or indirectly through
suggestions for manufacturing efficiencies or other cost savings. If we are
unable to generate sufficient cost savings in the future to offset such price
reductions, our profit margins could be adversely affected.
Requiring component suppliers to bear a greater proportion of the burden of
design and development costs.
OEMs are requiring potential suppliers of components to become involved
earlier in and share a greater proportion of the costs of the design and
development process for new platforms. They are also requiring suppliers to
develop integrated systems or modules rather than merely manufacturing separate
parts. OEMs expect the component supplier to manage the entire development cycle
(a cycle lasting two to four years) of the product or system, including:
o design and engineering;
o production of prototypes;
o design validation; and
o design of tooling and completion of manufactured products and
integrated systems of products.
Consolidation of the number of suppliers with which U.S. automakers place
purchase orders.
This trend places greater pressure on automotive component suppliers
and shifts a larger part of the cost of research and development and design and
capital outlays for such new platforms and systems onto component suppliers. In
addition, this trend has had a relatively greater impact on us than on many of
our competitors because of OEMs' reluctance to award new business to Harvard due
to its emergence from bankruptcy. We may be unable to become involved earlier in
the design and development process for new
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platforms. Even if we are successful in becoming involved earlier in such
processes, we may be unable to generate sufficient cash or have financing
available to fund the greater costs associated with this effort.
As a result of all these trends, the automotive supply industry is
experiencing a period of significant consolidation. As part of OEMs' efforts to
reduce costs and improve quality, U.S. automakers are reducing their supplier
base by awarding contracts to full-service suppliers who are able to provide
design, engineering and program management capabilities as well as meet cost,
quality and delivery requirements. This trend has also resulted in greater
competition from larger companies with greater financial and other resources. As
a result, if we are unable to have the financial flexibility to make the
necessary capital expenditures or to make acquisitions to grow our business, we
may be unable to remain competitive and viable in the component supplier
industry.
Increasing sales of foreign cars are adversely affecting the market for U.S.
components, including our products.
Foreign automotive manufacturers have gained a significant share of the
U.S. market, both from export sales as well as the more recent opening of
domestic manufacturing facilities. Between 1985 and 1997, sales of automobiles
from foreign car makers with U.S. manufacturing facilities increased from 2.0%
to 20.5% of the North American market. The growth of such "transplant" sales has
resulted, and will likely continue to result in, a loss of market share for U.S.
automakers. As a result, we, and other component suppliers, will experience an
adverse effect because most of our current customers are U.S. automakers.
Although we plan to solicit additional business from foreign automakers, we may
be unsuccessful in doing so or such additional business may fail to make up for
lost business that we have already experienced.
We might not be able to implement new technologies needed to produce changing
products.
We compete for new business at the beginning of the development of new
models and upon the redesign of existing models by our major customers. New
model development begins two to five years prior to the marketing of such models
to the public, with existing business lasting for the model life cycle. To meet
the needs of customers with changing products, we need to implement new
technologies and manufacturing processes when launching our new products.
Moreover, in order to meet our customers' requirements, we may be required to
supply our customers regardless of cost. As a result, we may suffer an adverse
impact to our operating profit margins. Although our management believes it has
implemented manufacturing processes that adapt to the changing needs of our
customers, we still may encounter difficulties which could have an adverse
effect when implementing new technologies in future product launches.
Our business could be significantly affected by the loss of any of our major
customers.
Our largest customers are General Motors, Ford and Chrysler. For the
fiscal year 1998, General Motors accounted for approximately 39% of our
consolidated net sales, Ford accounted for approximately 34% of our consolidated
net sales and Chrysler accounted for approximately 10% of our consolidated net
sales. Our purchase orders from our customers generally provide for supplying
the customer's annual requirements for a particular model or assembly plant,
rather than for manufacturing a specific quantity of products. These contracts
are renewable on a year-to-year basis. If we lose any one of our major customers
or suffer a significant decrease in demand for certain key models or a group of
related models sold by any of our major customers, it could have a material
adverse effect on our results of operations.
Our business could be significantly affected by the loss of key personnel.
We believe that our future success will depend in large part on the
abilities and continued service of our executive officers and other key
employees. In particular, this means Roger Pollazzi, who serves as Chairman and
Chief Executive Officer and the senior management team. We may be unable to
retain the services of Mr. Pollazzi and other key personnel. The loss of any key
executive officers or employees, including Mr. Pollazzi, could have a material
adverse effect on our business.
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We may not be able to reach new agreements with our unionized employees.
As of March 29, 1999, we had approximately 4,200 employees.
Approximately 42% of our employees are covered by collective bargaining
agreements negotiated with 16 locals of 9 unions. These contracts expire at
various times through the year 2000. Discussions with various unions regarding
new labor agreements or an extension of existing contracts are presently
underway. While we believe that our relations with our employees are good, we
could experience a material adverse effect on our financial position or
operating results as a result of a prolonged dispute with our employees.
We may not be able to comply with laws governing environmental matters, and we
may be responsible for additional remediation activities and held liable in
litigation regarding environmental matters.
Our operations are subject to a variety of local, state and federal
laws governing, among other things, emissions to air, discharge to waters and
the generation, handling, storage, transportation, treatment and disposal of
hazardous substances and other materials. Although we have made and will
continue to make significant expenditures relating to our environmental
compliance obligations, there may be times when we are not in compliance with
all these requirements. We spent $2.7 million in cash in fiscal year 1996, $1.7
million in cash in fiscal year 1997 and $0.1 million in cash in fiscal year 1998
on environmental remediation costs and related expenses.
We have been identified as a defendant or potentially responsible party
in a variety of environmental matters in connection with historical and current
operations involving our use and disposal of hazardous materials. Claims were
filed in our bankruptcy proceedings in connection with most of these matters.
Several large claims were settled for cash and the remaining claims will be paid
as unsecured claims in accordance with the plan of reorganization. We also plan
to file objections to some claims.
We are also conducting remedial activities at certain current and
former facilities under governmental orders and private contractual agreements.
We have granted access to the Michigan Department of Environmental Quality at
our Hayes-Albion Corporation plant in Jackson, Michigan for an investigation of
the plant's use and disposal of chlorinated solvents. The investigation is in
connection with the Department's evaluation of an area-wide groundwater
contamination problem. We may be subject to injunctive orders requiring
remediation of this property.
Furthermore, we are aware of certain currently owned facilities that
are not required to be remediated at the present time but that could possibly
require remediation activity in the future. We have reserved approximately $8.5
million for our share of potential costs associated with the clean-up of
hazardous substances at various sites. However, we cannot assure you that the
reserved amounts will be sufficient to satisfy our obligations. Changes in
existing environmental laws or their interpretation and more rigorous
enforcement by regulatory authorities may give rise to additional expenditures,
compliance requirements or liabilities that could have a material adverse effect
on our business, financial condition and results of operations.
Finally, the discovery of additional environmental liabilities related
to our historical operations involving the use and disposal of hazardous
substances could have a material adverse effect on our business, results of
operations or financial condition.
If we do not meet our obligations to contribute to our defined benefit pension
plans, our payment obligations may be accelerated.
Upon our emergence from bankruptcy, our unfunded liabilities related to
defined benefit pension plans were approximately $29.8 million. If we are unable
to meet our contribution obligations under such plans, the Pension Benefit
Guaranty Corporation may seek to terminate the affected plan or plans, thus
accelerating payment obligations. Our long-term objective is to fund our entire
pension obligation with funds that are generated from operations, although we
cannot assure you that this will actually occur.
17
<PAGE>
We could be affected by "Year 2000" computer problems.
We are addressing the Year 2000 problem and certain of our information
systems are not presently Year 2000 compliant. The Year 2000 issue results from
computer programs written with date fields of two digits, rather than four
digits, resulting in the inability of the program to distinguish between the
year 1900 and 2000. Many of our computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000.
If not addressed and corrected on a timely basis, failure of our
computer systems to process Year 2000 related data correctly could have a
material adverse effect on our financial condition and results of operations.
Failures of this kind could, for example, lead to:
o incomplete or inaccurate accounting;
o inaccurate supplier and customer order processing;
o recording errors in inventories or other assets; and
o disruption of our manufacturing process as well as
transactions with third parties.
If not addressed, we face the potential risks of financial loss, legal liability
and interruption to business.
We have surveyed our key utilities and suppliers to determine the
extent to which we are vulnerable to the failure by these parties to fix Year
2000 compliance issues. We are still in the process of assessing the information
they have provided. Failure by such key utilities or suppliers to complete Year
2000 compliance work in a timely manner could have a material adverse effect on
certain of our operations. Examples of problems that could result from the
failure of these utilities and suppliers to remediate Year 2000 problems
include, in the case of utilities, service failures such as power,
telecommunications, elevator operations and loss of security access control and,
in the case of suppliers, failures to satisfy orders on a timely basis and to
process orders correctly.
Additionally, general uncertainty regarding the success of remediation
may cause many suppliers to reduce their activities temporarily as they assess
and address their Year 2000 efforts in 1999. This could result in a general
reduction in available supplies in late 1999 and early 2000. Our management
cannot predict the magnitude of any such reduction or its impact on our
financial results. We can give no assurance that the systems of other companies
on which our systems rely will be converted in a timely fashion, or that the
noncompliance of these systems would not have a material adverse effect on our
business, financial condition, competitive position and results of operations.
FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. These statements discuss our intentions, beliefs or current expectations
with respect to our future operating performance, and may include, but are not
limited to, projections of capital expenditures, plans for future operations,
financing needs or plans, compliance with covenants in loan agreements, sales of
assets or businesses, plans relating to our products or services, assessments of
materiality, predictions of future events, and the ability to obtain additional
financing, including our ability to meet obligations as they become due, and
pending and possible litigation. You can identify forward-looking statements by
our use of forward-looking terminology such as "may," "will," "expect,"
18
<PAGE>
"intend," "estimate," "anticipate" or "believe" as well as the negative of these
terms, variations of these terms, or similar terminology. Although we believe
that the expectations reflected in such forward-looking statements are
reasonable, we cannot assure you that such expectations be correct. The most
significant of such risks, uncertainties and other factors are discussed in this
"Risk Factors" section and you are urged to carefully consider such factors.
Additional risks and uncertainties are detailed in our filings with the SEC. We
do not have any obligation to update forward-looking statements.
We have also made cautionary statements in this prospectus, some of
which accompany the forward-looking statements used in the "Prospectus Summary"
and "Risk Factors" sections regarding important factors that could cause actual
results to differ materially from our expectations. All of our subsequent
written and oral forward-looking statements, or statements of persons acting on
our behalf, are expressly qualified in their entirety by such cautionary
statements.
19
<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new
notes as described in this prospectus. We will receive in exchange old notes in
like principal amount. The old notes surrendered in exchange for the new notes
will be retired and canceled and cannot be reissued. Accordingly, the issuance
of the new notes will not result in any change in our indebtedness.
20
<PAGE>
CAPITALIZATION
The following table sets forth the actual consolidated cash and cash
equivalents and capitalization of Harvard at September 30, 1998, the pro forma
adjustments to Harvard's consolidated cash and cash equivalents and
capitalization after giving effect to the transactions contemplated by the plan
of reorganization and our recent financings and the pro forma consolidated cash
and cash equivalents and capitalization of Harvard at September 30, 1998. This
table should be read in conjunction with the Consolidated Financial Statements,
including the notes thereto, included in Harvard's Annual Report on Form 10-K
for the fiscal year ended September 30, 1998, which is incorporated herein by
reference.
<TABLE>
<CAPTION>
Actual Pro-Forma
September 30, Pro-Forma September 30,
1998 Adjustments 1998
----------------------- -------------------- ----------------
($ in thousands)
<S> <C> <C> <C>
Cash and cash equivalents (1).....................................
$ 11,624 $ (11,621) $ 3
--------- --------- --------
Senior debt:
Existing DIP facility ................................... 39,161 (39,161) --
New revolving facility(2) ............................... -- -- --
New term facility ....................................... -- 50,000 50,000
14 1/2% senior secured notes ............................ -- 25,000 25,000
Subordinated DIP facility ............................... 25,000 (25,000) --
--------- --------- --------
64,161 75,000
--------- --------
Total senior debt
124,637 (124,637) --
--------- --------- --------
Pay-in-kind exchange preferred stock(3)
Shareholders' equity/(deficit):
New common stock and
additional paid-in capital(4) ........................... -- 175,000 175,000
Old common stock and
additional paid-in capital .............................. 20,311 (20,311) --
Accumulated deficit ..................................... (629,541) 629,541
--------- --------- --------
Total shareholders' equity/(deficit) .................... (609,230) 784,230 175,000
--------- --------- --------
Total capitalization .................................... $(420,432) $ 670,432 $250,000
========= ========= ========
</TABLE>
- --------------
(1) Cash reduced by $15.9 million of transaction fees and reorganization
expenses, offset by a $4.3 million increase in outstanding senior debt.
(2) Approximately $12.5 million of stand-by letters of credit are expected to
be outstanding as part of Harvard's self-insurance programs relating to
workers' compensation and other general insurance.
(3) Includes $10,142 of undeclared accrued dividends.
(4) The $175 million pro forma valuation of the new common stock was derived by
taking the mid-point of the projected valuation range of $150 to $200
million estimated (assuming an effective date of September 30, 1998) by the
financial advisors to the creditors' committee in the bankruptcy.
21
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents selected consolidated historical financial
data for Harvard as of the dates and for the fiscal periods indicated. The
selected audited financial data for each of the five years ended September 30,
1998, 1997, 1996, 1995 and 1994 has been derived from the Consolidated Financial
Statements of Harvard included in our Annual Report on Form 10-K for the fiscal
year ended September 30, 1998. As a result of the fact that Harvard will be
emerged from Chapter 11 and the prospective effect of Fresh Start Reporting,
Harvard does not believe that its historical results of operations are
necessarily indicative of its results of operations as an ongoing entity
following its emergence on November 24, 1998 from bankruptcy. The following
information should be read in conjunction with and is qualified by reference to
the audited Consolidated Financial Statements of Harvard and notes thereto
included in Harvard's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998, which is incorporated herein by reference.
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------------------------
1998 1997 1996 1995(1) 1994
---- ---- ---- ------- ----
($ in thousands)
<S> <C> <C> <C> <C> <C>
Statement of operations data:
Net sales .......................................... $690,076 $ 810,769 $824,837 $631,832 $614,952
Cost of sales ...................................... 656,243 797,774 776,141 557,340 543,532
-------- --------- -------- -------- --------
Gross profit ....................................... 33,833 12,995 48,696 74,492 71,420
Selling, general and administrative
expenses .................................. 66,546 45,822 42,858 33,037 32,217
Amortization of goodwill ........................... 1,584 8,448 15,312 2,986 1,584
Impairment and restructuring charges(3) ............ 10,842 288,545 -- -- --
Interest expense(2) ................................ 14,231 36,659 47,004 19,579 11,947
Gain on sale of operations(4) ...................... (28,673) -- -- -- --
Other (income) expense, net(5) ..................... 3,980 5,530 1,538 (1,789) (532)
-------- --------- -------- -------- --------
Income (loss) from continuing operations
before reorganization items,
income taxes and extraordinary item ....... (34,677) (372,009) (58,016) 20,679 26,204
Reorganization items ............................... 14,920 16,216 -- -- --
-------- --------- -------- -------- --------
Income (loss) from continuing operations
before income taxes and,
extraordinary item ........................ (49,597) (388,225) (58,016) 20,679 26,204
Provision (benefit) for income taxes ............... 6,207 1,204 3,196 11,566 9,536
-------- --------- -------- -------- --------
Income (loss) from continuing operations
before extraordinary item ................. (55,804) (389,429) (61,212) 9,113 16,668
Loss from discontinued operations,
net of tax(6) ............................. -- -- (7,500) -- (9,038)
-------- --------- -------- -------- --------
Income (loss) before extraordinary item ............ (55,804) (389,429) (68,712) 9,113 7,630
Extraordinary item ................................. -- -- -- (2,192) --
-------- --------- -------- -------- --------
Net income (loss) .................................. $(55,804) $(389,429) $(68,712) $ 6,921 $ 7,630
Pay-in-kind preferred dividends
and accretion(7) .......................... -- 10,142 14,844 14,809 14,767
-------- --------- -------- -------- --------
Net loss attributable to common
stockholders .............................. (55,804) (399,571) (83,556) (7,888) (7,137)
======== ========= ======== ======== ========
(Footnotes appear on the following page.)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------------------------------------------------
1998 1997 1996 1995(1) 1994
---- ---- ---- ------- ----
($in thousands)
<S> <C> <C> <C> <C> <C>
Share data:
Basic and diluted earnings per share
Income (loss) from continuing
operations......................... $(7.94) $(56.91) $(10.87) $(0.82) $(0.27)
Loss from discontinued operations........... -- -- (1.07) -- (1.28)
Extraordinary Item.......................... -- -- -- (0.32) --
Net loss per share.......................... $(7.94) $(56.91) $(11.94) $(1.14) $(1.01)
======= ======== ======== ======= =======
Weighted average number of shares and
equivalents........................ 7,026,437 7,020,692 6,999,279 6,894,093 7,041,324
========= ========= ========= ========= =========
Financial ratios and other data:
Ration of earnings to fixed charges......... -- -- -- 1.17 1.42
Depreciation and amortization............... $27,904 $60,186 $65,658 $34,856 $29,855
Cash flows from continuing operations....... 23,526 11,045 (5,133) 24,305 89,071
Capital expenditures........................ 24,887 36,572 40,578 22,080 10,141
Cash flows (used) provided by investing
activities......................... 3,564 (34,156) (48,224) (226,023) (13,954)
Cash flows (used) provided by financing
activities......................... (24,678) 31,216 27,316 161,283 (30,348)
Balance sheet data:
Working capital (deficiency)................ $(90,024) $2,096 $(7,158) $19,417 $30,333
Total assets................................ 250,981 307,494 617,705 662,262 387,942
Liabilities subject to compromise(8)........ 385,665 397,319 -- -- --
Debtor-in-possession credit facilities,
including current portion.......... 39,161 87,471 -- -- --
Creditors subordinated term loan............ 25,000 -- -- -- --
Long-term debt, including current
portion............................ 0 14,087 360,603 324,801 113,381
Pay-in-kind preferred stock................. 124,637 124,637 114,495 99,651 99,841
Shareholders' equity (deficiency)........... $(609,230) $(547,128) $(145,724) $(62,206) $(59,032)
</TABLE>
- ----------
(1) Includes the results of operations of the Doehler-Jarvis Entities from
July 28, 1995, the effective date of that acquisition.
(2) Interest expense does not include interest after May 7, 1997 amounting
to $13,605 in respect of the old senior notes as all such interest was
included as a liability subject to compromise. See Note 1 to the
Consolidated Financial Statements.
(3) During 1997, Harvard recorded charges for impairment of long-lived
assets of the Doehler-Jarvis Entities and at two other plants. Harvard
also recorded restructuring charges related to two operations scheduled
for closing. During 1998, Harvard recorded charges for impairment of
long-lived assets of its Tiffin, Ohio facility and for certain assets
relating to a platform that will end earlier than anticipated, and a
restructuring charge. See Note 13 to the Consolidated Financial
Statements. No tax benefit is currently available for any of these
charges.
(4) In November of 1997, Harvard sold Kingston-Warren's Material Handling
division resulting in a gain on sale of $11,354. During 1998, there was
a gain on sale of $17,319 as a result of the sale of the land, building
and certain other assets of the Harvard Interiors' St. Louis, Missouri
facility and the transfer of certain assets at the Doehler-Jarvis
Toledo, Ohio facility and related lease obligations to a third party.
(5) For 1997, other (income) expense, net includes approximately $2,200
related to joint venture losses.
23
<PAGE>
(6) Harvard, in the first quarter of fiscal 1994, decided to discontinue
its then specialty fastener segment ("ESNA") and therefore applied the
accounting guidelines for discontinued operations. In 1996, Harvard
recorded a $7,500 charge to discontinued operations representing the
write-down of the ESNA facility and continuing carrying costs. See Note
4 to the Consolidated Financial Statements.
(7) Pay-in-kind preferred dividends after May 7, 1997 do not include $6,749
of accrued dividends.
(8) September 30, 1998 and 1997, includes $300,000 of old senior notes
payable which are subject to the guaranty of the combined guarantor
subsidiaries and accrued interest of $9,728 which is subject to the
guaranty of the combined guarantor subsidiaries.
24
<PAGE>
THE EXCHANGE OFFER
Exchange Offer Registration Statement
The old notes were sold by Harvard on November 24, 1998 to initial
purchasers, who placed the old notes with certain institutional investors. In
connection therewith, Harvard and the initial purchasers entered into the
registration rights agreement, under which Harvard agreed, for the benefit of
the holders of the old notes, that Harvard would, at its sole cost,
o within 60 days following the original issuance of the old
notes, file with the SEC an exchange offer registration
statement (of which this prospectus is a part) under the
Securities Act with respect to an issue of a series of new
notes of Harvard identical in all material respects to the
series of old notes; and
o use its reasonable best efforts to cause such exchange offer
registration statement to become effective under the
Securities Act at the earliest possible time, but in no event
later than 120 days following the original issuance of the old
notes.
Upon the effectiveness of the exchange offer registration statement,
Harvard will offer to the holders of the old notes the opportunity to exchange
their old notes for a like principal amount of new notes, to be issued without a
restrictive legend and which may, subject to certain exceptions described below,
be reoffered and resold by the holder without restrictions or limitations under
the Securities Act. The term "holder" with respect to any note means any person
in whose name such note is registered on the books of Harvard.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal, Harvard will accept any and all old
notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time,
on the expiration date. Harvard will issue $1,000 principal amount at stated
maturity of new notes in exchange for each $1,000 principal amount at stated
maturity of outstanding old notes accepted in the exchange offer. Holders may
tender some or all of their old notes under the exchange offer. However, old
notes may be tendered only in integral multiples of $1,000 at stated maturity.
