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CONFIDENTIAL
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June 12, 2000
Wasserstein Perella & Co., Inc.
31 West 52nd Street
New York, NY 10019
Attn.: Mr. Stephen Benson
Mr. Alexander Greene
RE: Breed Technologies Inc.
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Gentlemen:
Harvard Industries, Inc. ("Harvard"), is pleased to submit this
revised proposal (the "Proposal") to fund a plan of reorganization (the "Plan")
for Breed Technologies, Inc. and its subsidiaries (collectively "Breed") in
connection with Case Nos. 99-03399 through 99-03415 under Chapter 11 of title 11
of the United States Code (the "Bankruptcy Code"), currently pending in the
United States Bankruptcy court for the District of Delaware (the "Bankruptcy
Court"). The principal terms and conditions of the Proposal are set forth in
this letter (including all exhibits and other attachments hereto) and will be
incorporated in the Plan. The Board of Directors of Harvard has reviewed and has
authorized the delivery of this Proposal.
This Proposal will automatically terminate at 10:00 a.m. (eastern
time) on June 12, 2000 unless prior to such time (i) Harvard shall have received
written confirmation from (x) Breed that Harvard has been selected as the
"stalking horse bidder" based on the terms and conditions set forth in this
Proposal and (y) the Agent for the holders of obligations under the Amended and
Restated Credit Agreement, dated as of April 28, 1998 (collectively, the
"Pre-Petition Lenders") that it has received statements in writing from the
holders of at least 51% of the principal amount of obligations outstanding under
the Credit Agreement (the "Required Lenders") that the Required Lenders support
such selection provided that the Plan is reasonably acceptable to the Required
Lenders, and (ii) Breed has issued a press release announcing (x) the selection
of Harvard as the "stalking horse bidder" on such terms and conditions and (y)
the support of such selection by Breed, subject to such terms and conditions.
In connection with formulating this Proposal, Harvard has reviewed
the business plans for Breed previously provided to Harvard through the date of
this letter, reviewed certain documents contained in Breed's data room and
reviewed selected financial operating data provided by Breed. Harvard has
assumed the completeness and accuracy of all the foregoing information provided
by Breed. This Proposal is also premised upon (i) the pro forma closing balance
sheet of Reorganized Breed (as defined below) as of February 29, 2000 being as
set forth on Exhibit B hereto (such balance sheet will constitute the "Pro Forma
Balance Sheet") and (ii) the other assumptions set forth in Exhibit A hereto.
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Wasserstein Perella & Co., Inc.
I. Structure.
Upon the terms and subject to the conditions contained in the
Definitive Agreement (as defined below), Harvard will acquire Breed and fund the
Plan in one or more contemporaneous transactions which will result in Breed
becoming a wholly-owned subsidiary of Harvard (such wholly-owned subsidiary is
referred to herein as "Reorganized Breed"). Harvard, at its option, may propose
an alternative structure for the acquisition of Breed or Breed's assets under
the Definitive Agreement and may assign its rights to one or more subsidiaries
of Harvard designated by Harvard, and Breed will be deemed to have accepted such
alternative structure or assignments so long as (a) the value of the aggregate
consideration and the form of such consideration payable to the creditors of
Breed is not, directly or indirectly, decreased and (b) such alternative
structure does not adversely affect the value of the transactions contemplated
hereby to the estate of Breed.
II. Consideration and Adjustment.
A. Consideration. Harvard proposes to pay a total consideration for Breed
(the "Purchase Price") as follows:
1. $200 million in cash, less any Senior Management Credit (as
hereinafter defined), which will be distributed pursuant to the
Plan;
2. Subordinated Notes (as described on Exhibit A hereto) in the
principal amount of $20 million, less any Allied Signal Shortfall
Amount (as hereinafter defined) will be distributed pursuant to
the Plan;
3. 40% of the fully-diluted outstanding common stock of Harvard on
the Effective Date (determined after giving effect to existing
options to purchase 2,229,102 shares of common stock) would be
distributed pursuant to the Plan; (Harvard currently estimates
that, based upon 10,261,523 outstanding shares of Harvard and the
amount of currently outstanding options, 8,327,083 shares of
Harvard common stock would constitute 40% of a fully-diluted
basis that would be issued to Breed's creditors under the Plan;);
the 40% will be protected against dilution as a result of shares
issued after the Effective Date under Harvard's confirmed plan of
reorganization.
4. the New Warrants described on Exhibit A hereto;
5. assumption of liabilities of Breed, including satisfaction of the
DIP Claims existing on the Effective Date (as defined below), and
Designated Professional Fees, which Designated Professional Fees
will not exceed $13.3 million provided that Harvard shall not
assume any liabilities related to senior management (including,
without limitation, John Riess) hired by Breed after March 1,
2000 and shall receive a credit against the cash portion of the
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Purchase Price for all amounts paid to or for the benefit of any
such senior manager by Breed on or after March 1, 2000
(collectively, the "Senior Management Credit");
6. assumption of certain unrecorded liabilities of Breed existing on
the Effective Date, which, as set forth on Exhibit D hereto,
Harvard believes to be approximately $90 million; and
7. proceeds of the Allied Signal lawsuit as set forth in Section II.
B below.
