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As filed with the Securities and Exchange Commission on January 25, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HARVARD INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
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Delaware 2522 21-0715310
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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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)
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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)
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Copy To:
Christopher E. Manno, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
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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. / /
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Amount maximum maximum Amount of
Title of each class of securities to be offering aggregate Registration
to be registered registered price(1) offering price Fee
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14 1/2% Senior Secured Notes due 2003 $25,000,000 $25,000,000 $25,000,000 $6,950
====================================================================================================================
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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.
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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 JANUARY 25, 1999.
Harvard Industries, Inc.
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Exchange Offer For: 14-1/2% Senior Secured Notes Due 2003
THE REGISTERED NOTES
o The terms of the exchange notes are substantially identical to the
outstanding notes, except that the exchange notes will be freely
tradable.
o Coupon interest accrues from November 24, 1998 at the rate of 14-1/2%
per annum, payable semi-annually in arrears on each March 1 and
September 1, beginning on March 1, 1999.
o In addition to coupon interest, Cash Flow Participation Interest (as
defined in this Prospectus) is payable semi-annually.
o The notes will mature on September 1, 2003.
o The notes are secured by a second priority security interest in
substantially all of our tangible and intangible assets and will rank
equally with all of our current and future Senior Debt including the
Senior Credit Facility (both as defined in this Prospectus).
THE EXCHANGE OFFER
o The Exchange Offer expires at 5:00 p.m., New York City time, on
_________ __, 1999 unless extended.
o The Exchange Offer is not subject to any conditions other than that
the Exchange Offer not violate applicable law or any applicable
interpretation of the Staff of the Securities and Exchange
Commission.
o All outstanding notes that are validly tendered and not validly
withdrawn will be exchanged.
o Tenders of outstanding notes may be withdrawn at any time prior to
the expiration of the Exchange Offer.
o We will not receive any proceeds from the Exchange Offer.
Investment in the Exchange Notes involves certain risks. Consider carefully
the risk factors beginning on page __ 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
criminaloffense.
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The date of this Prospectus is ___________ __, 1999.
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ABOUT THIS PROSPECTUS
This Prospectus is a part of an S-4 registration statement (the
"Registration Statement") that we have filed with the Securities and Exchange
Commission (the "SEC") with respect to the 14-1/2% Senior Secured Notes due 2003
(the "Registered Notes"). You should read both this Prospectus and any
supplement together with additional information described under "Where You Can
Find More Information."
You should rely only on the information provided or incorporated by
reference in this Prospectus or any supplement. We have not authorized anyone
else to provide you with additional or different information. The Common Stock
is not being offered in any state where the offer is not permitted. You should
not assume that the information in this Prospectus or any supplement is accurate
as of any date other than the date on the front of such documents.
In the event that we are no longer required to file annual, quarterly,
proxy statements and other information with the SEC, we have agreed to file with
the SEC (unless the SEC will not accept such a filing) and provide to the
holders of Notes annual reports and the information, documents and other reports
otherwise required pursuant to Sections 13 and 15(d) of the Exchange Act. For
additional information, please refer to the section entitled "Description of the
Notes -- Certain Covenants -- Reports" located elsewhere in this Prospectus.
All references in this Prospectus to "Harvard," the "Company," "we," "us,"
or "our" mean Harvard Industries, Inc. and its subsidiaries.
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
"Exchange Act"), with 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.
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 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;
o Harvard's Current Reports on Form 8-K filed on October 7, 1998, October
30, 1998 and December 3, 1998.
You 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.
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TABLE OF CONTENTS
Page
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About This Prospectus........................................................ii
Where You Can Find More Information..........................................ii
Prospectus Summary............................................................1
Risk Factors..................................................................8
Use Of Proceeds..............................................................20
Capitalization...............................................................21
Selected Historical Consolidated Financial And Operating Data................22
The Exchange Offer...........................................................24
Description Of The Notes.....................................................32
Description Of Indebtedness Under The Senior Credit Facility.................69
Certain Federal Income Tax Consequences......................................71
Plan Of Distribution.........................................................74
Validity Of The Notes........................................................75
Experts......................................................................75
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.
--------------------
The Notes will be available initially in book-entry form, and the Company
expects that the Notes sold pursuant hereto will be issued in the form of a
Global Note (as defined), which will be deposited with, or on behalf of, The
Depository Trust Company (the "Depository") 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
Depositary 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 froth in the Indenture (as defined). See "Description of the
Notes--Book Entry, Delivery and Form."
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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."
General
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 ("OEMs") producing cars and light trucks in
North America. In the fiscal year 1998, 82% of our sales were made to General
Motors Corporation ("General Motors"), Ford Motor Company ("Ford") and Chrysler
Corporation ("Chrysler").
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 (the "Bankruptcy Court"). On November 24, 1998 (the "Effective Date"),
we substantially consummated our First Amended Modified Consolidated Plan Under
Chapter 11 of the Bankruptcy Code dated August 19, 1998 (the "Plan of
Reorganization") and emerged from bankruptcy.
While we were in bankruptcy proceedings the Bankruptcy Court appointed a
Creditors' Committee. The Creditors' Committee was disbanded on the Effective
Date. 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
('Pullman") from 1992 to 1997.
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
Harvard, who was formerly the Vice President of Operations at Pullman
and has over 21 years of experience in the automotive industry.
The Turnaround Business Strategy
In connection with our reorganization, our new management team has outlined
the following turnaround business strategies (together, the "Turnaround Business
Strategy") for restoring our profitability:
o Close and/or Sell Underperforming Facilities: Since taking over in late
1997, 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
- 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
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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 $5.8 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 (the "Old Notes") and entered into a
$115.0 million senior secured credit facility with a group of lenders led by
General Electric Capital Corporation (the "Senior Credit Facility" and, together
with the Notes, the "Financings"). The Senior Credit Facility provided 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 Old Notes and 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 the Company while we were in bankruptcy
proceedings (together, the "DIP Credit Facilities"),
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.
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The Exchange Offer
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The Exchange Offer...................... We are offering to exchange $1,000 principal amount of our 14-1/2% Senior
Secured Notes due 2003 which have been registered under the Securities Act
of 1933 (the "New Notes") for each $1,000 principal amount of our
outstanding 14-1/2% Senior Secured Notes due 2003 which were issued
November 24, 1998 in a private offering (the "Old Notes"). In order to be
exchanged, an outstanding note must be properly tendered and accepted. All
outstanding notes that are validly tendered and not validly 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.
Minimum Condition....................... The Exchange Offer is not subject to any minimum amount of Old Notes being
tendered for exchange.
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.
Exchange Date........................... We will accept Old Notes for exchange beginning the first business day
after the expiration date.
Conditions to the Exchange
Offer................................ The Exchange Offer is not subject to any condition other than that the
Exchange Offer not violate applicable law or any applicable interpretation
of the Staff of the Securities and Exchange Commission.
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 such exchange.
Certain Representations................. If you desire to participate in the Exchange Offer, you will be required
to make the following representations:
o You must represent that you are not one of our "affiliates" (as defined
in Rule 405 of the Securities Act).
o You must represent that 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.
o You must represent that you are acquiring the New Notes in the ordinary
course of your business.
Transfer Restrictions on New Notes...... We believe that the registered 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 of 1933 provided that:
o the registered notes are being acquired in the ordinary course of your
business;
o you are not participating, do not intend to participate, and have no
arrangement or understanding with any person to participate, in the
distribution of registered notes issued to you; and
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o you are not an "affiliate" of ours.
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 of 1933 or without an exemption from registration of your
notes from such requirements, you may incur liability under the Securities
Act of 1933. We do not assume or indemnify you against such liability.
Each broker-dealer that is issued registered notes in the Exchange Offer
for its own account in exchange for outstanding notes which were acquired
by that broker-dealer as a result of market-making or other trading
activities must deliver a prospectus meeting the requirements of the
Securities Act of 1933, as amended, in connection with any resale of the
registered notes issued in the Exchange Offer. A broker-dealer may use
this Prospectus for an offer to resell, resale or other retransfer of the
registered notes issued.
Effect on Holders of Old Notes.......... You are entitled to exchange your outstanding notes for registered notes
with substantially identical terms. The Exchange Offer is intended to
satisfy these rights. After the Exchange Offer is complete, you will no
longer be entitled to any exchange or registration rights with respect to
your outstanding notes. If you do not tender your old notes, or if your
old notes are tendered but unaccepted, your Old Notes will be subject to
the restrictions on transfer provided for in the Old Notes. To the extent
that Old Notes are tendered and accepted in the Exchange Offer, the
trading market, if any, for the Old Notes remaining outstanding after
cosummation of the Exchange Offer could be adversely affected.
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The New Notes
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Issuer.................................. Harvard Industries, Inc.
Maturity................................ September 1, 2003.
Interest................................ Coupon interest accrues from November 24, 1998 at the rate equal to the
sum of 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 ia paid semi-annually. Cash Flow Participation
Interest is equal to the product of the Consolidated Cash Flow (as defined
in this Prospectus under the heading "Description of the Notes") 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) and the applicable
percentage as set forth below:
Interest Payment Date Percentage
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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 tangible and intangible assets;
o rank equal in right of payment with all of our current and future
Senior Debt including the Senior Credit Facility (both as defined in
this Prospectus);
o are senior in right of payment to all of our existing and future
subordinated indebtedness;
o will be effectively subordinated to the Senior Credit Facility to the
extent of the value of the working capital and fixed assets securing
the Senior Credit Facility.
Mandatory Redemption.................... Except (i) with respect to a Special PIK Redemption (as defined herein)
and (ii) upon a change of control, as set out under "Change of Control"
below, the Company will not be required to make mandatory redemption with
respect to the Notes.
Optional Redemption..................... Before September 1, 2001, the notes will be redeemable, in whole or in
part, at our option, 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 a make-whole
premium, plus accrued and unpaid interest and liquidated damages.
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These terms are more fully described in this Prospectus under the heading
"Description of the Notes--Optional Redemption." On or after September 1,
2001, the notes will be redeemable, at our option, in whole or in part,
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 redeemed 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 redeemed during the twelve-month period beginning
on September 1, 2002.
Change of Control....................... Upon a change of control of Harvard Industries, Inc., we are required to
make an offer to purchase the registered notes from you at a purchase
price in cash equal to 101% of their aggregate principal amount on the
date of purchase, plus accrued and unpaid interest and liquidated damages,
if any.
Guarantees.............................. The New Notes are guaranteed jointly and severally by our domestic
subsidiaries. These guarantees are:
o secured by substantially all of our tangible and intangible assets.
o senior obligations of the subsidiaries;
o rank equally in right of payment with all existing and future Senior
Debt of such subsidiaries (including debt under the Senior Credit
Facility); and
o rank senior to all existing and future subordinated debt of such
subsidiaries.
Collateral.............................. The New Notes are secured, subject to certain liens, by a second priority
security interest (second to the liens securing the Senior Credit
Facility) in substantially all of our working capital and fixed assets and
all the proceeds of these assets (the "Collateral"). These assets include
all accounts receivable, equipment, real property, intellectual property
and all of the capital stock of our subsidiaries.
Covenants............................... The indenture under which the Old Notes have been and the New Notes are
being issued (the "Indenture") contains certain covenants for your benefit
which, among other things and subject to certain exceptions, restrict our
ability and the ability of our subsidiaries to:
o pay dividends or make certain other restricted payments;
o incur additional indebtedness and issue preferred stock;
o create certain liens;
o enter into certain transactions with affiliates;
o sell assets;
o enter into cerain mergers and consolidations;
o engage in sale-leaseback transactions;
o restrict dividends and other payments from subsidiaries; and
o engage in business activities other than those in which we engage or
are currently contemplating engaging in.
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The Indenture also contains certain covenants which require us to maintain
a leverage ratio and an interest coverage ratio as described under the
section "Description of Notes--Certain Covenants."
In addition, the Indentrue provides that under certain 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 Notes--Certain Covenants" and "--
Repurchase at the Option of Holders--Asset Sales."
The Indenture allows modification and amendment of these and other
covenants 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.
Use of Proceeds......................... We will not receive any proceeds from the Exchange Offer.
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For additional information regarding the Notes, see "Description of the
Notes" and "Certain Federal Income Tax Consequences."
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 tendering their Old Notes for the New Notes offered in this
Prospectus, holders of the Old Notes should carefully consider the following
risk factors which (other than "Consequences of Failure to Exchange" and
"Absence of a Public Market for the New Notes; Possible Volatility of Note
Price") are generally applicable to the Old Notes as well as to the New Notes.
Holders of the Old Notes should also consider the other information contained
and incorporated by reference in this Prospectus before purchasing the New
Notes. The risks and uncertainties described below are not the only ones facing
our company. Additional risks and uncertainties not presently known to us or
that we currently deem immaterial may also impair our business operations.
This Prospectus contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. We
consider forward-looking statements to be those statements regarding our
intentions, beliefs or current expectations with respect to our future operating
performance. Forward-looking statements 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. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "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 can give no assurance that such expectations will
prove to have been correct. The most significant of such risks, uncertainties
and other factors are discussed below 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.
Important factors that could cause actual results to differ materially from
our expectations ("Cautionary Statements") are disclosed in this Prospectus
including those accompanying the forward-looking statements used in the
"Prospectus Summary" and "Risk Factors" sections and in all other sections of
this Prospectus. 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 the Cautionary Statements.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes set forth in the legend printed on the Old Notes.
The issuance of the Old Notes under exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws resulted in these restrictions on the Old Notes. In
general, the Old Notes may not be offered or sold, unless registered under the
Securities Act and applicable state securities laws, unless they are offered or
sold under an exemption from the Securities Act. Except under certain limited
circumstances, we do not intend to register the Old Notes under the Securities
Act.
In addition, any holder of Old Notes who tenders in the Exchange Offer for
the purpose of participating in a distribution of New Notes may be deemed to
have received restricted securities. If this is the case, the holder will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. To the extent 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."
Substantial Leverage
As a result of the Financings, we are highly leveraged and, after giving
pro forma effect to the Financings, we would have had total indebtedness of $75
million at September 30, 1998 (of which (i) $50 million would have consisted of
indebtedness under the Senior Credit Facility and (ii) $25 million would have
consisted of the Notes) and equity of $175 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. Under certain conditions, we will be permitted to incur
additional indebtedness in the future. See "Description of Notes--Incurrence of
Indebtedness and Issuance of Preferred Stock."
Our ability to pay principal of and interest and premium, if any, on the
Notes and to satisfy our debt service
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obligations under the Senior Credit Facility will depend upon the future
operating performance of our subsidiaries. This operating performance will be
affected by economic conditions in the markets they serve and financial,
business and other factors, many of which are beyond their control. Based upon
the current level of operations, our management believes that cash flow from
operations and available cash, together with available borrowings under the
Senior Credit Facility, will be adequate to meet our future liquidity needs for
at least the next twelve months.
For fiscal years 1998, 1997 and 1996 we had net losses of $56 million, $389
million and $69 million, respectively. 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. There can be no assurance 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
able to refinance the Notes. If we are able to refinance the Notes, we cannot
assure you it will be on commercially reasonable terms.
The degree to which we are leveraged could have important consequences to
holders of the New Notes, including, but not limited to:
1) making it more difficult for us to satisfy our obligations with respect
to the New Notes;
2) 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;
3) limiting our ability to obtain additional financing we may need to fund
future working capital, capital expenditures or other corporate
requirements;
4) 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;
5) 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;
6) restricting our ability to acquire other businesses in the future; and
7) 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 waive 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. See "Description of Indebtedness Under the Senior
Credit Facility" and "Description of Notes-Repurchase at the Option of
Holders-Change of Control."
Second Priority Security Interest; Collateral
The Notes are secured by a second priority security interest in the
Collateral under the Collateral Agreement and the other Security Documents (both
as defined in this Prospectus under the heading "Description of the Notes").
Indebtedness outstanding under the Senior Credit Facility is secured by a first
priority security interest in the Collateral. In each case security is subject
to certain existing and permitted liens. In addition, the security interest is
subject to an Intercreditor Agreeement that we entered into with the Trustee,
the Collateral Agent, and the Administrative Agent (each as defined in this
Prospectus under the heading "Description of the Notes"). The Intercreditor
Agreement provides for the allocation of rights among the Trustee and all other
parties with respect to the Collateral and for enforcement provisions with
respect to these rights. The proceeds from the sale of the Collateral, in the
event there is a 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
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full of debt outstanding under the Senior Credit Facility. See "Description of
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 illiquid 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. If it is possible, the sale may be of
insignificant value. In addition, to the extent that third parties enjoy
Permitted Liens (as defined in this Prospectus under the heading "Description of
the Notes"), 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 Notes--Certain Covenants--Liens."
Under the Intercreditor Agreement and the Collateral Agreement, the Loan
Collateral Agent (as defined in this Prospectus under the heading "Description
of the Notes"), for the benefit of the lenders under the Senior Credit Facility
is the only one who holds:
o the control of foreclosure proceedings;
o the enforcement and amendment of the Collateral Agreement; and
o the right to take other actions with respect to the Collateral.
Under certain conditions, the Loan Collateral Agent will be able to release
Collateral, from time to time, in whole or in part. In such event and upon
satisfaction of these certain conditions, the Collateral released will be
automatically released as security for the New Notes without any action on the
part of the Trustee or the holders. See "Description of Indebtedness Under the
Senior Credit Facility--Collateral."
Effect of Future Bankruptcy upon Exercise of Remedies
The Collateral Agent's right to repossess and dispose of the Collateral
upon the occurrence of an Event of Default (as defined in this Prospectus under
the heading "Description of the Notes") is likely to be significantly impaired
by certain bankruptcy laws 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, a secured creditor,
such as the Collateral Agent, can only 1) repossess its security from a debtor
in a bankruptcy case or 2) dispose of security repossessed from such debtor if
the secured creditor has bankruptcy court approval. Moreover, the Bankruptcy
Code permits the debtor to continue to retain and to use such collateral even
though the debtor is in default under applicable debt contracts, provided that
the secured creditor is given "adequate protection" as such term is interpreted
by the relevant bankruptcy court. Because 1) the term "adequate protection" is
not given a precise definition and varies according to the circumstances and 2)
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 holders of the Notes 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.
Holding Company Structure; Pari Passu Debt of Subsidiary Guarantors
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 the Subsidiary Guarantors (as defined in
this Prospectus under the heading "Description of the Notes") on a senior basis.
At September 30, 1998 on a pro forma basis and after giving effect to the
Financings and the effectiveness of the Plan of Reorganization, we and our
subsidiaries on a consolidated basis
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would have had Senior Debt of approximately $75.0 million (this does not include
the $65.0 million revolving portion of the Senior Credit Facility, which is
undrawn, except for approximately $12.5 million of stand-by letters of credit
that were outstanding). Under certain limited conditions, the Indenture and the
Senior Credit Facility permit us to incur additional indebtedness. 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. See "Description of Notes--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" and
"Description of Indebtedness Under the Senior Credit Facility."
Fraudulent Conveyance
If our unpaid creditors or those of the bankrupt subsidiary commence (or
someone commences on their behalf) a bankruptcy case or lawsuit any debt
incurred by us or any of the Subsidiary Guarantors may be subject to review
under the Bankruptcy Code or relevant state fraudulent conveyance laws. Under
these laws and in that situation, if a court were to find that, at the time that
we or any of the Subsidiary Guarantors incurred the debt:
(1) we incurred such debt with the intent of hindering, delaying or
defrauding current or future creditors, or
(2) (a) we received less than reasonable equivalent value or fair
consideration for incurring such debt and
(b) we:
(i) were insolvent or were rendered insolvent by reason of the
Notes (in the case of the Company) or the Guarantees (in the
case of Subsidiary Guarantors);
(iii) were engaged, or about to engage, in a business or
transaction for which our assets constituted unreasonably
small capital;
(iii) 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
(iv) were a defendant in an action for money damages, or had a
judgment for money damages docketed against us (if unsatisfied
after final judgment),
then such court could avoid or subordinate the amounts owing under the New
Notes (in the case of the Company) or the Guarantees (in case of the Subsidiary
Guarantors), to existing and futrue debt of the Company 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:
(1) the sum of its debts (including contingent liabilities) is greater than
its assets, at a fair valuation, or
(2) 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.
We cannot assure you what standards a court would use to determine whether
we or the Subsidiary Guarantors were solvent at the relevant time. 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.
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:
(i) 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;
(ii) were not insolvent nor rendered insolvent by incurring the
obligations; and
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(iii) had sufficient assets to satisfy any probable money judgment against
us in any pending action.
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 obligations
of the Subsidiary Guarantors under the Guarantees will be limited so as not to
constitute a fraudulent conveyance under applicable law.
Restrictive Debt Covenants
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 certain investments and capital expenditures;
o enter into transactions with affiliates;
o allow our Restricted Subsidiaries (as defined under the heading
"Description of the Notes") to make certain payments;
o make certain asset sales;
o merge or consolidate with, or transfer substantially all of our assets
to another person;
o encumber assets under certain circumstances; or
o restrict dividends and other payments from Restricted Subsidiaries.
Under the Senior Credit Facility and the Indenture, we are also required to
maintain specific financial covenants, including a minimum fixed charge coverage
ratio and maximum leverage ratio (each as defined in the Senior Credit Facility
and the Indenture). 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 Notes--Certain Covenants."
Limitation on Change of Control Offer
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require us to purchase all or a portion of the holder's Notes at a
price equal to 101% of the aggregate principal amount plus any accrued and
unpaid Interest and Liquidated Damages (as defined in this Prospectus under the
heading "Description of the Notes"). If we are involved in a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction that
does not result in a Change of Control, the provisions of the Indenture may not
protect holders.
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. 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 Notes-Repurchase at the Option of Holders-Change of Control."
Absence of a Public Market for the Notes; Possible Volatility of Note Price
The New Notes are new securities for which there is currently no
market. We do not intend to apply for listing of the New Notes on any securities
exchange or for the inclusion of the New Notes in any automated quotation
system.
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Accordingly, we cannot assure you as to the development or liquidity of any
market for the New Notes. If a market for the New Notes were to develop, the New
Notes could trade at prices that may be higher or lower than the initial
offering price of the Old Notes depending upon many factors, including: 1)
prevailing interest rates, 2) our operating results and 3) the markets for
similar securities. 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.
Emergence from Bankruptcy
We emerged from bankruptcy on November 24, 1998 (the "Effective Date"). 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 could also have an adverse impact on our ability to
secure new purchase orders with 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.
History of Net Losses
We experienced losses for three of the last five fiscal years. For the
fiscal year 1996 we had net losses of $69 million, for fiscal year 1997 we had
net losses of $389 million, and for the fiscal year 1998 we had net losses of
$56 million. 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, we will be required to find
additional sources of financing to fund our operating deficits, working capital
requirements, anticipated capital expenditures and financing commitments. The
additional financing we need may not be available at the time we require it. In
addition, the financing may only be available on terms that we find
unacceptable.
Limitation on Use of Net Operating Losses and Built-in Losses; Cancellation of
Indebtedness Income
Under the Internal Revenue Code of 1986, as amended (the "Code"), our use
of net operating loss ("NOL") carry forwards against future taxable income is
subject to limitation if we experience an "ownership change" as defined in the
Code (the "Section 382 Limitation").
As a result of the implementation of the Plan of Reorganization, we expect
to undergo an "ownership change" (generally, a greater than 50 percentage point
change in ownership). As a result, our ability to use all of our NOLs (and
"recognized built-in losses," if any) in taxable years beginning after the
Effective Date (and a portion of the taxable year which includes the Effective
Date) will become subject to the Section 382 Limitation. Under this provision,
the income that may be offset by NOL carryovers that occur prior to the
Effective Date should generally be limited to the product of:
(1) a rate set by the U.S. Treasury Department (5.02% on the
Effective Date) and
(2) the lower of (a) the value of the Company'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 Section 382 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 exceeds the lesser of $10.0 million or 15% of the fair market
value of the assets before the ownership change. Section 382 also limits our
ability to take depreciation or amortization charges with respect to its
built-in loss assets. The annual limitation on our ability to use our NOLs (and
recognized built-in losses, if any) may be significant.
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Cancellation of indebtedness income that arises in a case under the
Bankruptcy Code is not includable in gross income but it does reduce tax
attributes of the taxpayer, including NOLs. The Plan of Reorganization
discharged certain general unsecured claims, in particular the 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.
Inability to Compare Financial Information
We will be unable to compare information reflecting our results of
operations and financial condition after the Effective Date to prior periods due
to:
(1) the replacement of the management team and the restructuring of our
core operations and general and administrative activities;
(2) our bankruptcy proceedings, including the costs and expenses of these
proceedings as well as the effect of settlements of certain related liabilities;
and
(3) 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.