The form and terms of the new notes will be identical in all respects
(including principal amount, interest rate, maturity and ranking) to terms of
the old notes for which they may be exchanged under the exchange offer except
that the new notes have been registered under the Securities Act and, therefore,
will not bear legends restricting their transfer and will not contain certain
terms providing for an increase in the interest rate on the old notes under
certain circumstances described in the registration rights agreement. The new
notes will evidence the same debt as the old notes and will be entitled to the
benefits of the indenture under which the old notes were, and the new notes will
be, issued.
As of the date of this prospectus, $25 million aggregate principal
amount at stated maturity of the old notes are outstanding. Harvard has fixed
the close of business on ________, 1999 as the record date for the exchange
offer for purposes of determining the persons to whom this prospectus, together
with the letter of transmittal, will initially be sent. As of such date, there
was one registered holder of the old notes.
Holders of the old notes do not have any appraisal or dissenters'
rights under law or the indenture in connection with the exchange offer. Harvard
intends to conduct the exchange offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder.
Holders who tender old notes in the exchange offer will not be required
to pay brokerage commission or fees or, subject to the instructions in the
letter of transmittal, transfer taxes with respect to the exchange of old notes
under the exchange offer. Harvard will pay all charges and expenses, other than
certain applicable taxes, in connection with the exchange offer. See "--Fees and
Expenses."
25
<PAGE>
Expiration Date; Extensions; Amendments
The term "expiration date" means 5:00 p.m., New York City time, on
___________, unless Harvard, in its reasonable discretion, extends the exchange
offer, in which case the term "expiration date" shall mean the latest date and
time to which the exchange offer is extended.
In order to extend the exchange offer, Harvard will notify the exchange
agent of any extension by oral or written notice and will make a public
announcement thereof prior to 9:00 a.m., New York City time, on the next
business day after each previously scheduled expiration date, unless otherwise
required by applicable law or regulation.
Harvard reserves the right, in its reasonable discretion,
o to delay accepting any old notes, to extend the exchange offer
or, if in their reasonable judgment any of the conditions set
forth below under the caption "--Conditions" shall not have
been satisfied, to terminate the exchange offer, by giving
oral or written notice of such delay, extension or termination
to the exchange agent, or
o to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will
be followed as promptly as practicable by a public announcement thereof. If the
exchange offer is amended in a manner determined by Harvard to constitute a
material change, Harvard will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders, and
Harvard will extend the exchange offer for a period of five to ten business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered holders, if the exchange offer would otherwise
expire during such five to ten business day period.
Without limiting the manner in which Harvard may choose to make a
public announcement of any delay, extension, termination or amendment of the
exchange offer, Harvard shall have no obligation to publish, advertise or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
Procedures for Tendering
Only a holder of old notes may tender them in the exchange offer. A
holder who wishes to tender old notes for exchange under the exchange offer must
transmit a properly completed and duly signed letter of transmittal, or a
facsimile thereof, together with any required signature guarantees, or, in the
case of a book-entry transfer, agent's message (discussed below under the
caption "--Book-entry Transfer") and any other required documents, to the
exchange agent prior to the expiration date. In addition, either
o certificates for the old notes must be received by the
exchange agent prior to the expiration date along with the
letter of transmittal,
o a timely confirmation of a book-entry transfer of the old
notes into the exchange agent's account at The Depository
Trust Company under the procedure for book-entry transfer
described below, must be received by the exchange agent prior
to the expiration date or
o the registered holder must comply with the guaranteed delivery
procedures described below.
To be tendered effectively, the old notes, or book-entry confirmation,
as the case may be, the letter of transmittal and other required documents must
be received by the exchange agent at the address set forth below under
"--Exchange Agent" prior to 5:00 p.m., New York City time, on the expiration
date. Delivery of documents to the book entry transfer facility in accordance
with its procedure does not constitute delivery to the exchange agent.
26
<PAGE>
The Depository Trust Company has authorized its participants that hold
old notes on behalf of beneficial owners of old notes through The Depository
Trust Company to tender their old notes as if they were registered holders. To
effect a tender of old notes, The Depository Trust Company's participants should
either
o complete and sign the letter of transmittal (or a manually
signed facsimile thereof), have the signature thereon
guaranteed if required by the instructions to the letter of
transmittal, and mail or deliver the letter of transmittal (or
such manually signed facsimile) to the exchange agent under
the procedure set forth in "Procedures for Tendering" or
o transmit their acceptance to the Depository Trust Company
through the its Automated Tender Offer Program for which the
transaction will be eligible and follow the procedure for
book-entry transfer set forth in "--Book-Entry Transfer."
The tender by a holder will constitute an agreement between such holder
and Harvard in accordance with the terms and subject to the conditions set forth
herein and in the letter of transmittal.
The method of delivery of the old notes and the letter of transmittal
and all other required documents to the exchange agent is at the election and
risk of the holder. Instead of delivery by mail, it is recommended that holders
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed to assure delivery to the exchange agent before the expiration date.
No letter of transmittal or old notes, or book-entry confirmation, as the case
may be, should be sent to Harvard.
Any beneficial owner whose old notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's own behalf, such
owner must, prior to completing and executing the letter of transmittal and
delivering such beneficial owner's old notes, either make appropriate
arrangement to register ownership of the old notes in such owner's name or
obtain a properly completed bond power from the registered holder. The transfer
of registered ownership may take considerable time.
If the letter of transmittal is signed by a person other than the
registered holder of any old notes listed therein, such old notes must be
endorsed or accompanied by a properly completed bond power and signed by such
registered holder as such registered holder's name appears on such old notes.
If the letter of transmittal or any old notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by Harvard, evidence
satisfactory to Harvard of their authority to so act must be submitted with the
letter of transmittal.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the old notes tendered pursuant thereto
are tendered (1) by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal or (2) for the account of an "eligible guarantor institution"
within the meaning of Rule 17Ad-5 under the Exchange Act. In the event that a
guarantee is required, such guarantee must be made by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an eligible guarantor institution.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered old notes will be determined by
Harvard in its sole discretion, which determination shall be final and binding.
Harvard reserves the absolute right to reject any and all old notes not properly
tendered or any old notes Harvard's acceptance of which would, in the opinion of
counsel for Harvard, be unlawful. Harvard also reserves the right to waive any
defects, irregularities or conditions of tender as to particular old
27
<PAGE>
notes. Harvard's interpretation of the terms and conditions of the exchange
offer, including the instructions in the letter of transmittal, shall be final
and binding on all parties. Unless waived, any defects of irregularities in
connection with tenders of old notes must be cured within such time as Harvard
shall determine. Neither Harvard, the exchange agent nor any other person shall
incur any liability for failure to give notice of any defect or irregularity
with respect to any tender of old notes. Tenders of old notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any old notes received by the exchange agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will not be deemed to have been properly tendered. Any old notes received
by the exchange agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned by the exchange
agent to the tendering holders, unless otherwise provided in the letter of
transmittal, as soon as practicable following the expiration date.
By tendering, each Holder will represent to Harvard, among other
things, that
o it is not an "affiliate" (as defined in Rule 405 of the
Securities Act) of Harvard;
o 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 notes; and
o it is acquiring the new notes in the ordinary course of its
business (a "participating broker-dealer".)
A holder unable to make the foregoing representations is referred to
herein as a "restricted holder." A restricted holder will not be able to
participate in the exchange offer, and may only sell its old notes under a
registration statement containing the selling securityholder information
required by Item 507 of Regulation S-K of the Securities Act, or under an
exemption from the registration requirement of the Securities Act.
Each participating broker-dealer who holds old notes that were acquired
for its own account as a result of market-making activities or other trading
activities (other than old notes acquired directly from Harvard), may exchange
such old notes under the exchange offer; however, such broker-dealer may be
deemed to be an "underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resales of the new notes received by the broker-dealer in
the exchange offer, which prospectus delivery requirement may be satisfied by
the delivery by such broker-dealer of the prospectus contained in the exchange
offer registration statement. Each participating broker-dealer is required to
acknowledge in the letter of transmittal that it acquired the old notes as a
result of market-making activities or other trading activities and that it will
deliver a prospectus in connection with the resale of such new notes. Based upon
interpretations by the staff of the SEC, Harvard believes that new notes issued
pursuant to the exchange offer to participating broker-dealers may be offered
for resale, resold, and otherwise transferred by a participating broker-dealer
upon compliance with the prospectus delivery requirements, but without
compliance with the registration requirements, of the Securities Act. Harvard
has agreed that for a period of 180 days from the date on which the exchange
offer registration statement is declared effective, they will make this
prospectus available to participating broker-dealers for use in connection with
any such resale. During such period of time, delivery of this prospectus, as it
may be amended or supplemented, will satisfy the prospectus delivery
requirements of a participating broker-dealer engaged in market-making or other
trading activities.
Based upon interpretations by the staff of the SEC, Harvard believes
that new notes issued under the exchange offer may be offered for resale, resold
and otherwise transferred by a holder thereof (other than a participating
broker-dealer) without compliance with the registration and prospectus delivery
requirements of the Securities Act.
Acceptance of Old Notes for Exchange; Delivery of New 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. For purposes of the exchange offer, Harvard shall be
deemed to have accepted properly tendered old notes for exchange when, as and if
Harvard has given oral or written notice thereof to the exchange agent.
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In all cases, issuance of new notes for old notes that are accepted for
exchange under the exchange offer will be made only after timely receipt by the
exchange agent of certificates for such old notes or a timely book-entry
confirmation of such old notes into the exchange agent's account at the
book-entry transfer facility, a properly completed and duly executed letter of
transmittal or agent's message and all other required documents. If any tendered
old notes are not accepted for any reason set forth in the terms and conditions
of the exchange offer or if old notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged old
notes will be returned without expense to the tendering holder thereof (or, in
the case of old notes tendered by book-entry transfer into the exchange agent's
account at the book-entry transfer facility under the book-entry transfer
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 date.
Book-entry Transfer
The exchange agent will establish a new account or utilize an existing
account with respect to the old notes at The Depository Trust Company promptly
after the date of this prospectus, and any financial institution that is a
participant in The Depository Trust Company and whose name appears on a security
position listing as the owner of old notes may make a book-entry tender of old
notes by causing The Depository Trust Company to transfer such old notes into
the exchange agent's account in accordance with The Depository Trust Company's
procedures for such transfer. However, although tender of old notes may be
effected through book-entry transfer into the exchange agent's account at The
Depository Trust Company, the letter of transmittal (or a manually signed
facsimile thereof), properly completed and validly executed, with any required
signature guarantees, or an agent's message in lieu of the letter of
transmittal, and any other required documents, must, in any case, be received by
the exchange agent at its address set forth below under the caption "Exchange
Agent" on or prior to the expiration date, or the guaranteed delivery procedures
described below must be complied with. The confirmation of a book-entry transfer
of old notes into the exchange agent's account at The Depository Trust Company
as described above is referred to herein as a "book-entry confirmation."
Delivery of documents to The Depository Trust Company in accordance with The
Depository Trust Company's procedures does not constitute delivery to the
exchange agent.
The term "agent's message" means a message transmitted by The
Depository Trust Company to, and received by, the exchange agent and forming a
part of a book-entry confirmation, which states that The Depository Trust
Company has received an express acknowledgment from the participant in The
Depository Trust Company tendering the old notes stating
o the aggregate principal amount of old notes which have been
tendered by such participant;
o that such participant has received and agrees to be bound by
the term of the letter of transmittal; and
o that Harvard may enforce such agreement against the
participant.
Guaranteed Delivery Procedures
Holders who wish to tender their old notes and 1) whose old notes are
not immediately available, 2) who cannot deliver their old notes, the letter of
transmittal or any other required documents to the exchange agent prior to the
expiration date or 3) who cannot complete the procedure for book-entry transfer
on a timely basis, may effect a tender if:
o the tender is made through an "eligible guarantor institution"
within the meaning of 17Ad-5 under the Exchange Act;
o prior to the expiration date, the exchange agent receives
from such eligible guarantor institution a properly completed
and duly executed notice of guaranteed delivery (by facsimile
transmission, mail or hand delivery) setting forth the name
and address of the holder, the
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certificate number(s) of such old notes and the principal
amount of old notes tendered, stating that the tender is being
made thereby and guaranteeing that, within three New York
Stock Exchange trading days after the expiration date, the
letter of transmittal (or facsimile thereof) or, in the case
of a book-entry transfer, an agent's message, together with
the certificate(s) representing the old notes, 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 guarantor institution with the exchange agent; and
o such properly completed and executed letter of transmittal
(or facsimile thereof) or, in the case of a book-entry
transfer, an agent's message, as well as the certificate(s)
representing all 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 New York Stock
Exchange trading days after the expiration date.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of old notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date.
To withdraw a tender of old notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the expiration date. Any such notice of withdrawal must
o specify the name of the person having deposited the old notes
to be withdrawn;
o identify the old notes to be withdrawn including the
certificate number or numbers and principal amount of such old
notes;
o be signed by the holder in the same manner as the original
signature on the letter of transmittal by which such old notes
were tendered including any required signature guarantees, or
be accompanied by documents of transfer sufficient to have the
trustee with respect to the old notes register the transfer of
such old notes into the name of the person withdrawing the
tender; and
o specify the name in which any such old notes are to be
registered, if different from that of the depositor.
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 a signed notice of withdrawal with
signatures guaranteed by an eligible guarantor institution unless such holder is
itself an eligible guarantor institution. If old notes have been tendered under
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 the book-entry transfer facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by Harvard in its sole discretion, which determination shall be
final and binding on all parties. Any old notes so withdrawn will be deemed not
to have been properly tendered for purposes of the exchange offer and no new
notes will be issued with respect thereto unless the old notes so withdrawn are
properly retendered. Properly withdrawn old notes may be retendered by following
one of the procedures described above under "--Procedures for Tendering" at any
time prior to the expiration date.
Any old notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the exchange
offer will be returned as soon as practicable after withdrawal, rejection of
tender or termination of the exchange offer 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
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transfer facility under 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).
Conditions
Harvard will not be required to accept for exchange, or exchange new
notes for, any old notes, and may terminate the exchange offer before the
acceptance of the old notes, if:
o any action or proceeding is instituted or threatened in any
court or by or before any governmental agency with respect to
the exchange offer which, in the reasonable judgment of
Harvard, might materially impair the ability of Harvard to
proceed with the exchange offer or materially impair the
contemplated benefits of the exchange offer to Harvard, or any
material adverse development has occurred in any existing
action or proceeding with respect to Harvard or any of its
subsidiaries;
o any change, or any development involving a prospective
change, in the business or financial affairs of Harvard or any
of their subsidiaries has occurred which, in the reasonable
judgment of Harvard, might materially impair the ability of
Harvard to proceed with the exchange offer or materially
impair the contemplated benefits of the exchange offer to
Harvard;
o any law, statute, rule or regulation is proposed, adopted or
enacted, which, in the reasonable judgment of Harvard, might
materially impair the ability of Harvard to proceed with the
exchange offer or materially impair the contemplated benefits
of the exchange offer to Harvard; or
o any governmental approval has not been obtained, which
approval Harvard shall, in its reasonable discretion, deem
necessary for the consummation of the exchange offer as
contemplated hereby.
The above conditions are for the sole benefit of Harvard and may be
asserted by Harvard regardless of the circumstances giving rise to any such
condition or may be waived by Harvard in whole or in part at any time and from
time to time in their reasonable discretion. The failure by Harvard at any time
to exercise any of the foregoing rights will not be deemed a waiver of such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
If Harvard determines in its reasonable discretion that any of the
conditions are not satisfied, Harvard may
o refuse to accept any old notes and return all tendered old
notes to the tendering holders;
o extend the exchange offer and retain all old notes tendered
prior to the expiration of the exchange offer, subject,
however, to the rights of holders to withdraw such old notes
(see "--Withdrawal of Tenders" above); or
o A waive such unsatisfied conditions with respect to the
exchange offer and accept all properly tendered old notes
which have not been withdrawn.
If such waiver constitutes a material change to the exchange offer,
Harvard will promptly disclose such waiver by means of a prospectus supplement
that will be distributed to the registered holders, and Harvard will extend the
exchange offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders, if the exchange offer would otherwise expire during such five to ten
business day period.
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Exchange Agent
Norwest Bank Minnesota, National Association has been appointed as
exchange agent for the exchange offer. Requests for additional copies of this
prospectus or of the letter of transmittal should be directed to the exchange
agent addressed as follows:
<TABLE>
<S> <C> <C>
By Registered or By Hand Delivery or In Person:
Certified Mail: Overnight Courier:
Morwest Bank Minnesota, Norwest Bank Minnesota, Norwest Bank Minnesota,
National Association National Association National Association
Corporate Trust Operations Corporate Trust Operations Northstar East Bldg.
P.O. Box 1517 Norwest Center 608 2nd Ave. S.
Minneapolis, MN 55480-1517 Sixth and Marquette 12th Floor
Minneapolis, MN 55479-0113 Corporate Trust Services
Minneapolis, MN 55479-0113
</TABLE>
By Facsimile: (612) 667 4927
Confirm by Telephone: (612) 667-9764
Fees and Expenses
The expenses of soliciting tenders will be borne by Harvard. Harvard
has not retained any dealer-manager in connection with the exchange offer and
will not make any payments to brokers, dealers or others soliciting acceptances
of the exchange offer. Harvard, however, will pay the exchange agent reasonable
and customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the exchange offer
will be paid by Harvard. Such expenses include fees and expenses of the exchange
agent and trustee, accounting and legal fees and printing costs, among others.
Harvard will pay all transfer taxes, if any, applicable to the exchange
of old notes under the exchange offer. If, however, certificates representing
new notes or old notes for principal amounts not tendered or accepted for
exchange are to be delivered to, or are to be issued in the name of, any person
other than the registered holder of the old notes tendered, or if tendered old
notes are registered in the name of any person other than the person signing the
letter of transmittal, or if a transfer tax is imposed for any reason other than
the exchange of old notes under the exchange offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the letter of
transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
Shelf Registration Statement
If Harvard is not required to file an exchange offer registration
statement because (1) the exchange offer is not permitted by applicable law or
SEC policy or (2) any holder of transfer restricted securities that is either a
"qualified institutional buyer" or an institutional "accredited investor" (both
as defined by the Securities Act) shall notify Harvard at least 20 business days
prior to the consummation of the exchange offer that (A) such holder is
prohibited by applicable law or SEC policy from participating in the exchange
offer, (B) that such holder may not resell the new notes acquired by the
exchange offer to the public without delivering a prospectus and that the
prospectus contained in the exchange offer registration statement is not
appropriate or available for such resales by such Holder or (C) that such holder
is a broker-dealer and holds securities acquired directly from Harvard or one of
its affiliates, then Harvard is required under the registration rights
agreement,
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in lieu of, or in the event of (2) above, in addition to, effecting the
registration of the new notes under the exchange offer registration statement to
file with the SEC a shelf registration statement. Harvard is required under the
registration rights agreement to use its best efforts at the earliest possible
time but in no event later than 120 days after the issuance of the old notes to
keep such shelf registration statement continuously effective for a period
ending on the earlier of the second anniversary of the issuance of the old notes
or such time as there are no longer any registrable securities outstanding.
For purposes of the foregoing, "transfer restricted securities" means
each note until
o the date on which such note has been exchanged by a person
other than a broker-dealer for a new note in the exchange
offer;
o following the exchange by a broker-dealer in the exchange
offer of a note for a new note, the date on which such new
note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of
the prospectus contained in the exchange offer registration
statement;
o the date on which such note has been effectively registered
under the Securities Act and disposed of in accordance with
the shelf registration statement; or
o the date on which such note is distributed to the public
according to Rule 144 under the Act.
"Registrable securities" means the old notes unless such old notes are
sold under Rule 144 (or any successor provision) promulgated under the
Securities Act under circumstances in which any legend borne by such notes
relating to restrictions on transferability thereof, under the Securities Act or
otherwise, is removed by Harvard or according to the indenture or such notes are
eligible to be sold under paragraph (k) of Rule 144 or when such notes shall
cease to be outstanding.
Harvard will, in the event of the filing of the shelf registration
statement, provide to each holder of registrable securities covered by the shelf
registration statement copies of any shelf registration statement or any
prospectus which is a part of the shelf registration statement, notify each such
holder when the shelf registration statement has become effective and take
certain other actions as are required to permit unrestricted resales of
registrable securities. A holder of registrable securities that sells such
registrable securities pursuant to the shelf registration statement generally
will be required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to the purchaser, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the registration rights
agreement which are applicable to such holder (including certain indemnification
obligations). In addition, holders of registrable securities will be required to
deliver information to be used in connection with the shelf registration
statement and to provide comments on the shelf registration statement within the
time periods set forth in the registration rights agreement in order to have
their registrable securities included in the shelf registration statement and
benefit from the provisions regarding liquidated damages, if any, set forth in
the following paragraph.