B. Allied Signal Lawsuit. At the option of Breed, which option must be
selected in the Definitive Agreement, the Plan will provide either:
(i) that Harvard will assign all rights in the Allied Signal lawsuit
pursuant to the Plan to the entity or entities specified therein (or their
designee(s)) and that Harvard will have absolutely no funding obligations
whatsoever in connection with the prosecution of the Allied Signal lawsuit; or
(ii) that Harvard will fund up to $5 million to prosecute the Allied
Signal lawsuit. Pursuant to the Plan, a committee consisting of Harvard and
representatives of certain of Breed's creditor constituencies will be formed to
direct the prosecution of the Allied Signal lawsuit. Any recoveries from the
Allied Signal lawsuit will be distributed first to reimburse Harvard for any and
all out-of-pocket expenses (the "Lawsuit Expenses") incurred by it to prosecute
the Allied Signal lawsuit in an amount not to exceed $5 million, provided, that,
in the event the recoveries, if any, from the Allied Signal lawsuit are
insufficient to reimburse Harvard for the Lawsuit Expenses, the aggregate
principal amount of the Subordinated Notes, if any, will be reduced dollar for
dollar by the amount of Harvard's unreimbursed Lawsuit expenses (the "Allied
Signal Shortfall Amount"). Any recoveries from the Allied Signal lawsuit
remaining after reimbursing Harvard for the Lawsuit Expenses will be distributed
as follows: (i) first, the next $50 million in recoveries after reimbursing
Harvard in full for the Lawsuit Expenses will be distributed pursuant to the
Plan and (ii) second, 20% of any recovery in excess of the amounts set forth in
clause (i) above will be retained by Harvard and the remaining 80% will be
distributed pursuant to the Plan.
III. Financing.
In connection with the Proposal, we have received a letter from a
senior secured lender (the "Lender")( a copy of which is attached as Exhibit E
hereto) indicating that the Lender is highly interested in providing Harvard
with $325 million in financing (the "New Financing") in connection with the
transaction contemplated by the Proposal. The New Financing would replace
Harvard's current $50 million credit facility and would be used to (a) fund the
Plan and (b) provide Harvard and Reorganized Breed with a line of credit. Breed
will directly fund the cost of and Harvard will obtain access to certain due
diligence required by the Lender (e.g. US facility real estate, inventory, and
physical property appraisals) as authorized to be conducted
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and paid by Breed pursuant to Bankruptcy Court orders entered prior to the date
hereof. To the extent such due diligence requires the services of a third party
firm, such firm shall be satisfactory to the Lender. Breed will be entitled to
retain all work products produced by such firms engaged by Breed.
IV. Deposit.
The Definitive Agreement will provide that upon obtaining a firm
financing commitment for the New Financing that is satisfactory to Harvard and
Breed, Harvard will provide Breed prior to the Termination Date (as such term is
defined in the Fee Agreement) with an irrevocable standby letter of credit
designating Breed as beneficiary thereunder in an amount equal to $3 million
(the "Deposit"). Breed will be entitled to draw upon the Deposit if Harvard is
in material breach of any of its obligations under the Definitive Agreement (as
defined below). The Deposit will be returned to Harvard, so long as Harvard is
not in material breach of the Definitive Agreement, upon the first to occur of
the following: (i) the Bankruptcy Court approves a higher or better offer for
the Breed assets, (ii) Breed or the Required Lenders announce that either is no
longer supporting the Harvard Proposal, (iii) confirmation of a stand-alone plan
of reorganization of Breed, (iv) Breed is in material breach of its obligations
under the Definitive Agreement or (v) Harvard is not in material breach of its
obligations under the Definitive Agreement and elects to terminate the
Definitive Agreement consistent with its rights thereunder.
V. Cooperation and Support.
Subject to their fiduciary duties which includes seeking higher and
better offers on a timely basis, Breed and the Board of Directors of Breed will
cooperate fully with Harvard and will support this Proposal and the transactions
contemplated hereby; provided, however, that this provision shall not prohibit
the Board of Directors of Breed from appointing a new chief executive officer or
other senior executive officer for Breed or making an announcement in connection
therewith.
VI. Conditions to this Proposal.
This proposal is subject to the satisfaction of the following
conditions:
(a) Simultaneously with the acceptance by Breed of this Proposal,
Breed shall have executed a fee agreement (the "Fee
Agreement") in the form attached hereto as Exhibit F, which
Fee Agreement shall be incorporated herein by reference; and
(b) Receipt by Harvard of Breed's existing financial forecasts for
the period through December 31, 2000, consisting of monthly
cash flows, profit and loss statements and balance sheets
("Financial Forecasts").
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VII. Definitive Agreement.