Risks Associated with Execution of the Turnaround Business Strategy
The 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. 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 the Turnaround Business Strategy on
relations with current customers.
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.
Substantial Capital Requirements; Capital Expenditure Program
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. During the
past few years, the Company has put off certain capital expenditures because of
financial constraints.
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. We expect, based on current information,
that our capital expenditures will total approximately $29 million in 1998 and
$20 million in 1999. In addition, through the year
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2002 (including the year 1998), we expect that capital expenditures will be
approximately $110 million. 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.
Risks in the Automotive Industry
We sell primarily to customers in the North American automobile and light
truck manufacturing industry. Direct sales of our products to the North American
automobile and light truck manufacturing market accounted for approximately:
o 92% of net sales for our fiscal year ended September 30, 1998;
o 98% of net sales for our fiscal year ended September 30, 1997; and
o 96% of net sales for our fiscal year ended September 30, 1996.
The strength or weakness of the North American automobile and light truck
manufacturing industry and events, such as regulatory requirements, trade
agreements and labor disputes affect demand for some of our products. One such
labor dispute was settled in the third quarter of 1998 after a 54 day strike at
General Motors. The General Motors strike reduced our sales revenue by
approximately $14 million and reduced our operating income by $5.4 million.
In addition, automotive sales and production are cyclical and seasonal and
depend upon general economic conditions. A decline in automotive production and
sales would likely affect the sales of components, tools and services to vehicle
manufacturers and their dealerships, and also the sales of components, tools and
services to aftermarket customers. Our results of operations and our financial
condition may decline if there is a decline in automotive sales and production.
In addition, if we fail to respond when demand in the market changes our results
of operations could be adversely affected in any given quarter.
Trends that Produce Risk in the Automotive Industry
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. These
changes include:
o increasing focus on suppliers' costs and improving quality performance;
o requiring component suppliers to bear a greater proportion of the burden
of design and development costs; and
o consolidating the number of suppliers with which U.S. automakers place
purchase orders.
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.
In addition, 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.
The ability to become involved earlier in the design and development
process for new platforms is an important
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factor in winning new business from the OEMs. 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 the Company due to its emergence from
bankruptcy. We may be unable to become involved earlier in the design and
development process for new 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.
Finally, 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.
Risks Associated with Obtaining Business for New and Redesigned Model
Introductions
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
affect when implementing new technologies in future product launches.
Reliance on 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.
Dependence on 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.
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
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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.
In connection with historical and current operations involving our use and
disposal of hazardous materials, we have been identified as a defendant or
potentially responsible party in a variety of environmental matters. These
include contractual indemnity and statutory cost recovery litigation involving
current and former operating facilities as well as waste disposal sites. We have
asserted counterclaims and cross-claims relating to the properties involved and
other properties where we believe that the original plaintiffs, as well as other
parties, are liable for certain investigative and remedial costs that have been
or may be incurred. In addition, we believe that all claims for costs related to
off-site disposal or formerly owned properties will be discharged by the
bankruptcy.
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. In addition, the State of Ohio has filed a
complaint in state court in Ohio seeking penalties and injunctive relief arising
out of alleged air emission violations at our Tiffin, Ohio facility.
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 believe we have provided adequate
reserves (estimated to be approximately $8.5 million upon consummation of the
Plan of Reorganization) 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.
Underfunded Pension Plans
As reflected in our audited financial statements, we had aggregate unfunded
pension liabilities as of September 30, 1998 and 1997 of approximately $17.0
million and $5.7 million, respectively. Approximately $7.4 million of the
increase in 1998 is due to a loss related to the shutdown of the Doehler-Jarvis
Toledo subsidiary.
On July 26, 1994, we entered into a settlement agreement (the "PBGC
Settlement Agreement") with the Pension Benefit Guaranty Corporation ("PBGC"),
under which we were obligated to make contributions to specified underfunded
pension plans. All contributions required to be made by the PBGC Agreement have
been made. In connection with the Plan of Reorganization, we have entered into a
new PBGC Settlement Agreement with the PBGC under which the prior PBGC
Settlement Agreement was terminated.
On November 6, 1998, we disclosed a more than 20% reduction in
participation under various pension plans. This was a result of the shut down,
during the pendency of the bankruptcy, of the Doehler-Jarvis Toledo operations,
the St. Louis, Missouri facility of our Harvard Interiors Manufacturing Company
division and the Bolivar, Tennessee facility of Harman Automotive, Inc., as well
as the sale of assets of our Greeneville, Tennessee facility of Doehler-Jarvis
Greeneville, Inc. We have agreed with the PBGC to amend the new PBGC Settlement
Agreement. This amendment says that the PBGC will refrain from exercising
certain remedies in connection with the above-described shutdowns and sale of
assets.
We estimate that upon our emergence from bankruptcy, the unfunded
liabilities related to defined benefit pension plans will be approximately $17
million. If we are unable to meet our contribution obligations under such plans,
the PBGC 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>
Year 2000 Issues
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 completed 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: 1) incomplete or inaccurate accounting,
2) inaccurate supplier and customer order processing 3) recording errors in
inventories or other assets and 4) 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 are currently installing a new management information system that will
allow our critical information systems and technology infrastructure to be Year
2000 compliant before transactions for the year 2000 are expected. Many of our
systems include new hardware and packaged software recently purchased from large
vendors who have represented that these systems are already Year 2000 compliant.
We are in the process of obtaining assurances from vendors that timely updates
will be made available to make all remaining purchased software Year 2000
compliant. We expect to use both internal and external resources to reprogram or
replace and test all of our software for Year 2000 compliance. We commenced the
testing of our Year 2000 compliant systems at pilot locations, with an expected
Company-wide rollout to occur in the Spring of 1999. The estimated cost for this
project is $14 million. We spent approximately $7.7 million for Year 2000
compliance in fiscal 1998 and plan to spend approximately $5.8 million in fiscal
1999.
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.
Competition
Our industry - manufacturing and supplying components to OEMs - is highly
competitive. Our products compete with those of a substantial number of
companies, many of which are larger and have greater resources, financial or
otherwise. These companies also have not and will not likely suffer the negative
effects of having been in bankruptcy. Competitive factors in the market include:
o product quality;
o customer service;
o product mix;
o new product design capabilities;
o cost;
o reliability of supply;and
o supplier ratings.
18
<PAGE>
There can be no assurance that we will be able to compete effectively with
these companies in the future or that significant new competitors will not enter
the market.
Collective Bargaining Agreements
As of September 30, 1998, we had approximately 4,400 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.
Prices and Availability of Raw Materials
Our major raw materials include aluminum, energy, steel, glass, rubber and
paint. We obtain these raw materials from regular commercial sources of supply
and, in most cases, from multiple sources. Under normal conditions, we have no
difficulty obtaining adequate raw material requirements at competitive prices,
and we have not experienced any shortages. Nevertheless, significant increases
in raw material prices could have a material adverse effect on our financial
condition or results of operations. Historically, we have, and in the future we
may, enter into hedging arrangements designed to protect against up and down
movement in raw material prices. We also may attempt to offset raw material cost
increases by increasing our selling prices. We cannot assure you, however, that
we will be successful in using these hedging strategies or that we will be able
to obtain selling price increases in the future.
19
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the New
Notes as described in this Prospectus. The Company 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 the indebtedness of
the Company.
20
<PAGE>
CAPITALIZATION
The following table sets forth the actual consolidated cash and cash
equivalents and capitalization of the Company at September 30, 1998, the pro
forma adjustments to the Company's consolidated cash and cash equivalents and
capitalization after giving effect to the transactions contemplated by the Plan
of Reorganization and the Financings and the pro forma consolidated cash and
cash equivalents and capitalization of the Company at September 30, 1998. This
table should be read in conjunction with the Consolidated Financial Statements,
including the notes thereto, included in the Company'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,
($ in thousands) 1998 Adjustments 1998
---- ----------- ----
<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) --
------ -------- --------
Total senior debt................. 64,161 10,839 75,000
Pay-in-kind exchangeable preferred
stock(3)..................................... 124,637 (124,637) --
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 the Company'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
$200 million estimated (assuming an Effective Date of September 30, 1998)
by the financial advisors to the Creditors' Committee in the bankruptcy.
21
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents selected consolidated historical financial
data for the Company as of the dates and for the fiscal periods indicated. The
selected audited financial data for each of the five years ended September 30,
1998, 1997, 1996, 1995 and 1994 has been derived from the Consolidated Financial
Statements of the Company included in our Annual Report on Form 10-K for the
fiscal year ended September 30, 1998. As a result of the fact that the Company
will be emerged from Chapter 11 and the prospective effect of Fresh Start
Reporting, the Company does not believe that its historical results of
operations are necessarily indicative of its results of operations as an ongoing
entity following its emergene on November 24, 1998 from bankruptcy. The
following information should be read in conjunction with and is qualified by
reference to the audited Consolidated Financial Statements of the Company and
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998, which is incorporated herein by reference.
<TABLE>
<CAPTION>
Year Ended
September 30,
------------------------------------------------------------------------------
($ in thousands) 1998 1997 1996 1995(1) 1994
---- ---- ---- ------- ----
<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 $7,630
PIK preferred dividends and
accretion(7)......................... -- 10,142 14,844 14,809 14,767
--------- -------- ------- ------- -------
Net loss attributable to common
stockholders......................... (55,804) (399,571) (83,556) (7,888) (7,137)
========= ========= ======== ======== =======
</TABLE>
(Footnotes appear on the following page.)
22
<PAGE>
<TABLE>
<CAPTION>
Year Ended
September 30,
------------------------------------------------------------------------------
1998 1997 1996 1995(1) 1994
---- ---- ---- ------- ----
($ 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:
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 -- -- --
DIP 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
PIK 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, the Company recorded charges for impairment of long-lived
assets of the Doehler-Jarvis Entities and at two other plants. The Company
also recorded restructuring charges related to two operations scheduled for
closing. During 1998, the Company 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, the Company 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.
(6) The Company, 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, the Company
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) PIK 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.
23
<PAGE>
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The Old Notes were sold by the Company on November 24, 1998 to certain
initial purchasers, who placed the Old Notes with certain institutional
investors. In connection therewith, the Company and the Initial Purchasers
entered into the Registration Rights Agreement, pursuant to which the Company
agreed, for the benefit of the Holders of the Old Notes, that the Company would,
at its sole cost, (i) within 60 days following the original issuance of the Old
Notes, file with the Commission the 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 the Company identical in all material respects
to the series of Old Notes and (ii) 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 (of which this Prospectus is a part),
the Company 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 the
Company.
Each Holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (i) it is not an "affiliate" (as defined
in Rule 405 of the Securities Act) of the Company, (ii) 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 (iii) 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
pursuant to a registration statement containing the selling securityholder
information required by Item 507 of Regulation S-K of the Securities Act, or
pursuant to 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 the Company), may
exchange such Old Notes pursuant to 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 Commission, the Company 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. The Company 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 Commission, the Company
believes that New Notes issued pursuant to 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.
If the Company is not required to file an Exchange Offer Registration
Statement because (i) the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) 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 the Company at
least 20 business days prior to the consummation of the Exchange Offer that (A)
such Holder is prohibited by applicable law or Commission 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
Statetement is not appropriate or available for such
24
<PAGE>
resales by such Holder or (C) that such Holder is a Broker-Dealer and holds
Securities acquired directly from the Company or one of its affiliates, then the
Company is required under the Registration Rights Agreement, in lieu of, or in
the event of (ii) above, in addition to, effecting the registration of the New
Notes pursuant to the Exchange Offer Registration Statement to file with the
Commission a shelf registration statement (the "Shelf Registration Statement").
The Company 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 and to keep such Shelf Registration 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 (i) 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, (ii) 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, (iii) 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 (iv) the date on which
such Note is distributed to the public pursuant to Rule 144 under the Act.
Registrable Securities means the Old Notes unless such Old Notes are sold
pursuant to 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 the Company or pursuant to the Indenture or such Notes
are eligible to be sold pursuant to paragraph (k) of Rule 144 or when such Notes
shall cease to be outstanding.
The Company 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.
If (a) any of the Registration Statements required under the Registration
Rights Agreement is not filed with the Commission on or piror to the date
specified for such filing therein, (b) any of such Registration Statements has
not been declared effective by the Commission on or prior to the date specified
for such effectiveness under the Registration Rights Agreement (the
"Effectiveness Target Date"), (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 interest ("Liquidated Damages") shall
accrue (in addition to any stated interest on the Notes) at a rate 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 the Company on a semi-annual basis every March 1 and September 1 in
the same manner as interest is paid pursuant to the Indenture. Following the
cure of all Registration Defaults relating to any particular Transfer Restricted
Securities, the accrual of the Liquidated Damages with respect to such Transfer
Restricted Securities will cease.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the
25
<PAGE>
Company will accept any and all Old Notes validly tendered and not withdrawn
prior to 5:00 p.m., New York City time, on the Expiration Date. The Company will
issue $1,000 principal amount 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 pursuant to 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 pursuant to 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. The Company has
fixed the close of business on ____________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. The
Company intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
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
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"--Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean 5:00 p.m., New York City time,
on___________, unless the Company, 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, the Company 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.
The Company reserves the right, in its reasonable discretion, (i) 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 (ii) 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 the Company to constitute a
material change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered Holders, and
the Company 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 the Company may choose to make a
public announcement of any delay, extension, termination or amendment of the
Exchange Offer, the Company 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 such Old Notes in the Exchange
Offer. A Holder who wishes to tender Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed 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 (as
defined), and any other required documents, to the Exchange Agent prior to
Midnight,
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New York City time, on the Expiration Date. In addition, either (i) certificates
for such Old Notes must be received by the Exchange Agent prior to the
Expiration Date along with the Letter of Transmittal, (ii) a timely confirmation
of a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes into
the Exchange Agent's account at The Depository Trust Company ("DTC" or the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date or (iii) the Holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the 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.
DTC has authorized DTC participants that hold Old Notes on behalf of
beneficial owners of Old Notes through DTC to tender their Old Notes as if they
were Holders. To effect a tender of Old Notes, DTC participants should either
(i) 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 pursuant to the procedure
set forth in "Procedures for Tendering" or (ii) transmit their acceptance to DTC
through the DTC Automated Tender Offer Program ("ATOP") 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 the Company in accordance with the terms and subject to the conditions set
forth herein and in the Letter of Transmittal.
The method of delivery of 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 the Company.
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 the Company,
evidence satisfactory to the Company 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 by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
Holder who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be 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" within the meaning of Rule
17Ad-5 under the Exchange Act (an "Eligible Institution").
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all Old
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Notes not properly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) 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 the Company shall determine. Neither the Company, 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 the Company, among other
things, that such Holder is not a Restricted Holder. Each Participating
Broker-Dealer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution."
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, the Company shall be
deemed to have accepted properly tendered Old Notes for exchange when, as and if
the Company has given oral or written notice thereof to the Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal or 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 pursuant to 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 DTC promptly after the date of this
Prospectus, and any financial institution that is a participant in DTC 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 DTC to transfer such Old Notes into
the Exchange Agent's account in accordance with DTC'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 DTC, 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 DTC as described above is referred to herein as a "Book-Entry
Confirmation." Delivery of documents to DTC in accordance with DTC's procedures
does not constitute delivery to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of a Book-Entry Confirmation,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering the Old Notes stating (i) the aggregate principal
amount of Old Notes which have been tendered by such participant, (ii) that such
participant has received and agrees to be bound by the term of the Letter of
Transmittal and (iii) that the Company may enforce such agreement against the
participant.
Guarantee Delivery Procedures
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, (ii) who
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cannot deliver their Old Notes, the Letter of Transmittal or any other required
documents to the Exchange Agent prior to the Expiration Date or (iii) who cannot
complete the procedure for book-entry transfer on a timely basis, may effect a
tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible 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 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 Institution with the Exchange Agent; and
(c) 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 (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the Holder
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Notes register the transfer of such Old Notes into the name
of the person withdrawing the tender and (iv) specify the name in which any such
Old Notes are to be registered, if different from that of the Depositor. 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 Institution unless such Holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of 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 the Company 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 validly tendered for
purposes of the Exchange Offer and no New Notes will be issued with respect
thereto unless the Old Notes so withdrawn are validly retendered. 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 Transfer Facility pursuant
to the book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for the
Old Notes).
Conditions
Notwithstanding any other term of the Exchange Offer, the Company shall
not be required to accept for exchange, or exchange New Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before
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the acceptance of such Old Notes, if:
(a) 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 the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or materially impair
the contemplated benefits of the Exchange Offer to the Company, or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries;
(b) any change, or any development involving a prospective change, in
the business or financial affairs of the Company or any of their subsidiaries
has occurred which, in the reasonable judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company;
(c) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in the reasonable judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company; or
(d) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable discretion, deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company regardless of the circumstances giving rise to
any such condition or may be waived by the Company in whole or in part at any
time and from time to time in their reasonable discretion. The failure by the
Company at any time to exercise any of the foregoing rights shall 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 the Company determines in its reasonable discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering Holders, (ii) 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 (iii) 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, the Company will promptly disclose such waiver by
means of a prospectus supplement that will be distributed to the registered
Holders, and the Company 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.
Exchange Agent
State Street Bank and Trust Company 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:
To:State Street Bank and Trust Company
By Hand/Overnight Courier:
State Street Bank and Trust Company
c/o________________
150 Royall Street
Canton , Massachusetts 02021
Attn:______________
----------------------
Facsimile Transmission
(781) 575-2549
Confirm by Telephone:_________________
Fees and Expenses
The expenses of soliciting tenders will be borne by the Company. The
Company has not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to brokers, dealers or others
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soliciting acceptances of the Exchange Offer. The Company, 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 the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to 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 pursuant to 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.
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 the Company'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
The Company 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 pursuant to an Indenture (the "Indenture") by
and among the Company, the Subsidiary Guarantors and Norwest Bank, as trustee
(the "Trustee"), which is also the indenture pursuant to 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 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 the circumstances described in the Registration
Rights Agreement. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (the "Trust Indenture Act"). The Notes are subject to all such terms, and
holders of Notes and the related Guarantees (the "Holders") are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Indenture does not purport to be
complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. Copies of the
proposed form of Indenture, the Collateral Agreement (as defined herein) and
other Security Documents (as defined herein) and the Registration Rights
Agreement (as defined herein) 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 certain terms used in the
following summary are set forth below under "--Certain Definitions." For
purposes of this summary, the term "Company" refers only to Harvard Industries,
Inc. and not to any of its Restricted Subsidiaries.
General
The Notes:
o are senior obligations of the Company;
o rank pari passu in right of payment with all current and future Senior
Debt of the Company, including the Senior Credit Facility, and
o rank senior in right of payment to all existing and future subordinated
obligations of the Company.
The operations of the Company are conducted primarily through its
Subsidiaries, and, therefore, the Company is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the Notes.
The Notes will be guaranteed by the Subsidiary Guarantors to the extent set
forth below under "--Guarantees" and will be secured to the extent set forth
below under "--Collateral."
In addition, the Company and the Restricted Subsidiaries are parties to the
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 the Senior Credit Facility to the extent of the
value of the Collateral securing borrowings under the Senior Credit Facility.
At September 30, 1998, on a pro forma basis after giving effect to the offering
of the Notes and borrowings under the Senior Credit Facility (together, the
"Financings") and the effectiveness of the Plan of Reorganization the Company
and its Restricted Subsidiaries on a consolidated basis would have had Senior
Debt outstanding of approximately $75.0 million, exclusive of the $65.0 million
revolving portion of the Senior Credit Facility, which is expected to be undrawn
at the Effective Date, except for approximately $12.5 million of stand-by
letters of credit that are expected to be outstanding thereunder.
As of the date of this Prospectus, all of the Domestic Subsidiaries are
Restricted Subsidiaries. Under certain circumstances, the Company 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 Notes are in the aggregate principal amount to $25.0 million and will
mature on September 1, 2003.
Interest on the Notes accrues at a rate equal to the sum of:
(1) the rate of 14 1/2% per annum on the principal amount of Notes
outstanding (calculated on the basis of a 360-day year comprised of twelve
30-day months) ("Coupon Interest") plus
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(2) Cash Flow Participation Interest (as defined below and, together with
Coupon Interest, "Interest").
"Cash Flow Participation Interest," for any relevant period,
equals the product of:
(a) 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 (each, a "Semi-Annual Accrual Period")
prior to the next succeeding interest payment date multiplied by
(b) the applicable percentage set forth for the period ending on the
interest payment date indicated 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%
If, however, the calculation of Cash Flow Participation Interest, based on
the appropriate percentages set forth above, results in an amount that is less
than $1.0 million for any two consecutive Semi-Annual Accrual Periods taken as a
whole, then Cash Flow Participation Interest will be for such two corresponding
interest payment dates taken as a whole, $1.0 million (the "Minimum Cash Flow
Participation Interest Amount").
Notwithstanding the above,
(i) if the Company's Fixed Charge Coverage Ratio is less than 2.50 to 1 for
any Semi-Annual Accrual Period, then the Company may elect to pay Cash Flow
Participation Interest on the next succeeding interest payment date for such
Semi-Annual Accrual Period by the issuance of additional Notes equal to the
amount of such interest (the "PIK Notes");
(ii) if the Company elects to pay Cash Flow Participation Interest for a
Semi-Annual Accrual Period by the issuance of PIK Notes pursuant to the
preceding clause, then the Company shall be required to redeem such PIK Notes on
the interest payment date falling immediately after the next succeeding
Semi-Annual Accrual Period (such date, the "Special PIK Redemption Date") at a
redemption price equal to 100% of the principal amount thereof plus accrued and
unpaid Interest and Liquidated Damages, if any, on such PIK Notes, to the
Special PIK Redemption Date (such redemption, the "Special PIK Redemption") if,
but only if:
(A) the Company's Fixed Charge Coverage Ratio for the four full fiscal
quarters immediately preceding such Special PIK Redemption Date would
have been at least 2.50 to 1 determined on a pro forma basis after
giving effect to such Special PIK Redemption as if such Special PIK
Redemption had occurred at the beginning of the applicable four-quarter
reference period and
(B) such Special PIK Redemption is permitted by the Senior Credit
Facility; and
(iii) in the event that the period for which Interest accrues and is due
(including for the period from the Issue Date to the first interest payment date
of March 1, 1999) is less than 180 days (such a period, a "Stub Period"):
(A) then the Interest due for such Stub Period (which may be a
Semi-Annual Accrual Period) will be pro rated to reflect the actual
number of days that the Notes were outstanding for such Stub Period
(calculated on the basis of a 360 day year comprised of twelve 30-day
months), provided
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(B) that the portion of Interest attributable to Cash Flow
Participation Interest (or the Minimum Cash Flow Participation Interest
Amount, if applicable) due at the end of such Stub Period (or, as the
case may be, on September 1, 1999 with respect to the period covered by
the Stub Period ending on March 1, 1999 plus the Semi-Annual Accrual
Period ending on September 1, 1999, taken together) shall similarly be
pro rated to reflect the actual number of days that the Notes were
outstanding for such Stub Period (or, with respect to the period ending
on September 1, 1999, the actual number of days that the Notes were
outstanding for the period covered by such Stub Period plus the
succeeding Semi-Annual Accrual Period, taken together) (calculated on
the basis of a 360 day year comprised of twelve 30-day months).
Interest on overdue principal and on overdue installments of Interest will
accrue at the rate of Interest borne by the Notes.
Interest will be payable semi-annually in arrears on March 1 and September
1 commencing on March 1, 1999 to Holders 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 the Issue Date.
Additional Notes in the form of PIK Notes may be issued from time to time
after the initial offering of the Notes, subject to the provisions of the
Indenture, in connection with the payment of Cash Flow Participation Interest as
described above. The Notes offered hereby and any PIK Notes subsequently issued
under the Indenture would be treated as a single class for all purposes under
the Indenture, including, without limitation, waivers, amendments, redemptions
and offers to purchase.
Principal, premium, if any, and Interest and Liquidated Damages, if any, on
the Notes will be payable:
o at the office or agency of the Company maintained for such purpose
within the City and State of New York; or,
o at the option of the Company, payment of interest and Liquidated
Damages, if any, may be made by check mailed to the Holders of the
Notes at their respective addresses set forth in the register of
Holders; provided that all payments of principal, premium, Interest and
Liquidated Damages, if any, with respect to Notes the Holders of which
have given wire transfer instructions to the Company will be required
to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof.
Until otherwise designated by the Company, the Company's office or agency
in New York will be the office of the Trustee maintained for such purpose. The
Notes will be issued in denominations of $1,000 and integral multiples thereof.
