As filed with the Securities and Exchange Commission on March 18, 1997
Registration No. 333-18133
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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SYRATECH CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 3914 13-3354944
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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175 McClellan Highway
East Boston, MA 02128-9114
Phone: (617) 561-2200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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E. MERLE RANDOLPH
Vice President, Treasurer and
Chief Financial Officer
Syratech Corporation
175 McClellan Highway
East Boston, MA 02128-9114
Phone: (617) 561-2200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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With copies to:
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<S> <C> <C>
JAMES L. PURCELL, ESQ. JAMES WESTRA, ESQ. KIRK A. DAVENPORT, ESQ.
Paul, Weiss, Rifkind, Wharton & Garrison Hutchins, Wheeler & Dittmar Latham & Watkins
1285 Avenue of the Americas A Professional Corporation 885 Third Avenue
New York, New York 10019-6064 101 Federal Street New York, New York 10022-4802
(212) 373-3000 Boston, Massachusetts 02110 (212) 906-1200
(617) 951-6600
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |B)
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |B)
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |B)
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |B)
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |B)
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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 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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TABLE OF ADDITIONAL REGISTRANTS
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State or Other Primary Standard I.R.S. Employer Address, Including Zip Code and
Jurisdiction of Classification Code Identification Telephone Number, Including Area
Name Incorporation Number Number Code of Principal Executive Office
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<S> <C> <C> <C> <C>
175 McClellan Highway
Syratech Holding East Boston, Massachusetts 02128
Corporation Arkansas 5023 71-0747664 (617)561-2200
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175 McClellan Highway
Wallace International East Boston, Massachusetts 02128
Silversmiths, Inc. Delaware 3914 06-1183605 (617)561-2200
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175 McClellan Highway
East Boston, Massachusetts 02128
Wallace International de P.R., Inc. Delaware 3914 66-0402645 (617)561-2200
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175 McClellan Highway
East Boston, Massachusetts 02128
International Silver Company Delaware 5023 04-3105031 (617)561-2200
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175 McClellan Highway
East Boston, Massachusetts 02128
International Silver de P.R., Inc. Delaware 3545 66-0467204 (617)561-2200
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175 McClellan Highway
East Boston, Massachusetts 02128
PMW Silver de P.R., Inc. Delaware 3356 66-0503108 (617)561-2200
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175 McClellan Highway
East Boston, Massachusetts 02128
Towle Manufacturing Company Delaware 3914 04-3093194 (617)561-2200
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175 McClellan Highway
East Boston, Massachusetts 02128
Rosemar Silver Company, Inc. Delaware 3914 04-3094668 (617)561-2200
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175 McClellan Highway
East Boston, Massachusetts 02128
Towle Holloware, Inc. Delaware 5023 04-3094663 (617)561-2200
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175 McClellan Highway
East Boston, Massachusetts 02128
Farberware Inc. Delaware 5023 13-3880567 (617)561-2200
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175 McClellan Highway
East Boston, Massachusetts 02128
Silvestri, Inc. Delaware 5199 04-3309807 (617)561-2200
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175 McClellan Highway
Silvestri, Inc. of East Boston, Massachusetts 02128
South Carolina South Carolina 6512 57-1046114 (617)561-2200
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6048 South York Road
Gastonia, North Carolina 28052
Rauch Industries, Inc. North Carolina 5199 56-1074945 (704)867-5333
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6048 South York Road
Gastonia, North Carolina 28052
Rochard, Inc. North Carolina 5199 13-2731346 (704)867-5333
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6048 South York Road
Gastonia, North Carolina 28052
Holiday Products, Inc. North Carolina 5199 56-1803414 (704)867-5333
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6048 South York Road
Gastonia, North Carolina 28052
Northstar Sales Corporation North Carolina 6512 56-1678701 (704)867-5333
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175 McClellan Highway
East Boston, Massachusetts 02128
Leonard Florence Associates, Inc. Massachusetts 5023 04-2904074 (617)561-2200
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4251 Crisfield Highway
Crisfield, Maryland 21871
CHI International, Inc. Maryland 3914 52-1930353 (410)968-0503
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State or Other Primary Standard I.R.S. Employer Address, Including Zip Code and
Jurisdiction of Classification Code Identification Telephone Number, Including Area
Name Incorporation Number Number Code of Principal Executive Office
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<S> <C> <C> <C> <C>
175 McClellan Highway
Syratech Security East Boston, Massachusetts 02128
Corporation Massachusetts 4841 04-3270184 (617)561-2200
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175 McClellan Highway
Syratech West Coast East Boston, Massachusetts 02128
Warehouse Corp. California 6512 33-0689857 (617)561-2200
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175 McClellan Highway
175 Amlegion Revere Massachusetts East Boston, Massachusetts 02128
Realty Trust Trust 6798 04-6812249 (617)561-2200
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175 McClellan Highway
East Boston, Massachusetts 02128
Syratech Silver Sales Corp. Georgia 6512 04-3094665 (617)561-2200
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SYRATECH CORPORATION
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CROSS REFERENCE SHEET
Location in Prospectus of Information Required by
Part I of Form S-3
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Item No. Caption Location in Prospectus
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1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus......................... Facing Page of Registration Statement; Cross-
Reference Sheet; Outside Front and Inside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................. Inside Front Cover Pages of Prospectus; Available
Information
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges.............................. Summary; Risk Factors; Exhibit 12.1
4. Use of Proceeds........................................ Use of Proceeds
5. Determination of Offering Price........................ Not applicable
6. Dilution............................................... Not applicable
7. Selling Security Holders............................... Not applicable
8. Plan of Distribution................................... Underwriting
9. Description of Securities to be registered............. Description of Senior Notes
10. Interests of Named Experts and Counsel................. Experts
11. Material Changes....................................... Not applicable
12. Incorporation of Certain Information by
Reference.............................................. Incorporation of Certain Documents by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities......... Part II--Item 17 Undertakings
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<PAGE>
SUBJECT TO COMPLETION, DATED MARCH , 1997
PRELIMINARY PROSPECTUS
$155,000,000
SYRATECH(TM)
------------
CORPORATION
% Senior Notes due 2007
-----------
The % Senior Notes due 2007 (the "Senior Notes") are being offered (the
"Offering") by Syratech Corporation, a Delaware corporation ("Syratech" or the
"Company"). The net proceeds of the Offering, together with the net proceeds of
the other financing described herein, will be used to support a recapitalization
(the "Recapitalization") of Syratech, pursuant to an Agreement and Plan of
Merger (the "Merger Agreement") providing for the merger of the Company and THL
Transaction I Corp ("THL I"), a Delaware corporation organized by Thomas H. Lee
Company, (the "Merger") with Syratech surviving such Merger and to pay related
transaction costs. The consummation of this Offering, the Recapitalization and
the financing thereof are conditioned upon each other.
The Senior Notes mature on , 2007, unless previously redeemed.
Interest on the Senior Notes is payable semiannually on and , commencing
, 1997. The Senior Notes will be redeemable at the option of the Company, in
whole or in part, on or after , 2002, at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the redemption date.
Notwithstanding the foregoing, at any time on or before, , 2000 the Company
may redeem up to 35% of the original aggregate principal amount of the Notes
with the net proceeds of a public offering of common stock of the Company at a
redemption price equal to % of the principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the redemption date; provided that at least
$100.0 million in aggregate principal amount of Senior Notes remain outstanding
immediately after the occurrence of such redemption; and provided, further, that
such redemption shall occur within 45 days of the date of the closing of such
public offering. Upon a Change of Control (as defined herein), the Company will
be required to make an offer to repurchase all outstanding Senior Notes at 101%
of the aggregate principal amount thereof plus accrued and unpaid interest, if
any, to the date of repurchase. See "Description of Senior Notes."
The Senior Notes will be general unsecured obligations of the Company
ranking senior to all existing and future subordinated indebtedness of the
Company and pari passu in right of payment to all unsubordinated indebtedness of
the Company, including indebtedness under the New Credit Facility (as defined
herein). However, the obligations of the Company under the New Credit Facility
will be secured by the accounts receivable and inventory of the Company and its
domestic subsidiaries and, accordingly, such indebtedness will effectively rank
senior to the Senior Notes to the extent of such assets. The Senior Notes will
be fully and unconditionally guaranteed (the "Subsidiary Guarantees") on a joint
and several basis by each of the Company's domestic subsidiaries (the
"Guarantors"). The Subsidiary Guarantees will rank senior to all existing and
future subordinated indebtedness of the Guarantors and pari passu with all other
unsubordinated indebtedness of the Guarantors, including the guarantees of
indebtedness under the New Credit Facility. As of December 31, 1996, on a pro
forma basis after giving effect to the Recapitalization, including the Offering
and the application of the proceeds therefrom, as described under "Use of
Proceeds," the Company and its subsidiaries would have had $17.5 million of
secured indebtedness (including outstanding letters of credit) which would have
effectively ranked senior to the Senior Notes.
The Company does not intend to list the Senior Notes on any national
securities exchange. See "Risk Factors -- Absence of Public Market."
See "Risk Factors" beginning on Page 13 for a discussion of factors that
should be considered in evaluating an investment in the Senior Notes.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Price to Discounts and Proceeds to
Public(1) Commissions(2) Company(2)(3)
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Per Senior Note........ % % %
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Total.................. $ $ $
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(1) Plus accrued interest, if any, from , 1997.
(2) The Company and the Guarantors have, jointly and severally, agreed to
indemnify the Underwriters (as defined herein) against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting expenses payable by the Company and the Guarantors,
estimated at $ .
The Senior Notes are being offered, subject to prior sale, by the Underwriters
when, as and if issued to and accepted by the Underwriters, and subject to
various prior conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the Senior Notes will be made in New York, New York on or about
, 1997.