A. Closing Conditions. The definitive agreement (together with all such
related agreements, documents and instruments as they may be supplemented,
restated or amended from time to time, collectively the "Definitive Agreement")
will contain customary closing conditions, including the following:
(i) Breed, together with Harvard as co-proponents, shall have
filed the Plan and related disclosure statement with the
Bankruptcy Court on or before July 12, 2000, and the
Bankruptcy Court shall have entered an order approving the
disclosure statement for the Plan on or before September 9,
2000 (the "Disclosure Statement");
(ii) (a) No chapter 11 plan shall have been filed by Breed or the
Pre-Petition Lenders with the Bankruptcy Court that provides
for the acquisition of Breed (or a substantial portion of its
ownership or assets) by a person or entity other than Harvard,
(b) no party (other than Harvard) shall have obtained
Bankruptcy Court approval of an acquisition of Breed (or a
substantial portion of its ownership or assets), (c) neither
Breed nor any Pre-Petition Lender having support of or control
over two-thirds or more of the obligations under the Amended
and Restated Credit Agreement shall have filed any chapter 11
plan providing only for an internal reorganization of Breed,
or obtained Bankruptcy Court approval of a disclosure
statement only for a stand-alone plan and (d) no order shall
have been entered by a court of competent jurisdiction that is
materially inconsistent with this Proposal or the Definitive
Agreement or the Plan;
(iii) The Plan shall have been confirmed pursuant to a final order
of the Bankruptcy Court in form and substance satisfactory to
Harvard by October 15, 2000, and shall have become effective
in accordance with its terms no later than October 31, 2000
(the "Effective Date");
(iv) The rights and benefits of Breed under certain licenses and
agreements (the "Retained Contracts") to be designated by
Harvard in the Definitive Agreement shall survive the Closing,
and such rights and benefits shall be available to Reorganized
Breed in accordance with the present terms and conditions of
the Retained Contracts, or with such modifications thereto as
Harvard or Breed may successfully negotiate. Reorganized
Breed's assumption of all pre-petition licenses and executory
contracts included in the Retained Contracts shall have been
approved by the Bankruptcy Court pursuant to one or more Final
Orders, and all consents, if any, of any third parties
required to be obtained in connection with such assumption
shall have been obtained;
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(v) On the Effective Date, subject to Section II.A.5 herein, the
assets of Breed (including, without limitation, any and all
claims of Breed against any person or entity of every kind and
nature (including claims against Allied Signal)) shall vest in
Reorganized Breed free and clear of all liens, claims, charges
and encumbrances of any kind whatsoever (except for liens and
security interests granted or created by Reorganized Breed),
and Reorganized Breed shall have no liabilities or obligations
in respect of such assets, other than liabilities and
obligations arising under the Retained Contracts (the
aggregate cure payments with respect to the Retained Contracts
shall not exceed the amount set forth in the Definitive
Agreement for such payments);
(vi) The amount of liabilities and working capital expenditures of
Breed are consistent with the Financial Forecasts;
(vii) The final documentation with respect to the Subordinated Notes
and all other elements of the capital structure of Reorganized
Breed shall be satisfactory to Harvard and Breed;
(viii) Harvard or Breed shall not have breached individually or in
the aggregate in any material respect any of its respective
representations, warranties or covenants contained in the
Definitive Agreement;
(ix) No material adverse change shall have occurred in Breed's or
Harvard's business, condition (financial or otherwise),
prospects, operations, assets or liabilities or in financial
markets generally ("Material Adverse Change") since the date
of the Pro Forma Balance Sheet. A 15% reduction in Breed's
cumulative financial performance from the period from March
31, 2000 through the closing date relative to the Financial
Forecasts for the same period is deemed to constitute a
Material Adverse Change.
(x) (i) approval of the Definitive Agreement and the transaction
contemplated thereby by the Board of Directors of each of
Harvard and Breed and (ii) receipt by the Board of Directors
of Harvard of a fairness opinion to the effect that the
transactions contemplated by the Definitive Agreement are fair
to the stockholders of Harvard from a financial point of view.
(xi) Receipt of all required governmental and third party approvals
(including Harvard shareholders);
(xii) The completion by Harvard of due diligence satisfactory to it
in its sole discretion;
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(xiii) Receipt of the proceeds of the New Financing on substantially
the terms and conditions set forth in the applicable financing
commitment; and
(xiv) Other additional customary conditions to closing in a
bankruptcy case, including, without limitation, approval of
the Definitive Agreement and the transactions contemplated
thereby (if required by applicable law or otherwise determined
to be required by the Board of Directors of Harvard) by the
stockholders of Harvard at a meeting of stockholders duly held
to consider such matters.
At such time as the conditions set forth in this Section VII.A which are subject
to satisfaction or waiver by Harvard prior to the closing date have been
satisfied or waived (other than clauses (iii), (iv), (v), (ix) and (xi) insofar
as it relates to receipt of governmental and shareholder approvals only) (the
"Commitment Date"), Harvard shall deliver a writing to Breed to such effect.
B. Representatives and Warranties. The Definitive Agreement will contain
customary representations and warranties by Breed for transactions of this type
in a bankruptcy case, including, without limitation: accuracy of financial
statements provided; no material actions taken or payments received out of the
ordinary course between the date of the Definitive Agreement and the Effective
Date; no Material Adverse Change; ownership of property, accuracy of disclosure;
levels of claims; corporate existence; corporate power and authority; no
default; environmental; products liability; contracts; subsidiaries; compliance
with laws; no pending or to Breed's knowledge threatened claims which, if
successful, would result in a Material Adverse Change; employee benefits; tax;
and no conflict with laws or contractual obligations.
C. Covenants. The Definitive Agreement will contain reasonable covenants
by Breed customary for transactions of this type in a bankruptcy case covering
the period between execution of the Definitive Agreement and the Effective Date,
including, without limitation: filings; reasonable access to facilities; notice
of developments; and cooperation. The Definitive Agreement will also contain
various reasonable covenants customary for transactions of this type regarding
(i) Breed's actions in its Chapter 11 Cases and (ii) Breed's operation of its
business through the Effective Date, including, among others, the following: (a)
Breed will be operated in the ordinary course of business consistent with the
Financial Forecasts and Breed will make all capital expenditures and
expenditures for plant maintenance and repairs, research and development, sales
and marketing and general and administrative expenses contemplated thereby, (b)
without first reviewing with Harvard at least two (2) business days prior to
taking action, Breed will not take certain actions, including, among others, the
following: (1) any customer bid submissions; (2) entry into any long-term
customer and/or supplier contract involving billings or payments in excess of
$500,000 per year; (3) extraordinary expense items over $500,000; (4) layoffs or
reorganization involving in excess of 100 employees; (5) any acquisition or
disposition of assets having a value in excess of $500,000; and (6) any capital
expenditures in excess of $500,000; provided, however, that if such two (2)
business day review
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period is impracticable under the circumstances due to the emergency nature of
any proposed action under this subparagraph (b), Breed shall use reasonable best
efforts to provide Harvard with as much prior notice as is possible, and (c)
without first obtaining the written consent of Harvard, Breed will not enter
into any multi-year agreement with a customer which is not reasonably expected
to have a positive operating margin.