Guarantees
The Company's payment obligations under the Notes will be jointly and
severally guaranteed (collectively, the "Guarantees") by the Subsidiary
Guarantors. The Guarantees, including the payment of principal and premium, if
any, and of Interest and Liquidated Damages, if any, on the Notes:
1) will be senior obligations of such Subsidiary Guarantors;
2) will rank pari passu in right of payment with all existing and future
senior obligations of the Subsidiary Guarantors; and
3) will rank senior to all existing and future subordinated obligations of
such Subsidiary Guarantors.
The Guarantees will be secured to the extent 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. See "Risk Factors----Fraudulent Conveyances."
The claims of creditors (including trade 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 Holders. At September 30, 1998, on a
pro forma basis after giving effect to the Financings and the effectiveness of
the Plan of Reorganization, the amount of liabilities of such Subsidiaries that
will not be Subsidiary Guarantors would have been approximately $[4.0] million.
The Indenture will provide that no Subsidiary Guarantor may consolidate
with or merge with or into (whether or not such Subsidiary Guarantor is the
surviving Person) another corporation, Person or entity (whether or not
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affiliated with such Subsidiary Guarantor (other than the Company or another
Subsidiary Guarantor)) unless:
(i) subject to the provisions of the following paragraph, the Person formed
by or surviving any such consolidation or merger (if other than such
Subsidiary Guarantor) assumes all the obligations of such Subsidiary
Guarantor pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Notes and the Indenture;
and
(ii) immediately after giving effect to such transaction, no Default or
Event of Default exists.
The Indenture will provide 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:
1) such Subsidiary Guarantor (in the event of a sale or other disposition,
by way of such a merger, consolidation or otherwise, of all of the capital
stock of such Subsidiary Guarantor) or
2) the corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of such Subsidiary Guarantor)
will be released and relieved of 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. See "Repurchase at the Option of Holders--Asset Sales."
Until such time as all Guarantees by the Subsidiary Guarantors under the
Indenture and the Notes shall have been released in accordance with the next
succeeding sentence, the Company shall cause each Domestic Subsidiary that is an
obligor under the 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 the 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 the Senior Credit Facility
remain discharged.
Collateral
The Company, the Subsidiary Guarantors, the Trustee and Norwest Bank, as
collateral agent (the "Collateral Agent"), have entered into a Collateral
Agreement (the "Collateral Agreement"). The Notes and the Guarantees are
secured, subject to
i) the terms of the Collateral Agreement and
ii) the other Security Documents and Liens permitted by
the covenant entitled "Liens,"
by a second priority security interest in substantially all the tangible and
intangible assets (including all accounts receivable, equipment, real property,
intellectual property and all of the capital stock of the Subsidiary Guarantors)
of the Company and the Subsidiary Guarantors and all proceeds thereof. The
Company 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.
In the event of foreclosure on the Collateral, the proceeds from the sale
of the Collateral may not be sufficient to satisfy in full the Company's
obligations under both the Notes and the Senior Credit Facility. The amount to
be received upon such a sale would be dependent on numerous factors, including
but not limited to the timing and the manner of the sale.
In addition, the book value of the Collateral should not be relied on as a
measure of realizable value for such assets. By its nature, portions of the
Collateral may be illiquid and may have no readily ascertainable market value.
Accordingly, there can be no assurance that the Collateral can be sold in a
short period of time in an orderly manner.
A significant portion of the Collateral includes tangible and intangible
assets that may only be usable, and thus retain value, as part of the existing
operating businesses of the Company and the Subsidiaries. Accordingly, any such
sale of the Collateral separate from the sale of certain of the Company's and
the Subsidiaries' operating businesses may not be feasible or of significant
value.
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To the extent that third parties enjoy Permitted Liens or Liens otherwise
permitted by the covenant described under "--Certain Covenants--Liens," such
third parties may have rights and remedies with respect to the assets or
property subject to such Liens that, if exercised, could adversely affect the
value of the Collateral.
In addition, in the event of a bankruptcy, the ability of the Holders to
realize upon any of the Collateral may be subject to certain bankruptcy law
limitations. See "Risk Factors--Risks Relating to the Notes--Collateral."
Certain 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 the Company 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
Holders 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.
No appraisals of any of the Collateral have been prepared by or on behalf
of the Company 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 Holders of Notes, would have a
secured claim to the extent of the value of the Collateral securing the
Company'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 to the extent the value of the Collateral 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 shall have
occurred and be continuing, the Company and the Subsidiary Guarantors shall have
the right:
o to remain in possession and retain exclusive control of the Collateral
securing the Company's and the Subsidiary Guarantors' obligations under
the Notes and the Guarantees (other than as set forth in the Loan
Security Documents and the Security Documents),
o to freely operate the Collateral and to collect, invest and dispose of
any income therefrom.
Release of Collateral. The Collateral securing the Company'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:
(i) sales of inventory and collection of accounts receivable in the
ordinary course of business;
(ii) sales and other dispositions as described below under "--Asset Sale
Release;" and
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(iii) the release of Collateral with the consent of each Holder affected
thereby.
In general, upon compliance by the Company with the conditions set forth
below, under the Loan Security Documents, the Security Documents, 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 the
Company to the Collateral Agent of an opinion of counsel to the effect that such
conditions have been met, the Collateral Agent will release the Released
Interests (as defined below) from the Lien of the Loan Collateral Agreement and
the Collateral Agreement and reconvey the Released Interests to the Company and
its Subsidiaries, as applicable.
Asset Sale Release. The Company has the right to obtain a release of items
of Collateral (the "Released Interests") subject to an Asset Sale upon
compliance with the condition that the Company deliver to the Collateral Agent
the following:
(A) a notice from the Company requesting the release of Released Interests:
1) describing the proposed Released Interests;
2) specifying the purchase price received for such Released Interests on a
date within 30 days of such notice (the "Valuation Date");
3) stating that the purchase price received is at least equal to the fair
market value of the Released Interests as well as certain other matters,
to the extent applicable, relating to restrictions set forth under
"--Asset Sales;"
4) stating that the release of such Released Interests 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 Loan Security Documents and the Security Documents with respect
thereto;
(B) an Officer's Certificate of the Company stating that:
1) such Asset Sale covers only the Released Interests and complies with the
terms and conditions of the Indenture with respect to Asset Sales;
2) all Net Proceeds from the sale of the Released Interests will be applied
pursuant to the provisions of the Loan Security Documents, the Security
Documents (including pursuant to the restrictions set forth under
"--Asset Sales") and the Intercreditor Agreement;
3) there is no Default or Event of Default in effect or continuing on the
date thereof, the Valuation Date 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, the
Security Documents or the Loan Security Documents relating to the
release in question; and
(C) Excess Proceeds, if any, that are required to be delivered to the
Collateral Agent pursuant to the Indenture and the Intercreditor Agreement and
to the Administrative Agent pursuant to the Senior Credit Facility and the
Intercreditor Agreement have been so delivered or are being delivered.
Intercreditor Agreement
The Company, the Administrative Agent and the Trustee have entered into an
intercreditor agreement (the "Intercreditor Agreement"). The Intercreditor
Agreement provides for, among other things:
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:
(i) the Lenders will be granted a first priority security
interest in the Collateral;
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(ii) the Trustee will not have any claims to the Collateral on either a
pari passu basis or prior to the Administrative Agent; and
(iii) so long as the obligations of the Company 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, nor will the Administrative Agent or such Lenders have any obligation
regarding the exercise of such rights or any other obligation or duty in respect
of the Trustee, nor shall the Trustee participate in the commencement or
solicitation of commencement of any bankruptcy proceeding against the Company or
seek the appointment of a receiver for the affairs or property of the Company,
except pursuant to its rights under the Indenture regarding the collection of
accrued and unpaid Interest (except if a default or event of default has
occurred under the Senior Credit Facility).
The Intercreditor Agreement provides that so long as the obligations or
commitments under the Senior Credit Facility have not been paid in full or
terminated, as the case may be, the Trustee will not be able to:
(i) exercise any remedies with respect to the Collateral;
(ii) 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 or any other exercise by any such party of
any rights and remedies relating to the Collateral under the Loan Security
Documents or otherwise, including regarding the release of Collateral subject to
compliance with the terms of the Indenture; or
(iii) object to the forbearance by such Lenders 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, pursuant to the terms of the
Intercreditor Agreement, to apply the proceeds from the sale or other
disposition of the Collateral:
1) first, to satisfy in full all costs and expenses (including, without
limitation, attorneys' fees and disbursements) incurred by the Lenders
and the Administrative Agent in connection with such disposition;
2) second, to satisfy in full the claims of the Lenders; and,
3) after all commitments of such 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 Holders of the Notes.
The Uniform Commercial Code, which may not be applicable in a bankruptcy
context, imposes for the benefit of the Trustee and the Holders 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
Loan Security Documents, the Administrative Agent and the Lenders will act in a
commercially reasonable manner.
The Administrative Agent is required to act in the interest of the Lenders
pursuant to the Senior Credit Facility and the Loan Collateral Agreement.
Neither the Trustee nor the Holders of Notes may hold the Collateral or contest
any senior lien granted by the Company to the Lenders under the Senior Credit
Facility and the Loan Security Documents. The 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 the Senior Credit
Facility and the Indenture, the Administrative Agent may release such Subsidiary
Guarantor from its obligations under the 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
1) Prior to September 1, 2001, the Notes are redeemable, in whole or in part, at
the option of the Company:
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
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o at a redemption price equal to 100% of the principal amount thereof
plus the Make-Whole Premium, plus, to the extent not included in the Make-Whole
Premium, accrued and unpaid Interest and Liquidated Damages, if any, to the date
of redemption.
For purposes of the foregoing:
(i) "Make-Whole Premium" means, with respect to a Note, an amount
equal to the present value of the remaining Coupon Interest and premium
payments due on such Note as if such Note were redeemed on September 1,
2001 pursuant to 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
(ii) if the Company redeems any Note on June 1 or December 1 of
any year, then Cash Flow Participation Interest shall 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.
2) On or after September 1, 2001, the Notes are redeemable, in whole or in part:
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 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 the Company redeems any Note:
(i) on March 1 or September 1 of any year, then Cash Flow
Participation Interest shall be calculated as set forth under
"--Principal, Maturity and Interest;"
(ii) on June 1 or December 1 of any year, then Cash Flow
Participation Interest shall 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
(iii) on any date other than March 1, June 1, September 1 or
December 1 of any year, then Cash Flow Participation Interest shall be
calculated as described under "--Principal, Maturity and Interest" with
respect to such calculation for Stub 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 shall deem fair and appropriate; provided that
no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address.
Notices of redemption may not be conditional. If any Note is to be redeemed
in part only, the notice of
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redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, Interest ceases to
accrue on Notes or portions of them called for redemption.
Mandatory Redemption
Except as set forth (i) above with respect to a Special PIK Redemption
pursuant to clause (ii) of the first paragraph under "--Principal, Maturity and
Interest" and (ii) below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
Repurchase at the Option of Holders
Change of Control. Upon the occurrence of a Change of Control, each Holder
of Notes will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid Interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). The calculation of the portion of
unpaid Interest represented by Cash Flow Participation Interest shall 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, the Company will mail a
notice to each Holder 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 shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered; and
(3) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the aggregate principal
amount of Notes or portions thereof being purchased by the Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Senior Credit Facility prohibits the Company from purchasing any Notes
following a Change of Control and also will provide that certain change of
control events with respect to the Company would constitute an event of default
thereunder. Any future credit agreements or other agreements relating to Senior
Debt to which the Company becomes a party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when the Company
is prohibited from purchasing Notes, the Company could seek the consent of its
Lenders to the purchase of Notes (following the obtaining of a waiver from such
Lenders, if applicable) or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or repay
such borrowings, the Company will remain prohibited from purchasing Notes. In
such case, the Company's failure to purchase tendered Notes would constitute an
Event of Default under the Indenture which would, in turn, constitute a default
under the Senior Credit Facility. The Indenture will provide that, prior to
complying with the provisions of
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this covenant, but in any event within 60 days following a Change of Control,
the Company 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.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer or if the Company exercises its option to purchase the Notes.
Asset Sales. The Company will not, and will not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) the Company 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
(2) at least 85% of the consideration therefor received by the Company or
such Restricted Subsidiary is in the form of cash or Cash Equivalents; provided
that the amount of:
(a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any
Guarantee thereof) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the
Company or such Restricted Subsidiary from further liability and
(b) any securities, notes or other obligations received by the Company
or any such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received), shall be deemed to be cash
for purposes of this provision.
Notwithstanding the above:
(i) the Company shall not be permitted to make any Asset
Sale of The Kingston-Warren Corporation and
(ii) the Company shall 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,
the Company may apply such Net Proceeds, at its option:
(a) to repay Indebtedness under the Senior Credit Facility (and, in the
case of borrowings under the revolving credit portion of the Senior Credit
Facility, to correspondingly permanently reduce the commitments with respect
thereto);
(b) to the acquisition of a controlling interest in another business,
provided that (i) on a pro forma basis after giving effect to such acquisition,
the Company'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 (ii)
such other business engages in a Permitted Business; or
(c) 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, the Company may
temporarily reduce Indebtedness under the Senior Credit Facility or otherwise
invest such Net Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $2.0 million,
the Company shall be required to make an offer to all Holders (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes that may be purchased
out of the Excess Proceeds, at an offer price in cash in an amount equal to 100%
of the principal amount thereof plus accrued and unpaid Interest and Liquidated
Damages thereon, if any, to the date of purchase, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Notes tendered pursuant to an Asset Sale Offer is less than the
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Excess Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
The Senior Credit Facility contains certain covenants that restrict the
ability of the Company to sell assets, other than the Designated Facilities,
obsolete assets, sales of inventory in the ordinary course of business and
certain other exceptions.
Certain Covenants
Restricted Payments
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other payment or distribution
on account of the Company's or any of its Restricted Subsidiaries' Equity
Interests (including, without limitation, any payment in connection with any
merger or consolidation involving the Company) or to the direct or indirect
holders of the Company's or any of its Restricted Subsidiaries' Equity Interests
in their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company and other than
dividends and distributions payable to the Company or any Restricted
Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value (including
without limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company or other Affiliate of the Company (other than a Subsidiary of the
Company);
(iii) 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
(iv) make any Restricted Investment (all such payments and other actions
set forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described 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 the Company or any of its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (ii), (iii) or (iv) of the next succeeding paragraph), is less
than the sum of (i) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning of the first
fiscal quarter immediately following the Issue Date to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) 100% of the aggregate net cash proceeds received
by the Company as a contribution to its common equity capital or from the
issue or sale since the Issue Date of Equity Interests of the Company
(other than Disqualified Stock), or of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Restricted Subsidiary of the Company
and other than Disqualified Stock or convertible debt securities that have
been converted into Disqualified Stock), plus (iii) to the extent not
already included in Consolidated Net Income of the Company for such period
without duplication, if any Restricted Investment that was made by the
Company or any of its Restricted Subsidiaries after the Issue Date 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 Issue Date 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
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<PAGE>
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 shall not prohibit:
(i) 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;
(ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Indebtedness which is subordinated to the Notes or Equity
Interests of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c) (ii) of the preceding paragraph;
(iii) the defeasance, redemption, repurchase or other acquisition of
Indebtedness which is subordinated to the Notes with the net cash proceeds from
an incurrence of Permitted Refinancing Indebtedness;
(iv) the payment of any dividend or distribution by a Restricted Subsidiary
of the Company to the holders of its common Equity Interests so long as the
Company or another Restricted Subsidiary receives at least its pro rata share of
such dividend or distribution in accordance with its Equity Interests;
(v) the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the Company that are held by any member of the
Company's (or any of its Restricted Subsidiaries) management pursuant to any
management equity subscription agreement or stock option agreement, provided
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $500,000 in any twelve-month period;
and
(vi) distributions required under the Plan of Reorganization but only in
the manner and to the extent contemplated thereby.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary of the Company, pursuant to the Restricted Payment. The fair market
value of any non-cash Restricted Payment shall be determined by the Board of
Directors of the Company whose resolution with respect thereto shall be
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, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "--Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and the Company shall not issue any Disqualified Stock and shall not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company may incur Indebtedness (including
Acquired Debt) and issue shares of Disqualified Stock and any Restricted
Subsidiary may incur Acquired Debt if:
(i) the Company's Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.75 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
(ii) the Company 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
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<PAGE>
items of Indebtedness (collectively, "Permitted Debt") so long as no Default has
occurred and is continuing or would be caused thereby:
(i) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness under the 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 the Company
and its Restricted Subsidiaries thereunder); provided that the sum of the
aggregate principal amount of all Indebtedness of the Company and its
Restricted Subsidiaries outstanding under the Senior Credit Facility after
giving effect to such incurrence, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (i) 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 the Senior Credit Facility that
have been made by the Company and its Restricted Subsidiaries since the
Issue Date, (Y) the aggregate amount of PIK Notes issued and outstanding
pursuant to the Indenture and (Z) the aggregate amount of Asset Sale
proceeds applied by the Company and its Restricted Subsidiaries to
permanently reduce the availability of revolving credit Indebtedness under
the Senior Credit Facility pursuant to the provisions described under the
caption "--Asset Sales;"
(ii) the incurrence by the Company of Indebtedness represented by the
Notes and the PIK Notes issued pursuant to the Indenture and the incurrence
by the Subsidiary Guarantors of the Guarantees;
(iii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace Indebtedness incurred pursuant to this
clause (iii), not to exceed $5.0 million at any time outstanding;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness;
(v) the incurrence by the Company 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 the Company or another Restricted
Subsidiary which is a Guarantor; provided, however, that (a) if the Company
is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and the Indenture, (b) if a Restricted Subsidiary of
the Company 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 the Company or a Restricted
Subsidiary of the Company and (2) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Subsidiary
Guarantor shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Restricted Subsidiary, as the case
may be, that was not permitted by this clause (v);
(vi) the incurrence by the Company 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);
(vii)the guarantee by the Company or any of the Subsidiary Guarantors
of Indebtedness of the Company or a Restricted Subsidiary of the Company
that was permitted to be incurred by another provision of this covenant
"--Incurrence of Indebtedness and Issuance of Preferred Stock;"
(viii) the incurrence by Trim Trends Canada of Indebtedness under the
CIBC Facility, provided that the aggregate principal amount of all
Indebtedness of Trim Trends Canada outstanding under the CIBC Facility,
after giving effect to such incurrence, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (viii), does not exceed an
amount equal to $2.0 million; and
(ix) the incurrence by the Company of additional Indebtedness in an
aggregate principal amount at any
44
<PAGE>
time outstanding, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any other Indebtedness incurred pursuant to
this clause (ix), 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 (i) through (ix) 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, the
Company 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 pursuant
to only one of such clauses or pursuant to 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
So long as the Notes are outstanding, the Company, 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 the Company ending with any fiscal quarter set forth below to
exceed the ratio set forth below opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Consolidated Leverage Ratio
-------------- ---------------------------
<S> <C>
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
the Maturity Date 3.50
</TABLE>
Maintenance of Consolidated Interest Coverage Ratio
So long as the Notes are outstanding, the Company 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 the Company ending with any fiscal quarter set forth below to be
less than the ratio set forth below opposite such fiscal quarter:
<TABLE>
<CAPTION>
Consolidated Coverage
Fiscal Quarter Interest Ratio
-------------- --------------
<S> <C>
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
45
<PAGE>
September 30, 2000 2.25
December 31, 2000 and thereafter
until the Maturity Date 2.75
</TABLE>
Liens
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective 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
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company to:
(i)(X) pay dividends or make any other distributions to the Company or any
of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to
any other interest or participation in, or measured by, its profits, or (Y) pay
any Indebtedness owed to the Company or any of its Restricted Subsidiaries;
(ii) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(iii) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of:
(a) the Senior Credit Facility as in effect as of the Issue Date, 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 the Senior Credit Facility as in effect on the
Issue Date;
(b) the Indenture and the Notes;
(c) applicable law;
(d) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect
at the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture
to be incurred;
(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 pursuant to 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 Company will not, directly or indirectly, consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell, assign,
transfer, convey or otherwise dispose of all or substantially all of its
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<PAGE>
properties or assets in one or more related transactions, to another Person
unless:
(i) the Company is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Company) 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;
(ii) the Person formed by or surviving any such consolidation or merger (if
other than the Company) or the Person to which such sale, assignment, transfer,
conveyance or other disposition shall have been made assumes all the obligations
of the Company under the Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee;
(iii) immediately before and after such transaction no Default or Event of
Default shall have occurred; and
(iv) except in the case of a merger of the Company with or into a
Subsidiary Guarantor, the Company or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made (A)
will have Consolidated Net Worth immediately after the transaction equal to or
greater than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) will, 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 pursuant to 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 the Company may not, directly or indirectly,
lease all or substantially all of its properties or assets, in one or more
related transactions, to any other Person.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any 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
Affiliate of any such Person (each of the foregoing, an "Affiliate
Transaction"), unless:
(i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and
(ii) the Company delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of its Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of its Board of Directors
and (b) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $2.5 million, an
opinion as to the fairness to the Holders of such Affiliate 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 Affiliate Transactions:
(1) any employment agreement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business of the Company
or such Restricted Subsidiary, as the case may be;
(2) transactions between or among the Company and/or its Subsidiary
Guarantors on terms that are no less favorable to the Company and/or such
Subsidiary Guarantor than those that would have been obtained in a
comparable transaction by the Company and/or such Subsidiary Guarantor with
an unrelated Person;
(3) any sale or other issuance of Equity Interests (other than
Disqualified Stock) of the Company or of Equity Interests of any Restricted
Subsidiary to the Company 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
the Company and of its Restricted
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<PAGE>
Subsidiaries in their capacity as such, to the extent such fees and
compensation are reasonable and customary;
(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 the Company or any of its Restricted
Subsidiaries, as determined by the Board of Directors of the Company or of
any such Restricted Subsidiary, to the extent such fees and compensation
are reasonable and customary, shall not be deemed to be Affiliate
Transactions.
Sale and Leaseback Transactions
The Company will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company may enter into a sale and leaseback transaction if:
(i) the Company could have incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
(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;"
(ii) 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
(iii) the transfer of assets in such sale and leaseback transaction is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, the covenant described above under the caption "--Repurchase at
the Option of Holders--Asset Sales."
Impairment of Security Interests
Subject to the Intercreditor Agreement, neither the Company 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 Holders of Notes, with respect to the Collateral. Neither the
Company nor any of its Subsidiaries shall 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 the Senior Credit Facility
and Permitted Liens as permitted under the covenant entitled "Liens." Neither
the Company 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 the Company or any of its Restricted
Subsidiaries shall acquire or create another Restricted Subsidiary after the
Issue Date, then such newly acquired or created Restricted Subsidiary will:
(i) 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;
(ii) 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
(iii) deliver an Opinion of Counsel to the effect, inter alia, that such
supplemental indenture has been duly authorized and executed by such Restricted
Subsidiary.
Business Activities
The Company will not, and the Company 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 the
Company and its Restricted Subsidiaries taken as a whole.
Payments for Consent
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or
48
<PAGE>
cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder 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 Holders
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 the Company is required by the
rules and regulations of the SEC, so long as any Notes are outstanding, the
Company will furnish to each of the Holders:
(i) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company
were required to file such 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 the Company and
any consolidated Restricted Subsidiaries and, with respect to the annual
information only, reports thereon by the Company's independent public
accountants (which shall be firm(s) of established national reputation) and
(ii) all information that would be required to be filed with the SEC on
Form 8-K if the Company were required to file such reports.
All such information and reports shall be filed with the SEC on or prior to
the dates on which such filings would have been required to be made had the
Company been subject to the rules and regulations of the SEC. In addition,
whether or not required by the rules and regulations of the SEC, the Company
shall file a copy of all such information and reports with the SEC for public
availability 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, the Company and the
Subsidiary Guarantors shall furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Further Surveys and Title Insurance
To the extent that, on the Issue Date, the Company shall not have delivered
Surveys of the properties subject to the Mortgages to the Collateral Agent and
the Title Insurance Company, then the Company shall use commercially reasonable
efforts to do so within 45 days of the Issue Date and shall use commercially
reasonable efforts to have the Title Company, within 10 days thereafter, omit
corresponding survey exceptions on the relevant title insurance policies issued
and issue those endorsements to such title insurance policies (such as survey
and access) that cannot be issued without such surveys.]