NationsBanc Capital Markets, Inc. Chase Securities Inc.
The date of this Prospectus is , 1997.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities of any State.
<PAGE>
[INSIDE FRONT COVER:]
1. Seven photographs of Syratech silver products, including flatware, serving
pieces and picture frames.
2. Stylized tradenames: Towle Silversmiths, Wallace Silversmiths, International
Silver Company, Rochard, Inc., Faberware, C.J. Vander Limited, Elements,
Tuttle La Preference, and Melannco.
[INSIDE BACK COVER:]
1. Six photographs of Syratech seasonal products, including Christmas
ornaments and Christmas decorations.
2. Stylized tradenames: Rauch Industries, Holiday Workshop, Potpourri Designs
and Silvestri.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SENIOR NOTES.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SENIOR NOTES IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates by reference documents which are not presented
herein or delivered herewith. Copies of any such documents relating to the
Company, other than exhibits to such documents (unless such exhibits
specifically are incorporated by reference in such documents), are available
without charge, upon written or oral request, from Syratech Corporation, 175
McClellan Highway East Boston, Massachusetts 02128-9114, Attention: Faye A.
Florence, Esq., Vice President, Secretary and General Counsel, telephone: (617)
561-2200. In order to ensure timely delivery of the documents requested, any
such request should be made by April 1, 1997.
The following documents previously filed by the Company (File No. 1-12624)
with the Commission are incorporated in this Prospectus by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
(2) The Company's Proxy Statement, dated April 8, 1996 which was mailed to
the Company's stockholders in connection with the Annual Meeting of
Stockholders held on May 9, 1996.
(3) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1996.
(4) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1996.
(5) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1996.
(6) The Company's Current Report on Form 8-K dated February 29, 1996, as
amended by the Current Report on Form 8-K/A dated February 27, 1997 (which
supersedes a Current Report on Form 8-K/A dated April 29, 1996); Current
Report on Form 8-K dated April 17, 1996, as amended by the Current Report on
Form 8-K/A dated August 26, 1996; Current Report on Form 8-K dated May 1,
1996; Current Report on Form 8-K dated July 11, 1996; Current Report on Form
8-K dated September 17, 1996; Current Report on Form 8-K dated October 25,
1996; and Current Report on Form 8-K dated November 12, 1996.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the date of
the Merger shall be deemed to be incorporated by reference herein and to be part
hereof from the date of the filing of such reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute part of this Prospectus.
FORWARD-LOOKING STATEMENTS
Except for the historical information contained or incorporated by
reference in this Prospectus, the matters discussed or incorporated by reference
herein are forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company, or industry results,
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the risk factors set forth under "Risk Factors" as well as the
following: general economic and business conditions; industry capacity; industry
trends; overseas expansion; the loss of major customers; changes in demand for
the Company's products; the timing of orders received from customers; cost and
availability of raw materials; dependence on foreign sources of supply; changes
in business strategy or development plans; availability and quality of
management; availability, terms and deployment of capital; and the seasonal
nature of the business. Special attention should be paid to such forward-looking
statements including, but not limited to, statements relating to (i) the
Company's ability to execute its growth strategies and to realize its growth
objectives, (ii) the Company's planned expansion of its product offerings, (iii)
the Company's ability to obtain sufficient resources to finance its working
capital and capital expenditure needs and provide for its known obligations, and
(iv) the continuation of, and the Company's ability to benefit from, the vendor
consolidation trend in the retail industry described elsewhere in this
Prospectus.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and
should be read in conjunction with the more detailed information and financial
data, including the notes thereto, appearing elsewhere in this Prospectus or
incorporated herein by reference. Unless the context indicates otherwise, all
references herein to "Syratech" or the "Company" shall refer to Syratech
Corporation and its subsidiaries.
The Company
Overview
Syratech designs, manufactures, imports and markets a diverse portfolio of
tabletop, giftware and seasonal products. The Company is a leading domestic
manufacturer and marketer of sterling silver flatware, sterling silver and
silver-plated hollowware. The Company also offers a number of other
complementary tabletop and giftware items, including stainless steel flatware,
brass hollowware, picture frames and photo albums, glassware, woodenware and
ceramics. Tabletop and giftware products generated approximately 63.4% of net
sales for the year ended December 31, 1996. The Company also is a leading
domestic manufacturer and marketer of seasonal products including Christmas
ornaments as well as a distributor of Christmas trim, lighting and tree skirts.
Seasonal products generated approximately 36.6% of net sales for the year ended
December 31, 1996.
Syratech has positioned itself as a single-source supplier to retailers by
offering a wide assortment of products across multiple price points through its
"good-better-best" strategy. This strategy enables the Company to sell its
products through a broad array of distribution channels, including retail
specialty stores, department stores, mass market merchandisers, catalogue
showrooms and warehouse clubs. Syratech markets its products under numerous
Company-owned tradenames including the Towle Silversmiths[RegTM], Wallace
International Silversmiths[RegTM]and International Silver Company[RegTM]
tradenames which are used in connection with the sale of tabletop and giftware
items and the Rauch[RegTM], Silvestri[RegTM] and Potpourri[RegTM] tradenames
which are used in connection with the sale of Christmas and other seasonal
merchandise.
Syratech has made a number of recent acquisitions to broaden and complement
its existing product lines. The Company has significantly enhanced the value of
acquired product lines by integrating them into the Company's existing
infrastructure. During 1996, the Company acquired Rauch, a leading domestic
manufacturer and marketer of Christmas ornaments, and C.J. Vander, a U.K.
manufacturer and marketer of prestigious sterling silver flatware and
hollowware. Also in 1996, the Company acquired certain assets, including the
tradenames, of Silvestri, a high-end manufacturer and marketer of Christmas
ornaments, collectibles, lighting and trim as well as other giftware and
decorative accessories, and Potpourri, a manufacturer and marketer of Christmas
products. The Company continually introduces new products and expands the
distribution of its existing products. As a result, the Company has generated
significant growth in net sales and Adjusted EBITDA from $103.7 million and
$11.8 million, respectively, in 1992 to $271.5 million and $29.8 million,
respectively, on a pro forma basis, in 1996. Furthermore, the Company believes
that the continued integration of the acquisitions into its existing business
will position it to increase sales and profitability.
Competitive Strengths
The Company's goal is to become the leading domestic, single-source
supplier of tabletop, giftware and seasonal products to retailers. To achieve
this goal, the Company will rely on its core competitive strengths, which are as
follows:
Leading Market Positions. The Company is one of the leading domestic
manufacturers and marketers of sterling silver flatware and sterling silver and
silverplated hollowware. These products are sold under the Wallace, Towle and
International Silver tradenames, which are well-recognized and date back to the
American Colonial period. In addition, the Company is one of the leading
domestic manufacturers of Christmas ornaments. These products are sold under the
Rauch, Silvestri and Potpourri tradenames, which are well-established brands for
Christmas and other seasonal merchandise. Historically, the Company has been
able to increase sales by leveraging its leading market positions, strong
presence with retailers and strong brand identity with consumers to introduce
new products and product categories.
4
<PAGE>
Broad Portfolio of Products with Well-Recognized Tradenames. The Company
provides a broad offering of quality products at multiple price points. These
items range from exclusive prestige products, such as sterling silver flatware
and hollowware, to moderately priced products, including silverplated and
stainless steel flatware, silverplated and brass hollowware and other giftware
and seasonal merchandise.
Syratech uses Company-owned and licensed tradenames as merchandising tools
to assist retailers in coordinating their product offerings and differentiating
their products from those of their competitors. In addition to the Wallace,
Towle, International, Rauch, Silvestri and Potpourri tradenames, the Company
markets giftware products under numerous other tradenames, including
Rochard[RegTM], Holiday Workshop[RegTM], Melannco[RegTM] and Elements[RegTM].
The Company believes that its strongest brands draw customers into retail stores
specifically to purchase products bearing those tradenames. In addition to its
own tradenames, the Company produces a variety of products under license from
certain entities including The Walt Disney Company[RegTM], Cuisinart[RegTM],
Victoria & Albert Museum[RegTM] and Faberge, Inc.[RegTM].
The Company recently acquired certain assets, including the intellectual
property, of Farberware, Inc. Following this acquisition, the Company licensed
the Farberware tradename to third parties for use on cookware and bakeware,
small electric and certain other commercial electric items. The Company is
currently marketing certain products under the Farberware tradename and believes
there are significant opportunities to develop the tradename in other product
categories which have not been otherwise licensed to third parties.
The Company's diverse product lines allow it to target a wide range of
customers and to respond more effectively to changes in retail distribution and
consumer preferences. Furthermore, the vendor consolidation trend in the retail
industry increases demand for vendors, like the Company, who can make timely
deliveries of a broad range of quality products and provide advertising and
other sales support.
Diversified Distribution Channels. The Company sells its products to
approximately 30,000 customers in most major distribution channels, including
retail specialty stores, such as jewelry, seasonal and nonseasonal giftware and
collectible stores, department stores, mass market merchandisers, catalogue
showrooms, warehouse clubs, premium and incentive marketers, drug store chains
and home centers. The Company believes that the recent Rauch and Silvestri
acquisitions will strengthen the Company's presence with mass market
merchandisers and department and specialty stores, respectively. In addition,
the Company has a policy of not owning or operating Company outlet stores and
believes that this policy further strengthens relationships with customers. The
Company's broad customer base, both in terms of number of customers and
distribution channels, reduces exposure to any single customer or distribution
channel. In 1996, no single customer accounted for more than 8% of the Company's
net sales.
Innovative Product Development. The vast majority of the Company's
products, including products that are sourced from outside vendors, are designed
by the Company's design team and independent designers in conjunction with the
Company's product development and marketing teams. The Company's design and
product development and marketing teams collaborate (i) to introduce innovative
new products and product categories, such as the Holiday Workshop line of
seasonal products, the Hostess Helpers[RegTM] sterling accessory line and a
dinnerware category that coordinates with sterling silver flatware and (ii) to
develop acquired brands into successful product lines for the Company, such as
the Melannco lines of picture frames and photo albums and the Elements glassware
lines.