The Definitive Agreement will contain reasonable covenants by
Harvard customary for transactions of this type in a bankruptcy case covering
the period between the execution of the Definitive Documentation and the
Effective Date, including, without limitation: (a) delivery by Harvard to Breed
and the Pre-Petition Lenders of monthly financial forecasts through December
2000 that include monthly projected income statements, balance sheets and cash
flow statements for Harvard (the "Harvard Financial Forecasts") and (b)
Harvard's operation of its business in the ordinary course of business
consistent with the Harvard Financial Forecasts and generally making capital
expenditures for plant maintenance and repairs, research and development, sales
and marketing and general and administrative expenses contemplated by the
Harvard Financial Forecasts. Breed's sole remedy for breach of these covenants
is termination of the Definitive Agreement at which time Breed will return the
Deposit to Harvard. The Definitive Agreement will also contain a covenant that
on or before the Commitment Date, Harvard will deliver to Breed written
agreements with holders of more than fifty (50%) percent of Harvard's then
outstanding common stock indicating that such holders will vote in favor of the
transactions contemplated by the Definitive Agreement.
D. Executory Contracts and Unexpired Leases. The Plan shall provide
Reorganized Breed with the right to assume or reject executory contracts and
unexpired leases (that have not previously been designated as Retained
Contracts) for a period of six months after the Effective Date (or such other
date as the Bankruptcy Court may determine) and the Bankruptcy Court shall
retain jurisdiction for such purpose.
E. Liquidated Damages. The Definitive Agreement will provide that in the
event of a material breach by Harvard (other than as a result of Breed's failure
to perform its obligations under the Definitive Agreement), Breed shall be
entitled to liquidated damages, as its sole and exclusive remedy, in the sum of
$5 million (inclusive of the Deposit); provided, however, that if, after the
Commitment Date, any such breach results from a failure by the Lender to close
on the New Financing and Harvard is not otherwise excused from performance, the
Deposit shall be the sole and exclusive remedy available to Breed.
VIII. Confidentiality; Termination and Revocation of this Proposal.
A. Breed and the Pre-Petition Lenders acknowledge that Harvard would be at
a competitive disadvantage as the "stalking horse bidder" if confidential
information concerning its bid were made available to other potential bidders,
either directly or indirectly. Breed therefore agrees to take reasonable actions
as are necessary to (i) ensure that documents delivered to Breed or the
Pre-Petition Lenders that are designated by Harvard as confidential are not
shared with any potential bidder or any other person reasonably calculated to
share such
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information with a potential bidder, and (ii) ensure that potential bidders that
are employed by or otherwise under the control of Breed do not utilize their
positions at Breed to interfere with the parties performance under this Proposal
or the Definitive Agreement, including Article V hereof. In the event of any
material disclosure in violation of subparagraph (i) of the preceding sentence,
this Proposal or the Definitive Agreement, as applicable, shall immediately and
automatically terminate on the date of such disclosure and such disclosure shall
constitute a breach of this Proposal letter or the Definitive Agreement.
B. Subject to the second paragraph of this Proposal, this Proposal is
revocable by Harvard by written notice to Breed at any time after June 25, 2000,
if, on such date, an order of the Bankruptcy Court, in form and substance
satisfactory to Harvard, approving the payment of fees and expenses under the
Fee Agreement (the "Approval Order") shall not then have been entered. In
addition, this proposal is revocable by Breed by giving written notice to
Harvard in the event Harvard has not provided its Deposit and obtained a firm
commitment for the New Financing by the ten week anniversary of this Proposal or
such later date as Breed agrees in writing.
C. Notwithstanding anything herein, in the Definitive Agreement, or
otherwise, Harvard hereby acknowledges and agrees that Breed may at any time
revoke its acceptance of this Proposal and, if applicable, terminate the
Definitive Agreement (and all its obligations thereunder) for any reason
whatsoever (or for no reason), including, without limitation, entering into a
Competing Sale Agreement or proposing a stand alone plan. In the event Breed so
elects to revoke its acceptance of this Proposal (and all obligations
thereunder) prior to the date of execution of a Definitive Agreement or to
terminate the Definitive Agreement (and all of its obligations thereunder) after
execution thereof, Breed's only obligation to Harvard is to make any payments
that may be determined to be owed under the Fee Agreement.
D. Notwithstanding anything herein or otherwise, Breed hereby acknowledges
and agrees that Harvard may at any time revoke this Proposal at any time prior
to execution of the Definitive Agreement for any reason whatsoever (or for no
reason). In the event Harvard so elects to revoke this Proposal prior to the
date of execution of a Definitive Agreement, Harvard shall have no further
obligations to Breed.