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default:
(i) default for 30 days in the payment when due of Interest on, or
Liquidated Damages, if any, with respect to, the Notes;
(ii) default in payment when due of the principal of or premium, if any, on
the Notes;
(iii) failure by the Company 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;"
(iv) failure by the Company 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 Holders--Asset Sales" or "Repurchase at the
Option of Holders--Change of Control;"
(v) failure by the Company 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;
(vi) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether
49
<PAGE>
such Indebtedness or guarantee now exists, or is created after the Issue Date,
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 (a "Payment 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 a Payment Default or the maturity of which has been so
accelerated, aggregates without duplication $1.0 million or more;
(vii) failure by the Company 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;
(viii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries;
(ix) 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
(x) 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 Holders for 30 days after notice.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company or any Restricted
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or Interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
Interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default or any litigation,
investigation, administrative action or other proceeding (a "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
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes or the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
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Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
Amendment, Supplement and Waiver
Except as provided in the next three succeeding paragraphs, the Indenture
or the Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding
(including, without limitation, 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 Holders 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 Holders 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
Holders.
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes (other
than provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders");
(iii) reduce the rate of, amounts due under or change the time for payment
of Interest on any Note;
(iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or Interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default
that resulted from such acceleration);
(v) make any Note payable in money other than that stated in the Indenture
and the Notes;
(vi) make any change in the provisions of the Indenture relating to waivers
of past Defaults or the rights of Holders to receive payments of principal
of or premium, if any, or Interest on the Notes;
(vii) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders");
(viii) 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;
(ix) release any Subsidiary Guarantor from its obligations under the
Guarantees, the Collateral Agreement and the Indenture, except in
accordance with the terms of the Collateral Agreement, the Loan Collateral
Agreement and the
Indenture;
(x) amend or modify any provisions of the Indenture, the Collateral
Agreement and other Security Documents, the Notes and the Guarantees
relating to the Collateral in any manner adverse to Holders; or
(xi) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture, the Notes,
the Guarantees and the Collateral Agreement (i) to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes and Guarantees in addition to
or in place of
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certificated Notes and Guarantees, (ii) to provide for the assumption of the
Company's obligations to Holders in the case of a merger or consolidation, (iii)
to make any change that would provide any additional rights or benefits to the
Holders or that does not adversely affect the legal rights under the Indenture
or the Collateral Agreement of any such Holder (including, but not limited to,
adding a Guarantor under the Indenture and adding additional collateral to the
Collateral) or (iv) 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 the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue or
resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture 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 Holder of Notes, unless such Holder 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"). 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 (the "Depositary") and registered in the
name of Cede & Co., as nominee of the Depositary (such nominee being referred to
herein as the "Global Note Holder").
Notes that are issued as described below under "Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer of Certificated Securities, such
Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers, banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the "Indirect Participants" or the
"Depositary's Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by or on behalf of the
Depositary only thorough the Depositary's Participants or the Depositary's
Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary 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 Depositary (with respect to the interests of the Depositary's
Participants), the Depositary's Participants and the Depositary's 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 Holder 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 Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the
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records of the Depositary or for maintaining, supervising or reviewing any
records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, Interest and
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
Holder under the Indenture. Under the terms of the Indenture, the Company 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 the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes. The Company believes, however, that it is currently the policy of the
Depositary 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 Depositary. Payments by the Depositary's
Participants and the Depositary's Indirect Participants to the beneficial owners
of Notes will be governed by standing instructions and customary practice and
will be the responsibility of the Depositary's Participants or the Depositary's
Indirect Participants.
The Depositary's management is aware that some computer applications,
systems, and the like for processing data ("Systems") that are dependent upon
calendar dates, including dates before, on, and after January 1, 2000, may
encounter "Year 2000 problems." The Depositary has informed its Participants and
other members of the financial community (the "Industry") that it has developed
and is implementing a program so that its Systems, as the same relate to the
timely payment of distributions (including principal and income payments) to
securityholders, book-entry deliveries, and settlement of trades within the
Depositary ("DTC Services"), continue to function appropriately. This program
includes a technical assessment and a remediation plan, each of which is
complete. Additionally, the Depositary's plan includes a testing phase, which is
expected to be completed within appropriate time frames.
However, the Depositary'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 Depositary licenses
software and hardware, and third party vendors on whom the Depositary relies for
information or the provision of services, including telecommunication and
electrical utility service providers, among others. The Depositary has informed
the Industry that it is contacting (and will continue to contact) third party
vendors from whom the Depositary acquires services to: (i) impress upon them the
importance of such services being Year 2000 compliant; and (ii) determine the
extent of their efforts for Year 2000 remediation (and, as appropriate, testing)
of their services. In addition, the Depositary is in the process of developing
such contingency plans as it deems appropriate.
According to the Depositary, the foregoing information with respect to The
Depositary 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 Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities 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:
(i) the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or
(ii) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Notes in the form of Certificated Securities
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
Depositary identify as being the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary 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 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
Securities, the Company will make all payments of principal, premium, if any,
Interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The Company expects that secondary trading in the Certificated
Securities will also be settled in immediately available funds.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a 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 (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"Administrative Agent" means the Administrative Agent under
the Senior Credit Facility.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means:
(i) the sale, lease, conveyance or other disposition of any assets or
rights (including, without limitation, by way of a sale and leaseback) by the
Company 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 the Company and its Restricted
Subsidiaries taken as a whole will be governed by the covenants described above
under the captions "--Repurchase at the Option of Holders--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
(ii) the issue or sale by the Company or any of its Restricted Subsidiaries
of Equity Interests of any the Company's Restricted Subsidiaries, in the case of
either clause (i) or (ii), whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of $1.0 million
or (b) for Net Proceeds in excess of $1.0 million.
Notwithstanding the foregoing, the following shall not be considered "Asset
Sales":
(i) a transfer of assets by the Company to a Subsidiary Guarantor or by a
Restricted Subsidiary of the Company to the Company or to a Subsidiary
Guarantor;
(ii) an issuance or sale of Equity Interests by a Restricted Subsidiary of
the Company to the Company or a Subsidiary Guarantor;
(iii) a Restricted Payment that is permitted by the covenant described
above under the caption "--Restricted Payments;"
(iv) the sale or transfer of the Designated Facilities; and
(v) the sale by the Company 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 GAAP) of
the obligation of the lessee for net rental payments during the 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
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lessor, be extended).
"Bankruptcy Code" means, the Bankruptcy Reform Act of 1978,
as amended and codified as 11 U.S.C. ss.ss. 101 et. seq.
"Bankruptcy Court" means the United States Bankruptcy Court
for the District of Delaware.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participation, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means:
(i) United States dollars,
(ii) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof having
maturities of not more than one year from the date of acquisition,
(iii) 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,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and
(v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or 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:
(i) the sale, lease, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related transactions,
of all or substantially all of the assets of the Company and its Restricted
Subsidiaries, taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act;
(ii) the adoption of a plan relating to the liquidation or
dissolution of the Company;
(iii) the consummation of any transaction (including, without limitation,
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 the Company (measured by
voting power rather than number of shares);
(iv) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors; or
(v) the Company 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, the Company, in any such event pursuant to a transaction
in which any of the outstanding Voting Stock of the Company is converted
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into or exchanged for cash, securities or other property, other than any such
transaction where the Voting Stock of the Company 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).
"CIBC Facility" means that certain $2.0 million revolving credit facility
dated June 4, 1997, by and between Trim Trends Canada and Canadian Imperial Bank
of Commerce, providing for up to $2.0 million of revolving credit borrowings, as
amended, modified, renewed, refunded, replaced or refinanced from time to time.
"Collateral" means all property of the Company and the Subsidiary
Guarantors, now owned or hereafter acquired, upon which a Lien is purported to
be created by any Security Document.
"Collateral Agreement" means the Collateral Agreement to be executed and
delivered by the Company and each Subsidiary Guarantor, as the same may be
amended, supplemented or otherwise modified from time to time.
"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 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, (i) the average of four Reference Treasury Dealer Quotations for such
redemption date, after excluding the highest and lowest such Reference Treasury
Dealer Quotations, or (ii) 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
(i) an amount equal to any extraordinary or non-recurring loss plus any net
loss realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income), plus
(ii) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such provision for
taxes was included in computing such Consolidated Net Income, plus
(iii) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, Cash Flow Participation Interest
expense, amortization of debt issuance costs and original issue discount,
non-cash interest payments (such as the PIK Notes), the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments, if any, pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Net
Income, plus
(iv) depreciation 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 to the extent that such depreciation and amortization were deducted in
computing such Consolidated Net Income, minus
(v) 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 GAAP.
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 the Company shall be added to Consolidated Net Income
to compute Consolidated Cash Flow of the Company only to the extent (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 the Company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that 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.
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"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum, without duplication, of
(i) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, Cash Flow Participation Interest expense, amortization of debt
issuance costs and original issue discount, non-cash interest payments (such as
the PIK Notes), the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments, if any, pursuant
to Hedging Obligations),
(ii) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period (including but not limited
to, the value of PIK Notes issued during such period, if applicable) and
(iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such Guarantee or Lien is called upon).
"Consolidated Leverage Ratio" means the ratio of:
(i) the aggregate outstanding amount of Indebtedness of each of the Company
and its Restricted Subsidiaries as of the date of calculation on a consolidated
basis in accordance with GAAP plus the aggregate liquidation preference of all
outstanding Disqualified Stock of the Company and preferred stock of the
Company's Restricted Subsidiaries (except preferred stock issued to the Company
or a Wholly Owned Subsidiary) on such date to
(ii) the aggregate Consolidated Cash Flow of the Company;
provided that, for the purposes of determining the ratio described above
for (i) 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, (ii) 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 (iii) 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, (i) 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 GAAP, and (ii) the
aggregate outstanding principal amount of Indebtedness of the Company and its
Subsidiaries and the aggregate liquidation preference of all outstanding
preferred stock of the Company'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:
(i) 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
(ii) any acquisition (including, without limitation, 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 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 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
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with such acquisition) occurred on the first day of the quarter, giving pro
forma effect to any cost reductions which the Company anticipates if the Company
deliver to the Trustee an Officers' Certificate executed by the chief financial
or accounting officer of the Company 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, to the extent 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 GAAP);
provided that:
(i) 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 to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Restricted Subsidiary that is a Guarantor,
(ii) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar distributions by
that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders,
(iii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, and
(iv) the cumulative effect of a change in accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less:
(x) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business made
within 12 months after the acquisition of such business) subsequent to the Issue
Date in the book value of any asset owned by such Person or a consolidated
Restricted Subsidiary of such Person,
(y) all investments as of such date in unconsolidated Restricted
Subsidiaries and in Persons that are not Restricted Subsidiaries (except, in
each case, Permitted Investments), and
(z) all unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in accordance with
GAAP.
"Continuing Directors" means, as of the date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issue Date or (ii) 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.
"Default" means any event that is or with the passage of time or the giving
of notice (or both) would be an Event of Default.
"Designated Facilities" means the assets (real and personal property) as of
the Issue Date relating to the Toledo,
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Tiffin and Harman businesses.
"DIP Credit Facilities" means the collective reference to the Company's
$175.0 million senior secured debtor-in-possession credit facility and the
Company's $25.0 million junior secured debtor-in-possession credit facility,
which are being refinanced by the Financings.
"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, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature, except to the extent that such Capital Stock is solely
redeemable with, or solely exchangeable for, any Capital Stock of such Person
that is not Disqualified Stock.
"Domestic Subsidiary" means any Subsidiary of the Company organized under
the laws of the United States of America, any state, territory, possession or
the District of Columbia. As of the Issue Date, the Domestic Subsidiaries are
Doehler-Jarvis, Inc., Harvard Transportation Corporation., Doehler-Jarvis
Greenville, Inc., Doehler-Jarvis Pottstown, Inc., Doehler-Jarvis Technologies,
Inc., Doehler-Jarvis Toledo, Inc., Harman Automotive, Inc., Hayes-Albion
Corporation and The Kingston-Warren Corporation.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Excluded Foreign Subsidiary" means, any Foreign Subsidiary in respect of
which either (i) the pledge of all of the Capital Stock of such Subsidiary as
Collateral or (ii) 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:
(i) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, Cash Flow Participation Interest expense, amortization of debt
issuance costs and original issue discount, non-cash interest payments (such as
the PIK Notes), the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations),
(ii) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period (including but not limited
to, the value of PIK Notes issued during such period, if applicable),
(iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such Guarantee or Lien is called upon) and
(iv) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company (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 GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings 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:
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(i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income,
(ii) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Restricted Subsidiaries following the Calculation
Date.
"Foreign Subsidiary" means any Subsidiary of the Company (a) that is not a
Domestic Subsidiary or (b) whose primary asset is the Capital Stock of one or
more Foreign Subsidiaries.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, the statements and pronouncements of
the Financial Accounting Standards Board and such other statements by such other
entities as have been approved by a significant segment of the accounting
profession, which are applicable at the Issue Date.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial regulatory or administrative functions of or pertaining to government.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness, including the Guarantee of the
Indenture and the Notes by each of the Subsidiary Guarantors pursuant to the
Indenture and any additional Guarantee of the Indenture and the Notes to be
executed by any Restricted Subsidiary of the Company.
"Guarantors" means each of the guarantors of the Company's obligations
under the Indenture and the Notes.
"Hedging Obligations" means, with respect to any Person, the net payment
Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements and agreements providing
for protection against fluctuations in commodity prices and (ii) 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:
(a) any indebtedness of such Person, whether or not contingent, in respect
of borrowed money or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof) or banker's acceptances or representing Capital Lease Obligations or
the balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, as well as all Indebtedness of others secured by a Lien on any asset of
such Person (whether or not such Indebtedness is assumed by such Person),
(b) to the extent 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
(c) 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
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amount of such Indebtedness.
The amount of any Indebtedness outstanding as of any date shall be (i) the
accreted value thereof, in the case of any Indebtedness that does not require
current payments of interest or that allows for the payment of interest in kind,
and (ii) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the Trustee after consultation with the Company.
"Intercreditor Agreement" means the intercreditor agreement dated as of the
Issue Date by and among the Trustee, the Administrative Agent, the Collateral
Agent and the Company that shall set forth the relative rights of the Lenders
under the Senior Credit Facility and the Holders of the Notes in respect of
shared collateral and the security interests granted pursuant to the Loan
Security Documents and the Security Documents.
"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 that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP. If the Company or any of its Restricted
Subsidiaries sells or otherwise disposes of any Equity Interests of any direct
or indirect Restricted Subsidiary of the Company such that, after giving effect
to any such sale or disposition, such Person is no longer a direct or indirect
Restricted Subsidiary of the Company, the Company 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."
"Issue Date" means the date of the issuance and sale of the Notes.
"Kingston-Warren" means The Kingston-Warren Corporation, a New Hampshire
corporation, and a Subsidiary of the Company.
"LCPI" means Lehman Commercial Paper Inc.
"Lender" means each of the institutions a party to and acting as lenders
under the Senior Credit Facility.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in any asset and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"LLC Agreement" means the Limited Liability Company Agreement dated
November 27, 1995 by and between Hutchinson SA and Kingston-Warren.
"Loan" means any loan made by any lender pursuant to the
Senior Credit Facility.
"Loan Collateral Agent" means the Collateral Agent under the Loan
Collateral Agreement.
"Loan Collateral Agreement" means the Collateral Agreement to be executed
and delivered by the Company and each Loan Guarantor, in favor of the
Administrative Agent as the same may be amended, supplemented or otherwise
modified from time to time.
"Loan Documents" means the Senior Credit Facility, the Loan Security
Documents, certain applications made by Lenders regarding letters of credit to
be issued under the Senior Credit Facility, the Loan Notes and the Intercreditor
Agreement.
"Loan Guarantor" means each Subsidiary of the Company other than Excluded
Foreign Subsidiaries.
"Loan Notes" means the collective reference to any promissory note
evidencing Loans.
"Loan Security Documents" means, collectively, the Loan Collateral
Agreement, the Mortgages and all other
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security hereafter delivered to the Loan Collateral Agent granting a Lien on any
property of any Person to secure the obligations and liabilities of the Company
or the Subsidiary Guarantors under any Loan Document.
"Maturity Date" means September 1, 2003.
"Mortgage" means each of the mortgages and deeds of trust made by the
Company or any Subsidiary Guarantor in favor of, or for the benefit of, the
Collateral Agent for the benefit of the Holders, substantially in the form as
set forth in the Collateral Agreement (with such changes thereto as shall be
advisable under the law of the jurisdiction in which such mortgage or deed of
trust is to be recorded), as the same may be amended, supplemented or otherwise
modified from time to time.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss).
"Net Proceeds" means the aggregate cash proceeds or Cash Equivalents
received by the Company or any of its Restricted Subsidiaries in respect of any
Asset Sale (including, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale), net
of (A) all costs relating to such Asset Sale (including, without limitation,
legal, accounting, investment banking and brokers fees, and sales and
underwriting commissions) and any relocation expenses incurred as a result
thereof, taxes paid or payable as a result thereof (after taking into account
any available tax credits or deductions and any tax sharing arrangements), (B)
amounts required to be applied to repayment of Indebtedness (other than
Indebtedness under the Senior Credit Facility) secured by a Lien on the asset or
assets that were the subject of such Asset Sale and (C) and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries.
"Norwest Bank" means Norwest Bank Minnesota, National Association.
"Note Documents" mean the Indenture, the Notes, the Guarantees, the
Collateral Agreement and other Security Documents, the Registration Rights
Agreement and the
Intercreditor Agreement.
"Obligations" means any principal, premium, if any, interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or its Restricted Subsidiaries whether or
not a claim for post-filing interest is allowed in such proceeding), penalties,
fees, charges, expenses, indemnifications, reimbursement obligations, damages
(including Liquidated Damages, if any), guarantees and other liabilities or
amounts payable under the documentation governing any Indebtedness or in respect
thereof.
"Officer" of any Person means the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the Treasurer
or the Secretary of such Person.
"Officers' Certificate" of any Person means a certificate signed on behalf
of such Person by two Officers of such Person, one of whom must be the principal
executive officer, the principal financial officer, the treasurer, assistant
treasurer or the principal accounting officer of such Person that meets the
requirements set forth in the Indenture.
"Paying Agent" means, with respect to the Notes issued and authenticated
under the Indenture, the paying agent maintained and appointed for the Notes
pursuant to the Indenture; initially, the Paying Agent shall be Norwest Bank.
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"Permitted Business" means the lines of business that the Company and its
Restricted Subsidiaries currently conduct on the date hereof or that the Company
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:
(a) any Investment in the Company or in a Restricted Subsidiary of the
Company;
(b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person engaged in a Permitted Business, if as a result of such
Investment (i) such Person becomes a Subsidiary Guarantor or (ii) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Subsidiary Guarantor;
(d) any Restricted Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with the covenant described above under the caption "--Repurchase at the Option
of Holders--Asset Sales;"
(e) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company;
(f) 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 Indenture to be
outstanding) in connection with the conduct of the business of the Company and
its Restricted Subsidiaries which are Guarantors;
(g) any Investment existing on the Issue Date 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;
(h) Investments in Permitted Joint Ventures that have an aggregate fair
market value, taken together with all other Investments made pursuant to this
clause (h) 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 (I) 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 (h) may be made in the form of additional investments in the
Permitted Joint Ventures and (II) 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 (h) may be made in the form of loans or advances
made to or on behalf of Hutchinson/Kingston-Warren LLC, pursuant to Section 6.6
of the LLC Agreement 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
pursuant to Article 2 of the LLC Agreement, provided that the terms and
conditions of such loans or advances require their repayment to the Company or
Kingston-Warren or that the Company or Kingston-Warren are repaid their share of
such expenditures pursuant to the LLC Agreement; and
(i) other Investments by the Company or any of its Restricted Subsidiaries
in any Person engaged in one or more Permitted Businesses, other than those
provided for in clause (h), 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 pursuant to this
clause (i) that are at the time outstanding, not to exceed $2.5 million.
"Permitted Joint Venture" means (i) KS-Doehler-Jarvis GmbH, a German joint
venture formed by Doehler-Jarvis, Inc. and KS Aluminum Technologie AG, and (ii)
Hutchinson/Kingston-Warren LLC, a Delaware limited liability company formed by
Kingston-Warren and Hutchinson SA.
"Permitted Liens" means:
(i) Liens securing the Senior Credit Facility and the Notes as permitted
under the Indenture;
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(ii) Liens on the assets of the Company 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;
(iii) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or any Restricted Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition and only extend
to the property so acquired;
(v) Liens existing on the Issue Date, provided that any Liens in existence
on the Issue Date 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
the Company and certain of its Subsidiaries, or Liens to secure the DIP Credit
Facilities, which Liens will not for any reason have been extinguished and
released by the Issue Date, shall not be a "Permitted Lien" within the meaning
of this definition;
(vi) Liens to secure any Permitted Refinancing Indebtedness incurred to
refinance any Indebtedness secured by any Lien referred to in the foregoing
clauses (i) through (v), as the case may be, at the time the original Lien
became a Permitted Lien;
(vii) Liens in favor of the Company or any Restricted
Subsidiary that is a Guarantor;
(viii) Liens incurred in the ordinary course of business (including those
incurred in connection with trade credit in the ordinary course of business) of
the Company or any Restricted Subsidiary of the Company 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 the Company or such Restricted Subsidiary;
(ix) 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, without limitation, landlord Liens on leased properties);
(x) 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 GAAP
shall have been made therefor;
(xi) Liens to secure Indebtedness (including Capital Lease Obligations and
purchase money obligations) permitted by clauses (iii) or (iv) 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;
(xii) 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 GAAP shall have been made
therefor;
(xiii) 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 the Company and its Restricted Subsidiaries taken as a whole;
(xiv) 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
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business;
(xv) leases or subleases granted to third Persons not interfering with the
ordinary course of business of the Company or any of its Restricted
Subsidiaries;
(xvi) 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;
(xvii) 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 the Senior Credit Facility and the Indenture require the
Company and its Subsidiaries to carry;
(xviii) any interest or title of a lessor or sublessor under
any operating lease;
(xix) any attachment or judgment Lien not constituting an
Event of Default under clause
(vii) of the first paragraph of the section described above under the
caption "Events of Default and Remedies";
(xx) Liens securing the CIBC Facility as permitted under the
Indenture; and
(xxi) 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 the Company
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 the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:
(i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus 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);
(ii) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(iii) 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 Holders as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and
(iv) such Indebtedness is incurred either by the Company or a Restricted
Subsidiary who is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"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 the Company;
provided, however, that if any of the foregoing shall cease to be a Primary
Treasury Dealer, the Company 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.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of November 24, 1998 among the Company, the Subsidiary Guarantors and
Lehman Brothers Inc. whereby the Company will agree to file with the SEC the
Exchange Offer Registration Statement on the appropriate form under the
Securities Act with
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respect to the New Notes.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary; provided that, on the Issue Date,
all Subsidiaries of the Company shall be Restricted Subsidiaries of the Company.
"SEC" means the Securities and Exchange Commission.
"Security Documents" means, collectively, the Collateral Agreement, the
Mortgages and all other security documents hereafter delivered to the Collateral
Agent granting a Lien on any property of any Person to secure the obligations
and liabilities of the Company and the Subsidiary Guarantors.
"Senior Credit Facility" means that certain $115.0 million Credit Facility,
dated as of the Issue Date, by and among the Company, the Subsidiary Guarantors
and the several lenders from time to time parties thereto, Lehman Brothers Inc.,
as Arranger, Lehman Commercial Paper Inc., as Syndication Agent, General
Electric Capital Corporation, as Administrative Agent and as Collateral Agent,
providing for up to $50.0 million of term loan borrowings and $65.0 million of
revolving credit borrowings and in each case, including any related notes,
guarantees, collateral documents, instruments, letters of credit and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
"Senior Debt" means any Indebtedness that is not subordinated in right of
payment to the Notes or any other Indebtedness. Notwithstanding anything to the
contrary in the foregoing, Senior Debt will not include (w) any liability for
federal, state, local or other taxes owed or owing by the Company, (x) any
Indebtedness of the Company to any of its Subsidiaries or other Affiliates, (y)
any trade payables or (z) any Indebtedness that is incurred in violation of the
Indenture.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or an entity described in clause (i) and
related to such Person or (b) the only general partners of which are such Person
or of one or more entities described in clause (i) and related to such Person
(or any combination thereof). Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" herein refer to a Subsidiary or Subsidiaries
of the Company.
"Subsidiary Guarantor" means each of the Domestic Restricted Subsidiaries
that will fully and unconditionally guarantee, jointly and severally, on a
senior basis to each Holder the Company's payment obligations under the
Indenture and the Notes.