Integrated Manufacturing and Sourcing. The Company relies both on its own
domestic manufacturing capabilities and on a variety of suppliers located
primarily in the Asia Pacific Rim to deliver quality products at competitive
prices to its customers. The Company's decision to manufacture or to import is
based largely upon expertise, quality, availability and cost. In order to ensure
quality, imported products are generally manufactured using Company-owned tools
and dies. In 1996, through its import organization comprised of approximately
150 employees, both in the U.S. and overseas, the Company sourced products from
approximately 480 manufacturers, with whom in many cases it has had
long-standing relationships.
5
<PAGE>
Business Strategy
The Company has developed and is implementing a business strategy to build
upon its core operating strengths and enhance profitability.
Leverage Recent Acquisitions. The Company believes that opportunities for
growth in sales and profitability exist through successfully integrating its
recent acquisitions into the Company's sales and marketing organization and
consolidating and rationalizing certain operations. Historically, the Company
has expanded and augmented acquired product lines through leveraging internal
marketing expertise and existing distribution relationships.
The Company plans to expand the distribution of Rauch, Silvestri and
Potpourri products by marketing them through the Company's established
distribution channels and also plans to add new products to their existing
lines. By integrating Rauch, Silvestri and Potpourri with the Company's
internally developed Holiday Workshop lines of seasonal products, the Company
has significantly expanded its product offerings in this product category, both
in terms of types of product and retail price points, and strengthened its
presence in major retail channels. In addition, the Company believes that such
strengthened presence will provide opportunities to cross-sell the Company's
tabletop and giftware product lines through Rauch and Silvestri distribution
channels.
Through the acquisition of C.J. Vander, the Company believes that it will
be able to expand the distribution of Wallace and Towle sterling silver and
silverplated product lines into the European market, primarily through C.J.
Vander's existing distribution channels. In addition, the Company intends to
expand the distribution of C.J. Vander products in the United States through the
Company's independent representatives who sell to high-end specialty and
department stores.
In addition, the Company believes that the recent acquisitions will enable
it to achieve cost savings through (i) the consolidation of warehouses,
showrooms and manufacturing facilities, (ii) efficiencies resulting from
increasing sales volume through its existing distribution network and (iii)
reductions in certain general and administrative expenses, such as MIS, human
resources and credit analysis. For example, the Company is consolidating its
distribution facilities in the Western United States by building its own
warehouse to reduce costs, increase capacity and serve its customers more
efficiently.
Expand Distribution of Existing Product Lines. The Company believes that it
has significant opportunities to expand the distribution of its existing product
lines by increasing the penetration of existing retailer customers and the
number of retail outlets to which it sells. Beginning in 1994, the Company
implemented a program with a specialty retailer and franchisee, whereby the
Company sources, markets and distributes giftware products for the customer's
retail system comprised of several thousand stores. As a result, the Company has
identified several growth opportunities, both in terms of expanded product
offerings and additional store coverage. In addition, the Company intends to
expand the distribution of several product lines introduced in the past several
years, such as Melannco and Elements, which the Company believes are growth
opportunities that have not yet been fully exploited.
Broaden Product Offerings. The Company expects to make a number of new
product introductions each year. As a result of the planned investments in
tools, dies and machinery, the Company believes that it will be able to broaden
significantly its offering of Christmas and other seasonal merchandise beginning
in 1997. The Company intends to capitalize on the Farberware tradename by
introducing new products in categories as to which exclusive rights to the
tradename have not been granted to third parties. In addition, the Company
continues to expand and upgrade its line of sterling silver, silverplated and
other tabletop and giftware products.
Invest Further in Technology and Productivity to Maintain a Low-Cost
Structure. In order to support the growth of its business, during 1997 the
Company plans to invest $15 million to expand its manufacturing, warehousing and
distribution capabilities. In addition, the Company intends to invest in
application solutions to enhance its Electronic Data Interchange (EDI) and
warehousing capabilities. The Company plans to add a Warehousing Management
System (WMS) to each of its warehouses. These systems will enhance the Company's
ability to service its customers by improving its order processing and logistics
and storage utilization, minimizing order cycle times, enhancing inventory
management, and ensuring that customer orders are processed efficiently.
Additionally, the Company is planning to expand its manufacturing capabilities
by acquiring new tools, dies and
6
<PAGE>
machinery. The Company also has purchased a 828,000 square foot manufacturing
and distribution facility in Chester, South Carolina which will increase
production capacity and reduce costs.
Make Selected Acquisitions. The Company believes that the giftware and
seasonal markets and, to a lesser extent, the tabletop market are highly
fragmented with a number of small manufacturers and marketers of limited
products lines. The Company believes that these industry dynamics and the
continuing trend among retailers to consolidate their vendor base should
generate attractive opportunities to acquire complementary brands, products,
product categories and businesses that will provide operating synergies.
The Recapitalization
Pursuant to a Restated Agreement and Plan of Merger dated November 27,
1996, effective as of October 23, 1996, as amended effective as of February 14,
1997 (the "Merger Agreement"), between Syratech and THL I, THL I will be merged
with and into Syratech (the "Merger"), with Syratech surviving the Merger. The
Merger, together with financings discussed below, are collectively referred to
as the "Recapitalization." Pursuant to the terms of the Merger:
(i) All shares of Syratech Common Stock, other than those retained by
stockholders as discussed below, will be converted into the right to
receive $32 per share in cash (except that Mr. Leonard Florence, the
Company's President, Chief Executive Officer and Chairman of the Board,
will receive $28 in cash per share) following the Merger.
(ii) Stockholders of the Company, other than management, may elect to retain
up to 34.75% of their shares of Syratech Common Stock, up to a maximum of
868,250 shares.
(iii) Mr. Leonard Florence has agreed to retain 528,472 shares of Syratech
Common Stock, and management, other than Mr. Florence, intends to retain
123,766 shares of Syratech Common Stock. In addition, Mr. Florence will
contribute 35,232 shares of Syratech Common Stock to the Company upon
consummation of the Merger, which shares shall be cancelled for no
additional consideration. The total number of shares retained by Mr.
Florence and management is expected to be 652,238, which represents
approximately $20.9 million, or approximately 17.2% of the equity of the
Company.
Upon consummation of the Merger:
(i) The common stock of THL I will be converted into an aggregate of
3,131,780 shares of Syratech Common Stock (less the number of shares
(not to exceed 781,250) retained by stockholders other than management
stockholders) and the preferred stock of THL I will be converted into an
aggregate of 18,000 shares of cumulative redeemable preferred stock,
$.01 par value per share (the "Cumulative Redeemable Preferred Stock")
of Syratech. As a result, affiliates of Thomas H. Lee Company ("Lee
Affiliates"), including Thomas H. Lee Equity Fund III, L.P. (the
"Fund"), will own approximately $100.2 million (less the value of shares
(not to exceed $25.0 million) retained by stockholders other than
management stockholders) of the common equity of the Company and
$18.0 million of the preferred equity of the Company (collectively, the
"Equity Investment"). This will represent up to 82.8% of the common
equity and 100% of the preferred equity of the Company.
(ii) Syratech will enter into the New Credit Facility, which will provide for
revolving credit borrowings of up to $130 million, and use a portion of
the borrowings thereunder, along with the proceeds from the Senior Notes
and the Equity Investment, (a) to pay stockholders of Syratech $32 per
share for their shares of Syratech Common Stock which are not being
retained (other than shares held by Mr. Florence who will receive $28
per share), (b) to pay transaction fees and expenses and (c) to
refinance existing indebtedness of Syratech.
See "The Recapitalization," "Use of Proceeds" and "Description of Other
Indebtedness."
7
<PAGE>
The Offering
<TABLE>
<S> <C>
Securities Offered............. $155.0 million aggregate principal amount of % Senior Notes due
2007 of the Company (the "Senior Notes").
Maturity Date.................. ____________________, 2007
Interest Payment Dates......... ____________ and ___ , commencing , 1997.
Optional Redemption............ On or after , 2002, the Company may redeem the Senior
Notes, in whole or in part, at the redemption prices set forth herein,
plus accrued and unpaid interest, if any, to the date of redemption.
Notwithstanding the foregoing, at any time on or before ,
2000, the Company may redeem up to 35% of the original aggregate
principal amount of Senior Notes, with the net cash proceeds of a
public offering of common stock of the Company, at a redemption
price of % of the principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the redemption date; provided that
at least $100.0 million in aggregate principal amount of Senior Notes
remain outstanding immediately after the occurrence of such
redemption; and provided, further, that such redemption shall occur
within 45 days of the date of the closing of such public offering. See
"Description of Senior Notes -- Optional Redemption."
Ranking........................ The Senior Notes will be general unsecured obligations of the
Company, ranking senior to all existing and future subordinated
indebtedness of the Company and pari passu in right of payment with
all other existing and future unsubordinated indebtedness of the
Company, including indebtedness under the New Credit Facility (as
defined herein). However, the obligations of the Company under the
New Credit Facility will be secured by the accounts receivable and
inventory of the Company and its domestic subsidiaries and,
accordingly, such indebtedness will effectively rank senior to the
Senior Notes to the extent of such assets. As of December 31, 1996,
on a pro forma basis after giving effect to the Recapitalization,
including the Offering and the application of the proceeds therefrom,
as described under "Use of Proceeds," the Company and its
subsidiaries would have had $17.5 million of secured indebtedness
(including outstanding letters of credit) which would have effectively
ranked senior to the Senior Notes.