Liquidated Damages
If (a) any of the registration statements required under the
registration rights agreement is not filed with the SEC on or prior to the
target date specified for such filing therein, (b) any of such registration
statements has not been declared effective by the SEC on or prior to the date
specified for such effectiveness under the registration rights agreement, (c)
the exchange offer has not been consummated within 30 business days after the
effectiveness target date with respect to the exchange offer registration
statement or (d) any registration statement required under the registration
rights 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 two business days by a post-effective amendment to such
registration statement that cures such failure and that is itself immediately
declared effective (each such event referred to in clauses (a) - (d), a
"registration default"), then liquidated damages in the form of interest shall
accrue (in addition to any stated interest on the notes) at a rate
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of 0.50% per annum per $1,000 principal amount of old notes held by such holder.
The amount of liquidated damages will increase by an additional 0.50% per annum
per $1,000 principal amount of notes with respect to each subsequent 12 week
period until all registration defaults have been cured, up to a maximum amount
for all liquidated damages for all registration defaults of 2.00% per annum per
$1,000 principal amount of notes. All accrued liquidated damages shall be paid
to holders by Harvard on a semi-annual basis every March 1 and September 1 in
the same manner as interest is paid under the indenture. Following the cure of
all registration defaults relating to any particular security whose transfer is
restricted, the accrual of the liquidated damages with respect to such security
will cease. Liquidated damages have been accruing since March 24, 1999. Such
liquidated damages will cease to accrue once the registration statement of which
this prospectus forms a part becomes effective.
Accounting Treatment
The new notes will be recorded at the same carrying value as the old
notes, which is the principal amount as reflected in Harvard's accounting
records on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The expenses of the exchange offer and the
unamortized expenses related to the issuance of the old notes will be amortized
over the term of the notes.
Regulatory Approvals
Harvard does not believe that the receipt of any material federal or
state regulatory approvals will be necessary in connection with the exchange
offer, other than the effectiveness of the exchange offer registration statement
under the Securities Act.
Other
Participation in the exchange offer is voluntary and holders of old
notes should carefully consider whether to accept the terms and conditions
thereof. Holders of the old notes are urged to consult their financial and tax
advisors in making their own decisions on what action to take with respect to
the exchange offer.
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DESCRIPTION OF THE NOTES
The new notes will be issued under an indenture among Harvard, the
subsidiary guarantors and Norwest Bank Minnesota, National Association, as
trustee, which is also the indenture under which the old notes were issued. The
terms of the new notes are identical in all respects to the terms of the old
notes, except that the new notes will have been registered under the Securities
Act, and, therefore, will not bear legends restricting their transfer. Also, the
provisions of the registration rights agreement, including those respecting
payment of liquidated damages, will not apply to the new notes. 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 notes are subject
to all of those terms, and holders of notes and the related guarantees are
referred to the indenture and the Trust Indenture Act for a complete statement
of them. The following summary of the material provisions of the indenture is
not complete. For a complete understanding of the indenture, you should read the
entire document, including the definitions stated in the indenture of the
defined terms used in it. Copies of the indenture, the collateral agreement and
other security documents and the registration rights agreement were filed as
exhibits to the exchange offer registration statement and are available as set
forth under the caption "Where You Can Find More Information." The definitions
of some of the terms used in the following summary are stated below under
Defined Terms."
The notes:
o are senior obligations of Harvard;
o rank equally in right of payment with all current and future
senior debt of Harvard, including our senior credit facility;
o are secured by liens on substantially all of Harvard's
tangible and intangible assets that are second in priority to
the liens securing our senior credit facility;
o rank senior in right of payment to all future subordinated
obligations of Harvard; and
o are fully and unconditionally guaranteed, jointly and
severally, by each of Harvard's domestic subsidiaries, which
guarantees are secured by liens on substantially all tangible
and intangible assets of those subsidiaries that are likewise
second in priority to the liens securing our senior credit
facility.
The operations of Harvard are conducted primarily through its
subsidiaries, and, therefore, Harvard is dependent upon the cash flow of its
subsidiaries to meet its obligations, including its obligations under the notes.
In addition, Harvard and the Restricted Subsidiaries are parties to our
senior credit facility, and all borrowings thereunder are secured by a first
priority security interest in the collateral, subject to certain liens. Because
the notes are secured by a second priority security interest in the collateral,
subject to liens permitted by the covenant entitled "Liens," the notes are
effectively subordinated to our senior credit facility up to the value of the
collateral securing borrowings under our senior credit facility.
As of the date of this prospectus, all of our domestic subsidiaries are
Restricted Subsidiaries. Under certain circumstances, Harvard will able to
designate current or future subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to any of the restrictive
covenants set forth in the indenture.
Principal, Maturity and Interest
The new notes are in the aggregate principal amount of $25.0 million
and will mature on September 1, 2003.
Interest on the notes accrues at a rate equal to the sum of:
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o the rate of 14 1/2% per annum on the principal amount
of notes outstanding, which is calculated on the
basis of a 360-day year comprised of twelve 30-day
months, plus
o cash flow participation interest.
Cash flow participation interest for any relevant period equals the
product of:
o Consolidated Cash Flow for the six month period
ending, for interest payments due March 1 of each
year, on December 31 and, for interest payments due
on September 1 of each year, on June 30 prior to the
next succeeding interest payment date, multiplied by
o the percentage stated in the following table for the
period ending on the interest payment date shown:
Interest Payment Date Percentage
--------------------- ----------
March 1, 1999................................... 2.00%
September 1, 1999............................... 2.00%
March 1, 2000................................... 2.50%
September 1, 2000............................... 2.50%
March 1, 2001................................... 3.50%
September 1, 2001............................... 3.50%
March 1, 2002................................... 4.50%
September 1, 2002............................... 4.50%
March 1, 2003................................... 4.50%
September 1, 2003............................... 4.50%
If, however, the calculation of cash flow participation interest, based
on the percentages stated above, results in an amount that is less than $1
million for two consecutive six month periods taken together, then the cash flow
participation interest will be a minimum amount of $1 million for the two
corresponding interest payment dates taken together. However:
(1) if Harvard's Fixed Charge Coverage Ratio is less than 2.50
to 1 for any six month period listed above, then Harvard will have the
option to pay cash flow participation interest on the next succeeding
interest payment date for that six month period in kind, rather than in
cash, by the issuance of additional notes equal to the amount of such
interest;
(2) if Harvard elects to pay cash flow participation interest
for a six month period by the issuance of pay-in-kind notes, then
Harvard will be required to redeem those pay-in-kind notes on the
interest payment date falling immediately after the next succeeding six
month period at a redemption price equal to 100% of the principal
amount of the pay-in-kind notes plus accrued and unpaid interest and
applicable liquidated damages payable under the registration rights
agreement, if any, on such pay-in-kind notes, to the date of redemption
if, but only if:
(A) Harvard's Fixed Charge Coverage Ratio for the
four full fiscal quarters immediately preceding the redemption
date would have been at least 2.50 to 1 determined on a pro
forma basis after giving effect to the redemption as if the
redemption had occurred at the beginning of the applicable
four-quarter reference period and
(B) the redemption is permitted by our senior credit
facility; and
(3) in the event that any period for which interest, including
cash flow participation interest, accrues and is due is less than 180
days, then the interest due for that period will be pro rated to
reflect the actual number of days that the notes were outstanding in
that period, calculated on the basis of a 360 day year comprised of
twelve 30-day months.
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If any pay-in-kind notes are issued, they will have the same form and terms as
the new notes offered hereby. The new notes and any such pay-in-kind notes will
be treated as a single class for all purposes.
Interest will be payable semi-annually in arrears on March 1 and
September 1 commencing on March 1, 1999 to noteholders of record on the
immediately preceding February 15 and August 15. 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 November 24, 1998, the date the old notes were
originally issued.
Interest on overdue principal and on overdue installments of interest
will accrue at the same rate of interest that is borne by the notes.
Principal, prepayment premium, if any, and interest and applicable
liquidated damages payable under the registration rights agreement, if any, on
the notes will be payable:
(a) at the office or agency of Harvard maintained for such purpose
within the City and State of New York; or
(b) at the option of Harvard, payment of interest and applicable
liquidated damages, if any, may be made by check mailed to the
noteholders of the notes at their respective addresses set
forth in the register of noteholders; provided that all
payments of principal, prepayment premium, interest and
applicable liquidated damages, if any, with respect to notes
the noteholders of which have given wire transfer instructions
to Harvard will be required to be made by wire transfer of
immediately available funds to the accounts specified by the
noteholders thereof.
Until otherwise designated by Harvard, Harvard's office or agency in
New York will be the office of the trustee maintained for such purpose. The
notes will be issued in denominations of $1,000 and integral multiples thereof.
Guarantees
Harvard's payment obligations under the notes will be fully and
unconditionally guaranteed on a joint and several basis by the subsidiary
guarantors. The guarantees, including the payment of principal and prepayment
premium, if any, and of interest and applicable liquidated damages, if any, on
the notes:
o are senior obligations of the subsidiary guarantors;
o rank pari passu in right of payment with all existing and
future senior obligations of the subsidiary guarantors; and
o are secured by liens on substantially all of the subsidiary
guarantors' tangible and intangible assets that are second in
priority to the liens securing our senior credit facility;
o rank senior to all existing and future subordinated
obligations of the subsidiary guarantors.
The guarantees will be secured as set forth below under "Collateral."
The obligations of each subsidiary guarantor under its guarantee will be limited
so as not to constitute a fraudulent conveyance or fraudulent transfer under
applicable law. We and the subsidiary guarantors believe that at the time we
initially incurred the obligations under the old notes or the guarantees, as the
case may be, we and the subsidiary guarantors together:
o were (a) in possession of sufficient capital to run our
businesses effectively; and (b) incurring debts within our
ability to pay as the same become due;
o were not insolvent nor rendered insolvent by incurring the
obligations; and
o had sufficient assets to satisfy any probable money judgment
against us in any pending action.
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In reaching these conclusions, we and the subsidiary guarantors have relied upon
our analysis of internal cash flow projections and estimated values of assets
and liabilities of the subsidiary guarantors. We cannot assure you that a court
ruling on such questions would reach the same conclusions.
The claims of trade creditors and other creditors of any subsidiary
that is not a subsidiary guarantor will generally have priority as to the assets
of such subsidiaries over the claims of the noteholders. At January 3, 1999, the
amount of those liabilities of the subsidiaries that are not subsidiary
guarantors were approximately $4.2 million.
The indenture provides that no subsidiary guarantor may consolidate
with or merge with or into another corporation, person or entity unless:
(1) subject to the provisions of the following paragraph, the
person formed by or surviving any such consolidation or merger assumes
all the obligations of such subsidiary guarantor under a supplemental
indenture in form and substance reasonably satisfactory to the trustee,
under the notes and the indenture; and
(2) immediately after giving effect to such transaction, no
default or event of default exists.
The indenture provides that in the event of a sale or other disposition
of all of the assets of any subsidiary guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the capital
stock of any subsidiary guarantor, then the subsidiary guarantor or the
corporation acquiring the property, as applicable, will be released from any
obligations under its guarantee; provided that the net proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the indenture and the intercreditor agreement signed in connection therewith.
See "Repurchase at the Option of Noteholders--Asset Sales."
Until all guarantees by the subsidiary guarantors under the indenture
and the notes have been released in accordance with the next succeeding
sentence, Harvard must cause each domestic subsidiary that is an obligor under
our senior credit facility to become a subsidiary guarantor under the indenture
and the notes and thereby issue its guarantee of the notes on the terms and
conditions set forth in the indenture and the notes.
Upon a subsidiary ceasing to be an obligor under our senior credit
facility, the guarantee of such subsidiary under the indenture and the notes
will be released and discharged at such time and will not be reinstated or
renewed so long as the subsidiary's obligations under our senior credit facility
remain discharged.
Collateral
Harvard, the subsidiary guarantors, the trustee and Norwest Bank
Minnesota, National Association, as collateral agent, have entered into a
collateral agreement. Under the collateral agreement, the notes and the
guarantees are secured by a second priority security interest in substantially
all the tangible and intangible assets of Harvard and the subsidiary guarantors
and all proceeds thereof. The collateral also includes all of the outstanding
stock of each of the subsidiary guarantors and 65% of the stock of one of
Harvard's Canadian subsidiaries, which is not a guarantor. Harvard and the
subsidiary guarantors will maintain the security interest created by the
security documents as a perfected security interest and will furnish reports
further describing the collateral as the collateral agent may from time to time
request. For a discussion of the risks relating to the use of the collateral to
secure the notes, see "Risk Factors--The notes are secured by a second priority
security interest; in case of a default, there may not be sufficient available
collateral to satisfy our obligations under the notes," "--The remedies selected
by the agent for our senior lenders in the event of a foreclosure on the
collateral may not serve the interests of the noteholders," and "--A future
bankruptcy by Harvard could impair the collateral agent's exercise of remedies
on your behalf."
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Bankruptcy Limitations
The right of the collateral agent to repossess and dispose of the
collateral upon the occurrence of an event of default would be significantly
impaired by applicable provisions of the Bankruptcy Code in the event that a
bankruptcy proceeding were to be commenced by or against Harvard or the
subsidiary guarantors prior to the collateral agent having repossessed and
disposed of the collateral. Prior to foreclosing on the property securing the
notes and the guarantees, the trustee must pursue payment under the guarantees.
Under the Bankruptcy Code, a secured creditor such as the collateral agent is
prohibited from repossessing its security from a debtor in a bankruptcy case, or
from disposing of security repossessed from such debtor, without bankruptcy
court approval.
Moreover, the Bankruptcy Code permits the debtor to continue to retain
and to use collateral even though the debtor is in default under the applicable
debt instruments, provided that the secured creditor is given "adequate
protection." The meaning of the term "adequate protection" may vary according to
circumstances, but it is intended in general to protect the value of the secured
creditor's interest in the collateral and may include cash payments or the
granting of additional security, if and at such times as the court in its
discretion determines, for any diminution in the value of the collateral as a
result of the stay of repossession or disposition or any use of the collateral
by the debtor during the pendency of the bankruptcy case.
In view of the lack of a precise definition of the term "adequate
protection" and the broad discretionary powers of a bankruptcy court, it is
impossible to predict how long payments under the notes could be delayed
following commencement of a bankruptcy case, whether or when the collateral
agent could repossess or dispose of the collateral or whether or to what extent
noteholders of the notes would be compensated for any delay in payment or loss
of value of the collateral through the requirement of "adequate protection." Any
disposition of the collateral would also require approval of the bankruptcy
court. See "Risk Factors--A future bankruptcy by Harvard could impair the
collateral agent's exercise of remedies on your behalf."
No appraisals of any of the collateral have been prepared by or on
behalf of Harvard in connection with the issuance and sale of the notes. In the
event a bankruptcy court determines that the value of the collateral is not
sufficient to repay all amounts due under the indenture and the collateral
agreement, the collateral agent, on behalf of the noteholders of notes, would
have a secured claim up to the value of the collateral securing Harvard's and
the subsidiary guarantors' obligations under the notes and the guarantees,
subject to the intercreditor agreement and liens permitted under the covenant
described below under "Liens," and unsecured claims with respect to any
shortfall. The Bankruptcy Code permits the payment and/or accrual of
post-petition interest, costs and attorneys' fees to the collateral agent during
a debtor's bankruptcy case only up to the value of the collateral that is
determined by the bankruptcy court to exceed the aggregate obligation under such
note or guarantee.
Possession, Use and Release of Collateral
Possession and the Use of Collateral. Unless an event of default occurs and is
continuing, Harvard and the subsidiary guarantors will generally have the right:
o to remain in possession and retain exclusive control of the
collateral securing Harvard's and the subsidiary guarantors'
obligations under the notes and the guarantees; and
o to freely operate the collateral and to collect, invest and
dispose of any income therefrom.
Release of Collateral. The collateral securing Harvard's and the subsidiary
guarantors' obligations under the notes and the guarantees may be sold or
disposed of free and clear of the security interests referred to above in
connection with:
o sales of inventory and collection of accounts receivable in
the ordinary course of business;
o sales and other dispositions as described below under "Asset
Sale Release;" and
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o the release of collateral with the consent of each affected
noteholder.
In general, upon compliance by Harvard with the conditions stated
below, under the security documents relating to the notes and those relating to
Harvard's senior credit facility, the intercreditor agreement, and the
applicable provisions of the Trust Indenture Act in respect of any release of
items of collateral, and upon delivery by Harvard to the collateral agent of an
opinion of counsel to the effect that those conditions have been met, the
collateral agent will release the items to be released from the lien of the
collateral agreement and reconvey those items to Harvard and its subsidiaries,
as applicable.
Asset Sale Release. Harvard has the right to obtain a release of items of
collateral that are the subject of an Asset Sale upon compliance with the
condition that Harvard deliver to the collateral agent the following:
(A) a notice from Harvard requesting the release of those
items of collateral:
(1) describing the proposed items to be released;
(2) specifying the purchase price received for such
items on a date within 30 days of such notice;
(3) stating that the purchase price received is at
least equal to the fair market value of the items to be
released as well as certain other matters, to the extent
applicable, relating to restrictions set forth under the
caption "Asset Sales";
(4) stating that the release of such items would not
be expected to interfere with the collateral agent's ability
to realize the value of the remaining collateral and will not
impair the maintenance and operation of the remaining
collateral; and
(5) certifying that such Asset Sale complies with the
terms and conditions of the security documents with respect
thereto;
(B) an officer's certificate stating that:
(1) such Asset Sale covers only the items to be
released and complies with the terms and conditions of the
indenture with respect to Asset Sales;
(2) all net proceeds from the sale of those items
will be applied under the provisions of the applicable
security documents and the intercreditor agreement;
(3) there is no default or event of default in effect
or continuing on the date thereof, the date the purchase price
is received or the date of such Asset Sale; and
(4) the release of the item of collateral will not
result in a default or event of default under the indenture,
the senior credit facility, or the security documents relating
to the release in question; and
(C) Excess proceeds, if any, that are required to be delivered
to the collateral agent under the indenture and the intercreditor agreement and
to the administrative agent under our senior credit facility and the
intercreditor agreement have been so delivered or are being delivered.
Intercreditor Agreement
Harvard, the administrative agent under our senior credit facility and
the trustee have entered into an intercreditor agreement. The intercreditor
agreement provides for, among other things:
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o the allocation of rights between the administrative agent and
the trustee with respect to the collateral;
o enforcement provisions and remedies with respect thereto; and
o the release of the collateral.
The intercreditor agreement includes provisions in which the trustee
acknowledges that:
o the lenders under the senior credit facility will be granted a
first priority security interest in the collateral;
o the trustee will not have any claims to the collateral on
either an equal basis or prior to the administrative agent
under the senior credit facility; and
o so long as the obligations of Harvard and the subsidiary
guarantors under the senior credit facility have not been
satisfied, the trustee will not have any right or claim in
respect of the rights and remedies of the administrative agent
and such lenders, except as provided by the intercreditor
agreement. Neither will the administrative agent or the
lenders under the senior credit facility have any obligation
regarding the exercise of such rights or any other obligation
or duty in respect of the trustee, nor may the trustee
participate in the commencement or solicitation of
commencement of any bankruptcy proceeding against Harvard or
seek the appointment of a receiver for the affairs or property
of Harvard, except that the trustee may pursue its rights
under the indenture regarding the collection of accrued and
unpaid interest unless a default or event of default has
occurred under the senior credit facility.
The intercreditor agreement also provides that so long as the
obligations or commitments under our senior credit facility have not been paid
in full or terminated, as the case may be, the trustee will not be able to:
o exercise any remedies with respect to the collateral on behalf
of the noteholders;
o institute any action with respect to such remedies, including
any foreclosure action or contest any foreclosure proceeding
brought by the administrative agent or any lender under the
senior credit facility or any other exercise by any such party
of any rights and remedies relating to the collateral under
the security documents or otherwise; or
o object to the forbearance by the lenders under the senior
credit facility from bringing or pursuing any foreclosure
proceeding or action or any other exercise of any rights
relating to the collateral.
In addition, the administrative agent has the exclusive right to
enforce certain rights, exercise certain remedies and make certain
determinations regarding the disposition of the collateral.
The administrative agent is required, under the terms of the
intercreditor agreement, to apply the proceeds from the sale or other
disposition of the collateral:
o first, to satisfy in full all costs and expenses, including
attorneys' fees and disbursements, incurred by the lenders
under the senior credit facility and the administrative agent
in connection with such disposition;
o second, to satisfy in full the claims of those lenders; and,
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o after all commitments of those lenders to make loans under the
senior credit facility have been terminated, to deliver any
remaining proceeds to the trustee to be applied to the claims
of the noteholders.
The Uniform Commercial Code, which may not be applicable in a
bankruptcy context, imposes for the benefit of the trustee and the noteholders a
requirement that any foreclosure sale of collateral be conducted in a
commercially reasonable manner, which requirement may be modified, but not
waived, by contract. In addition, the parties to the intercreditor agreement
have agreed that, in the enforcement and exercise of their rights and remedies
under the security documents signed in connection with the senior credit
facility, the administrative agent and the lenders will act in a commercially
reasonable manner.
The administrative agent under the senior credit facility is required
to act in the interest of the lenders under our senior credit facility. Neither
the trustee nor the noteholders may hold the collateral or contest any senior
lien granted by Harvard to the lenders under the senior credit facility. Those
lenders and the administrative agent have the exclusive right to release any or
all of the collateral, subject to the trustee's written notice to the
administrative agent that such release does not violate the indenture. In
addition, in order to facilitate the sale of the capital stock of any subsidiary
guarantor permitted by our senior credit facility and the indenture, the
administrative agent may release such subsidiary guarantor from its obligations
under our senior credit facility without the consent of the trustee, subject to
the trustee's written notice to the administrative agent that such release does
not violate the indenture.