"Survey" means maps or plats of an as-built survey of the sites of the
properties subject to Mortgages certified to the Collateral Agent and the Title
Insurance Company in a manner reasonably satisfactory to them, dated a date
satisfactory to the Initial Purchaser and the Title Insurance Company by an
independent professional licensed land surveyor reasonably satisfactory to the
Initial Purchaser and the Title Insurance Company, which maps or plats and the
surveys on which they are based shall be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly established and
adopted by the American Land Title Association and the American Congress on
Surveying and Mapping in 1992, and, without limiting the generality of the
foregoing, there shall be surveyed and shown on such maps, plats or surveys the
following:
(A) the locations on such sites of all the buildings, structures and other
improvements and the established building setback lines;
(B) the lines of streets abutting the sites and width
thereof;
(C) all visible and/or recorded access and other easements appurtenant to
the sites;
(D) all roadways, paths, driveways, encroachments and overhanging
projections and similar encumbrances affecting the site, whether recorded
or apparent from a physical inspection of the sites;
(E) any encroachments on any adjoining property by the building structures
and improvements on the sites;
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(F) if the site is described as being on a filed map, a legend relating the
survey to said map; and
(G) the flood zone designations, if any, in which the mortgaged properties
are located.
"Title Insurance Company" means the title insurance company that will issue
a mortgagee's title insurance policy (or policies) or marked up unconditional
binder for such insurance that shall (A) be in an amount satisfactory to the
Initial Purchaser prior to the Issue Date; (B) insure that the Mortgage insured
thereby creates a valid second lien on such mortgaged property (C) name the
Collateral Agent, for the benefit of the Initial Purchaser and the Holders of
Notes, as the insured thereunder; (D) be in the form of ACTA Loan Policy - 1970
(Amended 10/17/70 and 10/17/84) (or equivalent policies); (E) contain such
endorsements and affirmative coverage as the Initial Purchaser may reasonably
request and (F) be satisfactory to the Initial Purchaser (including any such
title companies acting as co-insurers or reinsurers, at the option of the
Initial Purchaser).
"Treasury Rate" means, with respect to any redemption date for the Notes,
(i) 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 after the Maturity Date, 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
(ii) 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.
"Trim Trends Canada" means Trim Trends Canada Ltd., a company organized
under the laws of Canada, and a Subsidiary of the Company.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution,
but only to the extent that such Subsidiary:
(a) has no Indebtedness other than Non-Recourse Debt,
(b) is not party to any agreement, contract, arrangement or understanding
with the Company or any Restricted Subsidiary of the Company unless the terms of
any such agreement, contract, arrangement or understanding are no less favorable
to the Company or such Restricted Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of the Company,
(c) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe
for additional Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results, and
(d) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of its Restricted
Subsidiaries; provided that, notwithstanding the above, the Company 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 (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" means a Restricted Subsidiary, 100% of the
outstanding Capital Stock and other
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Equity Interests of which is directly or indirectly owned by the Company.
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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 and is subject to, and qualified
in its entirety by reference to, the 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, the Company 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.
The term loan portion of the Senior Credit Facility will mature on the
fourth anniversary of the Effective Date and will be amortized in quarterly
installments in an aggregate principal amount for each year equal to the amount
set forth opposite such year below (with installments in each year being equal
in amount):
Period Principal Amount
------ ----------------
Year 1 $1,000,000
Year 2 $1,000,000
Year 3 $1,000,000
Year 4 $1,000,000
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 (i) the outstanding
amount of all direct borrowings under the revolving credit facility plus (ii)
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 (i) 85% of eligible accounts receivable, plus
(ii) 60% of eligible finished goods and raw materials inventory, plus (iii) 33%
of eligible tooling inventory, up to $2 million, plus (iv) 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 the
Company could be impaired if the Company fails to meet any of the covenants
contained in the Senior Credit Facility and such noncompliance is not cured by
the Company or waived by the lenders.
The Company will be 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 certain circumstances the Company 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 will be 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.
Funds borrowed under the Senior Credit Facility will bear interest at
either (i) the Base Rate plus the Applicable Margin or (ii) the Eurodollar Rate
plus the Applicable Margin. "Base Rate" means the highest of (i) the rate of
interest publicly announced by Bankers Trust Company as its prime rate then in
effect, (ii) the secondary market rate for three-month certificates of deposit
(adjusted for statutory reserve requirements) plus 1% and (iii) the federal
funds effective rate from time to time plus 0.5%. "Applicable Margin" means (i)
2.25% in the case of Base Rate term loans, (ii) 3.50% in the case of Eurodollar
term loans, (iii) 2.125% in the case of Base Rate loans which are revolving
credit loans and (iv) 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 the Company) are offered in the
interbank market.
The Senior Credit Facility will restrict, among other things and subject to
certain exceptions, the Company's ability: (i) to incur additional indebtedness,
except for extensions or refundings of certain permitted indebtedness, (ii) to
merge, consolidate, liquidate, dissolve, sell or transfer all or substantially
all of its assets or make other similar fundamental changes, (iii) to sell
assets outside the ordinary course of business (other than the Designated
Facilities (as defined therein)) in excess of amounts set forth therein in any
fiscal year, (iv) to guarantee or invest in, or make
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loans or advances to, other persons or entities, (v) to declare or pay dividends
or make other distributions with respect to the Company's equity interests, (vi)
to engage in certain transactions with affiliates and holders of its equity
interests and (vii) to redeem or prepay the Notes. The Senior Credit Facility
will also require the Company to maintain financial ratios relating to leverage,
interest coverage and fixed charge coverage. In addition, the Senior Credit
Facility will impose restrictions on capital expenditures of the Company.
Events of default under the Senior Credit Facility will include, among
other things: (i) the failure by the Company to pay principal, interest or any
other amount due thereunder when due, (ii) the failure of the Company 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
pursuant to such other indebtedness that would cause or permit acceleration
thereof in excess of an aggregate amount of $1,000,000, (iii) a breach by the
Company of any covenant or agreement under the Senior Credit Facility (following
expiration of any applicable grace period), (iv) the material inaccuracy of any
representation or warranty made by the Company under the Senior Credit Facility,
(v) judgments against the Company in excess of $1,000,000, (vi) certain changes
of control, (vii) certain ERISA events and (viii) 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 would
result in an Event of Default under the Indenture.
Collateral. Pursuant to the Senior Credit Facility, the Company, the other
Borrowers (as defined in the Senior Credit Facility) and the Administrative
Agent will enter into a Collateral Agreement (the "Loan Collateral Agreement").
The obligations of the Company under the Senior Credit Facility will be secured,
subject to the terms of the Loan Collateral Agreement by a first priority
security interest in substantially all the tangible and intangible assets
(including all accounts receivable, equipment, real property, intellectual
property and all of the capital stock of the Subsidiary Guarantors) of the
Company and the Subsidiary Guarantors and all proceeds thereof. See "Description
of Notes-Collateral" and "Description of Notes-Intercredtior Agreement."
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CERTAIN 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 Notes
issued pursuant to 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, life 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 Code, and regulations,
rulings and judicial decisions thereunder 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, or 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.
Persons considering the purchase, ownership or disposition of Notes should
consult their own tax advisors concerning the federal income tax consequences
and consequences arising under the laws of any other taxing jurisdiction.
The Exchange Offer
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should 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. Accordingly, such exchange should not constitute a taxable event to U.S.
Holders and, therefore, (i) no gain or loss should be realized by U.S. Holders
upon receipt of a New Note, (ii) the holding period of the New Note should
include the holding period of the Old Note exchanged therefor and (iii) the
adjusted tax basis of the New Note should be the same as the adjusted tax basis
of the Old Note exchanged therefore immediately before the exchange.
Tax Characterization of the Notes
The Company intends to treat the New Notes as indebtedness for federal
income tax purposes. Such treatment is not binding on the Internal Revenue
Service ("IRS"). Accordingly, there can be no assurance 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 the Company for federal income tax
purposes.
Taxation of Interest on the Notes
Fixed Interest Payments. Fixed interest on the New Notes will be taxable to
a U.S. Holder as ordinary interest income in accordance with the U.S. Holder's
method of tax accounting at the time that such interest is accrued or (actually
or constructively) received.
Contingent Interest Payments. A U.S. Holder will report the accrual of any
Cash Flow Participation Interest on the Notes under the "noncontingent bond
method" of the original issue discount ("OID") regulations. Under the
noncontingent bond method, Cash Flow Participation Interest will accrue on the
New Notes based upon the Company's determination of the projected amount of such
interest over the term of the New Notes based on the "comparable yield" of the
New Notes. In order to determine the income of U.S. Holders, the Regulations
require the Company to determine, as of the issue date, the comparable yield for
the New Notes. The comparable yield for the New Notes is the yield at which the
Company would issue a fixed rate debt instrument with terms and conditions
similar to those of the New Notes. The Company is required to provide the
comparable yield to owners and, solely for tax purposes, is also required to
provide to U.S. Holders 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
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the life of the New Notes. The Company's comparable yield and projected payment
schedule will be available from the Corporate Finance Department of the Company
(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 the Company
with respect to the actual yield of, or payments to be made in respect of, a New
Note. Further, the comparable yield and the projected payment schedule do not
necessarily represent the Company'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 OID on the New Notes, all U.S.
Holders will be bound by the Company's determination of the projected amount of
Cash Flow Participation Interest as of the issue date. However, if a U.S. Holder
believes that the Company-provided projected amount is unreasonable, a U.S.
Holder must set its own projected payment schedule and explicitly disclose 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 the Issue Date, the amount of income includible for that period will be
subject to positive or negative adjustment, as appropriate. Any net reduction
for the taxable year below zero (a "Negative Adjustment") will constitute an
ordinary loss to the extent of prior income accruals and will be carried forward
to offset future interest accruals during subsequent periods. At maturity, any
remaining Negative Adjustment will give rise to an ordinary loss on retirement
of the New Note.
Optional Redemption
The Company 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 Make-Whole Premium, plus, to the extent not included in the
Make-Whole Premium, accrued and unpaid Interest and Liquidated Damages. See
"Description of Notes--Optional Redemption." Under the OID regulations, the
Company is presumed to exercise any option that reduces the yield-to-maturity of
the New Notes. Because the exercise of the option to redeem will reduce the
yield-to-maturity of the New Notes, the option will be presumed exercised for
purposes of computing the accrual of OID on the New Notes. If, contrary to such
presumption, the Company does not exercise its option to redeem the New Notes,
then, solely for purposes of computing subsequent accruals of OID, the Notes
shall be treated as retired and reissued on the redemption date.
If the Company 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 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. For
purposes of determining gain or loss on the sale or other disposition of a New
Note, a U.S. Holder's adjusted tax basis will equal the issue price of the New
Note, increased by the interest accrued on the New Note, based upon the
Company's determination, as of the issue date, of the projected amount of Cash
Flow Participation Interest, 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 issue price
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. In general,
any gain upon a sale or other disposition of a New Note will be treated as
ordinary income (rather than capital gain) and any loss, except as described
above under "Contingent Interest Payments," 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 (i)
fails to furnish his or her social security or other taxpayer identification
number ("TIN"), (ii) furnishes an incorrect TIN, (iii) is notified by the IRS
that he or she has failed to report payments of interest or dividends and the
IRS has notified the Company that he or she is subject to backup withholding, or
(iv) 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
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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.
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PLAN OF DISTRIBUTION
Each Holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (i) it is not an "affiliate" (as defined
in Rule 405 of the Securities Act) of the Company, (ii) 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 (iii) 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 pursuant to a registration statement containing the selling
securityholder information required by Item 507 of Regulation S-K of the
Securities Act, or pursuant to 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 the Company), may
exchange such Old Notes pursuant to 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 Commission, the Company
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. The Company has agreed that for a period of 180 days following
the date on which the Exchange Offer Registration 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 Commission, the Company
believes that New Notes issued pursuant to 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.
The Company 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 pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or 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 pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
The Company 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.
74
<PAGE>
VALIDITY OF THE NOTES
The validity of the New Notes will be passed upon for the Company by
Willkie Farr & Gallagher, New York, New York.
EXPERTS
The audited consolidated financial statements of the Company 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 the Company's ability to continue as a going concern as discussed in
Note 1 to the consolidated financial statements.
75
<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
Where You Can Find More Information..............ii
Prospectus Summary................................1
Risk Factors......................................8
Use Of Proceeds..................................20
Capitalization...................................21
Selected Historical Consolidated Financial And
Operating Data................................22
The Exchange Offer...............................24
Description Of The Notes.........................32
Description Of Indebtedness Under The Senior
Credit Facility...............................69
Certain Federal Income Tax Consequences..........71
Plan Of Distribution.............................74
Validity Of The Notes............................75
Experts..........................................75
================================================================================
================================================================================
$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.
================================================================================
76
<PAGE>
PART II
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 By-laws that were adopted pursuant to 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)).
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 Willkie Farr and Gallagher.
8.1* Tax Opinion of Willkie Farr and Gallagher.
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)).
77
<PAGE>
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)).
16 Letter re change in certifying accountant (incorporated by
reference to Exhibit 16.1 to the Company'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 the Company (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 Willkie Farr & Gallagher (included in their
opinion filed as Exhibit 5.1).
24 Powers of Attorney (contained in the signature pages
hereto).
25 Statement on Form T-1 of Eligibility of Trustee.
78
<PAGE>
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.
- -----------
* To be filed by amendment
(b) Financial Statement Schedules.
None.
Item 22. Undertakings.
Insofar as indemnifications 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.
79
<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 January 25, 1999.
HARVARD INDUSTRIES, INC.
By /s/ Roger G. Pollazzi
--------------------------------
Name: Roger G. Pollazzi
Title: Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Harvard Industries Inc., do
hereby severally and individually constitute and appoint Roger G. Pollazzi and
D. Craig Bowman, and each of them, as our true and lawful attorneys and agents,
to do any and all things and acts in our names in the capacities indicated below
and to execute any and all instruments for us and in our names in the capacities
indicated below which said persons may deem necessary or advisable to enable
Harvard Industries, Inc. to comply with the Securities Act of 1933, as amended,
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with the offering contemplated by this Registration
Statement on Form S-4, including specifically, but not limited to, power and
authority to sign for us or any of us in our names in the capacities indicated
below and any and all amendments, including post-effective amendments to this
Registration Statement and any Rule 462(b) registration statement or amendments
thereto; and we hereby ratify and confirm all that said persons shall do or
cause to be done by virtue hereof.
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.
Signature Title Date
- --------- ----- ----
/s/ Roger G. Pollazzi Chairman of the Board and January 25, 1999
- -------------------------- Chief Executive Officer
Roger G. Pollazzi (Principal Executive Officer)
/s/ Theodore W. Vogtman Executive Vice Presient and January 25, 1999
- -------------------------- Chief Financial Officer
Theodore W. Vogtman (Principal Financial Officer and
Principal Accounting Officer)
/s/ Jon R. Bauer Director January 25, 1999
- --------------------------
Jon R. Bauer
/s/ Thomas R. Cochill Director January 25, 1999
- --------------------------
Thomas R. Cochill
80
<PAGE>
Director January 25, 1999
- --------------------------
Raymond Garfield, Jr.
/s/ Donald P. Hilty Director January 25, 1999
- --------------------------
Donald P. Hilty
/s/ George A. Poole Director January 25, 1999
- --------------------------
George A. Poole
/s/ James P. Shanahan, Jr. Director January 25, 1999
- --------------------------
James P. Shanahan, Jr.
/s/ Richard W. Viesser Director January 25, 1999
- --------------------------
Richard W. Viesser
81
<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 Willkie Farr and Gallagher.
8.1* Tax Opinion of Willkie Farr and Gallagher.
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)).
82
<PAGE>
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 24,1 995 (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)).
16 Letter re change in certifying accountant (incorporated by
reference to Exhibit 16.1 to the Company'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 the Company (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 Willkie Farr & Gallagher (included in their
opinion filed as Exhibit 5.1).
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.
- -----------
* To be filed by Amendment
83
<PAGE>
$25,000,000
HARVARD INDUSTRIES, INC.
14 1/2% Senior Secured Notes due 2003
AMENDED AND RESTATED PURCHASE AGREEMENT
November 23, 1998
LEHMAN BROTHERS INC.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Harvard Industries, Inc., a Florida corporation (the "Company"),
proposes to issue and sell to you (the "Initial Purchaser") $25.0 million in
gross proceeds of its 14 1/2% Senior Secured Notes due 2003 (the "Initial
Notes") to be issued pursuant to the terms of an Indenture (the "Indenture")
among the Company, the Company's domestic subsidiaries set forth on Schedule I
attached hereto (the "Domestic Subsidiaries"), and Wilmington Trust Company, as
trustee (the "Trustee"), relating to the Initial Notes. The Initial Purchaser
proposes to purchase all of the Initial Notes. Payment of principal of,
premium, liquidated damages, if any, and interest on the Initial Notes (as
defined herein) will be unconditionally guaranteed, jointly and severally and
on a senior basis (the "Initial Guarantees," together with the Notes, the
"Initial Securities"), by the Domestic Subsidiaries (as guarantors, the
"Subsidiary Guarantors") and any newly acquired or created domestic subsidiary.
This Amended and Restated Purchase Agreement (the "Agreement") amends and
restates in its entirety the Purchase Agreement (the "Purchase Agreement")
dated October 27, 1998 by and between the parties hereto.
The Initial Securities will be offered and sold to you pursuant to an
exemption from the registration requirements under the Securities Act of 1933,
as amended (the "Securities Act"). The Company has prepared an offering
memorandum dated November 23, 1998 (the "Offering Memorandum") relating to the
Company and the Initial Securities.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act, the
Initial Notes (and all securities issued in exchange therefor or in
substitution thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
<PAGE>
2
(THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISION OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE."
You have advised the Company that you will make offers (the "Exempt
Resales") of the Initial Notes purchased by you hereunder on the terms set
forth in the Offering Memorandum as amended or supplemented solely to persons
whom you reasonably believe to be "qualified institutional buyers", as defined
in Rule 144A under the Securities Act ("QIBs") (such persons being referred to
herein as the "Eligible Purchasers"). You will offer the Initial Notes to
Eligible Purchasers initially at a price equal to 100% of the principal amount
thereof. Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Initial Securities
will have the registration rights set forth in the registration rights
agreement (the "Registration Rights Agreement"), to be dated the date of the
closing of the offering of the Notes (the "Closing Date"),
<PAGE>
3
substantially in the form of Exhibit A hereto, for so long as such Initial
Securities constitute "Transfer Restricted Securities" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company will agree to file with the Securities and Exchange Commission (the
"Commission") under the circumstances set forth therein, (i) a registration
statement under the Securities Act (the "Exchange Offer Registration
Statement") relating to the Company's 14 1/2% New Senior Secured Notes due 2003
(the "New Notes" and, together with the Initial Notes, the "Notes") to be
offered in exchange for the Initial Notes (such offer to exchange being
referred to collectively as the "Exchange Offer") and the unconditional joint
and several guarantee of such New Notes on a senior basis (the "New
Guarantees"; together with the Initial Guarantees, the "Guarantees"; and
together with the New Notes, the "New Securities" ) and (ii) a shelf
registration statement pursuant to Rule 415 under the Securities Act (the
"Shelf Registration Statement", and together with the Exchange Offer
Registration Statement, the "Registration Statements") relating to the resale
of the Initial Securities by certain holders of such Notes, and to use their
best efforts to cause such Registration Statements to be declared effective.
In conjunction with the transactions described herein, the Company
will syndicate and close a $115.0 million senior secured credit facility (the
"Senior Credit Facility") among the Company, Lehman Brothers Inc., as Arranger,
Lehman Commercial Paper Inc. ("LCPI") as Syndication Agent, General Electric
Capital Corporation, as Administrative Agent (the "Administrative Agent") and
as Collateral Agent (the "Loan Collateral Agent"), and other financial
institutions which are parties thereto. As described in the Offering
Memorandum, the proceeds of the offering of the Notes and borrowings under the
Senior Credit Facility will be used (a) to refinance, in part, indebtedness and
other obligations of the Company under the Company's existing $175.0 million
senior secured debtor-in-possession credit facility, (b) to refinance, in part,
indebtedness and other obligations of the Company under the Company's existing
$25.0 million junior secured debtor-in-possession credit facility (together
with the $175.0 million facility, the "DIP Credit Facilities"), (c) to pay
administrative expenses due under the Company's plan of reorganization dated
August 19, 1998 (the "Plan of Reorganization") as confirmed by the United
States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court")
and to pay related fees and expenses, (d) to finance the working capital
purposes and (e) to provide funds for general corporate purposes. Concurrently
with the execution and delivery of the Indenture and the Senior Credit
Facility, the Company, the Subsidiary Guarantors, the Trustee, Wilmington Trust
Company, as collateral agent (the "Collateral Agent"), and LCPI will enter into
a Collateral Agreement (the "Collateral Agreement"), to be dated as of the
Closing Date, granting to the Collateral Agent, for the benefit of holders of
the Notes, a second priority security interest in the Collateral (as defined
herein). Furthermore, the Company, the Trustee, the Administrative Agent and
the Collateral Agent will enter into an Intercreditor Agreement (the
"Intercreditor Agreement") to be dated as of the Closing Date that will set
forth their relative rights in respect of the shared Collateral and the
security interests granted therein.
This Agreement, the Indenture, the Registration Rights Agreement, the
Collateral Agreement, the Mortgages (as defined herein) and the Intercreditor
Agreement and the other documents related thereto are hereinafter referred to
collectively as the "Operative Documents."
<PAGE>
4
1 Representations and Warranties of the Company and the Subsidiary
Guarantors. Except as disclosed in documents filed by the Company on or after
January 1, 1998 (the "1998 Exchange Act Documents") with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the disclosure statement filed with the Bankruptcy Court in
connection with the Plan of Reorganization on August 19, 1998 (the "Disclosure
Statement"), each of which are incorporated by reference or included in the
Offering Memorandum, the Company and the Subsidiary Guarantors represent and
warrant as follows:
(a) The Offering Memorandum has been prepared by the Company for use
by the Initial Purchaser in connection with the Exempt Resales. No order or
decree preventing the use of the Offering Memorandum, or any order asserting
that the transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act, has been issued and no
proceeding for that purpose has commenced or is pending or, to the knowledge of
the Company, is contemplated.
(b) No statement or information contained in the Offering Memorandum,
this Agreement, any other Operative Document, the Senior Credit Facility, the
Plan of Reorganization and the Disclosure Statement related thereto, or any
other document, certificate or written statement furnished to you, by or on
behalf of the Company for use in connection with the transactions contemplated
by the Offering Memorandum and this Agreement or the other Operative Documents,
contained as of the date such statement, information, document or certificate
was so furnished (or, in the case of the Offering Memorandum, as of its date
and as of the Closing Date), any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements contained
herein or therein not misleading. The projections and pro forma financial
information contained in the materials referenced above, as applicable, are
based upon good faith estimates and assumptions believed by management of the
Company to be reasonable at the time made, it being recognized by the Initial
Purchaser that such financial information as it relates to future events is not
to be viewed as fact and that actual results during the period or periods
covered by such financial information may differ from the projected results set
forth therein by a material amount. There is no fact known to the Company that
could reasonably be expected to have a material adverse effect on the business,
assets, property or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect") that has not been
expressly disclosed herein, in the other Operative Documents, in the Offering
Memorandum or in any other documents, certificates and statements furnished to
you for use in connection with the transactions contemplated hereby and by the
Senior Credit Facility.
(c) No consent or authorization of, approval by, filing with, notice
to or other act by or in respect of, any governmental authority or any other
person is required in connection with the issuance and sale of the Securities
hereunder, or with the execution, delivery, performance, validity or
enforceability of the Operative Documents except (i) as may be required by the
securities or "blue sky" laws of any state of the United States in connection
with the sale of the Initial Notes and the New Notes, (ii) as contemplated by
the Registration Rights Agreement, (iii) for filings, registrations,
recordations in all necessary and appropriate jurisdictions to perfect the
security interests in the Collateral as contemplated by the Collateral
Agreement and (iv) the final order of the Bankruptcy Court of the Plan of
Reorganization, in
<PAGE>
5
accordance with Section 1129 of the Bankruptcy Reform Act of 1978, as amended
and codified as 11 U.S.C. ss.ss.101 et seq. (the "Bankruptcy Code").
(d) Each of the Company and its subsidiaries (i) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (ii) has the corporate power and authority, and the legal right,
to own and operate its properties, to lease the properties it operates as
lessee and to conduct the business in which it is currently engaged, (iii) is
duly qualified as a foreign corporation and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of its properties or
the conduct of its business requires such qualification and (iv) is in
compliance with its certificate of incorporation and by-laws or other
organizational or governing documents and any law, treaty, rule or regulation
or determination of an arbiter or a court or other governmental authority
applicable to it or binding upon it or any of its property or to which it or
any of its property is subject, except to the extent that the failure to comply
therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(e) Each of the Company and the Subsidiary Guarantors has all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement, the Plan of Reorganization and the other Operative
Documents and to authorize, issue and sell the Securities as contemplated by
this Agreement.