Subsidiary Guarantees.......... The payment of principal, premium, if any, and interest on the Senior
Notes will be fully and unconditionally guaranteed on a joint and
several basis (the "Subsidiary Guarantees") by each of the Company's
domestic subsidiaries (collectively, the "Guarantors"). The Subsidiary
Guarantees will rank senior to all existing and future subordinated
indebtedness of the Guarantors and pari passu with all other
unsubordinated indebtedness of the Guarantors, including the
guarantees of indebtedness under the New Credit Facility. The
Guarantors' obligations under the New Credit Facility, however, will
be secured by a lien on certain assets of the Guarantors and,
accordingly, such indebtedness will rank prior to the Subsidiary
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Guarantees with respect to such assets. However, the Company's direct
and indirect foreign subsidiaries will not provide any guarantees of,
or other credit support for, the Senior Notes, and, accordingly, the
indebtedness and other liabilities of such subsidiaries will
effectively rank senior in right of payment to the Senior Notes to the
extent of the assets of such subsidiaries. As of December 31, 1996,
such subsidiaries had indebtedness and other liabilities (including
trade payables) of $3.7 million.
Change of Control......... Upon a Change of Control (as defined herein), the Company will be
required to make an offer to repurchase all outstanding Senior Notes at
101% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of repurchase. See "Description of Senior
Notes -- Repurchase at the Option of Holders -- Change of Control."
Covenants................. The Indenture pursuant to which the Senior Notes will be issued (the
"Indenture") will restrict, among other things, the ability of the
Company and its subsidiaries to incur additional indebtedness, pay
dividends or make certain other restricted payments, incur liens,
engage in any sale and leaseback transaction, sell stock of
subsidiaries, apply net proceeds from certain asset sales, merge or
consolidate with any other person, sell, assign, transfer, lease, envy
or otherwise dispose of substantially all of the assets of the Company,
enter into certain transactions with affiliates, or incur indebtedness
that is subordinate in right of payment to any Indebtedness and senior
in right of payment to the Senior Notes or a Subsidiary Guarantee.
Use of Proceeds........... The Company intends to use the net proceeds of the Offering, together
with the net proceeds of the Equity Investment and borrowings under the
New Credit Facility (i) to support the Recapitalization (ii) to pay
transaction costs associated with the Recapitalization and (iii) to
refinance existing indebtedness. See "Use of Proceeds."
</TABLE>
Risk Factors
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Notes.
9
<PAGE>
Summary Consolidated Historical and Unaudited Pro Forma Financial Data
The following table presents summary consolidated historical financial
information as of December 31, 1992 through 1996 and for each of the years in
the five-year period ended December 31, 1996 and has been derived from the
consolidated financial statements of the Company. In addition, the table
presents unaudited summary pro forma consolidated financial data of the Company,
as adjusted to give effect to the Recapitalization and the Rauch Acquisition
which have been derived from, and should be read in conjunction with, the
unaudited Pro Forma Condensed Consolidated Financial Statements, including the
notes thereto, appearing elsewhere in this Prospectus. See "Pro Forma Condensed
Consolidated Financial Statements." The summary unaudited pro forma consolidated
financial data are presented for illustrative purposes only and are not
necessarily indicative of the operating results or financial position that would
have occurred if the Recapitalization or other transactions had been consummated
on the dates indicated, nor are they necessarily indicative of future operating
results or financial position. The consolidated balance sheets of the Company as
of December 31, 1995 and 1996 and the consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996, together with the notes thereto and the related report
of Deloitte & Touche LLP, independent auditors, are included elsewhere herein.
The information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and Notes thereto of the Company included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------
Pro Forma
1992 1993 1994 1995 1996 1996
----------- ----------- ----------- ----------- --------------- ------------------
(dollars in thousands) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data(1):
Net sales..................................... $103,735 $122,682 $147,291 $169,520 $ 270,931 $ 271,540
Cost of sales................................. 70,361 84,643 104,600 119,836 194,113 194,544
-------- -------- -------- -------- ---------- -----------
Gross profit.................................. 33,374 38,039 42,691 49,684 76,818 76,996
Selling, general and administrative
expenses..................................... 24,364 27,727 31,613 34,239 57,664 58,870
Other operating income(2)..................... -- -- -- -- 3,948 3,948
-------- -------- -------- -------- ---------- -----------
Income from operations........................ 9,010 10,312 11,078 15,445 23,102 22,074
Interest expense.............................. (2,757) (948) (559) (287) (3,150) (22,713)(3)
Interest income............................... 23 82 98 4,881 771 792
Other income(4)............................... -- -- -- -- 11,900 11,900
-------- -------- -------- -------- ---------- -----------
Income before income taxes.................... 6,276 9,446 10,617 20,039 32,623 12,053
Provision for income taxes.................... 1,657 2,390 2,758 6,863 12,234 4,520
-------- -------- -------- -------- ---------- -----------
Income from continuing operations............. 4,619 7,056 7,859 13,176 20,389 7,533
Discontinued operations:
Income from discontinued operations,
net of income taxes.......................... 10,284 10,838 12,068 2,572 -- --
Gain on sale of Syroco, Inc., net of
income taxes................................. -- -- -- 30,451 -- --
-------- -------- -------- -------- ---------- -----------
Net income.................................... $ 14,903 $ 17,894 $ 19,927 $ 46,199 $ 20,389 $ 7,533
======== ======== ======== ======== ========== ===========
Earnings per common share from continuing
operations.................................. $ 0.55 $ 0.60 $ 0.67 $ 1.12 $ 2.32
======== ======== ======== ======== ==========
Other Financial Data:
EBITDA(5)..................................... $ 11,824 $ 13,363 $ 14,348 $ 18,698 $ 24,357 $ 23,460
Adjusted EBITDA............................... -- -- -- -- 30,528(6) 29,785(7)
Capital expenditures.......................... 5,557 2,781 2,603 2,679 15,125 15,218
Depreciation and amortization................. 2,814 3,051 3,270 3,253 4,767 4,898
Ratio of earnings to fixed charges(8)......... 2.9x 7.4x 10.2x 23.4x 7.7x 1.3x
Adjusted cash interest expense................ -- -- -- -- -- (19,843)(9)
Ratio of Adjusted EBITDA to Adjusted
cash interest expense........................ -- -- -- -- -- 1.5x
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------
Pro Forma
1992 1993 1994 1995 1996 1996
---------- ----------- ----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital......................... $87,458 $105,115 $125,136 $ 122,050 $119,918 $116,630
Total assets............................ 141,294 152,060 190,684 220,566 227,254 234,737
Total debt(10).......................... 6,446 5,060 15,379 51,735(11) 6,636 162,319
Cumulative Redeemable Preferred Stock -- -- -- -- -- 18,000
Common stockholders' equity............. 112,381 131,005 152,100 146,596 170,248 4,048
</TABLE>
- ------------
(1) The income statement has been restated to reflect Syroco, Inc. as a
discontinued operation. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Recent Transactions."
(2) Consists of income from the sale of Farberware inventory, and other
operating income, net of certain selling, general and administrative
expenses, relating to the sale of Farberware inventory. The Company has
licensed the right to manufacture, market and distribute these products to
third parties. See "Business--Recent Transactions."
(3) The pro forma statements give effect to the Recapitalization and the
corresponding increase in debt levels and interest expense. Because
interest rates in connection with the Senior Notes and the New Credit
Facility have not been determined as of the date of this Prospectus, the
Company has estimated pro forma interest expense for purposes of this
presentation. See "Pro Forma Condensed Consolidated Financial Statements"
for additional information on assumed interest rates and the effects on
certain income statement items of incremental changes in such assumed
interest rates.
(4) Consists of nonrecurring pre-tax income related to licensing the Farberware
name on cookware and bakeware.
(5) "EBITDA" is defined herein as income before income taxes, plus depreciation
and amortization expense and interest expense, net, less other income of
$3,512 related to the sale of Farberware inventory less the non- recurring
pre-tax income of $11,900 related to the one-time licensing of the
Farberware name on cookware and bakeware. EBITDA is presented because the
Company believes it is a widely accepted financial indicator of a company's
ability to service and/or incur indebtedness. However, EBITDA should not be
considered as an alternative to net income as a measure of operating
results or to cash flows as a measure of liquidity in accordance with
generally accepted accounting principles. EBITDA (subject to certain
adjustments) is a factor in certain of the covenants in the New Credit
Facility and the Indenture governing the Senior Notes.
(6) "Adjusted EBITDA" is defined herein as EBITDA adjusted for certain items of
expense which are not expected to be continuing costs to the Company. For
the year ended December 31, 1996, such items consist of Rauch salaries and
related benefits of $623, Silvestri expenses of $712, including showroom,
warehouse and freight expenses, compensation expense of $3,953 related to
the transfer of shares to three executive officers and pension expense of
$883.
(7) "Adjusted EBITDA" is defined herein as EBITDA adjusted for certain items
of expense which are not expected to be continuing costs to the Company.
For the pro forma 1996 presentation, such items consist of Rauch
non-recurring expenses of $154 incurred as a result of a 1994 fire at its
principal manufacturing, warehouse and distribution facility, Rauch
salaries and related benefits of $623, Silvestri expenses of $712,
including showroom, warehouse and freight expenses, compensation expense
of $3,953 related to the transfer of shares to three executive officers
and pension expense of $883.
(8) For purposes of computing this ratio, earnings consist of income from
continuing operations before income taxes plus fixed charges. Fixed charges
consist of interest expense, Cumulative Redeemable Preferred Stock
dividends, amortization of debt issuance costs and one-third of the rent
expense from operating leases, which management believes is a reasonable
approximation of an interest factor.