Optional Redemption
Prior to September 1, 2001, the notes are redeemable, in whole or in
part, at the option of Harvard:
o upon not less than 30 and no more than 60 days' prior notice;
o on any March 1, June 1, September 1 or December 1 of any year;
and
o at a redemption price equal to:
(a) 100% of the principal amount thereof, plus
(b) the applicable prepayment premium, plus
(c) to the extent not included in the prepayment premium,
accrued and unpaid interest and liquidated damages,
if any, applicable under the registration rights
agreement, to the date of redemption.
For purposes of the foregoing:
o the prepayment premium, with respect to a note, is an amount
equal to the present value of the remaining percentage
interest and premium payments due on such note as if such note
were redeemed on September 1, 2001 in accordance with the next
succeeding paragraph, discounted to the date of redemption on
a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at a discount rate equal to the Treasury
Rate plus 100 basis points; and
o if Harvard redeems any note on June 1 or December 1 of any
year, then cash flow participation interest must be calculated
by multiplying (A) Consolidated Cash Flow, with respect to any
redemption on June 1, for the quarterly period ended on the
preceding March 31 and, with respect to any redemption on
December 1, for the quarterly period ended on the preceding
September 30 by (B) the applicable percentage, stated under
"Principal, Maturity and Interest," corresponding to the date
next succeeding that June 1 or December 1, as the case may be.
On or after September 1, 2001, the notes are redeemable, in whole or in
part:
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o upon not less than 30 nor more than 60 days' prior notice; and
o at the redemption prices, expressed as percentages of
principal amount, set forth below plus accrued and unpaid
interest and applicable liquidated damages, if any, thereon to
the applicable redemption date, if redeemed during the
twelve-month period beginning on September 1 of the years
indicated below:
Year Percentage
---- ----------
2001 ............................................ 107.250%
2002 ............................................ 103.625%
For purposes of the foregoing, if Harvard redeems any note:
o on March 1 or September 1 of any year, then cash flow
participation interest will be calculated as set forth under
"Principal, Maturity and Interest;"
o on June 1 or December 1 of any year, then cash flow
participation interest will be calculated by multiplying (A)
Consolidated Cash Flow, with respect to any redemption on June
1, for the quarterly period ended on the preceding March 31
and, with respect to any redemption on December 1, for the
quarterly period ended on the preceding September 30 by (B)
the applicable percentage, stated under "Principal, Maturity
and Interest," corresponding to the date next succeeding that
June 1 or December 1, as the case may be; and
o on any date other than March 1, June 1, September 1 or
December 1 of any year, then cash flow participation interest
will be calculated as described under "Principal, Maturity and
Interest" with respect to such calculation for prorated
periods.
Selection and Notice
If less than all of 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, by lot, pro rata or by
such other method as the trustee may deem fair and appropriate; provided that no
notes of $1,000 or less may be redeemed in part. Notices of redemption must be
mailed by first class mail at least 30 but not more than 60 days before the
redemption date to each noteholder 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 must
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 noteholder 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 stated above under "Principal, Maturity and Interest" with
respect to redemption of pay-in-kind notes and below under "Repurchase at the
Option of Noteholders," Harvard is not required to make mandatory redemption or
sinking fund payments with respect to the notes.
Repurchase at the Option of Noteholders
Change of Control. Upon the occurrence of a Change of Control, each noteholder
will have the right to require Harvard to repurchase all or any part equal to
$1,000 or an integral multiple thereof of such noteholder's notes in accordance
with the offer described below at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
applicable liquidated damages thereon,
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if any, to the date of purchase. The calculation of the portion of unpaid
interest represented by cash flow participation interest must be made in the
same manner as that described under the second paragraph of the caption above
entitled "Optional Redemption."
Within ten days following any Change of Control, Harvard will mail a
notice to each noteholder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase notes on the date
specified in such notice, which date must be no earlier than 30 days and no
later than 60 days from the date such notice is mailed, under the procedures
required by the indenture and described in such notice. Harvard will comply with
the requirements of Rule 14e-1 under the Securities 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 date specified for repurchase of the notes, Harvard will, if
lawful:
o accept for payment all notes properly tendered;
o deposit the required payment amounts with the paying agent for
the notes in respect of all notes so tendered; and
o 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 being purchased by
Harvard.
The paying agent will promptly mail to each holder of notes so tendered
the required payment for such notes, and the trustee will promptly authenticate
and mail or cause to be transferred by book entry to each noteholder 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. Harvard will publicly announce the results of
the repurchase on or as soon as practicable after the date of payment.
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 noteholders of the notes to require that
Harvard repurchase or redeem the notes in the event of a takeover,
recapitalization or similar transaction.
Our senior credit facility prohibits Harvard from purchasing any notes
following a Change of Control and also will provide that certain change of
control events with respect to Harvard would constitute an event of default
thereunder. Any future credit agreements or other agreements relating to senior
debt to which Harvard becomes a party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when Harvard is
prohibited from purchasing notes, Harvard could seek the consent of the lenders
under the senior credit facility to the purchase of notes or could attempt to
refinance the borrowings that contain such prohibition. If Harvard does not
obtain such a consent or repay such borrowings, Harvard will remain prohibited
from purchasing notes. In such case, Harvard's failure to purchase tendered
notes would constitute an event of default under the indenture which would, in
turn, constitute a default under our senior credit facility. The indenture
provides that, prior to complying with the provisions of this covenant, but in
any event within 60 days following a Change of Control, Harvard will either
repay all outstanding senior debt other than the notes or obtain the requisite
consents or waivers, if any, under all agreements governing outstanding senior
debt to permit the repurchase of notes required by this covenant.
Harvard will not be required to repurchase notes upon a Change of
Control if a third party offers to do so in the manner, at the times and
otherwise in compliance with the requirements set forth in the indenture
applicable to a repurchase by Harvard upon a Change of Control, and purchases
all notes properly tendered and not withdrawn under such offer, or if Harvard
exercises an option to purchase the notes.
The definition of Change of Control includes a phrase relating to sales
and other dispositions of "all or substantially all" of the assets of Harvard
and its subsidiaries. Although there is a developing body of case law
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interpreting the phrase "substantially all," there is not a precise or
established definition of the phrase under applicable law. Accordingly, the
ability of a noteholder to require Harvard to repurchase such notes as a result
of a sale or other disposition of less than all of the assets of Harvard and its
subsidiaries to another person or group may be uncertain.
Asset Sales. Harvard will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
o Harvard or such Restricted Subsidiary 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, of the assets; and
o at least 85% of the consideration received by Harvard or such
Restricted Subsidiary is in the form of cash or Cash
Equivalents; provided that the amount of:
(a) any liabilities, as shown on Harvard's or such
Restricted Subsidiary's most recent balance sheet, of
Harvard 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 under a customary novation
agreement that releases Harvard or such Restricted
Subsidiary from further liability; and
(b) any securities, notes or other obligations received
by Harvard or any such Restricted Subsidiary from
such transferee that are immediately converted by
Harvard or such Restricted Subsidiary into cash, up
to the amount of the cash received, will be deemed to
be cash for purposes of this provision.
Notwithstanding the above:
o Harvard will not be permitted to make any Asset Sale of its
subsidiary The Kingston-Warren Corporation; and
o Harvard must comply with the applicable requirements of
Section 314(d) of the Trust Indenture Act regarding, and as a
condition to, the release of collateral.
Within 180 days after the receipt of any net proceeds from an Asset
Sale, Harvard may apply such net proceeds, at its option:
o to repay Indebtedness under our senior credit facility and, in
the case of borrowings under the revolving credit portion of
our senior credit facility, to correspondingly permanently
reduce the commitments with respect thereto;
o to the acquisition of a controlling interest in another
business, provided that (a) on a pro forma basis after giving
effect to such acquisition, Harvard's Consolidated Leverage
Ratio as of the last day of the period of four consecutive
fiscal quarters preceding such acquisition is no higher than
it would have been without giving pro forma effect to such
acquisition and (b) such other business engages in a Permitted
Business; or
o to make a capital expenditure or the acquisition of other
tangible long-term assets, in each case, in Permitted
Businesses.
Pending the final application of any such net proceeds, Harvard may
temporarily reduce Indebtedness under our senior credit facility or otherwise
invest such net proceeds in any manner that is not prohibited by the indenture.
If there are more than $2 million of net proceeds from Asset Sales that are not
applied or invested as
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provided in the first sentence of this paragraph, Harvard will be required to
make an offer to all noteholders (an "Asset Sale Offer") to purchase the maximum
principal amount of notes that may be purchased out of those excess proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and applicable liquidated damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in the indenture. If the aggregate amount of notes tendered under an Asset
Sale Offer is less than those excess proceeds, Harvard may use any of the
remaining excess proceeds for general corporate purposes. If the aggregate
principal amount of notes surrendered by noteholders thereof exceeds the amount
of those excess proceeds, the trustee will select the notes to be purchased on a
pro rata basis.
Our senior credit facility contains certain covenants that restrict the
ability of Harvard to sell assets, other than the assets of the Toledo, Tiffin
and Harman businesses, obsolete assets, sales of inventory in the ordinary
course of business and certain other exceptions.
Covenants
Restricted Payments
The indenture provides that Harvard will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly:
o declare or pay any dividend or make any other payment or
distribution on account of Harvard's or any of its Restricted
Subsidiaries' equity interests, including any payment in
connection with any merger or consolidation involving Harvard,
or to the direct or indirect holders of Harvard'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
Harvard and other than dividends and distributions payable to
Harvard or any Restricted Subsidiary;
o purchase, redeem or otherwise acquire or retire for value,
including in connection with any merger or consolidation
involving Harvard, any equity interests of Harvard or any
direct or indirect parent of Harvard or other affiliate of
Harvard, other than a subsidiary of Harvard;
o make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the notes; or
o make any Restricted Investment;
unless, at the time of and after giving effect to any of these payments or other
actions (collectively, "Restricted Payments"):
(a) no default or event of default shall have occurred
and be continuing or would occur as a consequence
thereof; and
(b) Harvard 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 under the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant
described below under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by
Harvard or any of its Restricted Subsidiaries after
November 24, 1998, excluding Restricted Payments
permitted by clauses (2), (3) or (4) of the next
succeeding paragraph, is less than the sum of (1) 50%
of the Consolidated Net Income of Harvard for the
period, taken as one accounting period, from the
beginning of the
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first fiscal quarter immediately following November
24, 1998 to the end of Harvard'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 (2) 100% of the aggregate net cash
proceeds received by Harvard as a contribution to its
common equity capital or from the issue or sale since
November 24, 1998 of equity interests of Harvard,
other than Disqualified Stock, or of Disqualified
Stock or debt securities of Harvard 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 Harvard and other than Disqualified
Stock or convertible debt securities that have been
converted into Disqualified Stock, plus (3) to the
extent not already included in Consolidated Net
Income of Harvard for such period without
duplication, if any Restricted Investment that was
made by Harvard or any of its Restricted Subsidiaries
after November 24, 1998 is sold for cash or otherwise
liquidated or repaid for cash, or if any Unrestricted
Subsidiary which is designated as an Unrestricted
Subsidiary subsequent to the November 24, 1998 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 or
Unrestricted Subsidiary, less the cost of
disposition, if any, and (B) the initial amount of
such Restricted Investment or designated amount of
such Unrestricted Subsidiary.
So long as no default or event of default has occurred and is
continuing or would be caused thereby, the foregoing provisions do not prohibit:
(1) the payment of any dividend 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;
(2) the redemption, repurchase, retirement, defeasance or
other acquisition of any Indebtedness which is subordinated to the
notes or equity interests of Harvard in exchange for, or out of the net
cash proceeds of the substantially concurrent sale, other than to a
Restricted Subsidiary of Harvard, of other equity interests of Harvard
(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 will be
excluded from clause (c) (2) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other
acquisition of Indebtedness which is subordinated to the notes with the
net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness;
(4) the payment of any dividend or distribution by a
Restricted Subsidiary of Harvard to the holders of its common equity
interests so long as Harvard or another Restricted Subsidiary receives
at least its pro rata share of such dividend or distribution in
accordance with its equity interests;
(5) the repurchase, redemption or other acquisition or
retirement for value of any equity interests of Harvard that are held
by any member of Harvard's or any of its Restricted Subsidiaries'
management under any management equity subscription agreement or stock
option agreement, provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired equity interests may not
exceed $500,000 in any twelve-month period; and
(6) distributions required under Harvard's plan of
reorganization in bankruptcy, but only in the manner and in the amount
contemplated thereby.
The amount of all Restricted Payments other than cash will be the fair
market value on the date of the Restricted Payment of the assets or securities
proposed to be transferred or issued by Harvard or such Restricted Subsidiary of
Harvard, under the Restricted Payment. The fair market value of any non-cash
Restricted Payment will be determined by the Board of Directors of Harvard whose
resolution with respect thereto must be
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delivered to the trustee, such determination to be based upon an opinion or
appraisal issued by an investment banking firm of national standing or by an
appraisal firm of national standing, if such fair market value exceeds or
reasonably may exceed $1.0 million. Not later than the date of making any
Restricted Payment, Harvard must 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 Harvard will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, become liable with
respect to any Indebtedness, including Acquired Debt, and Harvard 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 Harvard may incur
Indebtedness, including Acquired Debt, and issue shares of Disqualified Stock
and any Restricted Subsidiary may incur Acquired Debt if:
o Harvard's Fixed Charge Coverage Ratio for Harvard's most
recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.75 to
1, determined on a pro forma basis, 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; and
o Harvard is in compliance with the covenant described below
entitled "Maintenance of Consolidated Leverage Ratio."
The provisions of the first paragraph of this covenant shall not apply
to the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt") so long as no default has occurred and is continuing or would
be caused thereby:
(1) the incurrence by Harvard or its Restricted Subsidiaries
of Indebtedness under our senior credit facility and letters of credit
outstanding thereunder, with such letters of credit being deemed to
have a principal amount equal to the maximum potential liability of
Harvard and its Restricted Subsidiaries thereunder; provided that the
sum of the aggregate principal amount of all Indebtedness of Harvard
and its Restricted Subsidiaries outstanding under our senior credit
facility after giving effect to such incurrence, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any other Indebtedness incurred under this clause (1) does not
exceed an amount equal to $125.0 million less, without duplication, (x)
the aggregate amount of all repayments, optional or mandatory, of the
principal of any Indebtedness under the term loan portion of our senior
credit facility that have been made by Harvard and its Restricted
Subsidiaries since the November 24, 1998, (y) the aggregate amount of
pay-in-kind notes issued and outstanding under the indenture and (z)
the aggregate amount of Asset Sale proceeds applied by Harvard and its
Restricted Subsidiaries to permanently reduce the availability of
revolving credit Indebtedness under our senior credit facility
according to the provisions described under the caption "Asset Sales;"
(2) the incurrence by Harvard of Indebtedness represented by
the notes and the pay-in-kind notes issued under the indenture and the
incurrence by the subsidiary guarantors of the guarantees;
(3) the incurrence by Harvard or any of its Restricted
Subsidiaries of Indebtedness represented by obligations under capital
leases, 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 Harvard or such Restricted
Subsidiary, in an aggregate principal amount, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace
Indebtedness incurred under this clause (3), not to exceed $5.0 million
at any time outstanding;
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(4) the incurrence by Harvard or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness;
(5) the incurrence by Harvard of Indebtedness owing to and
held by any Restricted Subsidiary or Indebtedness of a Restricted
Subsidiary which is a guarantor owing to and held by Harvard or another
Restricted Subsidiary which is a guarantor; provided, however, that (a)
if Harvard 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 the indenture, (b) if a
Restricted Subsidiary of Harvard is the obligor on such Indebtedness,
such Indebtedness is expressly subordinated to the prior payment in
full in cash of such Restricted Subsidiary's guarantee and (c)(1) any
subsequent event or issuance or transfer of equity interests that
results in any such Indebtedness being held by a person other than
Harvard or a Restricted Subsidiary of Harvard and (2) any sale or other
transfer of any such Indebtedness to a person that is not either
Harvard or a subsidiary guarantor shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by Harvard or such
Restricted Subsidiary, as the case may be, that was not permitted by
this clause (5);
(6) the incurrence by Harvard or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred in the normal
course of business and consistent with past business practices for the
purpose of fixing or hedging currency, commodity or interest rate risk
(including with respect to any floating rate Indebtedness that is
permitted by the terms of the indenture to be outstanding in connection
with the conduct of their respective businesses and not for speculative
purposes);
(7) the guarantee by Harvard or any of the subsidiary
guarantors of Indebtedness of Harvard or a Restricted Subsidiary of
Harvard that was permitted to be incurred by another provision of this
covenant "Incurrence of Indebtedness and Issuance of Preferred Stock;"
(8) the incurrence by Harvard's subsidiary, Trim Trends Canada
Ltd., of indebtedness under its revolving loan facility with Canadian
Imperial Bank of Commerce, provided that the aggregate principal amount
of all Indebtedness of Trim Trends Canada Ltd. outstanding under the
that facility, after giving effect to such incurrence, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any other Indebtedness incurred under this clause (8), does not
exceed an amount equal to $2.0 million; and
(9) the incurrence by Harvard of additional Indebtedness in an
aggregate principal amount at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any other Indebtedness incurred under this clause (9), not to
exceed $2.5 million.
For purposes of determining compliance with this covenant, in the event
that an item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (9) above as of
the date of incurrence thereof or is entitled to be incurred pursuant to the
first paragraph of this covenant as of the date of incurrence thereof, Harvard
shall, in its sole discretion, classify such item of Indebtedness as of the date
of incurrence thereof in any manner that complies with this covenant and such
item of Indebtedness shall be treated as having been incurred under only one of
such clauses or under the first paragraph hereof. Accrual of interest, accrual
of dividends, 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.
Maintenance of Consolidated Leverage Ratio
The indenture provides that, so long as the notes are outstanding,
Harvard, will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly permit the Consolidated Leverage Ratio as of the last day
of any period of four consecutive fiscal quarters of Harvard ending with any
fiscal quarter set forth below to exceed the ratio set forth below opposite such
fiscal quarter:
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Consolidated
Leverage
Fiscal Quarter Ratio
-------------- ------
December 31, 1998............................................. 4.50
March 31, 1999................................................ 4.50
June 30, 1999................................................. 4.50
September 30, 1999............................................ 4.50
December 31, 1999............................................. 4.00
March 31, 2000................................................ 4.00
June 30, 2000................................................. 4.00
September 30, 2000 and thereafter until September 1, 2003..... 3.50
Maintenance of Consolidated Interest Coverage Ratio
So long as the notes are outstanding, Harvard will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly permit the
Consolidated Interest Coverage Ratio for any period of four consecutive fiscal
quarters of Harvard ending with any fiscal quarter set forth below to be less
than the ratio set forth below opposite such fiscal quarter:
Consolidated
Coverage
Fiscal Quarter Interest Ratio
-------------- --------------
December 31, 1998........................................... 2.00
March 31, 1999.............................................. 2.00
June 30, 1999............................................... 2.00
September 30, 1999.......................................... 2.00
December 31, 1999........................................... 2.25
March 31, 2000.............................................. 2.25
June 30, 2000............................................... 2.25
September 30, 2000.......................................... 2.25
December 31, 2000 and thereafter until September 1, 2003.... 2.75
Liens
Harvard will not, and will not permit any of its Restricted
Subsidiaries to allow the existence of any lien of any kind securing
Indebtedness, Attributable Debt, or trade payables, 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
Harvard will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly allow the existence of any encumbrance
or restriction on the ability of any Restricted Subsidiary of Harvard to:
o (x) pay dividends or make any other distributions to Harvard
or any of its Restricted Subsidiaries on its capital stock or
with respect to any other interest or participation in, or
measured by, its profits, or (y) pay any Indebtedness owed to
Harvard or any of its Restricted Subsidiaries;
o make loans or advances to Harvard or any of its Restricted
Subsidiaries; or
o transfer any of its properties or assets to Harvard or any of
its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of:
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(a) our senior credit facility as originally in effect,
and any amendments, modifications, restatements,
renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that
such amendments, modifications, restatements,
renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive
with respect to such dividend and other payment
restrictions than those contained in our senior
credit facility as originally in effect;
(b) the indenture and the notes;
(c) applicable law;
(d) any instrument governing Indebtedness or capital
stock of a person acquired by Harvard or any of its
Restricted Subsidiaries as in effect at the time of
such acquisition (except to the extent such
Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance
or restriction is not applicable to any person, or
the properties or assets of any person, other than
the person, or the property or assets of the person,
so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the
terms of the indenture to be incurred;
(e) by reason of customary non-assignment provisions in
leases entered into in the ordinary course of
business;
(f) capital leases, mortgage financings or purchase money
obligations for property acquired in the ordinary
course of business that impose encumbrances or
restrictions on the property so acquired;
(g) Indebtedness of subsidiary guarantors, provided that
such Indebtedness was permitted to be incurred under
the indenture; or
(h) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing
such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements
governing the Indebtedness being refinanced.
Merger, Consolidation, or Sale of Assets
The indenture provides that Harvard will not, directly or indirectly,
consolidate or merge with or into (whether or not Harvard 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:
o Harvard is the surviving corporation or the person formed by
or surviving any such consolidation or merger, if other than
Harvard, or to which such sale, assignment, transfer,
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;
o the person formed by or surviving any such consolidation or
merger, if other than Harvard, or the person to which such
sale, assignment, transfer, conveyance or other disposition
shall have been made assumes all the obligations of Harvard
under the notes and the indenture under a supplemental
indenture in a form reasonably satisfactory to the trustee;
o immediately before and after such transaction no default or
event of default shall have occurred; and
o except in the case of a merger of Harvard with or into a
subsidiary guarantor, Harvard or person formed by or surviving
any such consolidation or merger, if other than Harvard, or to
which such sale, assignment, transfer, conveyance or other
disposition shall have been made:
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(a) will have Consolidated Net Worth immediately after
the transaction equal to or greater than the
Consolidated Net Worth of Harvard immediately
preceding the transaction; and
(b) will, immediately after such transaction after giving
pro forma effect thereto and any related financing
transactions as if the same had occurred at the
beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional
Indebtedness under the Fixed Charge Coverage Ratio
test set forth in the first paragraph of covenant
described above under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock."