IX. Limited Binding Effect.
Except for Articles V and VIII of this Proposal and the Fee
Agreement and subject to all of the terms and conditions of those Articles and
the Fee Agreement, which shall be binding on the parties upon execution hereof
and shall survive termination of this Proposal, this letter is intended to serve
solely as a statement of Harvard's current intention with respect to the
transaction contemplated by this Proposal, and does not constitute a binding
obligation of Harvard as to any matter (including, without limitation,
consummation of this Proposal), does not contain all matters upon which
agreement must be reached in order to consummate this Proposal, and creates no
rights in favor of any party. A binding obligation with respect to this Proposal
will be created only by execution and delivery of definitive documentation
(including,
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without limitation, the Definitive Agreement), subject to the conditions
expressed therein. This Proposal has been prepared solely for discussion
purposes from information supplied by Breed and its affiliates and
representatives. Without in anyway limiting the generality of this section,
nothing in this letter is or should be considered an offer with respect to any
securities or a solicitation of acceptances of a chapter 11 plan.
We are available to discuss this Proposal at your convenience and
look forward to the opportunity to do so.
Yours truly,
HARVARD INDUSTRIES, INC.
By: /s/ Roger Pollazzi
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Roger Pollazzi
Chairman & Chief Executive Officer
cc: Chaim Fortgang, Esq., Counsel to the Bank Group
Mr. Fred Caruso, DSI
Attached List
AGREED AND ACCEPTED:
BREED TECHNOLOGIES, INC.
By: /s/ Lizanne Guptell
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LIZANNE GUPTELL
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Exhibit A
TERMS OF SECURITIES TO BE ISSUED
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I. New Breed Common Stock
Issuer: Reorganized Breed.
Holder: Pursuant to the Plan, on the Effective Date, Harvard will
receive 100% of the outstanding New Breed Common Stock.
II. New Warrants to Purchase Harvard Common Stock
Issuer: Harvard
Term: 7 years
Exercisable For: 5% of the fully-diluted common stock of Harvard on the
Effective Date (after giving effect to existing options to
purchase 2,229,102 shares of common stock). Based on current
estimates, Harvard would issue under the Plan warrants to
purchase 1,095,669 shares of common stock.
Exercise Price: A price per share of common stock of Harvard equal to 125%
of the average thirty-day closing trading price of Harvard
common stock measured over the fifteen business days prior
to the Effective Date and fifteen business days after the
Effective Date.
III. Subordinated Notes
Obligor: Reorganized Breed.
Guarantor: Harvard
Aggregate
Principal Amount: The aggregate principal amount of the Subordinated Notes
will $20 million subject to adjustment for any Allied Signal
Shortfall Amount.
Term: 5 years.
Interest: The interest will be equal to the interest rate on the term
loan portion of the new financing facility, plus 200 basis
points. Interest will be payable [monthly/semi-annually] in
arrears.
Security/Priority: The Subordinated Notes made be secured by all collateral
securing the New Financing, junior only thereto.
Covenants: The indenture shall not contain any covenants or events of
default that are not provided in the New Financing and
waivers and consents under the
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New Financing shall constitute waivers and consents under
the indenture.
Subordination: The Subordinated Notes will be fully subordinated to all
other secured debt of Harvard, Reorganized Breed and their
respective subsidiaries, existing at closing and any
refinancings thereof.
Intercreditor
Agreement: In connection with the guaranty issued by Harvard, to the
extent the Subordinated Notes are secured, the indenture
trustee for the Subordinated Notes and Lender will enter
into an appropriate intercreditor agreement.
A-2
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Exhibit B
PRO FORMA BALANCE SHEET
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See attached.
BREED TECHNOLOGIES, INC.
PRO FORMA BALANCE SHEET
FEBRUARY 29, 2000
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($ Millions)
Assets
Cash $51.7
Accounts Receivable 244.5
Inventory 101.3
Prepaid and Other Current Expenses 42.5
------
Total Current Assets 440.1
Net Property, Plant & Equipment 315.9
Other Long-term Assets 21.5
Capitalized Financing Costs 0.0
Fresh Start Asset 0.0
TOTAL ASSETS $777.5
Liabilities & Shareholders' Equity
Accounts Payable $121.5
Accrued Expenses 0.0
Income Taxes 4.9
Other Current Liabilities 107.0
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Total Current Liabilities 233.3
Long-Term Debt 30.1
DIP Financing 37.0
Other Long Term Liability 8.1
Pension/OPEB Liability 7.5
Deferred Taxes (1.3)
Common Equity 462.9
TOTAL LIAB. & SHAREHOLDERS' EQUITY $777.5
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Exhibit C
PRO FORMA CAPITALIZATION OF HARVARD
-----------------------------------
See attached
HARVARD INDUSTRIES, INC.
PRO FORMA CAPITALIZATION AND BALANCE SHEET REFLECTING ACQUISITION OF BREED
TECHNOLOGIES, INC.
MARCH 2000(1)
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($ Millions)
Assets
Cash $25.1
Accounts Receivable 284.6
Inventory 119.6
Prepaid and Other Current Expenses 47.2
------
Total Current Assets 476.6
Net Property, Plant & Equipment 225.8
Other Long-term Assets 26.9
Capitalized Financing Costs 10.0
Fresh Start Asset 156.3
TOTAL ASSETS $895.5
Liabilities & Shareholders' Equity
Accounts Payable $155.6
Accrued Expenses 38.8
Income Taxes 10.4
Other Current Liabilities 107.0
------
Total Current Liabilities 311.7
Long-Term Debt 270.0
Other Long Term Liability 64.7
Pension/OPEB Liability 104.5
Deferred Taxes 7.2
Common Equity 137.4
TOTAL LIAB. & SHAREHOLDERS' EQUITY $895.5
(1) Reflects Harvard Industries as of March 31, 2000 and Breed Technologies as
of February 29, 2000.
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Exhibit D
UNRECORDED LIABILITIES
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Liability Amount
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Environmental Liabilities $20 million
European Restructuring Liabilities $20 million
Recall and Warranty Liabilities $15 million
Tax Reserve Liabilities $35 million
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Total Unrecorded Liabilities $90 million
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Exhibit E
LETTER FROM LENDER
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See attached.