(9) For the purpose of calculating adjusted cash interest expense, cash
interest expense (i) is net of amortization of deferred financing costs of
$1,407 and (ii) has been adjusted to exclude (x) $519 of interest expense
associated with incremental borrowings assumed to have been made by the
Company (for purposes of the pro forma presentation) to finance the
acquisition of Rauch (which was actually purchased with cash) and
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<PAGE>
(y) to exclude $944 of interest expense associated with the incremental
borrowing made by the Company (and repaid during 1996) to finance the
acquisition of Farberware to be consistent with the exclusion from EBITDA
of the income from the sale of certain assets (including inventory)
acquired from Farberware.
(10) Consists of long-term debt, notes payable and current maturities of
long-term debt.
(11) Reflects temporary borrowings of $51,735 made on December 29, 1995 in
connection with the purchase by the Company, for retirement of 3,065 shares
of Common Stock owned by affiliates of Katy Industries, Inc. (the "Katy
Stock Repurchase"). These borrowings were paid on January 2, 1996.
12
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the specific factors set
forth below as well as the other information included in the Prospectus before
deciding to purchase the Senior Notes offered hereby.
Significant Leverage and Debt Service; Effective Subordination
On a pro forma basis, after giving effect to the Recapitalization,
including this Offering and the application of the net proceeds therefrom, the
Company's total debt, preferred stockholders' equity and common stockholders'
equity as of December 31, 1996 would have been $162.3 million (excluding
approximately $10.3 million of letters of credit outstanding), $18.0 million and
$4.0 million, respectively. See "Capitalization," "Pro Forma Condensed
Consolidated Financial Statements," and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
The Company's level of indebtedness will have several important effects on
its future operations, including (i) a substantial portion of the Company's cash
flow from operations must be dedicated to the payment of interest on its
indebtedness and will not be available for other purposes, (ii) covenants
contained in the New Credit Facility and the Indenture governing the Senior
Notes will require the Company to meet certain financial tests, and other
restrictions may limit its ability to borrow additional funds or to dispose of
assets and may affect the Company's flexibility in planning for, and reacting
to, changes in its business, including possible acquisition activities, and
(iii) the Company's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions, general corporate purposes
or other purposes may be impaired. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
The Company's ability to meet its debt service obligations and to reduce
its total indebtedness will be dependent upon the Company's future performance,
which will be subject to general economic conditions and to financial, business
and other factors affecting the operations of the Company, many of which are
beyond its control. Based upon the current and anticipated level of operations,
the Company believes, however, that its cash flow from operations, together with
amounts available under the New Credit Facility, will be adequate to meet its
anticipated requirements through December 31, 1998 for working capital, capital
expenditures, interest payments and scheduled principal payments. There can be
no assurance, however, that the Company's business will continue to generate
cash flow at or above current levels. If the Company is unable to generate
sufficient cash flow from operations in the future to service its debt, it may
be required to refinance all or a portion of its existing debt, including the
Senior Notes, or to obtain additional financing. There can be no assurance that
any such refinancing would be possible or that any additional financing could be
obtained. The inability to obtain additional financing could have a material
adverse effect on the Company. For example, a default by the Company under the
terms of the Indenture would result in a default under the terms of the New
Credit Facility.
Additionally, a substantial portion of the Company's other indebtedness,
particularly under the New Credit Facility, will mature prior to the Senior
Notes and the New Credit Facility will be secured by a lien on accounts
receivable and inventory, while the Senior Notes represent unsecured obligations
of the Company. Accordingly, the lender(s) under the New Credit Facility (and
any other indebtedness secured by assets of the Company) will have a claim
ranking effectively prior to that of the holders of the Senior Notes with
respect to the proceeds of assets securing such indebtedness.
The Company also conducts substantial operations through its direct and
indirect subsidiaries which are not incorporated in the United States (the
"Foreign Subsidiaries"). The Foreign Subsidiaries will not provide guarantees
of, or other credit support for, the Senior Notes. Consequently, the Company's
obligations under the Senior Notes will be effectively subordinated to the
indebtedness and other liabilities (including trade payables) of the Foreign
Subsidiaries. As of December 31, 1996, the Foreign Subsidiaries had identifiable
assets of $14.9 million and for the year then ended the Foreign Subsidiaries had
income from operations of $7.7 million. See Note 13 to Consolidated Financial
Statements of Syratech. As of December 31, 1996, the Foreign Subsidiaries had
indebtedness and other liabilities (including trade payables) of $3.7 million.
Competition
The tabletop, giftware and seasonal products markets are highly
competitive. Competition is affected not only by the large number of domestic
manufacturers, but also by the large volume of foreign imports. Several of the
Company's competitors are larger and may have greater financial resources than
the Company. The Company's
13
<PAGE>
products may compete indirectly with a broad range of products not offered by
the Company. A number of factors affect competition in the sale of tabletop,
giftware, seasonal and other products of the types manufactured, imported and
sold by the Company. Among these are brand identification, style, design,
packaging, price, quality, promotion and the level of service provided to
customers. The importance of these competitive factors varies from customer to
customer and from product to product. See "Business--Competition."
Dependence Upon Key Personnel
The Company is currently dependent upon the ability and experience of its
senior management team, including Leonard Florence, Chairman of the Board,
President and Chief Executive Officer, E. Merle Randolph, Vice President,
Treasurer and Chief Financial Officer, Melvin L. Levine, Vice President of
Purchasing, and Alan R. Kanter, Vice President of Sales. The loss of any of
these executives could adversely affect the Company. In connection with the
Merger, these executives will continue to be employed by the Company pursuant to
their current employment agreements with certain modifications. See
"Management--Employment Agreements." The terms of the employment agreements for
these four executives will be five years in the case of Messrs. Florence and
Levine and three years in the case of Messrs. Randolph and Kanter. The Company
does not maintain policies of "key person" life insurance on the life of any of
its executives.
Retail Industry
The Company sells its products to retailers, including department and
specialty stores, mass market merchandisers, catalogue showrooms, discount
wholesalers, warehouse clubs, premium and incentive marketers, drug and
supermarket chains, jewelers and home centers and through other channels of
distribution. Certain of such retailers have engaged in leveraged buyouts or
transactions in which they incurred a significant amount of debt, and some are
currently operating under the protection of the federal bankruptcy laws. As a
result of these financial difficulties and bankruptcy and insolvency
proceedings, the Company may be unable to collect some or all amounts owed by
these retailers. Additionally, all or part of the operations of a retailer that
seeks bankruptcy or other debtor protection may be discontinued or sales of the
Company's products to such a retailer may be curtailed or terminated as a result
of such bankruptcy or insolvency proceedings.
As is customary in the retail industry, the Company generally does not
enter into written agreements with customers but relies on orders that are
cancelable until shipment.
The Company's business is sensitive to consumer spending patterns, which in
turn are subject to prevailing economic conditions. Future economic recessions
could have a material adverse effect on the Company's financial condition and
results of operations.
Future Acquisitions
The Company expects to continue a strategy of identifying and acquiring
companies with complementary products or services that may be expected to
enhance the Company's operations and profitability. There can be no assurance
that the Company will be able to identify appropriate acquisition candidates,
negotiate appropriate acquisition terms, obtain financing which may be needed to
effect such acquisitions or integrate acquisitions successfully into the
Company's operations or that any of such acquisitions will prove profitable.
Seasonality
Historically, the Company has realized its highest sales and profit levels
in its third and fourth quarters as a result of the buying patterns associated
with the Christmas selling season. The Company expects that the recent Rauch and
Silvestri acquisitions and the acquisition of certain assets of Potpourri Press
will intensify the degree of seasonality that the Company historically has
experienced as the vast majority of Rauch, Silvestri and Potpourri products are
Christmas items. The Company's needs for working capital accelerate in the
second half of the year and, accordingly, total debt levels tend to peak in the
third and fourth quarters, falling off again in the first quarter of the
following year. The amount of the Company's sales generated during the second
half of the year generally depends upon a number of factors, including general
economic conditions, and other factors beyond the Company's control. The
Company's results of operations would be adversely and disproportionately
affected if the Company's sales were substantially lower than those normally
expected during the second half of the year.
14
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Foreign Sources of Supply
Many of the Company's products are manufactured to its specifications by
foreign manufacturers located principally in Hong Kong, India, Korea, Taiwan,
the People's Republic of China and Japan. In 1996, the Company purchased an
aggregate of approximately $104 million of products from approximately 480
foreign manufacturers. No vendor accounted for 10% or more of such purchases in
1995. The Company does not have information on the financial condition of its
major foreign vendors, all of which are privately held. Of the Company's foreign
purchases in 1996, approximately 92% were from vendors located in the Far East,
approximately 4% were from vendors located in India and approximately 4% in the
aggregate from vendors in other locations. The Company's arrangements with its
manufacturers are subject to the risks of doing business abroad, including risks
associated with economic or political instability in countries in which such
manufacturers are located, labor strikes and risks associated with foreign
currency and potential import restrictions. The Company also is subject to risks
associated with the availability of, and time required for, the transportation
of products from foreign countries, including shipping losses or lost sales that
may result from delays or interruptions in shipping.
Price and Availability of Raw Materials
Collectively, the Company and its four major competitors in the sterling
silver flatware market account for substantially all sterling silver flatware
sales in the United States. Prices of silver are subject to fluctuation. The
price of silver has ranged, according to the closing prices of Handy & Harman
Inc. (the "Handy & Harman Price"), from $3.54 per troy ounce to $6.01 per troy
ounce during the five-year period ended December 31, 1996. A prolonged
significant increase in silver prices could have a material adverse effect on
the Company's results of operations. The Handy & Harman Price for a troy ounce
of silver on February 21, 1997 was $5.23. Silver used by the Company in the
manufacture of its tabletop and giftware products represents less than 5% of its
Cost of Goods Sold. See "Business--Manufacturing and Raw Materials."