(f) The Purchase Agreement has been duly and validly authorized,
executed and delivered by the Company and each of the Subsidiary Guarantors,
and assuming due authorization, execution and delivery by the Initial
Purchaser, prior to its amendment herein and restatement hereby, heretofore
constituted the valid and binding agreement of the Company and each of the
Subsidiary Guarantors, enforceable against them in accordance with its terms
(subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights
generally from time to time in effect and to general principles of equity,
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing, regardless of whether in a proceeding in equity or at
law).
(g) The Registration Rights Agreement has been duly and validly
authorized by the Company and each of the Subsidiary Guarantors and, upon its
execution and delivery by the Company and each of the Subsidiary Guarantors
and, assuming due authorization, execution and delivery by the Initial
Purchaser, will constitute the valid and binding agreement of the Company and
each of the Subsidiary Guarantors, enforceable against them in accordance with
its terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws affecting creditors'
rights generally from time to time in effect and to general principles of
equity, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing, regardless of whether in a proceeding in equity or
at law).
(h) The Indenture has been duly and validly authorized by the Company
and each of the Subsidiary Guarantors, and upon its execution and delivery by
the Company and each of the Subsidiary Guarantors and, assuming due
authorization, execution and delivery by the Trustee, will constitute the valid
and binding agreement of the Company and each of the Subsidiary Guarantors,
enforceable against them in accordance with its terms (subject to
<PAGE>
6
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally from time
to time in effect and to general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether in a proceeding in equity or at law); no
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended ("TIA"), is required in connection with the offer and sale of the
Initial Securities contemplated hereby or in connection with the Exempt
Resales.
(i) Each of the Guarantees has been duly and validly authorized,
executed and issued by the applicable Subsidiary Guarantor and, assuming due
authentication of the Notes by the Trustee and upon payment for and delivery of
the Notes to the Initial Purchaser in accordance with the terms of this
Agreement, will constitute the valid and binding guarantee of that Subsidiary
Guarantor, enforceable against that Subsidiary Guarantor in accordance with its
terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws affecting creditors'
rights generally from time to time in effect and to general principles of
equity, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing, regardless of whether in a proceeding in equity or
at law).
(j) The Collateral Agreement and all other security documents
(including the Mortgages) delivered after the Closing Date to the Collateral
Agent granting a lien on any property or person to secure the obligations and
liabilities of the Company and the Subsidiary Guarantors (the "Security
Documents"), have been duly and validly authorized, executed and delivered by
each of the Company and the Subsidiary Guarantors and, assuming due
authorization, execution and delivery by the Collateral Agent, will constitute
the valid and binding agreement of each of the Company and the Subsidiary
Guarantors, enforceable against them in accordance with their terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally from time
to time in effect and to general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether in a proceeding in equity or at law).
(k) The Initial Notes have been duly and validly authorized by the
Company and when duly executed by the Company in accordance with the terms of
the Indenture and, assuming due authentication of the Initial Notes by the
Trustee, upon delivery to the Initial Purchaser against payment therefor in
accordance with the terms hereof, will have been validly issued and delivered,
and will constitute valid and binding obligations of the Company entitled to
the benefits of the Indenture, enforceable against the Company in accordance
with their terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws affecting creditors'
rights generally from time to time in effect and to general principles of
equity, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing, regardless of whether in a proceeding in equity or
at law).
(l) The New Notes have been duly and validly authorized by the Company
and if and when duly issued and authenticated in accordance with the terms of
the Indenture and,
<PAGE>
7
assuming due authentication of the New Notes by the Trustee, upon delivery in
accordance with the Exchange Offer provided for in the Registration Rights
Agreement, will constitute valid and binding obligations of the Company
entitled to the benefits of the Indenture, enforceable against the Company in
accordance with their terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws
affecting creditors' rights generally from time to time in effect and to
general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, regardless of whether
in a proceeding in equity or at law).
(m) The Senior Credit Facility has been duly and validly authorized by
the Company and each of the Subsidiary Guarantors, and upon its execution and
delivery by the Company and each of the Subsidiary Guarantors and, assuming due
authorization, execution and delivery by the lenders parties thereto, the
Arranger, the Syndication Agent and the Administrative Agent, will constitute
the valid and binding agreement of the Company and each of the Subsidiary
Guarantors, enforceable against them in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally from time
to time in effect and to general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether in a proceeding in equity or law).
(n) The Intercreditor Agreement has been duly and validly authorized
by the Company, and upon its execution and delivery by the Company and,
assuming due authorization, execution and delivery by the other parties
thereto, will constitute the valid and binding agreement of the Company,
enforceable against it in accordance with its terms (subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws affecting creditors' rights generally from time to time in
effect and to general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing,
regardless of whether in a proceeding in equity or law).
(o) This Agreement has been duly and validly authorized, executed and
delivered by each of the Company and the Subsidiary Guarantors and, assuming
due authorization, execution and delivery by the Initial Purchaser, will
constitute the valid and binding agreement of each of the Company and the
Subsidiary Guarantors, enforceable against them in accordance with its terms
(subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights
generally from time to time in effect and to general principles of equity,
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing, regardless of whether in a proceeding in equity or at
law).
(p) (i) All the shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable and (ii) all
the outstanding shares of capital stock of the Subsidiary Guarantors have been
duly authorized and validly issued, are fully paid and nonassessable, and are
wholly owned by the Company directly, or indirectly through one of the other
subsidiaries, free and clear of any lien, adverse claim, security interest,
equity or other encumbrance, other than liens that will be granted in favor of
the
<PAGE>
8
Collateral Agent under the Collateral Agreement and, without duplication, as
permitted under the covenant entitled "Liens" in the Indenture.
(q) The subsidiaries listed on Schedule II hereto, as of the date
hereof, constitute all the subsidiaries of the Company at the date hereof,
Schedule II sets forth as of the Closing Date the name and jurisdiction of
incorporation of each subsidiary and, as to each such subsidiary, the
percentage of each class of capital stock owned by the Company or any of its
subsidiaries.
(r) There are no outstanding subscriptions, options, warrants, calls,
rights or other agreements or commitments (other than stock options granted to
employees or directors and directors' qualifying shares) of any nature relating
to any capital stock of the Company or any subsidiary.
(s) No litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the knowledge of the
Company, threatened by or against the Company or any of its subsidiaries or
against any of their respective properties or revenues (a) with respect to any
of the Operative Documents or the Senior Credit Facility or any of the
transactions contemplated hereby or thereby, or (b) which could reasonably be
expected to have a Material Adverse Effect.
(t) The execution, delivery and performance of this Agreement, the
Senior Credit Facility and the other Operative Documents and the issuance of
the Securities and the consummation of the transactions contemplated hereby and
thereby will not conflict with, or result in a breach or violation of any of
the terms or provisions of, or (including with the giving of notice or the
lapse of time or both) constitute a default under (i) any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the properties or assets of the
Company or any of its subsidiaries is subject, (ii) the provisions of the
charter, by-laws or other organizational documents of the Company or any of its
subsidiaries or (iii) any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties or assets, except in the cases of
clause (i) or (iii), such breaches, violations or defaults that in the
aggregate would not have a Material Adverse Effect.
(u) Neither the Company nor any of its subsidiaries will be, upon
consummation of the Plan of Reorganization, in default under or with respect to
any provision of any security issued by it or of any agreement, instrument or
other undertaking to which it is a party or by which it or any of its property
is bound in any respect which could reasonably be expected to have a Material
Adverse Effect.
(v) The accountants, PricewaterhouseCoopers LLP, who have certified
the financial statements contained in the 1998 Exchange Act Documents, are
independent public accountants under Rule 101 of the Code of Professional
Conduct of the American Institute of Certified Public Accountants (the
"AICPA"), and its interpretation and rulings.
<PAGE>
9
(w) The unaudited pro forma consolidated balance sheet of the Company
and its consolidated subsidiaries as at September 30, 1998 (including the notes
thereto) (the "Pro Forma Balance Sheet"), copies of which have heretofore been
furnished to the Initial Purchaser, has been prepared giving effect (as if such
events had occurred on such date) to (i) the consummation of the Plan of
Reorganization, (ii) the offering of the Notes contemplated hereby and the use
of proceeds thereof, (iii) the loans to be made on the Closing Date pursuant to
the Senior Credit Facility and the use of proceeds thereof and (iv) the payment
of fees and expenses in connection with consummation of the foregoing. The Pro
Forma Balance Sheet has been prepared based on the best information available
to the Company as of the date of delivery thereof, and presents fairly on a pro
forma basis the estimated financial position of the Company and its
consolidated subsidiaries as at September 30, 1998, assuming that the events
specified in the preceding sentence had actually occurred at such date.
(x) The audited consolidated balance sheets of the Company and its
subsidiaries as at September 30, 1996, September 30, 1997 and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by an unqualified report from
PricewaterhouseCoopers LLP, present fairly the consolidated financial condition
of the Company and its consolidated subsidiaries as at such date, and the
consolidated results of its operations and its consolidated cash flows for the
respective fiscal years then ended. The unaudited consolidated balance sheet of
the Company and its subsidiaries as at June 30, 1998, and the related unaudited
consolidated statements of income and cash flows for the nine-month period
ended on such date, present fairly the consolidated financial condition of the
Company and its consolidated subsidiaries as at such date, and the consolidated
results of its operations and its consolidated cash flows for the nine-month
period then ended (subject to normal year-end audit adjustments). All such
financial statements, including the related schedules and notes thereto, have
been prepared in accordance with generally accepted accounting principles in
the United States of America ("GAAP") applied consistently throughout the
periods involved (except as approved by the aforementioned firm of accountants
and disclosed therein). The Company and its subsidiaries do not have any
material Guarantee Obligations (as defined in the Senior Credit Facility),
contingent liabilities and liabilities for taxes, or any long-term leases or
unusual forward or long-term commitments, including, without limitation, any
interest rate or foreign currency swap or exchange transaction or other
obligation in respect of derivatives, which are not reflected in the most
recent financial statements, including any notes thereto, referred to in this
paragraph. During the period from September 30, 1997 to and including the date
hereof, there has been no disposition with respect to any property, any sale,
lease, sale and leaseback, assignment, conveyance, transfer or other
disposition thereof (excluding the net cash proceeds of any settlement of or
payment in respect of any property, insurance claim or casualty insurance claim
or any condemnation proceeding relating to any asset of the Company or any of
its subsidiaries) by the Company or its subsidiaries of any material part of
their business or property.
(y) Since September 30, 1997, there has been no development or event
which has had or could reasonably be expected to have a Material Adverse
Effect, other than the pendency of the Company and its subsidiaries' bankruptcy
case voluntarily commenced under Chapter 11 of the Bankruptcy Code in the
Bankruptcy Court (the "Cases").
<PAGE>
10
(z) The Company and its subsidiaries (i) make and keep accurate books
and records and (ii) maintain internal accounting controls which provide
reasonable assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (C) access to its books, records and accounts is permitted only
in accordance with management's authorization and (D) the reported
accountability for its assets is compared with existing assets at reasonable
intervals.
(aa) The Company and each of its subsidiaries has good and marketable
title in fee simple to or a valid leasehold interest in, all its real property
and good title to, or a valid leasehold interest in, all personal property
owned by it (whether tangible or intangible), in each case free and clear of
all liens, encumbrances and defects except (i) such as do not materially affect
the value of such property and do not materially interfere with the use made
and proposed to be made of such property by the Company and its subsidiaries or
(ii) liens in favor of the Collateral Agent under the Collateral Agreement and,
without duplication, as permitted under the covenant entitled "Liens" in the
Indenture.
(bb) The Company and each of its subsidiaries owns or is licensed to
use, all material patents, patent applications, trademarks, service marks,
trade names, trademark registrations, service mark registrations, copyrights
and licenses and franchises ("Intellectual Property") necessary for the conduct
of their respective businesses as currently conducted. No material claim has
been asserted and is pending by any person challenging or questioning the use
of any Intellectual Property or the validity or effectiveness of any
Intellectual Property, nor does the Company know of any valid basis for any
such claim. To the best of the Company's knowledge, the use of Intellectual
Property by the Company and its subsidiaries does not infringe on the rights of
any person in any material respect.
(cc) Each of the Company and its subsidiaries possesses such
certificates, authorizations or permits ("Permits") issued by the appropriate
state, federal or foreign regulatory agencies or bodies necessary to conduct
the business now operated by them, except where the failure to possess such
certificates, authorizations or permits would not have a Material Adverse
Effect and except with respect to such Permits relating to the Tiffin, Ohio
facility of Hayes- Albion Corporation, one of the Domestic Subsidiaries; and
none of the Company or any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling, or finding, would have a Material Adverse Effect.
(dd) There are no strikes or other labor disputes against the Company
or any of its subsidiaries pending or, to the knowledge of the Company,
threatened that (individually or in the aggregate) could reasonably be expected
to have a Material Adverse Effect. Hours worked by and payment made to
employees of the Company and its subsidiaries have not been in violation of the
Fair Labor Standards Act or any other applicable law dealing with such matters
that (individually or in the aggregate) could reasonably be expected
<PAGE>
11
to have a Material Adverse Effect. All payments due from the Company or any of
its subsidiaries on account of employee health and welfare insurance that
(individually or in the aggregate) could reasonably be expected to have a
Material Adverse Effect if not paid have been paid or accrued as a liability on
the books of the Company or the relevant subsidiary.
(ee) None of the Company or any subsidiary has violated any safety or
similar law applicable to its business nor any federal, state or local law
relating to discrimination in the hiring, promotion or pay of employees nor any
applicable federal or state wages and hours laws which in each case could
reasonably be expected to result in a Material Adverse Effect, other than the
claim filed with the U.S. Department of Labor as described in the Letter dated
October 1, 1998 from Larry E. Stanley, District Director, Nashville District
Office of the U.S. Department of Labor, to Arthur McCarver, Plant Manager of
the Company.
(ff) Neither the Company nor any of its subsidiaries nor any director,
officer, agent, employee or other person associated with or acting on behalf of
the Company or any of its subsidiaries, have used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.
(gg) Neither the Company nor any of its subsidiaries are currently or
will be, upon sale of the Initial Securities in accordance herewith and the
application of the net proceeds therefrom, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(hh) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D ("Regulation D") under the Securities Act) of the Company has
directly, or through any agent (provided that no representation is made as to
the Initial Purchaser or any person acting on its behalf), (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or could be integrated
with the offering and sale of the Securities in a manner that would require the
registration of the Initial Securities under the Securities Act or (ii) engaged
in any form of general solicitation or general advertising (within the meaning
of Regulation D, including, but not limited to, advertisements, articles,
notices or other communications published in any newspaper, magazine, or
similar medium or broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising) in connection with the offering of the Initial Securities. No
securities of the same class as the Initial Notes have been issued and sold by
the Company within the six-month period immediately prior to the date hereof.
(ii) Except as permitted by the Securities Act, the Company has not
distributed and, prior to the later to occur of the Closing Date and completion
of the distribution of the Initial Securities, will not distribute any offering
material in connection with the offering and sale of the Initial Securities
other than the Offering Memorandum.
(jj) When the Initial Securities are issued and delivered pursuant to
this Agreement, such Initial Securities will not be of the same class (within
the meaning of Rule 144A under the Securities Act) as securities of the Company
that are listed on a national
<PAGE>
12
securities exchange registered under Section 6 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") or that are quoted in a United States
automated inter-dealer quotation system.
(kk) Assuming (i) that your representations and warranties in Section
2 are true, (ii) compliance by you with your covenants set forth in Section 2
and (iii) that each of the Eligible Purchasers is an entity that you reasonably
believe to be a QIB, the purchase of the Initial Securities by you pursuant
hereto and the resale of the Initial Securities pursuant to the Exempt Resales
will be exempt from the registration requirements of the Securities Act.
(ll) Except for the commencement of the Cases and except as disclosed
on Schedule 1(ll) hereto Agreement, neither a "reportable event" nor an
"accumulated funding deficiency" (within the meaning of Section 412 of the
Internal Revenue Code of 1986, as amended (the "Code") or Section 302 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA")), has occurred
during the five-year period prior to the date on which this representation is
made or deemed made with respect to any Plan (as defined in ERISA), and each
Plan has complied in all material respects with the applicable provisions of
ERISA and the Code. No termination of a "Single Employer Plan" (as defined in
ERISA) has occurred, and no lien in favor of the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV or ERISA (or any
successor) or a Plan has arisen, during such five-year period. Except as
disclosed on Schedule 1(ll) hereto Agreement, the present value of all accrued
benefits under each Single Employer Plan (based on those assumptions used to
fund such Plans) did not, as of the last annual valuation date prior to the
date on which this representation is made or deemed made, exceed the value of
the assets of such Plan allocable to such accrued benefits by a material
amount. Neither the Company nor any Commonly Controlled Entity (as defined in
ERISA) has had a complete or partial withdrawal from any Multiemployer Plan (as
defined in ERISA) which has resulted or could reasonably be expected to result
in a material liability under ERISA, and neither the Company nor any Commonly
Controlled Entity would become subject to any material liability under ERISA if
the Company or any such Commonly Controlled Entity were to withdraw completely
from all Multiemployer Plans as of the valuation date most closely preceding
the date on which this representation is made or deemed made. No such
Multiemployer Plan is in "reorganization" or "insolvent" (as defined under
ERISA).
(mm) There are no contracts, agreements or understandings between the
Company or any of its subsidiaries and any person granting such person the
right to require the Company or any of its subsidiaries to file a registration
statement under the Securities Act with respect to any securities of the
Company and its subsidiaries owned or to be owned by such person or to require
the Company or any of its subsidiaries to include such securities in the
securities registered pursuant to the Registration Statements or in any
securities being registered pursuant to any other registration statement filed
by the Company or any of its subsidiaries under the Securities Act.
(nn) Each of the Company and its subsidiaries carries, or is covered
by, insurance in such amounts and covering such risks as is adequate for the
conduct of their
<PAGE>
13
respective businesses and the value of their properties and as is customary for
companies engaged in similar businesses in similar industries.
(oo) The Company and each of its subsidiaries has filed or caused to
be filed all Federal, state and other material tax returns which are required
to be filed and has paid all taxes shown to be due and payable on said returns
or on any assessments made against it or any of its property and all other
taxes, fees or other charges imposed on it or any of its property by any
governmental authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Company or its subsidiaries, as the case may be); no tax lien has
been filed which is not being treated under the Plan of Reorganization, and, to
the knowledge of the Company, no claim is being asserted, with respect to any
such tax, fee or other charge.
(pp) Except as may otherwise be disclosed in the Offering Memorandum,
the Company and its subsidiaries have not (i) issued or granted any securities,
other than shares issued pursuant to employee benefit plans, qualified stock
options plans or other employee compensation plans or pursuant to outstanding
options, rights or warrants, (ii) incurred any liability or obligation, direct
or contingent, other than liabilities and obligations which were incurred in
the ordinary course of business, (iii) entered into any transaction not in the
ordinary course of business or (iv) declared or paid any dividend on its
capital stock.
(qq) Other than exceptions to any of the following that could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect:
(i) the Company and its subsidiaries: (A) are, and within
the period of all applicable statutes of limitation have been, in
compliance with all applicable environmental laws; (B) hold all
environmental permits (each of which is in full force and effect)
required for any of their current or intended operations or for any
property owned, leased, or otherwise operated by any of them; (C) are,
and within the period of all applicable statutes of limitation have
been, in compliance with all of their environmental permits; and (D)
reasonably believe that: each of their environmental permits will be
timely renewed and complied with, without material expense; any
additional environmental permits that may be required of any of them
will be timely obtained and complied with, without material expense;
and compliance with any environmental law that is or is expected to
become applicable to any of them will be timely attained and
maintained, without material expense.
(i) materials of environmental concern are not present at,
on, under, in, or about any real property now or formerly owned,
leased or operated by the Company or any of its subsidiaries, or at
any other location (including, without limitation, any location to
which materials of environmental concern have been sent for re-use or
recycling or for treatment, storage, or disposal) which could
reasonably be expected to (i) give rise to liability of the Company or
any of its subsidiaries under any applicable environmental law or
otherwise result in costs to the Company or any of its subsidiaries,
or (ii) interfere with the Company's or any of its subsidiaries'
continued operations, or
<PAGE>
15
(iii) impair the fair saleable value of any real property owned or
leased by the Company or any of its subsidiaries.
(iii) there is no judicial, administrative, or arbitral
proceeding (including any notice of violation or alleged violation)
under or relating to any environmental law to which the Company or any
of its subsidiaries is, or to the knowledge of the Company or any of
its subsidiaries will be, named as a party that is pending or, to the
knowledge of the Company or any of its subsidiaries, threatened.
(iv) neither the Company nor any of its subsidiaries has
received any written request for information, or been notified that it
is a potentially responsible party under or relating to the federal
Comprehensive Environmental Response, Compensation, and Liability Act
or any similar environmental law, or with respect to any materials of
environmental concern.
(v) neither the Company nor any of its subsidiaries has
entered into or agreed to any consent decree, order, or settlement or
other agreement, or is subject to any judgment, decree, or order or
other agreement, in any judicial, administrative, arbitral, or other
forum for dispute resolution, relating to compliance with or liability
under any environmental law.
(vi) neither the Company nor any of its subsidiaries has
assumed or retained, by contract or operation of law, any liabilities
of any kind, fixed or contingent, known or unknown, under any
environmental law or with respect to any material of environmental
concern. The term "material of environmental concern" shall have the
meaning specified in any applicable local, state, federal or foreign
laws and regulations with respect to environmental protection.
(rr) The Company is not required to deliver the information specified
in Rule 144A(d)(4) in connection with the Exempt Resales.
(ss) Neither the Company nor any of its subsidiaries has taken or may
take, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Securities to facilitate the
sale or resale of the Securities.
(tt) After giving effect to consummation of the Plan of
Reorganization, the transactions contemplated hereby and the Senior
Credit Facility, the Company and its subsidiaries, taken as a whole,
will be Solvent. "Solvent" for purposes of this Agreement and when
used with respect to any person, means that, as of any date of
determination, (i) the amount of the "present fair saleable value" of
the assets of such person will, as of such date, exceed the amount of
all "liabilities of such person, contingent or otherwise", as of such
date, as such quoted terms are determined in accordance with
applicable federal and state laws governing determinations of the
insolvency of debtors, (ii) the present fair saleable value of the
assets of such person will, as of such date, be greater than the
amount that will be required to pay the liability of such person on
its debts as such debts become absolute and matured, (iii) such person
<PAGE>
15
will not have, as of such date, an unreasonably small amount of
capital with which to conduct its business, and (iv) such person will
be able to pay its debts as they mature. For purposes of this
subsection, (A) "debt" means liability on a "claim", and (B) "claim"
means any (X) right to payment, whether or not such a right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or
unsecured or (Y) right to an equitable remedy for breach of
performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is reduced to judgment,
fixed, contingent, matured or unmatured, disputed, undisputed, secured
or unsecured.
(uu) As described in the Offering Memorandum, the proceeds of the
transactions described herein and the Senior Credit Facility shall be used to
(i) refinance the DIP Credit Facilities, (ii) pay administrative expenses due
under the Plan of Reorganization and pay related fees and expenses, (iii)
provide cash for working capital purposes and (iv) to provide funds for general
corporate purposes.
(vv) No mortgage encumbers improved real property which is located in
an area that has been identified by the Secretary of Housing and Urban
Development as an area having special flood hazards and in which flood
insurance has not been made available under the National Flood Insurance Act of
1968, except as would not have a Material Adverse Effect.
(ww) Any reprogramming required to permit the proper functioning, in
and following the year 2000, of (i) the Company's computer systems and (ii)
equipment containing embedded microchips (including systems and equipment
supplied by others or with which Company's systems interface) and the testing
of all such systems and equipment, as so reprogrammed, will be completed, in
all material respects, by September 30, 1999. The cost to the Company of such
reprogramming and testing and of the reasonably foreseeable consequences of
year 2000 to the Company (including, without limitation, reprogramming errors
and the failure of others' systems or equipment) will not result in a Material
Adverse Effect. Except for such of the reprogramming referred to in the
preceding sentence as may be necessary, the computer and management information
systems of the Company and its subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement to be,
sufficient to permit the Company to conduct its business without Material
Adverse Effect.