The indenture provides that Harvard 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.
Transactions with Affiliates
The indenture provides that Harvard 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 properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any of their affiliates, unless:
o such transaction is on terms that are no less favorable to
Harvard or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction by
Harvard or such Restricted Subsidiary with an unrelated
person; and
o Harvard delivers to the trustee (a) with respect to any
transaction with an affiliate or series of related
transactions with affiliates involving aggregate consideration
in excess of $1.0 million, a resolution of its Board of
Directors set forth in an officers' certificate certifying
that such transaction complies with the above requirement and
that such transaction has been approved by a majority of the
disinterested members of its Board of Directors and (b) with
respect to any transaction with an affiliate or series of
related transactions with affiliates involving aggregate
consideration in excess of $2.5 million, an opinion as to the
fairness to the noteholders of such transaction from a
financial point of view issued by an investment banking firm
of national standing or an appraisal firm of national
standing; provided that none of the following shall be deemed
to be transactions:
(1) any employment agreement entered into by Harvard or
any of its Restricted Subsidiaries in the ordinary
course of business of Harvard or such Restricted
Subsidiary, as the case may be;
(2) transactions between or among Harvard and/or its
subsidiary guarantors on terms that are no less
favorable to Harvard and/or such subsidiary guarantor
than those that would have been obtained in a
comparable transaction by Harvard and/or such
subsidiary guarantor with an unrelated person;
(3) any sale or other issuance of equity interests, other
than Disqualified Stock of Harvard or of equity
interests of any Restricted Subsidiary to Harvard or
any other Restricted Subsidiary;
(4) Restricted Payments that are permitted by, and
Investments that are not prohibited by, the covenant
described above under the caption "Restricted
Payments;"
(5) fees and compensation paid to members of the Board of
Directors of Harvard and of its Restricted
Subsidiaries in their capacity as such, if such fees
and compensation are reasonable and customary;
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(6) advances to employees for moving, entertainment and
travel expenses, drawing accounts and similar
expenditures in the ordinary course of business; and
(7) fees and compensation paid to, and indemnity provided
on behalf of, officers, directors or employees of
Harvard or any of its Restricted Subsidiaries, as
determined by the Board of Directors of Harvard or of
any such Restricted Subsidiary, if such fees and
compensation are reasonable and customary, shall not
be treated as transactions with affiliates covered by
these provisions.
For such purposes, an "affiliate" of a person includes any person who controls,
is controlled by, or is under common control with that person, and any person
who beneficially owns 10% or more of the capital stock of that person.
Sale and Leaseback Transactions
The indenture provides that Harvard will not, and will not permit any
of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that Harvard may enter into a sale and leaseback
transaction if:
o Harvard could have incurred Indebtedness in an amount equal to
the Attributable Debt relating to such sale and leaseback
transaction under (a) 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" and (b) the covenant described above under
the caption "Maintenance of Consolidated Leverage Ratio;"
o the gross cash proceeds of such sale and leaseback transaction
are at least equal to the fair market value, as determined in
good faith by the Board of Directors and set forth in an
officers' certificate delivered to the trustee, of the
property that is the subject of such sale and leaseback
transaction; and
o the transfer of assets in such sale and leaseback transaction
is permitted by, and Harvard applies the proceeds of such
transaction in compliance with, the covenant described above
under the caption "Repurchase at the Option of
Noteholders--Asset Sales."
Impairment of Security Interests
The indenture provides that, subject to the intercreditor agreement,
neither Harvard nor any of its subsidiaries will take or omit to take any action
that would adversely affect or impair the security interests granted to the
collateral agent, in favor of the trustee and noteholders of notes, with respect
to the collateral. Neither Harvard nor any of its subsidiaries may grant to any
person, or permit any person to retain, other than the collateral agent, any
interest whatsoever in the collateral, other than the security interest of our
senior credit facility and Permitted Liens as permitted under the covenant
entitled "Liens." Neither Harvard nor any of its subsidiaries will enter into
any agreement that requires the proceeds from any sale of collateral to be
applied to repay, redeem, defease or otherwise acquire or retire Indebtedness of
any person, other than as permitted by the indenture (under the covenant
described above under the caption "Liens"), the notes, the intercreditor
agreement and the collateral agreement.
Additional Subsidiary Guarantors
The indenture provides that, if Harvard or any of its Restricted
Subsidiaries acquire or create another Restricted Subsidiary after November 24,
1998, then such newly acquired or created Restricted Subsidiary will:
o execute a supplemental indenture in form and substance
satisfactory to the trustee providing that such Restricted
Subsidiary will become a subsidiary guarantor under the
indenture and the collateral agreement;
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o issue a guarantee or endorse the notes on the same terms and
conditions as the guarantees that will be issued by each
subsidiary guarantor pursuant to the indenture and the
collateral agreement; and
o deliver an opinion of counsel to the effect, among other
things, that such supplemental indenture has been duly
authorized and executed by such Restricted Subsidiary.
Business Activities
The indenture provides that Harvard will not, and Harvard will not
permit any of its Restricted Subsidiaries to, directly or indirectly, engage in
any line of business other than a Permitted Business, except to such extent as
would not be material to Harvard and its Restricted Subsidiaries taken as a
whole.
Payments for Consent
The indenture provides that Harvard will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
noteholder of any notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the indenture or the notes unless
such consideration is offered to be paid or is paid to all noteholders of the
notes that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
Reports
The indenture provides that whether or not Harvard is so required by
the rules and regulations of the SEC, so long as any notes are outstanding,
Harvard will furnish to each of the noteholders:
o 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 Harvard were required to file such financial
information, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of
Harvard and any consolidated Restricted Subsidiaries and, with
respect to the annual information only, reports thereon by
Harvard's independent public accountants, which shall be
firm(s) of established national reputation, and
o all information that would be required to be filed with the
SEC on Form 8-K if Harvard were required to file such reports.
All such information and reports must be filed with the SEC on or prior
to the dates on which such filings would have been required to be made had
Harvard been subject to the rules and regulations of the SEC. In addition,
whether or not required by the rules and regulations of the SEC, Harvard shall
file a copy of all such information and reports with the SEC for public
availability within the time periods specified in the SEC's rules and
regulations, unless the SEC will not accept such a filing, and make such
information available to securities analysts and prospective investors upon
request. For so long as any notes remain outstanding, Harvard and the subsidiary
guarantors shall furnish to the noteholders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered under Rule 144A(d)(4) under the Securities Act.
Events of Default and Remedies
The indenture provides that each of the following constitutes an event
of default:
o default for 30 days in the payment when due of interest on, or
applicable liquidated damages, if any, with respect to, the
notes;
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o default in payment when due of the principal of or premium, if
any, on the notes;
o failure by Harvard or any of its Restricted Subsidiaries to
comply with the provisions described under the captions
"Restricted Payments," "Incurrence of Indebtedness and
Issuance of Preferred Stock" or "Merger, Consolidation, or
Sale of Assets;"
o failure by Harvard or any of its Restricted Subsidiaries for
30 days after notice to comply with the provisions described
under the captions "Repurchase at the Option of
Noteholders--Asset Sales" or "Repurchase at the Option of
Noteholders--Change of Control;"
o failure by Harvard or any of its Restricted Subsidiaries for
60 days after notice to comply with any of its other
agreements in the indenture, the notes, the guarantees, the
collateral agreement and the other security documents;
o 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 Harvard or
any of its Restricted Subsidiaries, or the payment of which is
guaranteed by Harvard or any of its Restricted Subsidiaries,
whether such Indebtedness or guarantee now exists, or is
created after November 24, 1998, which default (a) is caused
by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such
default or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case,
the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under
which there has been such a default in payment or the maturity
of which has been so accelerated, aggregates without
duplication $1.0 million or more;
o failure by Harvard or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $1.0 million,
excluding amounts covered by insurance, which judgments are
not paid, discharged, stayed, vacated or bonded pending appeal
by a reputable financial intermediary with an investment grade
rating for a period of 60 days from the entry thereof;
o certain events of bankruptcy or insolvency with respect to
Harvard or any of its Restricted Subsidiaries;
o except as permitted under the indenture and the collateral
agreement, any guarantee shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for
any reason to be in full force and effect for 30 days after
notice or any subsidiary guarantor, or any person acting on
behalf of any subsidiary guarantor, shall deny or disaffirm
its obligations under its guarantee; and
o except as permitted by the collateral agreement and the other
security documents, any amendments thereto or the covenant
described above under the caption "Liens", any of the
collateral agreement or the other security documents ceases to
be in full force and effect or ceases to be effective, in all
material respects, to create the security interest purported
to be created in the collateral in favor of the noteholders
for 30 days after notice.
If any event of default occurs and is continuing, the trustee or the
noteholders of at least 25% in principal amount of the then outstanding notes
may declare all the notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an event of default arising from certain events of
bankruptcy or insolvency, with respect to Harvard or any Restricted Subsidiary,
all outstanding notes will become due and payable without further action or
notice. Noteholders of the notes may not enforce the indenture or the notes
except as provided in the indenture. Subject to certain limitations, noteholders
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
noteholders of the notes notice of any continuing default or event of default,
except a default or event of default relating to the payment of principal or
interest, if it determines that withholding notice is in their interest.
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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 Harvard with the
intention of avoiding payment of the premium that Harvard would have had to pay
if Harvard then had elected to redeem the notes under the optional redemption
provisions of the indenture, an equivalent premium shall also become and be
immediately due and payable if permitted by law upon the acceleration of the
notes.
The noteholders of a majority in aggregate principal amount of the
notes then outstanding by notice to the trustee may on behalf of the noteholders
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.
Harvard is required to deliver to the trustee annually a statement
regarding compliance with the indenture, and Harvard is required upon becoming
aware of any default or event of default or any litigation, investigation,
administrative action or other proceeding by a governmental authority, to
deliver to the trustee a statement specifying such default or event of default
or such proceeding.
No Personal Liability of Directors, Officers, Employees and Stockholders
The indenture provides that no director, officer, employee,
incorporator or stockholder of Harvard, as such, will have any liability for any
obligations of Harvard 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
noteholder 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 SEC that such a waiver is against public policy.
Transfer and Exchange
A noteholder may transfer or exchange notes in accordance with the
indenture. The registrar of the notes and the trustee may require a noteholder,
among other things, to furnish appropriate endorsements and transfer documents
and Harvard may require a noteholder to pay any taxes and fees required by law
or permitted by the indenture. Harvard is not required to transfer or exchange
any note selected for redemption. Also, Harvard 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 noteholder of a note will be treated as the owner of it
for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next three succeeding paragraphs, the
indenture or the notes may be amended or supplemented with the consent of the
noteholders of at least a majority in principal amount of the notes then
outstanding, including consents obtained in connection with a purchase of, or
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 noteholders of a majority in principal amount of the notes
then outstanding, including consents obtained in connection with a tender offer
or exchange offer for notes.
Without the consent of noteholders of notes holding at least two-thirds
in principal amount of the notes then outstanding, an amendment or waiver may
not make any change to those Sections in the indenture that are set forth under
the covenants described above under the captions "Incurrence of Indebtedness and
Issuance of Preferred Stock," "Restricted Payments," "Liens" and "Change of
Control", if such amendment or waiver would adversely affect the rights of
noteholders.
Without the consent of each noteholder affected, an amendment or waiver
may not, with respect to any notes held by a non-consenting noteholder:
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o reduce the principal amount of notes whose noteholders must
consent to an amendment, supplement or waiver;
o 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
Noteholders";
o reduce the rate of, amounts due under or change the time for
payment of interest on any note;
o 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
noteholders of at least a majority in aggregate principal
amount of the notes and a waiver of the payment default that
resulted from such acceleration;
o make any note payable in money other than that stated in the
indenture and the notes;
o make any change in the provisions of the indenture relating to
waivers of past defaults or the rights of noteholders to
receive payments of principal of or premium, if any, or
interest on the notes;
o 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
Noteholders";
o make any changes that would affect the ranking of the notes
and the guarantees, except in accordance with the terms of the
indenture and the collateral agreement;
o release any subsidiary guarantor from its obligations under
the guarantees, the collateral agreement or the indenture,
except in accordance with the terms of those documents;
o amend or modify any provisions of the indenture, the
collateral agreement or the other security documents, the
notes or the guarantees in any manner adverse to noteholders;
or
o make any change in the provisions respecting amendments and
waivers.
Notwithstanding the foregoing, without the consent of any noteholder,
Harvard and the trustee may amend or supplement the indenture, the notes, the
guarantees and the collateral agreement:
o to cure any ambiguity, defect or inconsistency, to provide for
uncertificated notes and guarantees in addition to or in place
of certificated notes and guarantees;
o to provide for the assumption of Harvard's obligations to
noteholders in the case of a merger or consolidation;
o to make any change that would provide any additional rights or
benefits to the noteholders or that does not adversely affect
the legal rights under the indenture or the collateral
agreement of any such noteholder, including adding a guarantor
under the indenture and adding additional collateral to the
collateral; or
o to comply with requirements of the SEC 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 Harvard, 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 SEC for permission to continue or
resign.
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The noteholders 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 will provide 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 noteholder, unless such noteholder shall have offered to
the trustee security and indemnity satisfactory to it against any loss,
liability or expense.
Book-Entry, Delivery and Form
Except as set forth in the next paragraph, the New notes will initially
be issued in the form of one global note. The global note will be deposited on
the date of the consummation of the exchange offer with, or on behalf of, The
Depository Trust Company and registered in the name of Cede & Co., as nominee of
The Depository Trust Company.
Notes that are issued as described below under "Certificated
Securities" will be issued in the form of definitive registered certificates.
Upon the transfer of those certificated notes, such certificated notes may,
unless the global note has previously been exchanged for such certificates, be
exchanged for an interest in the global note representing the principal amount
of notes being transferred.
The Depository Trust Company is a limited-purpose trust company that
was created to hold securities for its participant organizations and to
facilitate the clearance and settlement of transactions in such securities
between those participants through electronic book-entry changes in accounts of
the participants. The Depository's participants of The Depository Trust Company
include securities brokers and dealers, banks and trust companies, clearing
corporations and certain other organizations. Access to The Depository Trust
Company's system is also available to indirect participants such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Persons other
than participants and indirect participants may beneficially own securities held
by or on behalf of The Depository Trust Company only through its participants or
such indirect participants.
Harvard expects that under procedures established by The Depository
Trust Company, ownership of the notes evidenced by the global note will be shown
on, and the transfer of ownership thereof will be effected only through, records
maintained by The Depository Trust Company, its participants and its indirect
participants.
Prospective purchasers are advised that the laws of some states require
that certain persons take physical delivery in definitive form of securities
that they own. Consequently, the ability to transfer notes evidenced by the
global note will be limited to such extent.
So long as the global note holder is the registered owner of any notes,
the global note holder will be considered the sole noteholder under the
indenture of any notes evidenced by the global note. Beneficial owners of notes
evidenced by the global note will not be considered the owners or noteholders
thereof under the indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the trustee thereunder.
Neither Harvard nor the trustee will have any responsibility or liability for
any aspect of the records of The Depository Trust Company or for maintaining,
supervising or reviewing any records of The Depository Trust Company relating to
the notes.
Payments in respect of the principal of, premium, if any, interest and
applicable liquidated damages, if any, on any notes registered in the name of
the global note holder on the applicable record date will be payable by the
trustee to or at the direction of the global note holder in its capacity as the
registered noteholder under the indenture. Under the terms of the indenture,
Harvard and the trustee may treat the persons in whose names notes, including
the global note, are registered as the owners thereof for the purpose of
receiving such payments. Consequently, neither Harvard nor the trustee has or
will have any responsibility or liability for the payment of such amounts to
beneficial owners of notes. Harvard believes, however, that it is currently the
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policy of The Depository Trust Company to immediately credit the accounts of the
relevant participants with such payments, in amounts proportionate to their
interests in such payments, as shown on the records of The Depository Trust
Company. Payments by The Depository Trust Company's participants and its
indirect participants to the beneficial owners of notes will be governed by
standing instructions and customary practice and will be the responsibility of
the participants or the indirect participants.
The Depository Trust Company's management is aware that some computer
applications, systems, and the like for processing data that are dependent upon
calendar dates, including dates before, on, and after January 1, 2000, may
encounter "Year 2000 problems." The Depository Trust Company has informed its
participants and other members of the financial community that it has developed
and is implementing a program so that its data systems relating to the timely
payment of distributions, including principal and income payments, to
securityholders, book-entry deliveries, and settlement of trades within The
Depository Trust Company, continue to function appropriately. This program
includes a technical assessment and a remediation plan, each of which is
complete. Additionally, The Depository Trust Company's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, The Depository Trust Company's ability to perform properly its
services is also dependent upon other parties, including but not limited to
issuers and their agents, as well as third party vendors from whom The
Depository Trust Company licenses software and hardware, and third party vendors
on whom The Depository Trust Company relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. The Depository Trust Company has informed its participants and
other members of the financial community that it is contacting and will continue
to contact third party vendors from whom The Depository Trust Company acquires
services to: (1) impress upon them the importance of such services being Year
2000 compliant; and (2) determine the extent of their efforts for Year 2000
remediation and testing of their services. In addition, The Depository Trust
Company is in the process of developing such contingency plans as it deems
appropriate.
According to The Depository Trust Company, the foregoing information
with respect to The Depository has been provided to the Industry for
informational purposes only and is not intended to serve as a representation,
warranty, or contract modification of any kind.
Certificated Securities
Subject to certain conditions, any person having a beneficial interest
in the global note may, upon request to the trustee, exchange such beneficial
interest for notes in the form of certificated notes. Upon any such issuance,
the trustee is required to register such certificated notes in the name of, and
cause the same to be delivered to, such person or persons (or the nominee of any
thereof). In addition, if:
o Harvard notifies the trustee in writing that The Depository
Trust Company is no longer willing or able to act as a
depositary and Harvard is unable to locate a qualified
successor within 90 days or
o Harvard, at its option, notifies the trustee in writing that
it elects to cause the issuance of notes in the form of
certificated notes under the indenture,
then, upon surrender by the global note holder of its global note,
notes in such form will be issued to each person that the global note holder and
The Depository Trust Company identify as being the beneficial owner of the
related notes.
Neither Harvard nor the trustee will be liable for any delay by the
global note holder or The Depository Trust Company in identifying the beneficial
owners of notes and Harvard and the trustee may conclusively rely on, and will
be protected in relying on, instructions from the global note holder or The
Depository Trust Company for all purposes.
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Same Day Settlement and Payment
The indenture requires that payments in respect of the notes
represented by the global note (including principal, premium, if any, interest
and applicable liquidated damages, if any) be made by wire transfer of
immediately available funds to the accounts specified by the global note holder.
With respect to certificated notes, Harvard will make all payments of principal,
premium, if any, interest and applicable liquidated damages, if any, by wire
transfer of immediately available funds to the accounts specified by the
noteholders thereof or, if no such account is specified, by mailing a check to
each such noteholder's registered address. Harvard expects that secondary
trading in the certificated notes will also be settled in immediately available
funds.
Defined Terms
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 or uncapitalized terms used herein for which no
definition is provided.
"Acquired Debt" means, with respect to any specified person, (1)
Indebtedness of any other person existing at the time such other person is
merged with or into or became a Restricted 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
Restricted Subsidiary of such specified person, and (2) Indebtedness secured by
a lien encumbering any asset acquired by such specified person.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any
assets or rights, including by way of a sale and leaseback, by Harvard
or any Restricted Subsidiary other than in the ordinary course of
business, provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of Harvard and
its Restricted Subsidiaries taken as a whole will be governed by the
covenants described above under the captions "Repurchase at the Option
of Noteholders-Change of Control" and "Merger, Consolidation, or Sale
of Assets" and not by the provisions of the covenant described above
under the caption "Asset Sales", and
(2) the issue or sale by Harvard or any of its Restricted
Subsidiaries of equity interests of any Harvard's Restricted
Subsidiaries, in the case of either clause (1) or (2), 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, the following shall not be considered
"Asset Sales":
(1) a transfer of assets by Harvard to a subsidiary guarantor
or by a Restricted Subsidiary of Harvard to Harvard or to a subsidiary
guarantor;
(2) an issuance or sale of equity interests by a Restricted
Subsidiary of Harvard to Harvard or a subsidiary guarantor;
(3) a Restricted Payment that is permitted by the covenant
described above under the caption "Restricted Payments;"
(4) the sale or transfer of the assets of the Toledo, Tiffin
and Harman businesses; and
(5) the sale by Harvard of the capital stock of an
Unrestricted Subsidiary.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value, discounted at the rate
of interest implicit in such transaction, determined in accordance with
generally accepted accounting principles, of the obligation of the lessee for
net rental payments during the
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remaining term of the lease included in such sale and leaseback transaction,
including any period for which such lease has been extended or may, at the
option of the lessor, be extended.