Environmental Regulation
The Company's manufacturing operations, including silverplating, chrome
plating, tool making and painting, routinely involve the handling of waste
materials that are classified as hazardous. The Company is subject to certain
domestic federal, state, local and foreign laws and regulations concerning the
handling, containment and disposal of hazardous substances, and therefore, in
the ordinary course of its business, the Company incurs compliance costs and may
be required to incur clean-up costs. In addition, the Company's C.J. Vander
facility is subject to many environmental regulations related to its
manufacturing operations in the United Kingdom. Actions by federal, state, local
and foreign governments concerning environmental matters could result in laws or
regulations that could increase the cost of producing the products manufactured
by the Company or otherwise adversely affect the demand for its products. In
addition, the future costs of compliance with environmental laws and regulations
and liabilities resulting from currently unknown circumstances or developments
could be substantial and could have a material adverse effect on the Company.
For example, certain laws and regulations could impose liability upon the
Company for any historic releases of hazardous substances from facilities that
it has owned or operated, or, from facilities to which its waste materials have
been transported for treatment or disposal.
Trademarks, Copyrights and Patents
The Company markets its products under many well-recognized tradenames,
including Wallace Silversmiths[RegTM], International Silver Company[RegTM],
Towle Silversmiths[RegTM], Farberware[RegTM], Tuttle Sterling[RegTM], C.J.
Vander Ltd.[TM], Rauch Industries, Inc.[RegTM], Silvestri[RegTM],
Rochard[RegTM], Elements[RegTM] and 1847 Rogers Bros.[RegTM] The success of the
Company's various businesses depends in part on the Company's ability to use
these tradenames as well as certain proprietary designs and trademarks on an
exclusive basis in reliance upon the protections afforded by applicable
copyright, patent and trademark laws and regulations. The loss of certain of the
Company's rights to such designs, trademarks and tradenames or the inability of
the Company effectively to protect or enforce such rights could adversely affect
the Company.
Labor Relations
The Company believes that its relationship with its employees is good. The
Company's employees are not represented by labor unions; however, Rauch, which
merged with the Company on February 15, 1996, was a subject of efforts by UNITE
(the "Union") in the fall of 1995 to organize Rauch's employees. A scheduled
Union election was postponed because the Union filed unfair labor practice
charges against Rauch with the National Labor
15
<PAGE>
Relations Board (the "NLRB"). These charges, which related to allegations of
threats and promises by Rauch officials and the termination of certain
employees, were settled pursuant to an agreement between Rauch and the Union. On
May 2, 1996, the NLRB approved the agreement and the Union's request that the
petition for an election be withdrawn with prejudice.
On March 31, 1994 an Administrative Law Judge ("ALJ") designated by the
National Labor Relations Board ("NLRB") determined that the Company's
subsidiaries Wallace International de P.R., Inc. and International Silver de
P.R., Inc. (the "P.R. Subsidiaries") had engaged in unfair labor practices
incident to a union election (won by the P.R. Subsidiaries) held in February,
1993 and ordered the P.R. Subsidiaries to refrain from certain conduct and to
take certain affirmative action. The ALJ's decision was affirmed by the NLRB on
September 22, 1994. Incident to a second union election (also won by the P.R.
Subsidiaries) held on June 22, 1994 pursuant to stipulation, the P.R.
Subsidiaries were again charged with unfair labor practices. The ALJ again found
that the P.R. Subsidiaries had engaged in unfair labor practices. The Company
has appealed to the NLRB, and the appeal is pending.
Potential Inability to Fund a Change of Control Offer
Upon a Change of Control Offer (as defined in the Indenture), the Company
will be required to offer to repurchase all outstanding Senior Notes at 101% of
the principal amount thereof plus accrued and unpaid interest to the date of
repurchase. However, there can be no assurance that sufficient funds will be
available at the time of any Change of Control to make any required repurchases
of Senior Notes tendered. Moreover, restrictions in the New Credit Facility
prohibit the Company from making such required repurchases; consequently, any
such repurchases would constitute an event of default under the New Credit
Facility. There can be no assurance that the Company will be able to obtain
appropriate consents under the New Credit Facility to enable it to fulfill such
repurchase obligations. Notwithstanding these provisions, the Company could
enter into certain transactions, including certain recapitalizations, that would
not constitute a Change of Control but would increase the amount of debt
outstanding at such time. See "Description of Senior Notes--Repurchase at the
Option of Holders."
Fraudulent Conveyance Considerations
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent conveyance law, if, among other things, the
Company or any of the Guarantors, at the time it incurred the indebtedness
evidenced by the Senior Notes or its Subsidiary Guarantee, as the case may be,
(i)(a) was or is insolvent or rendered insolvent by reason of such occurrence or
(b) was or is engaged in a business or transaction for which the assets
remaining with the Company or such Guarantor constituted unreasonably small
capital or (c) intended or intends to incur, or believed or believes that it
would incur, debts beyond its ability to pay such debts as they mature, and (ii)
the Company or such Guarantor received or receives less than the reasonably
equivalent value of fair consideration for the incurrence of such indebtedness,
the Senior Notes and the Subsidiary Guarantees could be voided, or claims in
respect of the Senior Notes or such Subsidiary Guarantees could be subordinated
to all other debts of the Company or such Guarantors, as the case may be. The
voiding or subordination of any such pledges or other security interests or of
any of such indebtedness could result in an Event of Default (as defined in the
Indenture) with respect to such indebtedness, which could result in acceleration
thereof. In addition, the payment of interest and principal by the Company
pursuant to the Senior Notes or the payment of amounts by a Guarantor pursuant
to a Subsidiary Guarantee could be voided and required to be returned to the
person making such payment, or to fund for the benefit of the creditors of the
Company or such Guarantor, as the case may be.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or a Guarantor would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, were
greater than the saleable value of all of its assets at a fair valuation or if
the present saleable value of its assets were less than the amount of its
probable liability on its existing debts, including contingent liabilities, as
they become absolute and mature or (ii) it could not pay its debts as they
become due.
To the extent any Subsidiary Guarantees were voided as a fraudulent
conveyance or held unenforceable for any other reason, holders of Senior Notes
would cease to have any claim in respect of such Guarantor and would be
creditors solely of the Company and any Guarantor whose Subsidiary Guarantee was
not avoided or held unenforceable. In such event, the claims of the holders of
Senior Notes against the issuer of an invalid Subsidiary Guarantee would be
subject to the prior payment of all liabilities and preferred stock claims of
such Guarantor. There can be no assurance that, after providing for all prior
claims and preferred stock interests, if any, there would
16
<PAGE>
be sufficient assets to satisfy the claims of the holders of Senior Notes
relating to any voided portions of any Subsidiary Guarantees. The Company is a
holding company whose material assets consist primarily of the capital stock of
the Guarantors. Consequently, the Company is dependent upon dividends paid by
the Guarantors to pay its operating expenses, service its debt obligations,
including the Senior Notes, and satisfy any mandatory repurchase obligations
relating to the Senior Notes, as a result of a Change of Control or a sale or
other disposition of certain assets. See "Description of Senior Notes" and
"Description of Other Indebtedness."
On the basis of their historical financial information, recent operating
history as discussed in "Pro Forma Condensed Consolidated Financial Statements"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other factors, each of the Company and each Guarantor believes
that, after giving effect to the indebtedness incurred in connection with the
Offering, it (i) will not be insolvent, will not have unreasonably small capital
for the businesses in which it is engaged and will not incur debts beyond its
ability to pay such debts as they mature and (ii) will have sufficient assets to
satisfy any probable money judgment against it in any pending action. There can
be no assurance, however, as to what standard a court would apply in making such
determinations.
Absence of Public Market
There is no existing public market for the Senior Notes and the Company
does not intend to list the Senior Notes on any national securities exchange.
Although the Underwriters have advised the Company that they currently intend to
make a market in the Senior Notes, the Underwriters are not obligated to do so
and may discontinue such market-making at any time. Accordingly, there can be no
assurance that an active market will develop upon completion of this Offering
or, if developed, that such market will be sustained. The initial offering price
of the Senior Notes will be determined through negotiations between the Company
and the Underwriters, and may bear no relationship to the market price of the
Senior Notes after the Offering. Factors such as quarterly or cyclical
variations in the Company's financial condition and results of operations,
variations in interest rates, future announcements concerning the Company or its
competitors, government regulation, general economic and other conditions could
cause the market price of the Senior Notes to fluctuate substantially.
Control by the Thomas H. Lee Company
Upon completion of the Recapitalization, at least 60% and up to 82.8% of
the outstanding shares of Syratech Common Stock will be held by Lee Affiliates,
including the Fund, which will own at least 50%. In addition, the Fund will hold
$18.0 million of Cumulative Redeemable Preferred Stock. Accordingly, the Fund
will control the Company and have the power to elect all of its directors,
appoint new management and to approve any action requiring the approval of the
holders of Syratech Common Stock, including adopting amendments to the Company's
Amended and Restated Certificate of Incorporation and approving mergers or sales
of substantially all of the Company's assets. The directors elected by the Fund
will have the authority to effect decisions affecting the capital structure of
the Company, including the issuance of additional capital stock, the
implementation of stock repurchase programs and the declaration of dividends.
17
<PAGE>
THE RECAPITALIZATION
Pursuant to the Merger Agreement, THL I will be merged with and into
Syratech (the "Merger"), with Syratech surviving the Merger. Pursuant to the
terms of the Merger Agreement, all shares of Syratech Common Stock, other than
those retained by stockholders as discussed below, will be converted into the
right to receive $32 per share in cash (except that Mr. Florence will receive
$28 per share in cash) following the Merger. In addition, pursuant to the terms
of the Merger Agreement, stockholders of the Company, other than members of
Management (defined as those executive officers listed in Syratech's 1996 Proxy
Statement) may elect to retain up to 34.75% of their shares of Syratech Common
Stock. The total number of shares of Syratech Common Stock which may be retained
by stockholders, other than Management, is 868,250. To the extent that
stockholders (other than Management) elect to retain more than an aggregate of
868,250 shares of Syratech Common Stock, the number of shares they will be
entitled to retain will be subject to proration. Mr. Leonard Florence, the
Company's President, Chief Executive Officer and Chairman of the Board, is
required by the Merger Agreement to retain 528,472 shares of Syratech Common
Stock and to contribute 35,232 shares of Syratech Common Stock to the Company.