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May 16, 2000
Harvard Industries, Inc.
3 Werner Way, Suite 210
Lebanon, New Jersey 08833
Dear Mr. Ted Vogtman:
In connection' with the purchase by Harvard Industries, Inc. ("Harvard")
of substantially all of the assets of Breed Technologies, Inc. ("Seller") and
the assumption of certain liabilities of Seller (the "Acquisition"), it has been
a pleasure working with you to provide to Harvard Industries, Inc., Breed
Technologies, Inc. and all other wholly owned subsidiaries, (individually 'and
collectively the "Borrowers") with an accommodation to finance the Acquisition,
and to provide working capital loans thereafter. In connection therewith, The
CIT Group/Business Credit, Inc. CUT") and Citibank, N.A. and its affiliate
Salomon Smith Barney, Inc. ("Citi") are pleased to inform you that they are
prepared to continue working toward, providing you with underwritten financing
and to form a syndicate of lenders (the "Lenders") for which CIT and Citi would
act as administrative and collateral Agents (in such capacity, the "Agents") to
make available to Borrowers a secured committed credit facility to the Borrowers
in the amount of $325,000,000 ("Line of Credit"), consisting of, and subject to,
the following:
Revolving Line of Credit
1. A revolving Line of Credit (the "Revolving Line of Credit") evidenced by a
Financing Agreement ("Agreement") providing for revolving advances (
"Revolving Loans") up to the lesser of (a) $225,000,000 or (b) the sum of
up to. (herein the "'Borrowing Base"): (i) eighty-five percent (85%) of
eligible accounts receivable plus (ii) the lesser of x) the sum of 1)
sixty percent (60%) of eligible raw material and finished goods inventory
plus 2) twenty-five percent (25%) of eligible work in process inventory or
y) a subline to be mutually agreed upon, in the aggregate at any time,
subject to such availability reserves as Agents may reasonably establish.
After giving effect to all Revolving Loans and Letters of Credit to be
extended at closing, the Borrowers' excess revolving loan availability, at
the closing only, shall be at least $50,000,000. Such requirement
contemplates that all of the Borrowers' debts, obligations and payables
are then current in accordance with its usual business practices. The
Borrowers must maintain a minimum availability of at least $25,000,000 for
all times that the Term Loan balance is in excess of $75,000,000.
Term Loan
2. A Term Loan in the amount of up to $100,000,000 ("Term Loan") based on
eighty 'percent (80%) of the orderly liquidation value of eligible
machinery and equipment plus fifty percent (50%) of the fair market value
of eligible real estate, to be amortized as follows:
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Quarter Quarterly Payments
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1-2 $ 0
3-4 $ 2,500,000
5-8 $ 3,750,000
9-12. $ 5,000,000
13-19 $ 9,375,000
19 $ 3,750,000
In addition to the amortization schedule, the Borrowers shall make
customary mandatory prepayments, upon disposition of assets, upon sale of
equity and Borrowers' excess cash flow, as mutually agreed upon. Such
prepayments will be applied to the Term Loan in the inverse order of
maturity, thereof. The definition and calculation of excess cash flow will
be mutually agreed upon.
Letter of Credit Subline
3. Within the Revolving Line of Credit the Agents will assist the Borrowers
in opening up to $30,000,000 at any time of standby letters of credit for
business purposes unrelated to the purchase of inventory. All letters of
credit shall be reserved from availability.
Term
4. The Agreement shall have an initial term of five (5) years Maturity. The
Term Loan shall be due and payable in full upon any termination of the
Agreement.
Interest Rate; and Fees
5. Interest will be computed and payable monthly on: (i) all outstanding
Revolving Loans at a rate equivalent to (x) the Citibank Base Rate PIL15
one and one-half percent ( 1.50%) per annum or (y) at the Borrowers'
option, Libor plus two and three-quarters percent (2.75%) per annum,
provided that the interest rate set forth in this clause (i) shall be
increased by one half of one percent (1/2 of 1%) per annum on the balance
of all outstanding Revolving Loans for any month during which Overadvances
are outstanding under the Agreement at anytime during such month; (ii) the
Term wan at a rate equivalent to (x) the Citibank Base Rate plus two and
one quarter percent (2.25%) per annum or (y) at the Borrowers' option,
Libor plus three and one-half percent (3.50%) per annum; The Citibank Base
Rate is the rate of interest per annum announced by Citibank, N.A. from
time to time as its prime rate in effect at its principal office in the
City of New York. Such rate is not intended to be the lowest rate charged
by Citibank, N.A. to its borrowers. The Borrowers may elect to use Libor
provided i) the Borrowers give the Agents three business days prior notice
of such, 6ection and ii) there is then no unwaived or uncured default
under the Agreement. In no event may the Borrowers have more than five (5)
Libor elections outstanding at any one time. Upon the Borrowers' election
of a Libor option, the Borrowers shall specify a one, two or three month
Libor period.
Collections will be credited to the Borrowers' account upon the Agents'
receipt of good funds at its bank account in New York, New York, provided,
however-, for the purposes of calculating interest, that Agents will
charge Borrowers' account one day after receipt of good funds.
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6. In addition to passing along all charges imposed on the Agents by the
letter of credit issuing bank, the Agents shall earn a fee equal to 2.75%
per annum, payable monthly, on the face amount of each standby letter of
credit.