(xx) (i) The Collateral Agreement will be effective to create in favor
of the Collateral Agent, for the benefit of the Initial Purchaser and Eligible
Purchasers, a legal, valid and enforceable security interest in the collateral
described therein and proceeds thereof (collectively, the "Collateral"). In the
case of the pledged stock described in the Collateral Agreement, when any stock
certificates representing such pledged stock are delivered to the Collateral
Agent, and, in the case of the other collateral described in the Collateral
Agreement, when financing statements in appropriate form are filed in the
offices specified therein (which financing statements have been duly completed
and executed and delivered to the Collateral Agent) and such other filings as
are specified on Schedule 3 to the Collateral Agreement (all of which filings
have been duly completed), the Collateral Agreement shall constitute a fully
perfected lien on, and security interest in, all right, title and interest of
the Company and its subsidiaries in such collateral and the proceeds thereof,
as security for the Obligations (as defined in the Collateral Agreement), in
each case prior and superior in right to any other person (other
<PAGE>
16
than as set forth in the Intercreditor Agreement and) (except, in the case of
Collateral other than pledged stock, liens permitted by the covenant entitled
"Liens" in the Indenture); and (ii) each of the mortgages and deeds of trust
made by the Company or any of its subsidiaries, in favor of, or for the benefit
of, the Collateral Agent for the benefit of the Initial Purchaser and Eligible
Purchasers (collectively, the "Mortgages") is effective to create in favor of
the Collateral Agent, for the benefit of the Initial Purchaser and Eligible
Purchasers, a legal, valid and enforceable lien on the mortgaged properties
described therein and proceeds thereof, and when the Mortgages are filed in the
offices specified therein, each such Mortgage shall constitute a fully
perfected lien on, and security interest in, all right, title and interest of
the Company and its subsidiaries in the mortgaged properties and the proceeds
thereof, as security for the Obligations (as defined in the relevant Mortgage),
in each case prior and superior in right to any other person (other than as set
forth in the Intercreditor Agreement and, except, in the case of collateral
other than pledged stock, liens permitted by the covenant entitled "Liens" in
the Indenture.
(yy) As of the date hereof, the Company is a Florida corporation. As
of the Closing Date and upon consummation of the Plan of Reorganization, the
Company will be reincorporated as a Delaware corporation.
2. Representations, Warranties and Agreements of the Initial
Purchaser. The Initial Purchaser represents, warrants and agrees that:
(a) The Initial Purchaser is a QIB with such knowledge and experience
in financial and business matters as are necessary in order to evaluate the
merits and risks of an investment in the Securities.
(b) The Initial Purchaser (i) is not acquiring the Initial Securities
with a view to any distribution thereof or with any present intention of
offering or selling any of the Initial Securities in a transaction that would
violate the Securities Act or the securities laws of any State of the United
States or any other applicable jurisdiction; (ii) in connection with the Exempt
Resales, will solicit offers to buy the Securities only from and will offer to
sell the Securities only to, the Eligible Purchasers in accordance with this
Agreement; and (iii) will not offer or sell the Securities pursuant to, nor has
it offered or sold the Securities by, or otherwise engaged in, any form of
general solicitation or general advertising (within the meaning of Regulation
D; including, but not limited to, advertisements, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising).
(c) The Initial Purchaser understands that the Company and, for
purposes of the opinions to be delivered to you pursuant to Section 7 hereof,
counsel to the Company, will rely upon the accuracy and truth of the foregoing
representations and you hereby consent to such reliance.
The Initial Purchaser further agrees that, in connection with the
Exempt Resales, it will solicit offers to buy the Initial Securities only from,
and will offer to sell the Initial Securities only to, the Eligible Purchasers
in the Exempt Resales.
<PAGE>
17
3. Purchase of the Securities by the Initial Purchaser. On the basis
of the representations and warranties contained in, and subject to the terms
and conditions of, this Agreement, the Company agrees to sell $25.0 million in
gross proceeds of Initial Notes, the terms of which are set forth in Schedule 4
of the Purchase Agreement, to the Initial Purchaser and the Initial Purchaser
agrees to purchase all of the Initial Notes. Pursuant to this Agreement, the
Initial Purchaser will receive a fee equal to 4% of the gross proceeds of the
Notes or will purchase the Initial Notes at an aggregate purchase price equal
to 96% of the principal amount thereof.
The Company shall not be obligated to deliver any of the Initial
Securities to be delivered, except upon payment of all the Initial Securities
to be purchased on such Closing Date as provided herein.
4. Delivery of and Payment for the Initial Securities.
(a) Delivery to the Initial Purchaser of and payment for the Initial
Securities shall be made at 9:00 a.m., New York City time, on the Closing Date
at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York,
New York 10017, or such other place or time as you and the Company shall
designate.
(b) One or more Initial Notes in definitive form, registered in the
name of Cede & Company., as nominee of The Depository Trust Company ("DTC"), or
such other names as the Initial Purchaser may request upon at least one
business day's notice to the Company, having an aggregate principal amount at
maturity corresponding to the aggregate principal amount of Initial Notes sold
pursuant to Eligible Resales (collectively, the "Global Notes"), shall be
delivered by the Company to the Initial Purchaser, against payment by the
Initial Purchaser of the purchase price thereof by wire transfer of immediately
available funds as the Company may direct by written notice delivered to you
two business days prior to the Closing Date. The Global Notes in definitive
form shall be made available to you for inspection not later than 9:00 a.m. on
the business day immediately preceding the Closing Date.
(c) Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation
of the Initial Purchaser hereunder.
5. Further Agreements of the Company and Subsidiary Guarantors. Each
of the Company and the Subsidiary Guarantors agrees:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, of (i) the issuance by any state securities commission of
any stop order suspending the qualification or exemption from qualification of
any Initial Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purpose by the Commission or any state
securities commission or other regulatory authority, and (ii) the happening of
any event that makes any statement of a material fact made in the Offering
Memorandum untrue or that requires the making of any additions to or changes in
the Offering Memorandum in order to make the
<PAGE>
18
statements therein, in light of the circumstances under which they were made,
not misleading. The Company shall use its best efforts to prevent the issuance
of any stop order or order suspending the qualification or exemption of the
Initial Securities under any state securities or Blue Sky laws and, if at any
time any state securities commission shall issue any stop order suspending the
qualification or exemption of the Initial Securities under any state securities
or Blue Sky laws, the Company shall use every reasonable effort to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To furnish to you, without charge, as many copies of the Offering
Memorandum and any amendments or supplements thereto, as you may reasonably
request. The Company consents to the use of the Offering Memorandum, and any
amendments and supplements thereto required pursuant to this Agreement, by you
in connection with the Exempt Resales that are in compliance with this
Agreement.
(c) Not to amend or supplement the Offering Memorandum prior to the
Closing Date or during the period referred to in Section 5(d) below unless you
shall previously have been advised of, and shall not have reasonably objected
to, such amendment or supplement within a reasonable time, but in any event not
longer than five days after being furnished a copy of such amendment or
supplement. If, in connection with any Exempt Resales or market making
transactions after the date of this Agreement and prior to the consummation of
the Exchange Offer, any event shall occur that, in the judgment of the Company
or in the judgment of counsel to you, makes any statement of a material fact in
the Offering Memorandum untrue or that requires the making of any additions to
or changes in the Offering Memorandum in order to make the statements in the
Offering Memorandum, in light of the circumstances at the time that the
Offering Memorandum is delivered to prospective Eligible Purchasers, not
misleading, or if it is necessary to amend or supplement the Offering
Memorandum to comply with any applicable laws, the Company shall promptly
notify you of such event and prepare an appropriate amendment or supplement to
the Offering Memorandum so that (i) the statements in the Offering Memorandum
as amended or supplemented will, in light of the circumstances at the time that
the Offering Memorandum is delivered to prospective Eligible Purchasers, not be
misleading and (ii) the Offering Memorandum will comply with applicable law.
(d) To cooperate with you and your counsel in connection with the
qualification of the Initial Securities for offer and sale by you and by
dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request; provided, however, that the Company shall not be obligated to
qualify as a foreign corporation in any jurisdiction in which they are not now
so qualified or to take any action that would subject them to general consent
to service of process in any jurisdiction in which they are not now so subject.
The Company shall continue such qualification in effect so long as required by
law for distribution of the Initial Securities and shall file such consents to
service of process or other documents as may be necessary in order to effect
such qualification.
(e) Prior to the Closing Date, to furnish to you any internal
consolidated financial statements of the Company that have been prepared by the
Company for any period subsequent to the period covered by the financial
statements appearing or incorporated by reference in the Offering Memorandum.
<PAGE>
19
(f) To use its reasonable best efforts to do and perform all things
required to be done and performed under this Agreement by it prior to or after
the Closing Date and to satisfy all conditions precedent on its part to the
delivery of the Initial Securities (including pursuant to the proviso of
Section 7(v) hereof).
(g) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act) that
would be integrated with the sale of the Initial Securities in a manner that
would require the registration under the Securities Act of the sale to you or
the Eligible Purchasers of the Initial Securities.
(h) For a period of 3 years from the date of this Agreement, not to,
directly or indirectly, sell, contract to sell, grant any option to purchase,
issue any instrument convertible into or exchangeable for, or otherwise
transfer or dispose of, any debt securities of the Company or any of its
subsidiaries having a maturity of more than one year from the date of issue of
such securities, except (i) for the New Securities in connection with the
Exchange Offer or (ii) with the prior written consent of Lehman Brothers Inc.
(i) For the period that is two years after the Closing Date or for so
long as necessary to comply with Rule 144A in connection with resales by
registered holders or beneficial owners of Initial Securities, whichever is
longer, to make available to such registered holder or beneficial owner of
Initial Securities in connection with any sale thereof and any prospective
purchaser of such Initial Securities from such registered holder or beneficial
owner, the information required by Rule 144A(d)(4) under the Securities Act (or
any successor provision thereto).
(j) To comply with the Company's agreements in the Registration Rights
Agreement, and all agreements set forth in the representation letters of the
Company to DTC relating to the approval of the Securities by DTC for
"book-entry" transfer.
(k) To use its best efforts to effect the inclusion of the Notes in
the National Association of Securities Dealers, Inc. Automated Quotation System
- - PORTAL ("PORTAL").
(l) To apply the net proceeds from the sale of the Initial Notes being
sold by the Company as set forth in Section 1(uu) hereof.
(m) During the period that is two years after the Closing Date, to
take such steps as shall be necessary to ensure that the Company does not
become an "investment company" within the meaning of such term under the
Investment Company Act of 1940, as amended, and the rules and regulations of
the Commission thereunder.
(n) To do all things reasonably necessary to comply with the Plan of
Reorganization.
6. Expenses. The Company agrees that, whether or not the transactions
contemplated by this Agreement are consummated or this Agreement becomes
effective or is
<PAGE>
20
terminated, to pay all costs, expenses, fees and taxes incident to and in
connection with: (i) the preparation, printing, filing and distribution of the
Offering Memorandum (including, without limitation, financial statements) and
all amendments and supplements thereto, (ii) the preparation, printing
(including, without limitation, word processing and duplication costs) and
delivery of this Agreement, the other Operative Documents, any Blue Sky
Memoranda and any other agreements, memoranda, correspondence and other
documents printed and delivered in connection herewith and with the Exempt
Resales, (iii) your reasonable expenses incurred in connection with acting as
the Initial Purchaser hereunder (including the fees and expenses of your
counsel), (iv) the issuance and delivery by the Company of the Securities, (v)
the qualification of the Securities for offer and sale under the securities or
Blue Sky laws of the several states (including, without limitation, the fees
and disbursements of your counsel relating to such registration or
qualification), (vi) furnishing such copies of the Offering Memorandum, and all
amendments and supplements thereto, as may be reasonably requested by the
Initial Purchaser for use in connection with the initial Exempt Resales, (vii)
the preparation of certificates for the Securities including, without
limitation, printing and engraving, (viii) the fees, disbursements and expenses
of the Company's counsel and accountants, (ix) all expenses and listing fees in
connection with the application for quotation of the Initial Notes in PORTAL,
(x) all fees and expenses (including fees and expenses of counsel) of the
Company in connection with the approval of the Securities by DTC for
"book-entry" transfer and (xi) the performance by the Company of its other
obligations under this Agreement to the extent not provided for above.
7. Conditions of the Obligations. The obligations of the Initial
Purchaser hereunder are subject to the accuracy, when made, and again on the
Closing Date (as if made again on and as of such date), of the representations
and warranties of the Company and the Subsidiary Guarantors contained herein,
to the performance by the Company and the Subsidiary Guarantors of their
obligations hereunder and to each of the following additional terms and
conditions, and the obligations of the Company hereunder are subject to the
occurrence of the events described in Sections 7(n) and 7(o) hereof:
(a) The Offering Memorandum shall have been printed and copies made
available to you not later than 9:00 a.m., New York City time, on the day
following the date of this Agreement or at such later date and time as you may
approve in writing.
(b) The Initial Purchaser shall not have discovered and disclosed to
the Company on or prior to such Closing Date that the Offering Memorandum or
any amendment or supplement thereto contains an untrue statement of a fact
which, in the reasonable opinion of Simpson Thacher & Bartlett, counsel for the
Initial Purchaser, is material or omits to state a fact which, in the opinion
of such counsel, is material and is necessary to make the statements, in light
of the circumstances under which they were made, not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the other Operative
Documents, the Plan of Reorganization, the Senior Credit Facility, the Offering
Memorandum, and all other legal matters relating to this Agreement and the
transactions contemplated hereby and thereby shall be reasonably satisfactory
in all material respects to counsel for the Initial Purchaser, and the
<PAGE>
21
Company shall have furnished to such counsel all documents and information that
they may reasonably request to enable them to pass upon such matters.
(d) Willkie Farr & Gallagher shall have furnished to the Initial
Purchaser, its written opinion, as counsel to the Company, addressed to the
Initial Purchaser and dated as of the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchaser and its counsel, to the effect
that:
(i) Each of the Company and its subsidiaries (a) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the corporate power and
authority, and the legal right, to own and operate its properties, to
lease the properties it operates as lessee and to conduct the business
in which it is currently engaged, (c) is duly qualified as a foreign
corporation in each of the jurisdictions listed on Schedule III hereto
and is in good standing under the laws of each jurisdiction where its
ownership, lease or operation of its properties or the conduct of its
business requires such qualification and (d) is in compliance with its
certificate of incorporation and by-laws or other organizational or
governing documents and any law, treaty, rule or regulation or
determination of an arbiter or a court or other governmental authority
applicable to it or binding upon it or any of its property or to which
it or any of its property is subject, except to the extent that the
failure to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(ii) Each of the Company and the Subsidiary Guarantors has
all requisite power and authority to execute, deliver and perform its
obligations under this Agreement, the Plan of Reorganization and the
other Operative Documents and to authorize, issue and sell the
Securities as contemplated by this Agreement.
(ii) This Agreement has been duly and validly authorized,
executed and delivered by the Company and each of the Subsidiary
Guarantors.
(iv) No consent or authorization of, approval by, filing
with, notice to or other act by or in respect of, any governmental
authority or any other person is required in connection with the
issuance and sale of the Securities hereunder, or with the execution,
delivery, performance, validity or enforceability of the Operative
Documents except (i) as may be required by the securities or "blue
sky" laws of any state of the United States in connection with the
sale of the Initial Notes and the New Notes, (ii) as contemplated by
the Registration Rights Agreement, (iii) for filings, registrations,
recordations in all necessary and appropriate jurisdictions to perfect
the security interests in the Collateral as contemplated by the
Collateral Agreement and (iv) the final order of the Bankruptcy Court,
in accordance with Section 1129 of the Bankruptcy Code, of the Plan of
Reorganization.
(v) The Registration Rights Agreement has been duly and
validly authorized, executed and delivered by each of the Company and
the Subsidiary Guarantors and, assuming due authorization, execution
and delivery by the Initial Purchaser, constitutes the valid and
binding agreement of each of the Company and the Subsidiary
Guarantors,
<PAGE>
22
enforceable against them in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights
generally from time to time in effect and to general principles of
equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, regardless of whether in
a proceeding in equity or at law), except that such counsel need not
express an opinion concerning enforceability of the provisions of
Section 8 of the Registration Rights Agreement.
(vi) The Indenture has been duly and validly authorized,
executed and delivered by the Company and each of the Subsidiary
Guarantors, and assuming due authorization, execution and delivery by
the Trustee, constitutes the valid and binding agreement of the
Company and each of the Subsidiary Guarantors, enforceable against
them in accordance with its terms (subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other
similar laws affecting creditors' rights generally from time to time
in effect and to general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and
fair dealing, regardless of whether in a proceeding in equity or at
law); no qualification of the Indenture under the TIA is required in
connection with the offer and sale of the Initial Securities
contemplated hereby or in connection with the initial resale of such
Initial Securities in the manner contemplated by this Agreement and
the Offering Memorandum to register the Initial Securities under the
Securities Act, it being understood that no opinion will be expressed
as to any subsequent resale of any Initial Securities.
(vii) The Collateral Agreement and the other Security
Documents (including the Mortgages) have been duly and validly
authorized, executed and delivered by each of the Company and the
Subsidiary Guarantors which are a party thereto and, assuming due
authorization, execution and delivery by the Collateral Agent,
constitutes the valid and binding agreement of each of the Company and
the Subsidiary Guarantors, enforceable against them in accordance with
their terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws
affecting creditors' rights generally from time to time in effect and
to general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing,
regardless of whether in a proceeding in equity or at law).
(viii) The Initial Securities have been duly and validly
authorized and executed by the Company and the Subsidiary Guarantors
and, assuming due authentication of the Initial Notes by the Trustee,
upon delivery to the Initial Purchaser against payment therefor in
accordance with the terms hereof, have been validly issued and
delivered, and constitute valid and binding obligations of the Company
and the Subsidiary Guarantors entitled to the benefits of the
Indenture and the Collateral Agreement, enforceable against the
Company and the Subsidiary Guarantors in accordance with their terms
(subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including, without limitation, concepts of
materiality,
<PAGE>
23
reasonableness, good faith and fair dealing, regardless of whether in
a proceeding in equity or at law).
(ix) The New Securities have been duly and validly
authorized by the Company and the Subsidiary Guarantors and if and
when duly issued and authenticated in accordance with the terms of the
Indenture and the Collateral Agreement and delivered in accordance
with the Exchange Offer provided for in the Registration Rights
Agreement, will constitute valid and binding obligations of the
Company and the Subsidiary Guarantors entitled to the benefits of the
Indenture and the Collateral Agreement, enforceable against the
Company and the Subsidiary Guarantors in accordance with their terms
(subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, regardless
of whether in a proceeding in equity or at law).
(x) The Senior Credit Facility has been duly and validly
authorized, executed and delivered by the Company and each of the
Subsidiary Guarantors, and, assuming due authorization, execution and
delivery by the lenders party thereto, the Arranger, the Syndication
Agent and the Administrative Agent, constitutes the valid and binding
agreement of the Company and each of the Subsidiary Guarantors,
enforceable against them in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights
generally from time to time in effect and to general principles of
equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, regardless of whether in
a proceeding in equity or law).
(xi) The Intercreditor Agreement has been duly and validly
authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery by the other parties thereto,
constitutes the valid and binding agreement of the Company,
enforceable against it in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights
generally from time to time in effect and to general principles of
equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, regardless of whether in
a proceeding in equity or law).
(xii) (a) All the shares of capital stock of the Company
outstanding have been duly authorized and validly issued and are fully
paid and nonassessable. and (b) all the outstanding shares of capital
stock of the Subsidiary Guarantors have been duly authorized and
validly issued, are fully paid and nonassessable, and are wholly owned
by the Company, directly or indirectly, through one of the other
subsidiaries, free and clear of any lien, adverse claim, security
interest, equity or other encumbrance, other than liens in favor of
the Collateral Agent under the Collateral Agreement and, without
duplication, as permitted under the covenant entitled "Liens" in the
Indenture.
<PAGE>
24
(xiii) To the knowledge of such counsel, no litigation,
investigation or proceeding of or before any arbitrator or
governmental authority is pending or, to the knowledge of such
counsel, threatened by or against the Company or any of its
subsidiaries or against any of their respective properties or revenues
(a) with respect to any of the Operative Documents or the Senior
Credit Facility or any of the transactions contemplated hereby or
thereby or (b) which could reasonably be expected to have a Material
Adverse Effect.
(xiv) The execution, delivery and performance of this
Agreement, the Senior Credit Facility and the other Operative
Documents and the issuance of the Securities and the consummation of
the transactions contemplated hereby and thereby will not conflict
with, or result in a breach or violation of any of the terms or
provisions of, or (including with the giving of notice or the lapse of
time or both) constitute a default under (a) any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
properties or assets of the Company or any of its subsidiaries is
subject, (b) the provisions of the charter, by-laws or other
organizational documents of the Company or any of its subsidiaries or
(c) any statute or any order, rule or regulation of the United States
or the states of Delaware or New York or, to such counsel's knowledge,
of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties or
assets, except in the cases of clause (a) or (c), such breaches,
violations or defaults that in the aggregate would not have a Material
Adverse Effect.
(xv) In addition, the consummation of the transactions
contemplated by this Agreement shall not cause any third party to have
any rights of first refusal under any agreement listed on a
certificate of an officer of the Company as being the Company's and
its subsidiaries' material agreements that has not already been
described in the Offering Memorandum as to which the Company and any
of its subsidiaries and any of their property or assets may be
subject.
(xvi) Neither the Company nor any of its subsidiaries is
and, upon sale of the Initial Securities to be issued and sold thereby
in accordance herewith and the application of the net proceeds to the
Company of such sale as described in the Offering Memorandum, will be
an "investment company" within the meaning of the Investment Company
Act of 1940, as amended.
(xvii) When the Initial Securities are issued and delivered
pursuant to this Agreement, such Initial Securities will not be of the
same class (within the meaning of Rule 144A under the Securities Act)
as securities of the Company that are listed on a national securities
exchange registered under Section 6 of the Exchange Act or that are
quoted in a United States automated inter-dealer quotation system.
(xviiiO) Assuming (a) that your representations and
warranties in Section 2 are true, (b) compliance by you with your
covenants set forth in Section 2 and (c) that each of the Eligible
Purchasers is a QIB, it is not necessary in connection with the offer,
<PAGE>
25
sale and delivery of the Initial Securities hereunder or in connection
with the resale of such Initial Securities in the manner contemplated
by this Agreement and the Offering Memorandum to register the Initial
Securities under the Securities Act.
(xix) To the knowledge of such counsel, except as disclosed
in the Offering Memorandum, there are no contracts, agreements or
understandings between the Company or any of its subsidiaries and any
person granting such person the right to require the Company or any of
its subsidiaries to file a registration statement under the Securities
Act with respect to any securities of the Company owned or to be owned
by such person or to require the Company or any of its subsidiaries to
include such securities in all the securities registered pursuant to
the Registration Statements or in any securities being registered
pursuant to any other registration statement filed by the Company or
any of its subsidiaries under the Securities Act.
(xx) The description of the Indenture, the Initial
Securities, the Registration Rights Agreement, the Collateral
Agreement, the Intercreditor Agreement, the Senior Credit Facility and
the Plan of Reorganization in the Offering Memorandum conform in all
material respects to the terms thereof.
(xxi) The Company is not required to deliver to the Eligible
Purchasers the information specified in Rule 144A(d)(4) in connection
with the Exempt Resales.
Such counsel may state that whenever their opinion herein is qualified
by the phrase "of which we have knowledge" or "to our knowledge," it is
intended to indicate that the current actual knowledge of those attorneys
within that firm actively engaged in the representation of the Company and its
Subsidiaries is not inconsistent with that portion of the opinion which such
phrase qualifies. The opinion of such counsel may be limited to the laws of the
State of New York, the General Corporation Law of the State of Delaware and the
Federal laws of the United States.
(e) In connection with the transactions contemplated by this Agreement
and the filings, registrations and recordations contemplated by the Collateral
Agreement and the Mortgages, (i) Dykema, Gosset, as special Michigan counsel;
(ii) Armstrong, Teasdale, Schafly & Davis, as special Missouri counsel; (iii)
Getman Stacey Tamposi, as special New Hampshire counsel; (iv) Frost & Jacobs
LLP, as special Ohio counsel; (v) Reed, Smith, Shaw & McClay, as special
Pennsylvania counsel; (vi) McNair Law Firm P.A., as special South Carolina
counsel; (vii) Hunton & Williams, as special Tennessee counsel; (viii) Hunton &
Williams, as special Virginia counsel; and (ix) McGill & McGill, as special
Iowa counsel, in addition to such other counsel as the Company and the Initial
Purchaser shall deem appropriate to opine on the perfection of the Initial
Purchaser's and the Eligible Purchasers' security interest in the Collateral,
shall have furnished to the Initial Purchaser their written opinion as special
local counsel to the Company addressed to the Initial Purchaser and dated as of
the Closing Date, in form and substance reasonably satisfactory to the Initial
Purchaser and its counsel.
<PAGE>
26
(f) The Company, the Subsidiary Guarantors and the Trustee shall have
entered into the Indenture and the Initial Purchaser shall have received
counterparts, conformed as executed, thereof.