Management, other than Mr. Florence, intend to retain 123,766 shares of Syratech
Common Stock, and such amount will not be subject to proration. See "Certain
Transactions." The consummation of the Merger is subject to certain significant
conditions, including obtaining the consent of the holders of a majority of the
issued and outstanding shares of Syratech Common Stock at the meeting of such
holders scheduled for April 14, 1997, as well as obtaining other required
consents and the completion of financing.
Simultaneously with the consummation of the Merger, Lee Affiliates
including the Fund, will invest approximately $100.2 million (less the value of
shares (not to exceed $25.0 million) retained by stockholders other than
Management) in the common equity of THL I and $18.0 million in the preferred
stock of THL I (collectively, the "Equity Investment"). In connection with the
consummation of the Recapitalization, the Company will pay Thomas H. Lee Company
a closing fee of $3 million. See "Certain Transactions." Upon consummation of
the Merger, the common stock of THL I will be converted into an aggregate of
3,131,780 shares of Syratech Common Stock (less the number of shares (not to
exceed 781,250) retained by stockholders other than Management) and the
preferred stock of THL I will be converted into an aggregate of 18,000 shares of
the Company's Cumulative Redeemable Preferred Stock. See "Risk Factors--Control
by Thomas H. Lee Company."
In addition, in connection with the consummation of the Merger, Syratech
will enter into the New Credit Facility. See "Description of Other
Indebtedness." The proceeds from the Senior Notes, the equity investment in THL
I by affiliates of the Thomas H. Lee Company and a portion of the borrowings
under the New Credit Facility will be used (i) to pay stockholders of Syratech
$32 per share for their shares of Syratech Common Stock which are not being
retained (other than shares held by Mr. Florence who will receive $28 per
share), (ii) to pay transaction fees and expenses and (iii) to refinance
existing indebtedness of Syratech. See "Use of Proceeds." The closing of these
financings, including the Offering, will occur concurrently with, and will be
conditioned upon, the consummation of the Merger. The financings, together with
the Merger, are collectively referred to as the "Recapitalization".
18
<PAGE>
The sources and uses of funds in connection with the Recapitalization are
as follows (derived from the Pro Forma Condensed Consolidated Financial
Statements set forth elsewhere in this Prospectus):
(dollars in thousands)
Sources of Funds:
New Credit Facility proceeds (1)..................... $ 7,119
Senior Notes proceeds................................ 155,000
Syratech cash at December 31, 1996................... 2,605
Cash from exercise of employee stock options......... 2,874
Equity contribution:
THL I
Cumulative Redeemable Preferred Stock.............. 18,000
Common Stock (2)................................... 100,217
Retained by Management (3).......................... 20,872
--------
Total Sources...................................... $306,687
========
Uses of Funds:
Merger consideration (3)............................. $275,251
Repayment of existing debt........................... 6,436
Fees and expenses.................................... 25,000
--------
Total Uses......................................... $306,687
========
- ------------
(1) The Company expects that a $130,000 New Credit Facility, including a letter
of credit sub-limit of $30,000, will be available for working capital and
general corporate purposes. The amount shown excludes $10,348 of letters of
credit which will be issued to replace existing letters of credit. See
"Description of Other Indebtedness."
(2) Assumes non-management stockholders do not elect to retain shares.
(3) Includes 528,472 shares retained by Mr. Florence and 123,766 shares to be
retained by other members of Management.
19
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the issuance of the
Senior Notes are estimated to be approximately $ million, after deduction of
underwriting discounts and commissions, but prior to payment of other related
fees and expenses. The net proceeds of the issuance of the Senior Notes will be
used, together with the proceeds of the Equity Investment and the borrowings
under the New Credit Facility, (i) to support the Recapitalization, including
the refinancing of the Company's existing indebtedness, and (ii) to pay
transaction costs associated with the Recapitalization. The Company's current
credit facilities have maturity dates of April 30, 1997 and May 31, 1997. On
March 12, 1997, the weighted average interest rate on borrowings under such
facilities was 7.5%.
20
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1996, and on a pro forma basis to give effect to the
Offering, and the application of the net proceeds therefrom in connection with
the Recapitalization. This table should be read in conjunction with "Pro Forma
Condensed Consolidated Financial Statements" and the Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
December 31, 1996
-----------------------
Actual Pro Forma
---------- -----------
(in thousands except sh
<S> <C> <C>
Cash and cash equivalents...................................................... $ 3,605 $ 1,000
======= ========
Total debt:
Revolving loan and notes payable.............................................. $ 6,636 $ 200
New Credit Facility (1)....................................................... -- 7,119
Senior Notes offered hereby................................................... -- 155,000
------- --------
Total debt................................................................... 6,636 162,319
------- --------
Stockholders' equity:
Preferred Stock, $.10 par value; 500,000 shares authorized, no shares
issued or outstanding (135,000 shares designated Series A Preferred
Stock), actual basis; $.01 par value; 25,000 shares authorized,18,000
shares issued and outstanding, pro forma basis (2)............................ -- 18,000
Common Stock, $.01 par value; 20,000,000 shares authorized, 8,695,449
shares issued, actual basis; 20,000,000 shares authorized, 3,784,018
shares issued and outstanding, pro forma basis (3)............................ 87 38
Additional paid in capital.................................................... 12,480 --
Retained earnings............................................................. 157,117 3,443
Cumulative translation adjustment............................................. 567 567
Less: Treasury stock; 218 shares at cost, actual basis; no shares, pro forma
basis........................................................................ (3) --
------- --------
Total stockholders' equity (4)............................................... 170,248 22,048
------- --------
Total capitalization........................................................... $176,884 $184,367
======= ========
</TABLE>
- ------------
(1) The Company expects that a $130,000 New Credit Facility, including a letter
of credit sub-limit of $30,000, will be available for working capital and
general corporate purposes. The amount shown excludes $10,348 of letters of
credit which will be issued to replace existing letters of credit. See
"Description of Other Indebtedness."
(2) Reflects 18,000 shares of Cumulative Redeemable Preferred Stock to be held
by Lee Affiliates. Dividends are cumulative and accrue daily at the rate of
12% per annum. The liquidation preference of the Cumulative Redeemable
Preferred Stock is $1,000 per share plus all accrued and unpaid dividends.
Holders of the Cumulative Redeemable Preferred Stock are entitled, subject
to the rights of creditors, in the event of any voluntary or involuntary
liquidation of the Company, to an amount in cash equal to $1,000 for each
share outstanding plus all accrued and unpaid dividends compounded annually.
The rights of holders of the Cumulative Redeemable Preferred Stock upon
liquidation of the Company rank prior to those of the holders of Syratech
Common Stock. See "Description of Cumulative Redeemable Preferred Stock."
(3) The pro forma number of shares of Syratech Common Stock outstanding assumes
that no stockholder (other than Management) elects to retain shares of
Syratech Common Stock following the Merger.
21
<PAGE>
(4) The pro forma stockholders' equity is attributed to the following
adjustments:
(in thousands)
Historical stockholders' equity............................. $ 170,248
Common Stock converted by existing stockholders (a)......... (254,379)
Common equity contribution (b).............................. 100,217
Cumulative Redeemable Preferred Stock....................... 18,000
Cash proceeds from exercise of employee stock options....... 2,874
Costs and expenses incurred, net of deferred financing
cost capitalized............................................ (14,912)
---------
Pro forma stockholders' equity.............................. $ 22,048
=========
------------
(a) Assumes non-cash election is not exercised.
(b) Assumes non-management stockholders do not elect to retain Syratech
Common Stock.
22
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements (the "Pro Forma Condensed Consolidated Financial Statements") have
been derived by the application of pro forma adjustments to the Company's
historical financial statements included in this Prospectus. The pro forma
condensed consolidated statement of operations for the year ended December 31,
1996 give effect to the Recapitalization and related transactions and the
acquisition of Rauch as if such transactions were consummated as of the
beginning of the earliest period presented. The acquisition of C. J. Vander and
the Silvestri product line were not material to the condensed consolidated
financial statements and as such are not included in the Pro Forma Condensed
Consolidated Financial Statements. The pro forma balance sheet gives effect to
the Recapitalization and related transactions as if such transactions had
occurred as of December 31, 1996. The adjustments are described in the
accompanying notes. The Pro Forma Financial Statements should not be considered
indicative of actual results that would have been achieved had the
Recapitalization and related transactions been consummated on the date or for
the periods indicated and do not purport to indicate balance sheet data or
results of operations as of any future date or for any future period. The Pro
Forma Condensed Consolidated Financial Statements should be read in conjunction
with the Company's historical financial statements and the notes thereto
included in this Prospectus. See "Available Information" and "Incorporation of
Certain Documents by Reference."
The pro forma adjustments were applied to the respective historical
financial statements to reflect and account for the Merger as a
recapitalization. Accordingly, the historical basis of the Company's assets and
liabilities has not been impacted by the transaction.