"Cash Equivalents" means:
(1) United States dollars,
(2) 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 one year
from the date of acquisition,
(3) certificates of deposit and eurodollar time deposits with
maturities of not more than one year from the date of acquisition,
bankers' acceptances with maturities of not more than one year from the
date of acquisition and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better,
(4) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (2)
and (3) above entered into with any financial institution meeting the
qualifications specified in clause (3) above, and
(5) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or one of the two highest ratings from
Standard & Poor's Ratings Service Group, a division of the McGraw-Hill
Companies, with maturities of not more than 270 days from the date of
acquisition.
"Change of Control" means the occurrence of any of the following:
(1) 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 Harvard and its Restricted Subsidiaries, taken as a whole to
any "person" as such term is used in Section 13(d)(3) of the Exchange
Act;
(2) the adoption of a plan relating to the liquidation or
dissolution of Harvard;
(3) the consummation of any transaction, including any merger
or consolidation, the result of which is that any "person" as defined
above becomes the "beneficial owner" as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act (except that a person shall
be deemed to have "beneficial ownership" of all securities that such
person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition) directly or indirectly, of more than 50% of the total of the
Voting Stock of Harvard, measured by voting power rather than number of
shares;
(4) the first day on which a majority of the members of the
Board of Directors of Harvard are not Continuing Directors; or
(5) Harvard consolidates with, or merges with or into, any
person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any person, or
any person consolidates with, or merges with or into. Harvard, in any
such event under a transaction in which any of the outstanding Voting
Stock of Harvard is converted into or exchanged for cash, securities or
other property, other than any such transaction where the Voting Stock
of Harvard outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock, other than Disqualified
Stock, of the surviving or transferee person constituting a majority of
the outstanding shares of such Voting Stock of such surviving or
transferee person, immediately after giving effect to such issuance.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the notes to be redeemed that
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would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of such notes.
"Comparable Treasury Price" means, with respect to any redemption date
for the notes, (1) the average of four Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (2) if the trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such quotations.
"Consolidated Cash Flow" means, with respect to any person for any
period, the Consolidated Net Income of such person for such period plus
(1) an amount equal to any extraordinary or non-recurring loss
plus any net loss realized in connection with an Asset Sale, up to the
amount such losses were deducted in computing such Consolidated Net
Income, plus
(2) provision for taxes based on income or profits of such
person and its Restricted Subsidiaries for such period, up to the
amount that such provision for taxes was included in computing such
Consolidated Net Income, plus
(3) consolidated interest expense of such person and its
Restricted Subsidiaries for such period, whether paid or accrued and
whether or not capitalized, including cash flow participation interest
expense, amortization of debt issuance costs and original issue
discount, non-cash interest payments (such as the pay-in-kind notes),
the interest component of any deferred payment obligations, the
interest component of all payments associated with obligations under
capital leases, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance
financings, and net payments, if any, under Hedging Obligations, if any
such expense was deducted in computing such Consolidated Net Income,
plus
(4) depreciation and amortization, including amortization of
goodwill and other intangibles but excluding amortization of prepaid
cash expenses that were paid in a prior period, of such person and its
Restricted Subsidiaries for such period up to the amount that such
depreciation and amortization were deducted in computing such
Consolidated Net Income, minus
(5) non-cash items increasing such Consolidated Net Income for
such period, other than items that were accrued in the ordinary course
of business, in each case, on a consolidated basis and determined in
accordance with generally accepted accounting principles.
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 Restricted Subsidiary of Harvard shall be added to Consolidated Net Income to
compute Consolidated Cash Flow of Harvard only up to the amount, and in same
proportion, that the Net Income of such Restricted Subsidiary was included in
calculating the Consolidated Net Income of such person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to Harvard by such Restricted Subsidiary without prior governmental
approval, that has not been obtained, and without direct or indirect restriction
under the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.
"Consolidated Interest Coverage Ratio" means, for any period, the ratio
of (a) Consolidated Cash Flow for such period to (b) Consolidated Interest
Expense for such period.
"Consolidated Interest Expense" means, with respect to any person for
any period, the sum, without duplication, of
(1) the consolidated interest expense of such person and its
Restricted Subsidiaries for such period, whether paid or accrued,
including cash flow participation interest expense, amortization of
debt issuance costs and original issue discount, non-cash interest
payments (such as the pay-in-kind
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notes), the interest component of any deferred payment obligations, the
interest component of all payments associated with obligations under
capital leases, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance
financings, and net payments, if any, under Hedging Obligations,
(2) the consolidated interest of such person and its
Restricted Subsidiaries that was capitalized during such period,
including the value of pay-in-kind notes issued during such period, if
applicable, and
(3) 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.
"Consolidated Leverage Ratio" means the ratio of:
(1) the aggregate outstanding amount of Indebtedness of each
of Harvard and its Restricted Subsidiaries as of the date of
calculation on a consolidated basis in accordance with generally
accepted accounting principles plus the aggregate liquidation
preference of all outstanding Disqualified Stock of Harvard and
preferred stock of Harvard's Restricted Subsidiaries, except preferred
stock issued to Harvard or one of its wholly owned subsidiaries, on
such date to
(2) the aggregate Consolidated Cash Flow of Harvard;
provided that, for the purposes of determining the ratios described above for
(1) the fiscal quarter ending on December 31, 1998, Consolidated Cash Flow shall
be deemed equal to Consolidated Cash Flow for such fiscal quarter multiplied by
four, (2) for the six month period ending on March 31, 1999, Consolidated Cash
Flow shall be deemed equal to Consolidated Cash Flow for such period multiplied
by two and (3) for the nine month period ending on June 30, 1999, Consolidated
Cash Flow shall be deemed equal to Consolidated Cash Flow for such period
multiplied by 1.33.
For purposes of this definition, (1) the amount of Indebtedness which
is issued at a discount shall be deemed to be the accreted value of such
Indebtedness at the end of the quarter, whether or not such amount is the amount
then reflected on a balance sheet prepared in accordance with generally accepted
accounting principles, and (2) the aggregate outstanding principal amount of
Indebtedness of Harvard and its subsidiaries and the aggregate liquidation
preference of all outstanding preferred stock of Harvard's subsidiaries for
which such calculation is made shall be determined on a pro forma basis as if
the Indebtedness and preferred stock giving rise to the need to perform such
calculation had been incurred and issued and the proceeds therefrom had been
applied, and all other transactions in respect of which such Indebtedness is
being incurred or preferred stock is being issued had occurred, on the first day
of the quarter.
In addition to the foregoing, for purposes of this definition,
Consolidated Cash Flow shall be calculated on a pro forma basis after giving
effect to:
(1) the incurrence of the Indebtedness of such person and its
subsidiaries and the issuance of the preferred stock of such
subsidiaries, and the application of the proceeds therefrom, giving
rise to the need to make such calculation and any incurrence, and the
application of the proceeds therefrom, or repayment of other
Indebtedness, at any time subsequent to the beginning of the quarter
and on or prior to the date of determination, as if such incurrence or
issuance, and the application of the proceeds thereof, or the
repayment, as the case may be, occurred on the first day of the
quarter, except that, in making such computation, the amount of
Indebtedness under any revolving credit facility shall be computed
based upon the average balance of such Indebtedness at the end of each
month during such period, and
(2) any acquisition, including any acquisition giving rise to
the need to make such calculation as a result of such person or one of
its subsidiaries (including any person that becomes a subsidiary of
Harvard as a result of such acquisition) incurring, assuming or
otherwise becoming liable for Indebtedness or such person's
subsidiaries issuing preferred stock, at any time on or subsequent to
the
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first day of the quarter and on or prior to the date of determination,
as if such acquisition, including the incurrence, assumption or
liability for any such Indebtedness and the issuance of such preferred
stock and also including any Consolidated Cash Flow associated with
such acquisition, occurred on the first day of the quarter, giving pro
forma effect to any cost reductions which Harvard anticipates if
Harvard deliver to the trustee an officers' certificate executed by the
chief financial or accounting officer of Harvard certifying to and
describing and quantifying with reasonable specificity the cost
reductions, non-recurring expenses and non-recurring costs expected to
be attained within the first year after such acquisition.
Furthermore, in calculating Consolidated Interest Expense for purposes
of the calculation of Consolidated Cash Flow, (a) interest on Indebtedness
determined on a fluctuating basis as of the date of determination, including
Indebtedness actually incurred on the date of the transaction giving rise to the
need to calculate the Consolidated Leverage Ratio, and which will continue to be
so determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness as in effect on the
date of determination and (b) notwithstanding (a) above, interest determined on
a fluctuating basis, if such interest is covered by Hedging Obligations, shall
be deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"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 generally accepted accounting principles; provided that:
(1) the Net Income, but not loss, of any person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only up to the amount of dividends or
distributions paid in cash to the referent person or a Restricted
Subsidiary that is a guarantor,
(2) the Net Income of any Restricted Subsidiary shall be
excluded up to the amount that the declaration or payment of dividends
or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval that has not been obtained or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its
stockholders,
(3) 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
(4) 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 (1) the consolidated equity of the common stockholders of such
person and its consolidated Restricted Subsidiaries as of such date plus (2) 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 up to the amount 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 November 24, 1998 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 generally accepted accounting principles.
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"Continuing Director" means, as of the date of determination, any
member of the Board of Directors of Harvard who (1) was a member of such Board
of Directors on November 24, 1998 or (2) was nominated for election or elected
to such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such board at the time of such nomination or
election.
"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 at the option of the holder thereof, or upon the happening of any
event, matures or is mandatorily redeemable, under a sinking fund obligation or
otherwise, or redeemable at the option of the noteholder thereof, in whole or in
part, on or prior to the date that is 91 days after the date on which the notes
mature, except for the amount that such capital stock is solely redeemable with,
or solely exchangeable for, any capital stock of such person that is not
Disqualified Stock.
"Excluded Foreign Subsidiary" means, any Foreign Subsidiary in respect
of which either (1) the pledge of all of the capital stock of such subsidiary as
collateral or (2) the guaranteeing by such subsidiary of the obligations, would,
in the good faith judgment of the Issuer, result in adverse tax consequences to
the Issuer or violate applicable law in any material respect.
"Fixed Charges" means, with respect to any person for any period, the
sum, without duplication, of:
(1) the consolidated interest expense of such person and its
Restricted Subsidiaries for such period, whether paid or accrued,
including cash flow participation interest expense, amortization of
debt issuance costs and original issue discount, non-cash interest
payments (such as the pay-in-kind notes), the interest component of any
deferred payment obligations, the interest component of all payments
associated with obligations under capital leases, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net payments (if any)
under Hedging Obligations,
(2) the consolidated interest of such person and its
Restricted Subsidiaries that was capitalized during such period,
including the value of pay-in-kind notes issued during such period, if
applicable,
(3) 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
(4) 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 Harvard, other than
Disqualified Stock, 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 generally accepted accounting principles.
"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 Harvard
or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness, other than revolving credit borrowings under any Credit Facility,
or issues preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but on or 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:
(1) acquisitions that have been made by Harvard or any of its
Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four-
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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 (3) of the proviso set forth in the definition of
Consolidated Net Income,
(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with generally accepted
accounting principles, and operations or businesses disposed of prior
to the Calculation Date, shall be excluded, and
(3) the Fixed Charges attributable to discontinued operations,
as determined in accordance with generally accepted accounting
principles, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only up to the amount 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.
"Hedging Obligations" means, with respect to any person, the net
payment obligations of such person under (1) interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements and agreements
providing for protection against fluctuations in commodity prices and (2) other
agreements or arrangements in the ordinary course of business which are designed
to protect such person against fluctuations in commodity prices, interest rates
or currency exchange rates.
"Indebtedness" means, with respect to any person:
(1) 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
obligations under capital leases 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 up to the amount that 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 generally accepted accounting
principles, 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,
(2) up to the amount not otherwise included, the guarantee by
such person of any Indebtedness of any other person, whether or not it
appears on the balance sheet of such person; provided that the amount
of such Indebtedness shall be the lesser of the amount of Indebtedness
that is the subject of such guarantee and the maximum liability of such
person on such guarantee and
(3) all Indebtedness of other persons secured by a lien on any
asset of such person, whether or not such Indebtedness is assumed by or
is otherwise the legal liability of such person, provided that the
amount of such Indebtedness shall be the lesser of (A) the fair market
value of such asset at such date of determination and (B) the amount of
such Indebtedness.
The amount of any Indebtedness outstanding as of any date shall be (a)
the accreted value thereof, in the case of any Indebtedness that does not
require current payments of interest or that allows for the payment of interest
in kind, and (b) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Independent Investment Banker" means one of the Reference Treasury
Dealers appointed by the trustee after consultation with Harvard.
"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 of assets or capital contributions (excluding commission, travel and
entertainment, moving, 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
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that are or would be classified as investments on a balance sheet prepared in
accordance with generally accepted accounting principles. If Harvard or any of
its Restricted Subsidiaries sells or otherwise disposes of any equity interests
of any direct or indirect Restricted Subsidiary of Harvard such that, after
giving effect to any such sale or disposition, such person is no longer a direct
or indirect Restricted Subsidiary of Harvard, Harvard or such Restricted
Subsidiary, as the case may be, 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."
"Net Income" means, with respect to any person, the net income (loss)
of such person, determined in accordance with generally accepted accounting
principles and before any reduction in respect of preferred stock dividends,
excluding, however, (1) 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 dispositions pursuant to sale and leaseback
transactions, or (b) the disposition of any securities by such person or any of
its Restricted Subsidiaries or the extinguishment of any Indebtedness of such
person or any of its Restricted Subsidiaries and (2) any extraordinary gain (but
not loss), together with any related provision for taxes on such extraordinary
gain (but not loss).
"Non-Recourse Debt" means Indebtedness (1) as to which neither Harvard
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; (2) 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 (other than the notes being offered hereby)
of Harvard 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; and (3) as to which the lenders have been notified
in writing that they will not have any recourse to the stock or assets of
Harvard or any of its Restricted Subsidiaries.
"Permitted Business" means the lines of business that Harvard and its
Restricted Subsidiaries currently conduct on the date hereof or that Harvard and
its Restricted Subsidiaries contemplate conducting as set forth in the
Disclosure Statement For Debtors' First Amended and Modified Consolidated Plan
under Chapter 11 of the Bankruptcy Code dated August 19, 1998 filed with the
United States Bankruptcy Court for the District of Delaware in connection with
the plan of reorganization and businesses reasonably related thereto.
"Permitted Investments" means:
(1) any Investment in Harvard or in a Restricted Subsidiary of
Harvard;
(2) any Investment in Cash Equivalents;
(3) any Investment by Harvard or any Restricted Subsidiary of
Harvard in a person engaged in a Permitted Business, if as a result of
such Investment (a) such person becomes a subsidiary guarantor or (b)
such person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, Harvard or a subsidiary guarantor;
(4) any Restricted Investment made as a result of the receipt
of non-cash consideration from an Asset Sale that was made under and in
compliance with the covenant described above under the caption
"Repurchase at the Option of Noteholders--Asset Sales;"
(5) any acquisition of assets solely in exchange for the
issuance of equity interests, other than Disqualified Stock, of
Harvard;
(6) Investments arising in connection with Hedging Obligations
that are incurred in the ordinary course of business, for the purpose
of fixing or hedging currency, commodity or interest rate risk,
including with respect to any floating rate Indebtedness that is
permitted by the terms of the
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indenture to be outstanding, in connection with the conduct of the
business of Harvard and its Restricted Subsidiaries which are
guarantors;
(7) any Investment existing on November 24, 1998 and any
Investment that replaces, refinances or refunds an Investment, provided
that the new Investment is in an amount that does not exceed the amount
replaced, refinanced or refunded and is made in the same person as the
Investment replaced, refinanced or refunded;
(8) Investments in Permitted Joint Ventures that have an
aggregate fair market value, taken together with all other Investments
made under this clause (8) that are at that time outstanding, not to
exceed $7.5 million at the time of such Investment, with the fair
market value of each Investment being measured at the time made and
without giving effect to subsequent changes in value, provided that (a)
no more than $3.0 million of the aggregate amount of Investments, with
the fair market value of each Investment being measured at the time
made and without giving effect to subsequent changes in value,
permitted by this clause (8) may be made in the form of additional
investments in the Permitted Joint Ventures and (b) no more than $4.5
million of the aggregate amount of Investments, with the fair market
value of each Investment being measured at the time made and without
giving effect to subsequent changes in value, permitted by this clause
(8) may be made in the form of loans or advances made to or on behalf
of Hutchinson/Kingston-Warren LLC, under Section 6.6 of the Limited
Liability Company Agreement dated November 27, 1995 by and between
Hutchinson SA and The Kingston-Warren Corporation, for the sole purpose
of funding the working capital needs, capital expenditures and other
general corporate or partnership needs of Hutchinson/Kingston-Warren
LLC in furtherance of its stated business purpose under Article 2 of
that agreement, provided that the terms and conditions of such loans or
advances require their repayment to Harvard or Kingston-Warren or that
Harvard or Kingston-Warren are repaid their share of such expenditures
under that agreement; and
(9) other Investments by Harvard or any of its Restricted
Subsidiaries in any person engaged in one or more Permitted Businesses,
other than those provided for in clause (8), above having an aggregate
fair market value, measured as of the date made and without giving
effect to subsequent changes in value, when taken together with all
other Investments made under this clause (9) that are at the time
outstanding, not to exceed $2.5 million.
"Permitted Joint Venture" means (1) KS-Doehler-Jarvis GmbH, a German
joint venture formed by Doehler-Jarvis, Inc. and KS Aluminum Technologie AG, and
(2) Hutchinson/Kingston-Warren LLC, a Delaware limited liability company formed
by Kingston-Warren and Hutchinson SA.
"Permitted Liens" means:
(1) liens securing our senior credit facility and the notes as
permitted under the indenture;
(2) liens on the assets of Harvard or any of the subsidiary
guarantors to secure Hedging Obligations with respect to Indebtedness
under any Credit Facility permitted by the indenture to be incurred;
(3) liens on property of a person existing at the time such
person is merged into or consolidated with Harvard or any Restricted
Subsidiary of Harvard; 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 Harvard;
(4) liens on property existing at the time of acquisition
thereof by Harvard or any Restricted Subsidiary of Harvard, provided
that such liens were in existence prior to the contemplation of such
acquisition and only extend to the property so acquired;
(5) liens existing on November 24, 1998, provided that any
liens in existence on November 24, 1998 that are liens of pre-petition
claims, arising from the filing of a voluntary petition for relief
under Chapter 11 of the Bankruptcy Code of Harvard and certain of its
subsidiaries, or liens to secure the credit facilities which existed
while Harvard was in bankruptcy, which liens will not for any reason
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have been extinguished and released by the November 24, 1998, shall not
be a "Permitted Lien" within the meaning of this definition;
(6) liens to secure any Permitted Refinancing Indebtedness
incurred to refinance any Indebtedness secured by any lien referred to
in the foregoing clauses (1) through (5), as the case may be, at the
time the original lien became a Permitted Lien;
(7) liens in favor of the Company or any Restricted Subsidiary
that is a guarantor;
(8) liens incurred in the ordinary course of business,
including those incurred in connection with trade credit in the
ordinary course of business, of Harvard or any Restricted Subsidiary of
Harvard with respect to obligations that do not exceed $5.0 million in
the aggregate at any one time outstanding and that (a) are not incurred
in connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary course of business
which shall be a "Permitted Lien" within the meaning of this
definition) and (b) do not in the aggregate materially detract from the
value of the property or materially impair the use thereof in the
operation of business by Harvard or such Restricted Subsidiary;
(9) liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds, deposits to secure the
performance of bids, trade contracts, government contracts, leases,
letters of credit or licenses or other obligations of a like nature
incurred in the ordinary course of business, including landlord liens
on leased properties;
(10) liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good
faith by appropriate proceedings promptly instituted and diligently
prosecuted, provided that any reserve or other appropriate provision as
shall be required to conform with generally accepted accounting
principles shall have been made therefor;
(11) liens to secure Indebtedness, including obligations under
capital leases and purchase money obligations, permitted by clauses (3)
or (4) of the second paragraph of the covenant described above under
the caption "Incurrence of Indebtedness and Issuance of Preferred
Stock" covering only the assets acquired with such Indebtedness;
(12) carriers', warehousemen's, mechanics', landlords'
materialmen's, repairmen's or other like liens arising in the ordinary
course of business in respect of obligations not overdue for a period
in excess of 60 days or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently prosecuted;
provided that any reserve or other appropriate provision as shall be
required to conform with generally accepted accounting principles shall
have been made therefor;
(13) easements, rights-of-way, zoning and similar restrictions
and other similar encumbrances or title defects incurred, or leases or
subleases granted to others, in the ordinary course of business, which
do not in any case materially detract from the value of the property
subject thereto or do not interfere with or adversely affect in any
material respect the ordinary conduct of the business of Harvard and
its Restricted Subsidiaries taken as a whole;
(14) liens in favor of customs and revenue authorities to
secure payment of customs duties in connection with the importation of
goods in the ordinary course of business and other similar liens
arising in the ordinary course of business;
(15) leases or subleases granted to third persons not
interfering with the ordinary course of business of Harvard or any of
its Restricted Subsidiaries;
(16) liens, other than any lien imposed by ERISA or any rule
or regulation promulgated thereunder, incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance, and other types of social security;
(17) other deposits made in the ordinary course of business to
secure liability, including letters of credit, to insurance carriers in
connection with insurance policies that our senior credit facility and
the indenture require Harvard and its subsidiaries to carry;
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(18) any interest or title of a lessor or sublessor under any
operating lease;
(19) any attachment or judgment lien not constituting an event
of default under clause (7) of the first paragraph of the section
described above under the caption "Events of Default and Remedies";
(20) liens securing the Trim Trends Canada Ltd.'s revolving
loan facility with Canadian Imperial Bank of Commerce, as permitted
under the indenture; and
(21) liens to secure Indebtedness permitted by clause (ix) of
the second paragraph of the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock."