7. A Line of Credit Fee, payable at the end of each month, of one-half of one
percent (0.50%) per annum computed on the difference between the Revolving
Line of Credit and the average daily outstanding Revolving Loan and Letter
of Credit balance.
8. An Administrative Management Fee of $250,000 per year, payable on the date
of closing and in advance, annually thereafter.
9. A $6,500,000 Facility Fee, $2,000,000 fully earned and payable upon
acceptance of a commitment letter, if so issued and $4,500,000 fully
earned and payable at closing.
10. The Borrowers may terminate the Agreement at any time. However, should the
Borrowers terminate the Agreement, prior to Maturity, the Agents shall
earn an Early Termination Fee determined by multiplying the Revolving Line
of Credit by 0) three percent (3%) if the Agreement is terminated on or
prior to one (1) year after closing, (ii) two percent (2%) if the
Agreement is terminated after one (1) year from closing but prior to two
(2) years after closing and (iii) one percent (III/o) if the Agreement is
terminated at any time thereafter prior to an Anniversary Date.
11. The Borrowers may prepay at any time, in whole or in part, the Term Loan.
Should 'the Borrowers so prepay the Term Loan, the Agents shall earn a
Prepayment Premium determined by multiplying the amount prepaid by (i) by
three percent (3%) if the prepayment occurs on or prior to one (1) year
after closing, (ii) two percent (2%) if the prepayment occurs after one
(1) year from closing but prior to two (2) years after closing and (iii)
one percent ~1%) if the prepayment occurs at any time thereafter.
Collateral
12. To secure the obligations due the Agents by the Borrowers and Guarantors,
i) the Borrowers and Guarantors will grant the Agents a first lien on all
assets of the Borrowers' and Guarantors'. including without limitation
present and future accounts receivable, inventory, trademarks, patents,
general intangibles, equipment, real estate (whether owned or leased), the
issued: and outstanding stock of any subsidiaries of the Borrowers and the
proceeds of each of the foregoing; and ii) the Borrowers' current
shareholders will pledge to the Agents their shares in the Borrowers. A
second lien on certain of the Borrowers' assets will be permitted,
provided such lien is on terms acceptable to the Agents and secures only
the obligations, evidenced by the subordinated notes, arising from the
Acquisition.;
Guarantees
13. Each Borrower will cross-guarantee the obligations of each other Borrower
under the documents. All non-borrowing affiliates will guarantee the
obligations of each Borrower.
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Covenants, Warranties and Events of Default
14. The Agreement will contain such warranties, representations, affirmative
and negative covenants (including financial and collateral reporting) and
events of default as are customary for the Agents in financing
transactions of this type. The Borrowers will provide to the Agents, among
other things, a weekly borrowing base certificate, monthly interim
financial statements and year-end statements. Such year end statements
must be certified by an independent public accountant mutually acceptable
to each of us.
Out of Pocket Expenses
15. The Borrowers shall reimburse the Agents (whether or not this transaction
is consummated) for all of Agents' out-of-pocket costs and expenses
(including reasonable fees and expenses of outside legal counsel and
travel, lodging and similar expenses of Agents' personnel in inspecting
and monitoring collateral) incurred in connection with the Agreement,
including, but not limited to, those incurred by the Agents in connection
with the preparation, execution and closing of this financing transaction,
and the perfection of liens and security interests.
Syndication
16. Upon acceptance of this letter, the Agents may initiate discussions with
potential lenders regarding their participation in this Line of Credit.
Borrowers will agree to a closing schedule that allows for the primary
syndication of the transaction prior to closing.
However, if it any time prior to the completion of syndication, the Agents
determine that it will not be able to sell down the Line of Credit to the
Agents' desired hold positions then the Agents reserve the right, after
consultation with the Borrowers, to adjust the structure and pricing as
the Agents deem appropriate in order to effect a successful syndication to
such desired !hold position.
If syndicated, the Agents would syndicate the transaction with the
assistance of Borrowers, Borrowers' management and their agents. Such
assistance would include, but not be limited to: (i) prompt assistance in
the preparation of an Information Memorandum and verification of the
accuracy and completeness of the information contained therein; and (ii)
participation of Borrowers' senior management in meetings and conference
calls with potential lenders at such time and places as the Agents may
reasonably request.
Indemnification
17. Borrowers agree to indemnify and hold harmless CIT and Citi and each of
their affiliates and each of their respective officers, directors,
employees, agents, advisors and representatives (each, an "Indemnified
Party") from and against any and all claims, damages, losses, liabilities
and expenses (including, without limitation, fees and disbursements of
counsel), joint or several, that may be incurred by or asserted or awarded
against any Indemnified Party arising. cut of or in connection with or
relating to any investigation, litigation or proceeding or the preparation
of any defense with respect thereto arising out of or in connection with
or relating to this letter or the transactions contemplated hereby, or any
use made or proposed to be made with the proceeds of the
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Line of Credit, whether or not such investigation litigation or proceeding
is brought by any Borrower or Guarantor, any of their shareholders: or
creditors, an Indemnified Party or any other person, or an Indemnified
Party is otherwise a party thereto and whether or not the transactions
contemplated hereby are consummated, except to the extent such claim,
damage, loss, liability or expense is found in a final judgment of a court
of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct. Borrowers further agree that no
Indemnified Party shall have any liability (whether direct or indirect, in
contract, tort or otherwise) to any Borrower or Guarantor any of their
shareholders or creditors for or in connection with the transactions
contemplated hereby, except to the extent such liability is found in a
final judgment of a court of competent jurisdiction to have resulted from
such Indemnified Party's gross negligence or willful misconduct.