(g) The Company, the Subsidiary Guarantors and the Initial Purchaser
shall have entered into the Registration Rights Agreement and the Initial
Purchaser shall have received counterparts, conformed as executed, thereof.
(h) The Company, the Subsidiary Guarantors, the Collateral Agent and
the Trustee shall have entered into the Collateral Agreement and the Initial
Purchaser shall have received counterparts, conformed as executed, thereof.
(i) The Company, the Trustee, the Administrative Agent and the
Collateral Agent shall have entered into the Intercreditor Agreement and the
Initial Purchaser shall have received counterparts, conformed as executed,
thereof.
(j) Each of the Company and the Subsidiary Guarantors shall have
furnished to the Initial Purchaser a certificate, dated as of the Closing Date,
with respect to the Company, of its President, Vice President or Treasurer and
its Chief Financial Officer and, with respect to the Subsidiary Guarantors of
its President, Vice President or Treasurer and its principal financial officer,
stating that:
(i) The representations, warranties and agreements of the
Company and the Subsidiary Guarantors in Section 1 are true and
correct as of such Closing Date and, after giving effect to the
consummation of the transactions contemplated by this Agreement, the
other Operative Documents, the Senior Credit Facility and the Plan of
Reorganization; the Company has complied with all its agreements
contained herein, and the condition set forth in Section 7(k) has been
fulfilled;
(ii) (A) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Offering Memorandum any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Memorandum, except with regard to the
strike at the two General Motors plants that ended on July 31, 1998,
or (B) since such date there has not been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries and
no event has occurred which is material to the consolidated financial
position, stockholders' equity, results of operations, business or
prospects of the Company and its subsidiaries, otherwise than as set
forth or contemplated in the Offering Memorandum; and
(iii) They have carefully examined the Offering Memorandum
and, in their opinion (i) as of its date and as of the Closing Date,
the Offering Memorandum did not include any untrue statement of a
material fact and did not omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, and
(ii) since the date of the
<PAGE>
27
Offering Memorandum, no event has occurred which should have been set
forth in a supplement or amendment to the Offering Memorandum.
(k) (i) There not occurring or becoming known to the Initial Purchaser
as of the date of this Agreement any material adverse condition or material
adverse change in or affecting the business, operations, condition (financial
or otherwise), assets, liabilities, management, prospects or value of the
Company or (ii) the Initial Purchaser not becoming aware after the date of this
Agreement of any information or other matter affecting the Company or the
transactions contemplated hereby that is inconsistent in a material and adverse
respect with any such information or other matter disclosed to the Initial
Purchaser prior to the date of this Agreement, the effect of which, in any such
case described in clause (i) or (ii), is, in the judgment of the Initial
Purchaser, so material and adverse as to make it impracticable or inadvisable
to proceed with the payment for and delivery of the Securities being delivered
on such Closing Date on the terms and in the manner contemplated in the
Offering Memorandum.
(l) Simpson Thacher & Bartlett shall have been furnished with such
other documents and opinions, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Agreement and in order to evidence the accuracy,
completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
(m) (i) The Bankruptcy Court shall have entered a final order in form
and substance reasonably satisfactory to the Initial Purchaser confirming, in
accordance with Section 1129 of the Bankruptcy Code, the Plan of
Reorganization, which order shall be in full force and effect and shall not
have been stayed, reversed, vacated or otherwise modified; (ii) the Bankruptcy
Court shall have entered a final order in form and substance reasonably
satisfactory to the Initial Purchaser granting the Debtors' Motion for Entry of
Order in Aid of Implementation of the Plan and Approving Terms of Revised Exit
Financing Transaction (the "Motion") filed with the Bankruptcy Court on
November 4, 1998, which order shall be in full force and effect and shall not
have been stayed, reversed, vacated or otherwise modified; and (iii) each of
the Official Committee of Unsecured Creditors and the lenders under the DIP
Credit Facilities shall have joined in the Motion, shall have filed with the
Bankruptcy Court separate pleadings stating that they have no objection to the
relief being sought in the Motion or shall not have objected to the relief
being sought in the Motion or sought to have the granting of the Motion stayed,
reversed or vacated.
(n) The Senior Credit Facility shall have been consummated pursuant to
documentation reasonably satisfactory to the Initial Purchaser.
(o) The Plan of Reorganization shall have been consummated, shall be
in full force and effect, no provision thereof shall have been waived (except
for Section 12.2(j) of the Plan of Reorganization), amended, supplemented or
otherwise modified and the Company and its subsidiaries shall be in full
compliance with the Plan of Reorganization.
(p) The Initial Purchaser shall have received (i) the Pro Forma
Balance Sheet, (ii) audited consolidated financial statements of the Company
and its subsidiaries for the 1996
<PAGE>
28
and 1997 fiscal years and (iii) unaudited interim consolidated financial
statements of the Company and its subsidiaries for each quarterly period ended
subsequent to the date of the latest applicable financial statements delivered
pursuant to clause (ii) of this paragraph as to which such financial statements
are available, and such financial statements shall not, in the reasonable
judgment of the Initial Purchaser, reflect any material adverse change in the
consolidated financial condition of the Company and its subsidiaries, as
reflected in the financial statements contained in the Offering Memorandum.
(q) All governmental and third party approvals (including landlords'
and other consents) necessary or, in the reasonable discretion of the Initial
Purchaser, advisable in connection with the reorganization, the financing
contemplated hereby and the continuing operations of the Company and its
Subsidiaries shall have been obtained and be in full force and effect, and all
applicable waiting periods shall have expired without any action being taken or
threatened by any competent authority which would restrain, prevent or
otherwise impose materially adverse conditions on the transaction or the
financing contemplated hereby.
(r) The Initial Purchaser shall have received all fees required to be
paid, and all expenses for which invoices have been presented (including
reasonable fees, disbursements and other charges of counsel to the Initial
Purchaser), on or before the Closing Date.
(s) The Initial Purchaser shall have received the results of a recent
lien and title search regarding mortgages, without duplication of the condition
stated in Section 7(v) hereof, in each of the jurisdictions where assets of the
Company and the subsidiaries are located, and such search shall reveal no liens
on any of the assets or mortgages on any properties of the Company or its
subsidiaries, except for (i) liens and mortgages permitted by the covenant
entitled "Liens" in the Indenture or (ii) such pre-petition liens and mortgages
and liens and mortgages securing the DIP Credit Facilities that will be
extinguished by, or simultaneously with, the closing of the offering of the
Notes and for which termination notices relating thereto will have been
delivered by the Company to the Initial Purchaser at the Closing.
(t) The Collateral Agent shall have received (i) the certificates
representing the shares of Capital Stock pledged pursuant to the Collateral
Agreement, together with an undated stock power for each such certificate
executed in blank by a duly authorized officer of the pledgor thereof and (ii)
each promissory note pledged to the Collateral Agent pursuant to the Collateral
Agreement endorsed (without recourse) in blank (or accompanied by an executed
transfer form in blank satisfactory to the Initial Purchaser) by the pledgor
thereof.
(u) Each document (including, without limitation, any Uniform
Commercial Code financing statement) required by the Collateral Agreement or
the other Security Documents or under law or reasonably requested by the
Collateral Agent to be filed, registered or recorded in order to create in
favor of the Collateral Agent, for the benefit of the Initial Purchaser and
Eligible Purchasers, a perfected lien on the collateral described therein,
prior and superior in right to any other person (other than as set forth in the
Intercreditor Agreement and) (other than with respect to liens expressly
permitted by the covenant entitled "Liens" in the Indenture), shall be in
proper form for filing, registration or recordation and shall have been duly
filed in all places necessary or advisable to perfect such security interests,
including, with respect to the Collateral,
<PAGE>
29
in each jurisdiction where such Collateral is located, and all other actions
shall have been taken which shall have been reasonably requested by the Initial
Purchaser or its counsel to perfect such interests.
(v) If requested by the Initial Purchaser, the Collateral Agent shall
have received, and the title insurance company issuing the policy referred to
in Section 7(w) below (the "Title Insurance Company") shall have received, maps
or plats of an as-built survey of the sites of the mortgaged properties
certified to the Collateral Agent and the Title Insurance Company in a manner
reasonably satisfactory to them, dated a date satisfactory to the Initial
Purchaser and the Title Insurance Company by an independent professional
licensed land surveyor reasonably satisfactory to the Initial Purchaser and the
Title Insurance Company, which maps or plats and the surveys on which they are
based shall be made in accordance with the Minimum Standard Detail Requirements
for Land Title Surveys jointly established and adopted by the American Land
Title Association and the American Congress on Surveying and Mapping in 1992,
and, without limiting the generality of the foregoing, there shall be surveyed
and shown on such maps, plats or surveys the following: (A) the locations on
such sites of all the buildings, structures and other improvements and the
established building setback lines; (B) the lines of streets abutting the sites
and width thereof; (C) all visible and/or recorded access and other easements
appurtenant to the sites; (D) all roadways, paths, driveways, encroachments and
overhanging projections and similar encumbrances affecting the site, recorded
or apparent from a physical inspection of the sites; (E) any encroachments on
any adjoining property by the building structures and improvements on the
sites; (F) if the site is described as being on a filed map, a legend relating
the survey to said map; and (G) the flood zone designations, if any, in which
the mortgaged properties are located; provided that, to the extent not
delivered by the Closing Date, the Company shall, within 45 days of the Closing
Date, deliver, or have delivered, to the Collateral Agent and the Title
Insurance Company surveys of the properties subject to the Mortgages, meeting
the requirements of this section such that the Title Company will omit
corresponding survey exceptions on the relevant title insurance policies issued
pursuant to Section 7(w) hereof and will issue those endorsements to such title
insurance policies (such as survey and access) that cannot be issued without
such surveys.
(w) The Collateral Agent shall have received in respect of each
property subject to a Mortgage a mortgagee's title insurance policy (or
policies) or marked up unconditional binder for such insurance. Each such
policy shall (A) be in an amount satisfactory to the Initial Purchaser; (B)
insure that the Mortgage insured thereby creates a valid second lien on such
mortgaged property; (C) name the Collateral Agent, for the benefit of the
Initial Purchaser and the Eligible Purchasers, as the insured thereunder; (D)
be in the form of ALTA Loan Policy - 1970 (Amended 10/17/70 and 10/17/84) (or
equivalent policies); (E) contain such endorsements and affirmative coverage as
the Initial Purchaser may reasonably request; and (F) be satisfactory to the
Initial Purchaser (including any such title companies acting as Company-
insurers or reinsurers, at the option of the Initial Purchaser). The Collateral
Agent shall have received evidence satisfactory to it that all premiums in
respect of each such policy, all charges for mortgage recording tax, and all
related expenses, if any, have been paid.
(x) For any property set forth in a schedule to the Collateral
Agreement if requested by the Initial Purchaser, the Collateral Agent shall
have received (A) a policy of flood
<PAGE>
30
insurance which (1) covers any parcel of improved real property which is
encumbered by any Mortgage (2) is written in an amount not less than the
outstanding principal amount of the indebtedness secured by such Mortgage which
is reasonably allocable to such real property or the maximum limit of coverage
made available with respect to the particular type of property under the
National Flood Insurance Act of 1968, whichever is less, and (3) has a term
ending not later than the maturity of the Indebtedness secured by such Mortgage
and (B) confirmation that the Company has received the notice required pursuant
to Section 208(e)(3) of Regulation H of the Board.
(y) The Initial Purchaser shall have received a copy of all recorded
documents referred to, or listed as exceptions to title in, the title policy or
policies referred to in subsection (w) above and a copy of all other material
documents affecting the mortgaged properties.
(z) The Initial Purchaser shall have received insurance certificates
satisfying the requirements of Section 5 of the Collateral Agreement.
(aa) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market, or trading in any securities of the Company on any
exchange or in the over-the-counter market, shall have been suspended or
minimum prices shall have been established on any such exchange or such market
by the Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium shall
have been declared by Federal or state authorities, (iii) the United States
shall have become engaged in hostilities, there shall have been an escalation
in hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States or (iv) there
shall have occurred such a material adverse change in general economic,
political or financial conditions (or the effect of international conditions on
the financial markets in the United States shall be such) as to make it, in the
judgment of the Initial Purchaser, impracticable or inadvisable to proceed with
the offering or delivery of the Securities being delivered on such Closing Date
on the terms and in the manner contemplated in the Offering Memorandum.
(bb) The Notes shall have been approved by the National Association of
Securities Dealers, Inc. for trading in the PORTAL market.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchaser.
8. Indemnification and Contribution.
(a) Each of the Company and the Subsidiary Guarantors hereby jointly
and severally agrees to indemnify and hold harmless the Initial Purchaser, its
officers and employees and each person, if any, who controls the Initial
Purchaser within the meaning of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating
<PAGE>
31
to purchases and sales of Securities), to which the Initial Purchaser, officer,
employee or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (as amended or supplemented)
or any written or oral communication furnished by or on behalf of the Company
for use in connection with reselling the Securities or in any amendment or
supplement thereto, (ii) the omission or alleged omission to state in the
Offering Memorandum (as amended or supplemented) or in any written or oral
communication furnished by or on behalf of the Company for use in connection
with reselling the Securities or in any amendment or supplement thereto any
material fact required to be stated therein or necessary to make the statements
therein not misleading or (iii) any act or failure to act or any alleged act or
failure to act by the Initial Purchaser in connection with, or relating in any
manner to, the Securities or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon matters covered by clauses (i) or (ii)
above (provided that neither the Company nor the Subsidiary Guarantors shall be
liable under this clause (iii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to act
undertaken or omitted to be taken by the Initial Purchaser through its gross
negligence or willful misconduct); and shall reimburse the Initial Purchaser
and each such officer, employee or controlling person promptly upon demand for
any legal or other expenses reasonably incurred by the Initial Purchaser,
officer, employee or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that
neither the Company nor the Subsidiary Guarantors shall be liable in any such
case to the extent that any such loss, claim, damage, liability or action
arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in the Offering Memorandum (as
amended or supplemented) or in any written or oral communication furnished by
or on behalf of the Company for use in connection with reselling the securities
or in any amendment or supplement thereto, in reliance upon and in conformity
with written information concerning the Initial Purchaser specifically for
inclusion therein. The foregoing indemnity agreement is in addition to any
liability which the Company and the Subsidiary Guarantors may otherwise have to
the Initial Purchaser or to any officer, employee or controlling person of the
Initial Purchaser.
(b) The Initial Purchaser shall indemnify and hold harmless the
Company, the Subsidiary Guarantors, their respective officers and employees,
each of their respective directors, and each person, if any, who controls the
Company or any Subsidiary Guarantor within the meaning of the Securities Act,
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company or any Subsidiary Guarantor or
any such director, officer or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Offering Memorandum (as
amended or supplemented) or (ii) the omission or alleged omission to state in
the Offering Memorandum (as amended or supplemented) any material fact required
to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information concerning the Initial
<PAGE>
32
Purchaser furnished to the Company by or on behalf of the Initial Purchaser
specifically for inclusion therein, and shall reimburse the Company or such
Subsidiary Guarantor and any such director, officer or controlling person for
any legal or other expenses reasonably incurred by the Company or such
Subsidiary Guarantor or any such director, officer or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred.
The foregoing indemnity agreement is in addition to any liability which the
Initial Purchaser may otherwise have to the Company, the Subsidiary Guarantors
or any such director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this Section
8 of the notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however,
that the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, provided, however, that the
failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 8. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation;
provided, however, that the Initial Purchaser shall have the right to employ
counsel to represent jointly the Initial Purchaser and its officers, employees
and controlling persons who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the Initial Purchaser
against the Company and the Subsidiary Guarantors under this Section 8 if, in
the reasonable judgment of the Initial Purchaser, it is advisable for the
Initial Purchaser, its officers, employees and controlling persons to be
jointly represented by separate counsel, and in that event the fees and
expenses of such separate counsel shall be paid by the Company and the
Subsidiary Guarantors. No indemnifying party shall (i) without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the consent of
the indemnifying party or if there be a final judgment of the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
<PAGE>
33
(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 8(a) or 8(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and the Subsidiary Guarantors on the one hand and the
Initial Purchaser on the other from the offering of the Initial Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Subsidiary Guarantors on the one hand and the Initial
Purchaser on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Subsidiary Guarantors on the one hand
and the Initial Purchaser on the other with respect to such offerings shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Initial Securities purchased under this Agreement (before deducting
expenses) received by the Company and the Subsidiary Guarantors, on the one
hand, and the total discounts and commissions received by the Initial Purchaser
with respect to the Initial Securities purchased under this Agreement, on the
other hand, bear to the total gross proceeds from the offering of the Initial
Securities under this Agreement, in each case as set forth in the table on the
cover page of the Offering Memorandum. The relative fault shall be determined
by reference to whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company and the Subsidiary Guarantors or the
Initial Purchaser, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Initial Purchaser agree that it would not be just
and equitable if contributions pursuant to this Section 8(d) were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section shall be deemed to include, for purposes of this Section 8(d), any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8(d), the Initial Purchaser
shall not be required to contribute any amount in excess of the amount by which
the total price at which the Initial Securities purchased by it were resold to
Eligible Purchasers exceeds the amount of any damages which the Initial
Purchaser has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The Initial Purchaser confirms and the Company acknowledges that
the last sentence on the cover page, the stabilization legend on page 4 and the
seventh and ninth paragraphs of the section entitled "Plan of Distribution" in
the Offering Memorandum constitute the only information furnished in writing to
the Company by or on behalf of the Initial Purchaser specifically for inclusion
in the Offering Memorandum.
<PAGE>
34
9. Termination. The obligations of the Initial Purchaser hereunder may
be terminated by Lehman Brothers Inc. by notice given to the Company prior to
delivery of and payment for the Initial Securities if, prior to that time, any
of the events described in Sections 7(k), 7(m), 7(n), 7(o) and 7(aa) shall have
occurred or if the Initial Purchaser shall decline to purchase the Initial
Securities for any reason permitted under this Agreement, but, in any event,
this Agreement shall terminate on December 11, 1998 if the transactions
contemplated hereby shall not have been earlier consummated.
10. Reimbursement of Initial Purchaser's Expenses. Regardless of
whether the transactions contemplated by this Agreement are consummated or this
Agreement is terminated, the Company and the Subsidiary Guarantors will
reimburse the Initial Purchaser for all reasonable out-of-pocket expenses
(including the fees and disbursements of their counsel) incurred by the Initial
Purchaser in connection with this Agreement and the proposed purchase of
the Initial Securities, and upon demand the Company and the Subsidiary
Guarantors shall pay the full amount thereof to Lehman Brothers Inc.
11. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) If to the Initial Purchaser, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., Three World Financial
Center, New York, New York 10285, Attention: Capital Markets (Fax:
212-526-6588), with a copy to Simpson Thacher & Bartlett, 425 Lexington Avenue,
New York, New York 10017, Attention: Rise B. Norman, Esq. (Fax: 212-455-2502);
and
(b) If to Company or the Subsidiary Guarantors, shall be delivered or
sent by mail, telex or facsimile transmission to Harvard Industries, Inc., 3
Werner Way, Lebanon, New Jersey 08833, Attention: Theodore Vogtman (Fax:
908-236-0071), with a copy to Willkie Farr & Gallagher, 787 Seventh Avenue, New
York, NY 10019, Attention: Christopher E. Manno, Esq. (Fax: 212-728-8111).
Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof. Any notice of a change of address or facsimile
transmission number must be given by the Company, the Subsidiary Guarantors or
by the Initial Purchaser, as the case may be, in writing, at least three days
in advance of such change.
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchaser, its personal
representatives and successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that the
representations, warranties, indemnities and agreements of the Company and the
Subsidiary Guarantors contained in this Agreement shall also be deemed to be
for the benefit of the person or persons, if any, who control the Initial
Purchaser within the meaning of Section 15 of the Securities Act.
<PAGE>
35
13. Survival. The respective indemnities, representations, warranties
and agreements of the Initial Purchaser and the Company and the Subsidiary
Guarantors contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall survive the delivery of and
payment for the Securities and shall remain in full force and effect,
regardless of any investigation made by on behalf of any of them or any person
controlling any of them.
14. Definition of the Terms "Business Day" and "Subsidiary." For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations.
15. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
16. Counterparts. This Agreement may be executed in one more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
[The rest of this page has been left black intentionally; the signature page
follows.]
<PAGE>
36
If the foregoing correctly sets forth the agreement among the Initial
Purchaser, the Company and the Subsidiary Guarantors, please indicate your
acceptance in the space provided for the purpose below.
Very truly yours,
HARVARD INDUSTRIES, INC.
By: /S/ D. Craig Bowman
-------------------------------------
Name: D. Craig Bowman
Title: Secretary and Vice President, Law
DOEHLER-JARVIS, INC.
HARVARD TRANSPORTATION
CORPORATION
DOEHLER-JARVIS GREENEVILLE, INC.
POTTSTOWN PRECISION CASTING, INC
DOEHLER-JARVIS TECHNOLOGIES, INC.
DOEHLER-JARVIS TOLEDO, INC.
HARMAN AUTOMOTIVE, INC.
HAYES-ALBION CORPORATION
THE KINGSTON-WARREN CORPORATION
On behalf of each of the above
Subsidiary Guarantors
By: /S/ D. Craig Bowman
-------------------------------------
Name: D. Craig Bowman
Title: Vice President
Accepted:
LEHMAN BROTHERS INC.
By: /S/ Thom Bernard
-------------------------------
Name: Thom Bernard
Title:
<PAGE>
Schedule I
Subsidiary Guarantors
Harvard Transportation Corporation
Doehler-Jarvis, Inc.
Doehler-Jarvis Toledo, Inc.
Doehler-Jarvis Pottstown, Inc.
Doehler-Jarvis Greeneville, Inc.
Doehler-Jarvis Technologies, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
Schedule II
Subsidiaries
Harvard Transportation Corporation (Michigan)
Doehler-Jarvis, Inc. (Delaware)
Doehler-Jarvis Toledo, Inc. (Delaware)
Doehler-Jarvis Pottstown, Inc. (Delaware)
Doehler-Jarvis Greeneville, Inc. (Delaware)
Doehler-Jarvis Technologies, Inc. (Delaware)
Harman Automotive, Inc. (Michigan)
Hayes-Albion Corporation (Michigan)
The Kingston-Warren Corporation (New Hampshire)
Trim Trends, Ltd. (Canada)
177192 Canada, Inc. (Canada)
<PAGE>
EXHIBIT A
Form of Registration Rights Agreement
<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
January 25, 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 dated
November 14, 1997, except for Note 9 (which contains an explanatory paragraph
relating to the ability of Harvard Industries, Inc. to continue as a going
concern) as to which the date is December 29, 1997, appearing on page 47 of the
Annual Report on Form 10-K of Harvard Industries, Inc. for the year ended
September 30, 1998.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, NY
January 25, 1999
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------------
__ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. National Banking Association 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
HARVARD INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
Florida 21-0715310
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Werner Way, Suite 960
Lebanon, NJ 08833
(Address of principal executive offices) (Zip code)
-----------------------------
14 1/2% Senior Secured Notes due 2003
(Title of the indenture securities)
================================================================================
<PAGE>
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate
trust powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor
is not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of
this Statement of Eligibility. Norwest Bank
incorporates by reference into this Form
T-1 the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of
the trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of
the trustee to commence business issued
June 28, 1872, by the Comptroller of the
Currency to The Northwestern National Bank
of Minneapolis.*
b. A copy of the certificate of the
Comptroller of the Currency dated January
2, 1934, approving the consolidation of
The Northwestern National Bank of
Minneapolis and The Minnesota Loan and
Trust Company of Minneapolis, with the
surviving entity being titled Northwestern
National Bank and Trust Company of
Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January
12, 1943, as to change of corporate title
of Northwestern National Bank and Trust
Company of Minneapolis to Northwestern
National Bank of Minneapolis.*
d. A copy of the letter dated May 12, 1983
from the Regional Counsel, Comptroller of
the Currency, acknowledging receipt of
notice of
<PAGE>
name change effective May 1, 1983 from
Northwestern National Bank of
Minneapolis to Norwest Bank Minneapolis,
National Association.*
e. A copy of the letter dated January 4, 1988
from the Administrator of National Banks
for the Comptroller of the Currency
certifying approval of consolidation and
merger effective January 1, 1988 of
Norwest Bank Minneapolis, National
Association with various other banks under
the title of "Norwest Bank Minnesota,
National Association."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January 2,
1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 7. A copy of the latest report of condition of the
trustee published pursuant to law or the requirements
of its supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with
registration statement number 333-70169.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 15h day of January 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Raymond S. Haverstock
-------------------------
Raymond S. Haverstock
Vice President
<PAGE>
EXHIBIT 6
January 15, 1999
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to
the Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Raymond S. Haverstock
-------------------------
Raymond S. Haverstock
Vice President