"Permitted Refinancing Indebtedness" means any Indebtedness of Harvard
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of Harvard or any of its Restricted Subsidiaries,
other than intercompany Indebtedness; provided that:
(1) 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 premium, accrued and
unpaid interest on, any Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded, plus the amount of reasonable expenses
incurred in connection therewith;
(2) 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 being extended, refinanced,
renewed, replaced, defeased or refunded;
(3) if the Indebtedness 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
noteholders as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and
(4) such Indebtedness is incurred either by Harvard or a
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Reference Treasury Dealer" means Lehman Brothers Inc. and three other
primary U.S. Government securities dealers in New York City (each, a "Primary
Treasury Dealer") appointed by the trustee in consultation with Harvard;
provided, however, that if any of the foregoing shall cease to be a Primary
Treasury Dealer, Harvard shall substitute therefor another Primary Treasury
Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the trustee, of the bid and asked prices for the Comparable Treasury Issue,
expressed in each case as a percentage of its principal amount, quoted in
writing to the trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such redemption date.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a person means any subsidiary of that person
that is not an Unrestricted Subsidiary; provided that, on November 24, 1998, all
subsidiaries of Harvard shall be Restricted Subsidiaries of Harvard.
"Treasury Rate" means, with respect to any redemption date for the
notes, (1) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication which is published
weekly by the Board of Governors of the Federal Reserve System and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Comparable Treasury Issue (if no maturity is
within three months before or
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after September 1, 2003, yields for the two published maturities most closely
corresponding to the Comparable Treasury Issue shall be determined and the
Treasury Rate shall be interpolated or extrapolated from such yields on a
straight line basis, rounding to the nearest month) or (2) if such release (or
any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue, expressed as a
percentage of its principal amount, equal to the Comparable Treasury Price for
such redemption date. The Treasury Rate shall be calculated on the third
Business Day preceding the redemption date.
"Unrestricted Subsidiary" means any subsidiary of Harvard that is
designated by the Board of Directors as an Unrestricted Subsidiary through a
Board Resolution, but only if that such subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt,
(2) is not party to any agreement, contract, arrangement or
understanding with Harvard or any Restricted Subsidiary of Harvard
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to Harvard or such Restricted
Subsidiary than those that might be obtained at the time from persons
who are not affiliates of Harvard,
(3) is a person with respect to which neither Harvard 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
(4) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of Harvard or any of its
Restricted Subsidiaries; provided that, notwithstanding the above,
Harvard and its Restricted Subsidiaries may make payments to, provide
credit or credit support for or make investments in Unrestricted
Subsidiaries to the extent that such payments or investments are in
compliance with the covenant entitled "Restricted Payments."
"Voting Stock" of any person as of any date means the capital stock of
such person that is at the time entitled to vote in the election of the Board of
Directors of such person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (1) 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 (2) the then outstanding principal
amount of such Indebtedness.
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DESCRIPTION OF INDEBTEDNESS UNDER THE SENIOR CREDIT FACILITY
The following summary of the material terms and provisions of the
senior credit facility does not purport to be complete. For a complete
understanding at the senior credit facility, you should read the entire senior
credit facility, a copy of which was filed as an exhibit to the exchange offer
registration statement and is available as set forth under the caption "Where
You Can Find More Information.".
Concurrently with the effectiveness of the plan of reorganization and
the consummation of the Offering, Harvard entered into the senior credit
facility with a group of lenders led by General Electric Capital Corporation, as
administrative agent, Lehman Brothers Inc., as arranger, and Lehman Brothers
Commercial Paper Inc., as syndication agent. The senior credit facility provides
for up to $50.0 million in term loan borrowings and up to $65.0 million of
revolving credit borrowings.
Term Loan
The term loan portion of the senior credit facility will mature on
September 30, 2002, and will be amortized in equal quarterly installments of
$250,000, with the balance of $46,250,000 to be paid on the maturity date.
Revolving Credit
The revolving credit portion of the senior credit facility will expire
on the third anniversary of the effective date and will be available on a
revolving basis prior to its expiration, provided that the sum of (1) the
outstanding amount of all direct borrowings under the revolving credit facility
plus (2) the outstanding amounts of all undrawn letters of credit under the
revolving credit facility may not exceed the borrowing base. The borrowing base
is an amount calculated as the sum of (1) 85% of eligible accounts receivable,
plus (2) 60% of eligible finished goods and raw materials inventory, plus (3)
33% of eligible tooling inventory, up to $2 million, plus (4) 25% of eligible
work-in-process inventory, in each case less any reasonable reserves as required
by the administrative agent. Further, total inventory-based commitments cannot
exceed $20 million. The ability to meet the operating cash requirements of
Harvard could be impaired if Harvard fails to meet any of the covenants
contained in the senior credit facility and such noncompliance is not cured by
Harvard or waived by the lenders.
Prepayment
Harvard is required, subject to certain exceptions, to prepay
outstanding borrowings from the net proceeds of certain asset sales, equity and
debt issuances and 100% of annual excess cash flow, provided, however, that
under specified circumstances Harvard may use up to 50% of annual excess cash
flow to redeem or prepay the notes in an amount not to exceed $3 million in any
fiscal year and $5 million in the aggregate. Borrowings under the senior credit
facility are secured by a perfected first priority security interest in the
collateral that secures, on a second priority basis, the notes, in each case
subject to certain existing and permitted liens.
Interest
Funds borrowed under the senior credit facility bear interest at either
(1) the base rate plus the applicable margin or (2) the Eurodollar Rate plus the
Applicable Margin. "Base rate" means the highest of (1) the rate of interest
publicly announced by Bankers Trust Company as its prime rate then in effect,
(2) the secondary market rate for three-month certificates of deposit (adjusted
for statutory reserve requirements) plus
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1% and (3) the federal funds effective rate from time to time plus 0.5%.
"Applicable margin" means (1) 2.25% in the case of base rate term loans, (2)
3.50% in the case of Eurodollar term loans, (3) 2.125% in the case of base rate
loans which are revolving credit loans and (4) 3.375% in the case of Eurodollar
loans which are revolving credit loans. "Eurodollar rate" means the rate
(adjusted for statutory reserve requirements for eurocurrency liabilities) at
which eurodollar deposits for one, two, three or six months (as selected by
Harvard) are offered in the interbank market.
Restrictions
The senior credit facility restricts, among other things and subject to
specified exceptions, Harvard's ability:
o to incur additional indebtedness, except for extensions or
refundings of certain permitted indebtedness;
o to merge, consolidate, liquidate, dissolve, sell or transfer
all or substantially all of its assets or make other similar
fundamental changes;
o to sell assets outside the ordinary course of business (other
than the assets relating to the business of specified
subsidiaries under the senior credit facility) in excess of
amounts set forth therein in any fiscal year;
o to guarantee or invest in, or make loans or advances to, other
persons or entities,
o to declare or pay dividends or make other distributions with
respect to Harvard's equity interests;
o to engage in certain transactions with affiliates and holders
of its equity interests; and
o to redeem or prepay the notes.
The senior credit facility also requires Harvard to maintain financial ratios
relating to leverage, interest coverage and fixed charge coverage. In addition,
the senior credit facility imposes restrictions on capital expenditures of
Harvard.
Events of Default
Events of default under the senior credit facility include, among other
things:
o the failure by Harvard to pay principal, interest or any other
amount due thereunder when due;
o the failure of Harvard or any of its subsidiaries to pay any
principal, interest or other amount due on other indebtedness
(including capitalized leases) in excess of an aggregate
amount of $1,000,000, or the occurrence of any other breach,
default or event of default under such other indebtedness that
would cause or permit acceleration thereof in excess of an
aggregate amount of $1,000,000;
o a breach by Harvard of any covenant or agreement under the
senior credit facility (following expiration of any applicable
grace period);
o the material inaccuracy of any representation or warranty made
by Harvard under the senior credit facility;
o judgments against Harvard in excess of $1,000,000;
o certain changes of control;
o certain ERISA events; and
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o acts of bankruptcy, insolvency or dissolution.
Under the terms of the indenture with respect to the notes offered hereby, an
event of default under the senior credit facility will result in an event of
default under the indenture.
Collateral
Under the senior credit facility, Harvard, the other borrowers under
the senior credit facility and the administrative agent enter into a collateral
agreement. The obligations of Harvard under the senior credit facility are
secured, subject to the terms of the loan collateral agreement by a first
priority security interest in substantially all the assets of Harvard and the
subsidiary guarantors and all proceeds thereof. See "Description of the
Notes--Collateral" and "Description of the Notes--Intercreditor Agreement."
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences to U.S. Holders (as defined below) associated with the ownership
and disposition of the new notes. Except where noted, it deals only with new
notes issued under the exchange offer and held as capital assets and does not
deal with special situations, such as those of dealers in securities or
currencies, traders in securities that elect to mark to market, financial
institutions, insurance companies, tax-exempt organizations or holders whose
"functional currency" is not the U.S. dollar or who hold the new notes as a
hedge or part of a straddle or conversion transaction. Furthermore, the
discussion below is based upon the provisions of the Internal Revenue Code, and
U.S. Treasury Department Regulations, existing rulings and judicial decisions as
of the date hereof, and, at any time and without prior notice, such authorities
may be repealed, revoked or modified so as to result in federal income tax
consequences different from those discussed below.
A U.S. Holder means a holder of a note that is a citizen or resident of
the United States, a corporation or partnership created or organized in or under
the laws of the United States or any political subdivision thereof, an estate
the income of which is subject to United States federal income taxation
regardless of its source, or a trust if a United States court can exercise
primary supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust, or any other person whose worldwide income or gain is otherwise subject
to United States federal income taxation on a net income basis.
The following summary does not address the United States federal income
tax consequences applicable to holders other than U.S. Holders.
U.S. Holders should consult their own tax advisors concerning the
federal income tax consequences with respect to an exchange of old notes for new
notes under the exchange offer and with respect to the ownership and disposition
of new notes as well as consequences arising under the laws of any other taxing
jurisdiction, including state, local or foreign jurisdictions.
The Exchange Offer
The exchange of old notes for new notes under the exchange offer will
be treated as a continuation of the corresponding old notes because the terms of
the new notes are not materially different from the terms of the old notes
pursuant to Section 1001 of the Internal Revenue Code and the Treasury
Regulations thereunder. Accordingly, such exchange will not constitute a taxable
event to U.S. Holders and, therefore,
o no gain or loss will be realized by U.S. Holders upon receipt
of a new note;
o the holding period of the new note will include the holding
period of the old note exchanged therefor; and
o the adjusted tax basis of the new note will be the same as the
adjusted tax basis of the old note exchanged therefore
immediately before the exchange.
Tax Characterization of the Notes
Harvard intends to treat the new notes as indebtedness for federal
income tax purposes. Such treatment is not binding on the Internal Revenue
Service. Accordingly, there can be no assurance that the Internal Revenue
Service would not challenge such treatment or that a court would not hold that
the new notes should be characterized, in whole or in part, as equity for
federal income tax purposes. The following discussion assumes that the new notes
will be respected as indebtedness of Harvard for federal income tax purposes.
75
<PAGE>
Taxation of Interest on the Notes
A U.S. Holder will include in income, for each taxable year of such
U.S. Holder, the daily portion of the accrual of interest on the new notes under
the "noncontingent bond method" of the original issue discount regulations.
Under the noncontingent bond method, interest will accrue on the new notes based
upon the fixed interest and Harvard's determination of the projected amount of
cash flow participation interest over the term of the new notes based on the
"comparable yield" of the new notes irrespective of whether such projected
amount is actually paid. In order to determine the income of each U.S. Holder,
the U.S. Treasury Department Regulations require Harvard to determine, as of the
issue date, the comparable yield for the new notes. Because the exchange of old
notes for new notes is not a taxable exchange, the issue date of the new notes
is the same as the issue date of the old notes. The comparable yield for the new
notes is the yield at which Harvard would have issued a fixed rate debt
instrument with terms and conditions similar to those of the new notes. Harvard
is required to provide the comparable yield to owners and, solely for tax
purposes, is also required to provide to each U.S. Holder a projected payment
schedule, which is a hypothetical schedule for payments on the new notes. The
projected payment schedule must produce the comparable yield over the life of
the new notes. Harvard's comparable yield and projected payment schedule will be
available from the Corporate Finance Department of Harvard (Mail address: 3
Werner Way, Lebanon, New Jersey, 08833; via facsimile transmission
908-236-0071).
The comparable yield and projected payment schedule are used to
determine accruals of interest for tax purposes only and are not assurances by
Harvard with respect to the actual yield of, or payments to be made in respect
of, a new note. In general, Harvard's determination will be respected by the
Internal Revenue Service unless unreasonable. Further, the comparable yield and
the projected payment schedule do not necessarily represent Harvard's
expectations regarding such yield or the amount of payments with respect to the
new notes, which may be less than the projected payments.
For purposes of reporting the accrual of original issue discount on the
new notes, each U.S. Holder will be bound by Harvard's determination of the
payment schedule. However, if a U.S. Holder believes that the projected payment
schedule provided by Harvard is unreasonable, a U.S. Holder must set its own
projected payment schedule and explicitly disclose on the U.S. Holder's federal
income tax return the use of such schedule and the reason therefor.
Under the noncontingent bond method, if the cash flow participation
interest payable for any period differs from the amount projected to be paid as
of November 24, 1998, the amount of income includible by each U.S. Holder for
that period will be subject to a positive or negative adjustment, as
appropriate. Any net negative adjustment for the taxable year below zero will
constitute an ordinary loss to such U.S. Holder up to the amount of prior
interest accruals and any excess will be carried forward to offset future
interest accruals during subsequent periods with respect to the new notes. At
maturity, any remaining negative adjustment will give rise to an ordinary loss
to such U.S. Holder on redemption or retirement of the new note.
An issuance of pay-in-kind notes would not be considered an interest
payment made on the new notes at the time of such issuance and thus would result
in a negative adjustment to the amount of interest accrued by the U.S. Holder in
accordance with the projected payment schedule. The pay-in-kind notes would be
aggregated with, and would have the same issue date as, the new notes.
Optional Redemption
Harvard has the option to redeem the new notes at any time prior to
September 1, 2001 at a redemption price equal to 100% of the principal amount
thereof plus the applicable prepayment premium, if any, plus, up to the amount
not included in the applicable prepayment premium, accrued and unpaid interest
and liquidated damages under the registration rights agreement, if any, and on
or after September 1, 2001 at the redemption price set forth herein plus accrued
and unpaid interest and applicable liquidation damages, if any. See "Description
of The Notes--Optional Redemption." Under the original issue discount
regulations, Harvard is presumed to exercise any option that minimizes the
yield-to-maturity of the new notes. Because the exercise of
76
<PAGE>
an option to redeem will reduce the yield-to-maturity of the new notes, an
option that minimizes the yield to maturity will be presumed exercised for
purposes of computing the accrual of original issue discount on the new notes.
If, contrary to such presumption, Harvard does not exercise its option to redeem
the new notes, then, solely for purposes of computing subsequent accruals of
original issue discount, the new notes shall be treated as retired and reissued
on the presumed redemption date, resulting in a redetermination of the yield to
maturity and original issue discount accruals.
If Harvard exercises such rights to redeem the new notes, the tax
treatment of the redemption would be governed by the rules for dispositions
generally. See "Disposition of the Notes."
Disposition of the Notes
Generally, any sale or redemption of the new notes or pay-in-kind
notes, if any, will result in taxable gain or loss equal to the difference
between the amount of cash or other property received and the U.S. Holder's
adjusted tax basis in the new notes or pay-in-kind notes sold, redeemed or
otherwise disposed of. For purposes of determining gain or loss on the sale,
redemption or other disposition of a new note or pay-in-kind note, if any, a
U.S. Holder's aggregate adjusted tax basis in the new notes and any pay-in-kind
notes will equal the adjusted tax basis of the old notes, increased by the
interest previously accrued on the new notes, based upon Harvard's
determination, as of the issue date, of the projected payments, and decreased by
the amount of any prior payments of coupon interest and the projected amount of
any prior payments of cash flow participation interest. For purposes of
computing adjustments to the tax basis of the new notes, the projected payments
of cash flow participation interest on the new notes will be treated as actual
payments on the new notes. For purposes of calculating gain or loss on the
redemption of any pay-in-kind note, the U.S. Holder's adjusted tax basis in any
such pay-in-kind note redeemed will equal that proportion of the U.S. Holder's
aggregate adjusted tax basis in the new notes on the date of the redemption that
the principal amount of the redeemed pay-in-kind note bears to the aggregate
amount of the principal amount of the pay-in-kind notes and new notes held by
the U.S. Holder. In general, any gain upon a sale, redemption or other
disposition of a new note or pay-in-kind note, if any, will be treated as
interest income (rather than capital gain) and any loss, except with respect to
any remaining negative adjustment as described above under "Taxation of Interest
on the Notes," will be treated as a capital loss.
Backup Withholding
A U.S. Holder may be subject, under certain circumstances, to backup
withholding at a 31 percent rate with respect to payments received with respect
to the new notes. This withholding generally applies only if the U.S. Holder
o fails to furnish his or her social security or other taxpayer
identification number ("TIN");
o furnishes an incorrect TIN;
o is notified by the IRS that he or she has failed to report
payments of interest or dividends and the IRS has notified
Harvard that he or she is subject to backup withholding; or
o fails, under certain circumstances, to provide a certified
statement, signed under penalty of perjury, that the TIN
provided is his or her correct number and that he or she is
not subject to backup withholding.
Any amount withheld from a payment to a U.S. Holder under the backup
withholding rules is allowable as a credit against such U.S. Holder's federal
income tax liability, provided that the required information is furnished to the
IRS. Certain U.S. Holders may not be subject to backup withholding. U.S. Holders
should consult their tax advisors as to their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption.
77
<PAGE>
PLAN OF DISTRIBUTION
Each holder desiring to participate in the exchange offer will be
required to represent, among other things, that (1) it is not an "affiliate" (as
defined in Rule 405 of the Securities Act) of Harvard, (2) 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 notes, and (3) it is
acquiring the new notes in the ordinary course of its business. A restricted
holder will not be able to participate in the exchange offer, and may only sell
its old notes under a registration statement containing the selling
securityholder information required by Item 507 of Regulation S-K of the
Securities Act, or under an exemption from the registration requirement of the
Securities Act.
Each participating broker-dealer who holds old notes that were acquired
for its own account as a result of market-making activities or other trading
activities (other than old notes acquired directly from Harvard), may exchange
such old notes under the exchange offer; however, such participating
broker-dealer may be deemed to be an "underwriter" within the meaning of the
Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of the new
notes received by the broker-dealer in the exchange offer, which prospectus
delivery requirement may be satisfied by the delivery by such broker-dealer of
the prospectus contained in the exchange offer registration statement.
Based upon interpretations by the staff of the SEC, Harvard believes
that new notes issued under the exchange offer to participating broker-dealers
may be offered for resale, resold, and otherwise transferred by a participating
broker-dealer upon compliance with the prospectus delivery requirements, but
without compliance with the registration requirements, of the Securities Act.
Harvard has agreed that for a period of 180 days following the date on which the
exchange offer registration statement is declared effective, they will make this
prospectus available to participating broker-dealers for use in connection with
any such resale. During such period of time, delivery of this prospectus, as it
may be amended or supplemented, will satisfy the prospectus delivery
requirements of a participating broker-dealer engaged in market making or other
trading activities.
Based upon interpretations by the staff of the SEC, Harvard believes
that new notes issued under the exchange offer may be offered for resale, resold
and otherwise transferred by a holder thereof (other than a participating
broker-dealer) without compliance with the registration and prospectus delivery
requirements of the Securities Act.
Harvard will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by participating broker-dealers for their own
account under 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 at 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
participating broker-dealer and/or the purchasers of any such new notes. Any
participating broker-dealer that resells new notes that were received by it for
its own account under 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 participating broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
Harvard has agreed to pay all expenses incidental to the exchange offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
registration rights agreement.
78
<PAGE>
VALIDITY OF THE NOTES
The validity of the new notes will be passed upon for Harvard by
Sonnenschein Nath & Rosenthal, New York, New York.
EXPERTS
The audited consolidated financial statements of Harvard for the year
ended September 30, 1998 incorporated by reference herein, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
Reference is made to said report, which includes an explanatory paragraph with
respect to Harvard's ability to continue as a going concern as discussed in Note
1 to the consolidated financial statements.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information required by the Securities Exchange Act of 1934, as amended,
the SEC. You may read and copy any document we file at the SEC's public
reference rooms located at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and at Seven World Trade Center, Suite 1300, New York,
New York 10048. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. Copies of such material can be obtained by mail from
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 at prescribed rates. Our filings with the SEC are
also available to the public on the SEC's Internet web site at
http://www.sec.gov.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file with the
SEC later will automatically update and supersede this information. The
following documents filed by Harvard and any future filings made by us with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
prior to the termination of the offering are incorporated by reference in this
prospectus:
o Harvard's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998, including all subsequently filed
amendments;
o Harvard's Quarterly Report on Form 10-Q for the quarterly
period ended January 3, 1999, including all subsequently filed
amendments;
o Harvard's Current Reports on Form 8-K filed on October 7,
1998, October 30, 1998, December 3, 1998 and March 25, 1999.
Holders of securities of Harvard may request a copy of these filings,
at no cost, by writing or telephoning us at: Harvard Industries, Inc., 3 Werner
Way, Lebanon, NJ 08833, Attn: Phyllis Morais, Telephone: (908) 437-4157.