Conditions of Closing
18. The foregoing is furnished as a means of affording the Borrowers a guide
to, and an outline of, the material terms and conditions of the proposed
facility land is not a commitment on the part of the Agents and should not
be construed as a commitment. Moreover, Borrowers appreciate that the
foregoing is subject to:
(a) successful completion of all the above items;
(b) the execution and delivery of appropriate legal documentation which
must be satisfactory in form and substance to Borrowers and Agents
and their respective counsels;
(c) the: Agents' satisfaction with the financial condition of the Seller
and the Bo rowers and an updated examination of the books and
records of the Borrowers and the Seller;
(d) Corporate structure, capital structure, other debt instruments,
material contract and governing, documents of Borrowers and their
affiliates, and tax effects resulting from Acquisition to be
acceptable;
(e) Cash consideration for Seller purchase not to exceed $230,000,000
and aggregate fees and closing costs (including those payable to the
Agents) not to exceed an additional $25,000,000;
(f) Purchase price to be funded in part by receipt of debt and/or equity
instruments in amounts and terms acceptable to the Agents;
(g) Satisfactory court approvals, in form and substance satisfactory to
Agents and their counsel.;
(h) the absence of any material adverse change in the financial
condition, business, prospects, profitability, assets or operations
of the Borrowers and/or the Seller. It is understood and agreed that
any adverse change in the terms, conditions, assumptions or
projections supplied by the Borrowers and on which the Agents
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based its decision to issue this letter may, in the Agents'
reasonable business discretion, be construed by the Agents as a
material adverse change;
(i) $20,000,000 junior secured subordinated notes. The notes evidencing
such debt are to be subordinate to the obligations due the Agents by
the Borrowers on terms reasonably satisfactory to the Agents. The
terms and provisions of the subordinated debt must be reasonably
satisfactory to the Agents in all respects;
(j) the Agents' receipt of, and satisfaction with, a fair market value
appraisal of real estate and an orderly liquidation value appraisal
of machinery and equipment accompanied by reliance letter from each
appraiser. The appraisals must be performed by an appraiser mutually
agreed upon who will be retained by the Agents but paid for by the
Borrowers;
(k) the Agents' receipt of, and satisfaction with, an environmental
audit and risk assessment conducted by an environmental engineering
firm retained by and acceptable to the Agents but paid for by the
Borrowers, on each parcel of real estate owned or leased by the
Borrowers and/or the Seller and the hazardous waste practices of the
Borrowers and/or the Seller;
(l) the Agents' receipt of, and satisfaction with, a 12 month Cash
Budget Projection for Borrowers and Seller;
(m) the Agents' receipt of, and satisfaction with, an industry analysis
evaluation of each Borrowers' business plan. The evaluation must be
performed by an industry expert mutually agreed upon, who will be
retained by the Agents but paid for by the Borrowers;
(n) the approval of each Agent's executive credit committee;
(o) the Agents' review of, and satisfaction with, an executed
acquisition agreement and the structure of the proposed Acquisition.
(p) Satisfactory syndication/assignment rights
Confidentiality
19. This letter and the financing arrangements described herein are delivered
with the: understanding that neither this letter nor the substance of said
proposed financing arrangements shall be disclosed by the Borrowers to
anybody outside their organization, except to those professional advisors
who am in a confidential relationship with the Borrowers and require
knowledge thereof to perform their duties (such as legal counsel,
accountants and financial advisers), the Creditors Committee of Breed or
where disclosure is required by law.
Good Faith Deposit
20. To induce the Agents to proceed with their consideration of the Borrowers'
requested financing accommodation and to confirm that the request is made
in good faith, the
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Agents request a $500,000 working fee (the "Working Fee") and a $250,000
good faith deposit (the "Good Faith Deposit"). The Good Faith Deposit will
be subject to replenishment as cost 6rE! incurred and paid. Said Good
Faith Deposit less any out-of pocket expenses the Agents may incur will be
returned to the Borrowers if the Agents are unable to offer the Borrowers
a financing arrangement. If a financing agreement is consummated, the
Agents will credit any amount remaining from such Good Faith Deposit
against the Loan Facility Fee due at closing. In any other event, the Good
Faith Deposit will be retained by the Agents.
This letter (a) embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter of this letter and supersedes
all prior agreements, Commitments, arrangements, negotiations or understandings,
whether oral or written, of the parties with respect thereto, and (b) can be
changed only by a writing signed by each of the parties hereto and shall bind
and benefit each of such parties and their respective successors and assigns.
This letter is to be used as a basis for continued discussions, and does not
constitute a commitment of CIT or Citi to lend or to syndicate a financing or an
agreement of CIT or Citi to prepare, negotiate, execute or deliver such a
commitment.
If the foregoing is acceptable to you, please so indicate by signing and
returning to us the enclosed copy of this letter together with your check to
CIT's order in the amount of $750,000, repr6senting the Working Fee and Good
Faith Deposit by the earlier of: i) any disclosure of this proposal in
connection with Harvard's Letter of Intent to Seller or ii) close of business
June 13, 2000. We we1come the opportunity to work with you on this from you
soon. Should you have any questions or transaction a J hope to he comments,
please feel free to contact us at anytime.
Very truly yours,
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ SIGNATORY
-------------------------------
Title:
CITIBANK, N.A.
By: /s/ THOMAS M. HALSON
-------------------------------------
Title: VICE PRESIDENT
Read and Agreed to;
Harvard Industries, Inc.
By: /s/ THEODORE W. VOGTMAN
-----------------------
Title: CHIEF FINANCIAL OFFICER
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