79
<PAGE>
================================================================================
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information or to make any
representation to you that is not contained in this prospectus. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any jurisdiction where the offer or sale is not
permitted. You should not under any circumstances assume that the information in
this prospectus is correct on any date after the date of this prospectus.
------------------
TABLE OF CONTENTS
Page
----
About This Prospectus........................................................ii
Prospectus Summary............................................................1
Risk Factors..................................................................8
Forward-Looking Statements...................................................18
Use of Proceeds..............................................................20
Capitalization...............................................................21
Selected Historical Consolidated Financial and
Operating Data...............................................................22
The Exchange Offer...........................................................25
Description Of The Notes.....................................................35
Description Of Indebtedness Under The Senior Credit
Facility.....................................................................72
Material Federal Income Tax Consequences.....................................74
Plan Of Distribution.........................................................77
Validity Of The Notes........................................................78
Experts......................................................................78
Where You Can Find More Information..........................................78
Documents Incorporated by Reference..........................................78
------------------
Until ____________ ___, 1999 (90 days after the date of this prospectus), all
dealers effecting transactions in the new notes offered hereby, whether or not
participating in this distribution, may be required to deliver a prospectus,
this is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
================================================================================
$25,000,000
Offer to Exchange 14 1/2% Senior
Notes Due 2003
that have been registered under the
Securities Act of 1933
for outstanding 14 1/2% Senior
Notes due 2003
------------------------------
P R O S P E C T U S
Dated , 1999
------------------------------
Harvard
Industries, Inc.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Generally, Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL") permits a corporation to indemnify certain persons made a
party to an action, by reason of the fact that such person 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 or enterprise. In the case of an action by or in the right of the
corporation, no indemnification may be made in respect of any matter as to which
such person was adjudged liable for negligence or misconduct in the performance
of such person's duty to the corporation unless the Delaware Court of Chancery
or the court in which such action was brought determines that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for proper expenses. To the extent such person has been successful in
the defense of any matter, such person shall be indemnified against expenses
actually and reasonably incurred by him.
Section 102(b)(7) of the DGCL enables a Delaware corporation to include a
provision in its certificate of incorporation limiting a director's liability to
the corporation or its stockholders for monetary damages for breaches of
fiduciary duty as a director. Harvard's Amended and Restated Certificate of
Incorporation and Bylaws that were adopted under the plan of reorganization
provide for indemnification of its officers and directors to the full extent
permitted under Delaware law.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
Exhibit No. Description
- ----------- -----------
1* Purchase Agreement by and among the Registrant and
the Initial Purchasers.
2.1* Plan of Reorganization and related Disclosure
Statement, filed with the U.S. Bankruptcy Court for
the District of Delaware on July 10, 1998
(incorporated by reference to Exhibits 99.1 and 99.2
to the Registrant's Form 8-K filed with the
Commission on July 24, 1998 (Commission File No.
001-01044)).
2.2* First Amended and Modified Consolidated Plan of
Reorganization dated August 19, 1998, filed with the
U.S. Bankruptcy Court for the District of Delaware on
August 25, 1998 (incorporated by reference to Exhibit
2.1 to the Registrant's Form 8-K filed with the
Commission on October 30, 1998 (Commission File No.
001-01044)).
3.1(a)* Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1(a) to the
Registrant's Form 10-K filed with the Commission on
January 13, 1999 (Commission File No. 0-21362)).
3.1(b)* Certificate of Merger of the Registrant (incorporated
by reference to Exhibit 3.1(b) to the Registrant's
Form 10-K filed with the Commission on January 13,
1999 (Commission File No. 0-21362)).
3.2* By-laws of the Registrant (incorporated by reference
to Exhibit 3.2 to the Registrant's Form 10-K filed
with the Commission on January 13, 1999 (Commission
File No. 0-21362)).
II-1
<PAGE>
4.1* Indenture (including the Form of 14 1/2% Senior
Secured Note due September 1, 2003), dated as of
November 24, 1998 between the Registrant, the
subsidiary guarantors and Norwest Minnesota Bank,
National Association, as Trustee (incorporated by
reference to Exhibit 4.2 to the Registrant's Form
10-K filed with the Commission on January 13, 1999
(Commission File No. 0-21362)).
5.1** Opinion of Sonnenschein Nath & Rosenthal.
10.1* Settlement Agreement dated as of October 15, 1998, by
and among the Registrant, certain of its subsidiaries
and the PBGC (incorporated by reference to Exhibit
10.1 to the Registrant's Form 10-K filed with the
Commission on January 13, 1999 (Commission File No.
0-21362)).
10.2* Registration Rights Agreement, dated as of November
23, 1998, by and among the Registrant and Lehman
Brothers Inc., as Initial Purchaser (incorporated by
reference to Exhibit 10.3 to the Registrant's Form
10-K filed with the Commission on January 13, 1999
(Commission File No. 0-21362)).
10.3* Credit Agreement, dated as of November 24, 1998,
between the Registrant, its subsidiaries, General
Electric Capital Corporation, as Administrative Agent
and the lenders party thereto(incorporated by
reference to Exhibit 10.4 to the Registrant's Form
10-K filed with the Commission on January 13, 1999
(Commission File No. 0-21362)).
10.4* Loan Collateral Agreement, dated as of November 24,
1998, by the Registrant in favor of General Electric
Capital Corporation, as Administrative Agent
(incorporated by reference to Exhibit 10.5 to the
Registrant's Form 10-K filed with the Commission on
January 13, 1999 (Commission File No. 0-21362)).
10.5* Collateral Agreement, dated as of November 24, 1998,
by the Registrant in favor of Norwest Bank Minnesota,
National Association, as Collateral Agent
(incorporated by reference to Exhibit 10.6 to the
Registrant's Form 10-K filed with the Commission on
January 13, 1999 (Commission File No 0-21362)).
10.6* Warrant Agreement, dated as of November 24, 1998,
between the Registrant and State Street Bank and
Trust Company, as Warrant Agent (incorporated by
reference to Exhibit 10.7 to the Registrant's Form
10-K filed with the Commission on January 13, 1999
(Commission File No. 0-21362)).
10.7* Harvard Industries, Inc. Nonqualified ERISA Excess
Benefit Plan (incorporated by reference to Exhibit
10.20 to the Registrant's Registration Statement on
Form S-1 filed with the Commission on August 24, 1995
(File No. 33-96376)).
10.8* Harvard Industries, Inc. Nonqualified Additional
Credited Service Plan (incorporated by reference to
Exhibit 10.21 to the Registrant's Registration
Statement on Form S-1 filed with the Commission on
August 24, 1995 (File No. 33-96376)).
10.9* Harvard Industries, Inc. 1998 Stock Incentive Plan
(incorporated by reference to Exhibit 10.10 to the
Registrant's Form 10-K filed with the Commission on
January 13, 1999 (File No. 0-21362)).
12.1** Ratio of Earnings to Fixed Charges.
II-2
<PAGE>
16* Letter re change in certifying accountant
(incorporated by reference to Exhibit 16.1 to
Harvard's Current Report on Form 8-K/A filed with the
Commission October 7, 1998 (Commission File No.
001-01044)).
21* List of subsidiaries of Harvard (incorporated by
reference to Exhibit 21 to the Registrant's Form 10-K
filed with the Commission on January 13, 1999
(Commission File No. 0-21362)).
23.1** Consent of Arthur Andersen LLP, Independent
Accountants.
23.2** Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.3** Consent of Sonnenschein Nath & Rosenthal (included in
their opinion filed as Exhibit 5.1).
23.4** Consent of Norman Levy Associates, Inc., independent
appraisers.
23.5** Consent of Chanin Kirkland Messina LLC, independent
financial professionals.
24* Powers of Attorney (contained in the signature pages
hereto).
25* Statement on Form T-1 of Eligibility 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 Nominees.
* Previously filed.
** Filed herewith.
***To be filed by amendment
(b) Financial Statement Schedules.
None.
II-3
<PAGE>
Item 22. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions described under Item 20 above, 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 option of their 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.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Lebanon, State of New Jersey, on April 14, 1999.
HARVARD INDUSTRIES, INC.
By /s/ Roger G. Pollazzi
------------------------------
Name: Roger G. Pollazzi
Title: 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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Roger G. Pollazzi Chairman of the Board and April 14, 1999
- ------------------------ Chief Executive Officer
Roger G. Pollazzi (Principal Executive Officer)
/s/ Theodore W. Vogtman* Executive Vice President and April 14, 1999
- ------------------------ Chief Financial Officer
Theodore W. Vogtman (Principal Financial Officer)
/s/ Kevin L.B. Price Vice President, Controller April 14, 1999
- -------------------- and Treasurer
Kevin L.B. Price (Principal Accounting Officer)
/s/ Jon R. Bauer* Director April 14, 1999
- -----------------
Jon R. Bauer
/s/ Thomas R. Cochill* Director April 14, 1999
- ----------------------
Thomas R. Cochill
- ----------------------- Director , 1999
Raymond Garfield, Jr.
/s/ Donald P. Hilty* Director April 14, 1999
- --------------------
Donald P. Hilty
/s/ George A. Poole* Director April 14, 1999
- --------------------
George A. Poole
/s/ James P. Shanahan, Jr.* Director April 14, 1999
- ---------------------------
James P. Shanahan, Jr.
/s/ Richard W. Viesser* Director April 14, 1999
- -----------------------
Richard W. Viesser
*By: /s/ D. Craig Bowman
-------------------
D. Craig Bowman,
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
Exhibit Index
Exhibit No. Description
- ----------- -----------
1* Purchase Agreement by and among the Registrant and
the Initial Purchasers.
2.1* Plan of Reorganization and related Disclosure
Statement, filed with the U.S. Bankruptcy Court for
the District of Delaware on July 10, 1998
(incorporated by reference to Exhibits 99.1 and 99.2
to the Registrant's Form 8-K filed with the
Commission on July 24, 1998 (Commission File No.
001-01044)).
2.2* First Amended and Modified Consolidated Plan of
Reorganization dated August 19, 1998, filed with the
U.S. Bankruptcy Court for the District of Delaware on
August 25, 1998 (incorporated by reference to Exhibit
2.1 to the Registrant's Form 8-K filed with the
Commission on October 30, 1998 (Commission File No.
001-01044)).
3.1(a)* Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1(a) to the
Registrant's Form 10-K filed with the Commission on
January 13, 1999 (Commission File No. 0-21362)).
3.1(b)* Certificate of Merger of the Registrant (incorporated
by reference to Exhibit 3.1(b) to the Registrant's
Form 10-K filed with the Commission on January 13,
1999 (Commission File No. 0-21362)).
3.2* By-laws of the Registrant (incorporated by reference
to Exhibit 3.2 to the Registrant's Form 10-K filed
with the Commission on January 13, 1999 (Commission
File No. 0-21362)).
4.1* Indenture (including the Form of 14 1/2% Senior
Secured Note due September 1, 2003), dated as of
November 24, 1998 between the Registrant, the
subsidiary guarantors and Norwest Minnesota Bank,
National Association, as Trustee (incorporated by
reference to Exhibit 4.2 to the Registrant's Form
10-K filed with the Commission on January 13, 1999
(Commission File No. 0-21362)).
5.1** Opinion of Sonnenschein Nath & Rosenthal.
10.1* Settlement Agreement dated as of October 15, 1998, by
and among the Registrant, certain of its subsidiaries
and the PBGC (incorporated by reference to Exhibit
10.1 to the Registrant's Form 10-K filed with the
Commission on January 13, 1999 (Commission File No.
0-21362)).
10.2* Registration Rights Agreement, dated as of November
23, 1998, by and among the Registrant and Lehman
Brothers Inc., as Initial Purchaser (incorporated by
reference to Exhibit 10.3 to the Registrant's Form
10-K filed with the Commission on January 13, 1999
(Commission File No. 0-21362)).
10.3* Credit Agreement, dated as of November 24, 1998,
between the Registrant, its subsidiaries, General
Electric Capital Corporation, as Administrative Agent
and the lenders party thereto (incorporated by
reference to Exhibit 10.4 to the Registrant's Form
10-K filed with the Commission on January 13, 1999
(Commission File No. 0-21362)).
10.4* Loan Collateral Agreement, dated as of November 24,
1998, by the Registrant in favor of General Electric
Capital Corporation, as Administrative Agent
(incorporated
II-6
<PAGE>
by reference to Exhibit 10.5 to the Registrant's Form
10-K filed with the Commission on January 13, 1999
(Commission File No. 0-21362)).
10.5* Collateral Agreement, dated as of November 24, 1998,
by the Registrant in favor of Norwest Bank Minnesota,
National Association, as Collateral Agent
(incorporated by reference to Exhibit 10.6 to the
Registrant's Form 10-K filed with the Commission on
January 13, 1999 (Commission File No 0-21362)).
10.6* Warrant Agreement, dated as of November 24, 1998,
between the Registrant and State Street Bank and
Trust Company, as Warrant Agent (incorporated by
reference to Exhibit 10.7 to the Registrant's Form
10-K filed with the Commission on January 13, 1999
(Commission File No. 0-21362)).
10.7* Harvard Industries, Inc. Nonqualified ERISA Excess
Benefit Plan (incorporated by reference to Exhibit
10.20 to the Registrant's Registration Statement on
Form S-1 filed with the Commission on August 24, 1995
(File No. 33-96376)).
10.8* Harvard Industries, Inc. Nonqualified Additional
Credited Service Plan (incorporated by reference to
Exhibit 10.21 to the Registrant's Registration
Statement on Form S-1 filed with the Commission on
August 24, 1995 (File No. 33-96376)).
10.9* Harvard Industries, Inc. 1998 Stock Incentive Plan
(incorporated by reference to Exhibit 10.10 to the
Registrant's Form 10-K filed with the Commission on
January 13, 1999 (File No. 0-21362)).
12.1** Ratio of Earnings to Fixed Charges.
16* Letter re change in certifying accountant
(incorporated by reference to Exhibit 16.1 to
Harvard's Current Report on Form 8-K/A filed with the
Commission October 7, 1998 (Commission File No.
001-01044)).
21* List of subsidiaries of Harvard (incorporated by
reference to Exhibit 21 to the Registrant's Form 10-K
filed with the Commission on January 13, 1999
(Commission File No. 0-21362)).
23.1* Consent of Arthur Andersen LLP, Independent
Accountants.
23.2* Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.3** Consent of Sonnenschein Nath & Rosenthal (included in
their opinion filed as Exhibit 5.1).
23.4** Consent of Norman Levy Associates, Inc., independent
appraisers.
23.5** Consent of Chanin Kirkland Messina LLC, independent
financial professionals.
24* Powers of Attorney.
25* Statement on Form T-1 of Eligibility of Trustee.
99.1*** Form of Letter of Transmittal.
99.2*** Form of Notice of Guaranteed Delivery.
II-7
<PAGE>
99.3*** Form of Letter to Clients.
99.4*** Form of Letter to Nominees.
* Previously filed.
** Filed herewith.
***To be filed by amendment
II-8
<PAGE>
Exhibit 5.1
Sonnenschein Nath & Rosenthal
1221 Avenue of the Americas
Suite 2400
New York, New York 10020
April 14, 1999
Harvard Industries, Inc.
3 Werner Way
Lebanon, New Jersey 08833
Ladies and Gentlemen:
You have requested our opinion as counsel to Harvard Industries, Inc., a
Delaware corporation (the "Company"), in connection with the preparation and
filing of the Company's Registration Statement on Form S-4, No. 333-71137 (the
"Registration Statement") relating to the proposed offer to exchange (the
"Exchange Offer") the Company's 14 1/2% Senior Secured Notes due 2003 (the "New
Notes"), for all outstanding 14 1/2% Senior Secured Notes due 2003 of the
Company, such New Notes to be issued pursuant to an Indenture, dated as of
November 24, 1998 (the "Indenture"), by and among the Company, certain of its
subsidiaries (the "Subsidiary Guarantors") and Norwest Bank Minnesota, National
Association, as Trustee (the "Trustee"). Payment of the New Notes will be
guaranteed by the Subsidiary Guarantors in accordance with the terms of the
Indenture (the "Subsidiary Guarantees" and, together with the New Notes, the
"Securities").
We have participated in the preparation of the Registration Statement
and, in connection therewith, have examined and relied upon the originals or
copies of such records, agreements, documents and other instruments, and have
made such inquiries of such officers and representatives, as we have deemed
relevant and necessary as the basis for the opinion hereinafter set forth. In
such examination, we have assumed, without independent verification, the
genuineness of all signatures (whether original or photostatic), the legal
capacity of natural persons, the authenticity of all documents submitted to us
as originals, and the conformity to authentic original documents of all
documents submitted to us as certified or photostatic copies. We have assumed,
without independent verification, the accuracy of the relevant facts stated
therein. In making our examination of documents executed by parties other than
the Company and its subsidiaries, we have assumed that such parties had 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 other facts material to the
opinion expressed herein that were not independently established or verified, we
have relied upon statements and representations of officers and employees of the
Company.
Based upon the foregoing and subject to the assumptions and
qualifications set forth herein, it is our opinion that:
1. The Company is a corporation validly existing in good standing under
the laws of the State of Delaware.
2. The Securities have been duly authorized, and when issued, assuming
due authentication of the New Notes by the Trustee, will be valid and binding
obligations of the Company or the respective Subsidiary Guarantors, as the case
may be, enforceable against them in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, fraudulent transfer,
<PAGE>
Harvard Industries, Inc.
April 14, 1999
Page 2
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
The foregoing opinions are limited to the laws of the State of New York,
the laws of the United States of America and the general corporate law of the
State of Delaware, and do not purport to express any opinion on the laws of any
other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm and this opinion under
the heading "Validity of the Notes" in the prospectus comprising a part of such
Registration Statement and any amendment thereto. In giving such consent, we do
not hereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
Except to the extent provided in the preceding paragraph, this opinion is
rendered solely to the Company in connection with the Exchange Offer and may not
be relied upon by, nor may copies be delivered to, any other person or entity
for any purpose without our prior written consent.
Very truly yours,
SONNENSCHEIN NATH & ROSENTHAL
By: /s/ PHILIP A. HABER
-----------------------
Philip A. Haber
<PAGE>
EXHIBIT 12.1
HARVARD INDUSTRIES INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
DIVIDENDS ON PREFERRED STOCK
(In thousands of dollars)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
Year ended
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pre-tax income from continuing operations................ (49,597) (388,225) $(58,016) $20,679 $26,204
Add: Fixed charges....................................... 14,231 38,477 48,117 20,257 12,571
---------------------------------------------------------------------------
Income as adjusted....................................... (35,366) (349,748) $ (9,899) $40,936 $38,775
===========================================================================
Fixed charges:
Interest on indebtedness............................... 14,231 36,659 $ 47,004 $19,579 $11,947
Portion of rents representative of the interest
factor................................................. 0 1,818 1,113 678 624
---------------------------------------------------------------------------
Fixed charges.......................................... 14,231 38,477 48,117 20,257 12,571
Dividends on preferred stock and accretion............... 0 10,142 14,844 14,809 14,767
---------------------------------------------------------------------------
Fixed charges and dividends on preferred stock........... 14,231 48,619 $ 62,961 $35,066 $27,338
===========================================================================
Ratio of earnings over fixed charges and dividends
on preferred stock..................................... 1.17 x 1.42 x
========================
Deficiency of earnings over fixed charges and
dividends on preferred stock.......................... (49,597) (398,367) $(72,860)
===========================================
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 12, 1999
included in Harvard Industries, Inc.'s Form 10-K for the year ended September
30, 1998 and to all references to our firm included in this registration
statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
April 14, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of our report
(which contains an explanatory paragraph relating to the ability of Harvard
Industries, Inc. to continue as a going concern) dated November 14, 1997, except
for Note 9 as to which the date is December 29, 1997, appearing in
the Annual Report on Form 10-K/A of Harvard Industries, Inc. for the year ended
September 30, 1998.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
11 Madison Avenue
New York, NY
April 14, 1999
<PAGE>
Exhibit 23.4
NORMAN LEVY ASSOCIATES, INC.
21415 CIVIC CENTER DRIVE, SUITE 306
SOUTHFIELD, MICHIGAN 48076
(248) 353-8640
FAX (248) 353-1442
March 26, 1999
Via Facsimile and First Class Mail
Mr. Phillip A. Haber, Esq.
Sonnenschein Nath & Rosenthal
1221 Avenue of the Americas
New York, NY 10020-1089
Re: Consent of Independent Appraiser
Dear Mr. Haber:
We hereby consent to the reference to us and to our appraisal dated April 29,
1998 of assets of Harvard Industries, Inc. in that company's Form 10-Q for the
quarter ended January 3, 1999, and to the incorporation of reference thereof in
the company's Registration Statements on Form S-3, File No. 333-71139, and Form
S-4, File No. 333-71137, filed with the Securities and Exchange Commission.
Very truly yours,
NORMAN LEVY ASSOCIATES, INC.
/s/ David K. Levy
David K. Levy
Executive Vice President
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT FINANCIAL PROFESSIONALS
We hereby consent to the reference to us in the Form 10-Q of Harvard Industries,
Inc. for the quarter ended January 3, 1999, and to the incorporation by
reference thereof in the company's Registration Statements on Form S-3, File No.
333-71139, and Form S-4, File No. 333-71137, filed with the Securities and
Exchange Commission.
CHANIN KIRKLAND MESSINA LLC
By: /s/ Russell Belinsky
-------------------------
Name: Russell Belinsky
Title: Managing Director
Date: March 29, 1999