23
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
December 31, 1996
-------------------------------------------------------------
Historical Pro Forma
Syratech Recapitalization Syratech
Corporation Adjustments Corporation
-------------- ------------------------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents................................... $ 3,605 $ (2,605)(1) $ 1,000
Accounts receivable, net............................... 60,020 -- 60,020
Inventories............................................ 79,355 -- 79,355
Deferred income taxes.................................. 8,940 -- 8,940
Prepaid expenses and other............................. 3,803 -- 3,803
-------- ---------- --------
Total current assets................................ 155,723 (2,605) 153,118
Property, plant and equipment, net...................... 63,955 -- 63,955
Purchase price in excess of net assets acquired......... 7,032 -- 7,032
Other assets............................................ 544 10,088 10,632
-------- ---------- --------
Total............................................... $227,254 $ 7,483 $234,737
======== ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan and notes payable....................... $ 6,636 $ 683(3) $ 7,319
Accounts payable....................................... 9,689 -- 9,689
Accrued expenses....................................... 11,049 -- 11,049
Accrued compensation................................... 4,228 -- 4,228
Accrued advertising.................................... 3,273 -- 3,273
Income taxes payable................................... 930 -- 930
-------- ---------- --------
Total current liabilities........................... 35,805 683 36,488
Long-term debt.......................................... 155,000 155,000
Deferred income taxes................................... 17,706 -- 17,706
Pension liability....................................... 3,495 -- 3,495
Commitments and contingencies:
Stockholders' equity:
Cumulative Redeemable Preferred Stock.................. -- 18,000(5) 18,000
Common stock........................................... 87 (49)(6)(7) 38
Additional paid-in capital............................. 12,480 (12,480)(7) --
Retained earnings...................................... 157,117 (153,674)(2)(7) 3,443
Cumulative translation adjustment...................... 567 -- 567
Less: Treasury stock................................... (3) 3(7)(8) --
-------- ---------- --------
Total stockholders' equity.......................... 170,248 (148,200) 22,048
-------- ---------- --------
Total............................................... $227,254 $ 7,483 $234,737
======== ========== ========
</TABLE>
See notes to pro forma condensed consolidated balance sheet.
24
<PAGE>
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands except share data)
The pro forma financial data have been derived by the application of pro
forma adjustments to the Company's historical financial statements for the
period noted. The Merger has been accounted for as a recapitalization which will
have no impact on the historical basis of assets and liabilities. The pro forma
financial data assumes that there are no dissenting stockholders to the Merger.
(1) The net effect of the Merger, as if it occurred on December 31, 1996,
reflects the following:
Sources of Funds:
New Credit Facility proceeds (a)..................... $ 7,119
Senior Notes proceeds................................ 155,000
Syratech cash at December 31, 1996................... 2,605
Cash from exercise of employee stock options......... 2,874
Equity contribution:
THL I
Cumulative Redeemable Preferred Stock.............. 18,000
Common Stock (b)................................... 100,217
Retained by Management (c).......................... 20,872
--------
Total Sources...................................... $306,687
========
Uses of Funds:
Merger consideration (c)............................. $275,251
Repayment of existing debt........................... 6,436
Fees and expenses.................................... 25,000
--------
Total Uses......................................... $306,687
========
------------
(a) The Company expects that a $130,000 New Credit Facility, including a
letter of credit sub-limit of $30,000, will be available for working
capital and general corporate purposes. The amount shown excludes
$10,348 of letters of credit which will be issued to replace existing
letters of credit. See "Description of Other Indebtedness."
(b) Assumes non-management stockholders do not elect to retain shares.
(c) Includes 528,472 shares to be retained by Mr. Florence and 123,766
shares to be retained by other members of Management.
(2) The adjustment to retained earnings reflects the total fees and expenses
of $25,000 anticipated to be paid to effect the Merger, net of the
adjustment to other assets of $10,088 of capitalized debt issuance fees.
The estimated fees and expenses are anticipated to consist of (i) fees
and expenses related to the Merger Financings, including bank commitment
fees and underwriting discounts and commissions, (ii) fees and expenses
in connection with the prepayment of historical debt and (iii)
professional, advisory and investment banking fees and expenses and (iv)
miscellaneous fees and expenses such as printing and filing fees.
(3) The pro forma adjustment to short-term borrowings reflects the repayment
of historical revolving debt outstanding of $6,436 and the addition of
$7,119 under the New Credit Facility, excluding $10,348 of letters of
credit which will be issued to replace existing letters of credit.
(4) The pro forma adjustment to long-term debt reflects issuance of $155,000
of Senior Notes.
(5) Reflects 18,000 shares of Cumulative Redeemable Preferred Stock to be
held by Lee Affiliates. Dividends are cumulative and accrue daily at the
rate of 12% per annum. The liquidation preference of the Cumulative
Redeemable Preferred Stock is $1,000 per share plus all accrued and
unpaid dividends. Holders of the Cumulative Redeemable Preferred Stock
are entitled, subject to the rights of creditors, in the event of any
voluntary or involuntary liquidation of the Company, to an amount in cash
equal to $1,000 for each share outstanding plus all accrued and unpaid
dividends compounded annually.
25
<PAGE>
The rights of holders of the Cumulative Redeemable Preferred Stock upon
liquidation of the Company rank prior to those of the holders of Syratech
Common Stock. The Cumulative Redeemable Preferred Stock will be
redeemable at any time at the option of the Company, in whole or in part,
at $1,000 per share plus all accumulated and unpaid dividends, if any, to
the date of redemption. The Company must, subject to the Company's
existing debt agreements (including the Indenture), redeem all
outstanding Cumulative Redeemable Preferred Stock in the event of a
public offering of equity, a change of control, or certain sales of
assets. As used in the designation of the Cumulative Redeemable Preferred
Stock, the terms "Change of Control" has the same meaning as is ascribed
to that term in the Indenture governing the issuance of the Senior Notes.
See "Description of Cumulative Redeemable Preferred Stock."
(6) The adjustment reflects the effect of the Merger on the 8,659,999 shares
outstanding (excluding the 35,232 shares held by Mr. Florence) to be
cancelled and retired at $.01 par value per share. There will be
3,784,018 shares outstanding subsequent to the Merger.
(7) The adjustment reflects amounts distributed to convert up to 8,217,261
shares of Syratech Common Stock to cash, including those converted under
the Employee Stock Option Plan, for total consideration of $275,251 less
the retention of shares by existing stockholders. Combining the value of
the retained shares with the receipt of proceeds by Syratech in
connection with the Merger for up to 3,131,780 shares issued to THL I
results in common stockholders' equity contribution of $121,089.
(8) The adjustment reflects the cancellation of the 218 shares of treasury
stock.
26
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
-------------------------------------------------------------------------------------------
Recapitalization
Historical Pro Forma Pro Forma Pro Forma
Syratech Rauch(1) Adjustments Combined Adjustments Combined
----------------- ----------- ----------------- ----------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales......................... $ 270,931 $ 609 $271,540 $271,540
Cost of sales..................... 194,113 330 $ 101(2) 194,544 194,544
---------- ------- --------- -------- ----------- --------
Gross profit.................. 76,818 279 (101) 76,996 76,996
Selling, general and
administrative expenses.......... 57,664 1,806 30(3) 58,420 $ 450(4) 58,870
(94)(5)
(986)(6)
Other operating income(a)......... 3,948(7) 3,948 3,948
---------- ------- --------- -------- ----------- --------
Income (loss) from
operations................... 23,102 (1,527) 949 22,524 (450) 22,074
Interest expense.................. (3,150) (93) (519)(8) (3,762) (18,951)(9) (22,713)
Interest income................... 771 21 792 792
Other income(b)................... 11,900(10) 11,900 11,900
---------- ------- --------- -------- ----------- --------
Income (loss) before
provision (benefit)
for income taxes............. 32,623 (1,599) 430 31,454 (19,401) 12,053
Provision (benefit) for income
taxes............................ 12,234 (439)(11) 11,795 (7,275)(11) 4,520
---------- ------- --------- -------- ----------- --------
Net income (loss)............. 20,389 (1,599) 869 19,659 (12,126) 7,533
---------- ------- --------- -------- ----------- --------
Preferred stock dividends
accrued.......................... 2,160(12) 2,160
---------- ------- --------- -------- ----------- --------
Net income (loss) for
common
stockholders................. $ 20,389 $(1,599) $ 869 $ 19,659 $ (14,286) $ 5,373
========== ======= ========= ======== =========== ========
</TABLE>
- ------------
(a) Income from the sale of Farberware inventory and other operating income, net
of certain selling, general and administrative expenses.
(b) Non-recurring pre-tax income related to the one-time licensing of the
Farberware name on cookware and bakeware.
See notes to pro forma condensed consolidated statement of operations.
27
<PAGE>
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(in thousands)
The pro forma condensed consolidated financial data have been derived by
the application of pro forma adjustments to the Company's historical financial
statements for the period noted. The Merger has been accounted for as a
recapitalization which will have no impact on the historical basis of assets and
liabilities. The pro forma financial data assumes that there are no dissenting
shareholders to the Merger.
(1) Includes the results of operations for the 45 day period, beginning
January 1, 1996 prior to the Company's acquisition of Rauch.
(2) Reflects additional depreciation expense as a result of an allocation of a
portion of the Rauch purchase price to property, plant and equipment.
(3) Reflects additional amortization expense as a result of amortizing, over
30 years, the $7,224 allocation of Rauch purchase price in excess of net
assets acquired.
(4) The pro forma adjustment to selling, general and administrative expenses
reflect the annual management fee the Company will pay to the Thomas H.
Lee Company.
(5) Reflects an adjustment for certain acquisition related costs incurred by
Rauch.
(6) Reflects an adjustment for a stock option buy out by Rauch.
(7) Consists of income from the sale of Farberware inventory and other
operating income, net of certain selling, general and administrative
expenses, relating to the sale of Farberware inventory. The Company
licensed the right to manufacture, market and distribute these products to
a third party. See "Business--Recent Transactions."
(8) Reflects an increase in interest expense had the acquisition of Rauch
taken place on January 1, 1996, using an interest rate of 8.3% per annum,
which represents the Company's weighted average interest costs for the
period.
(9) The pro forma adjustment to interest expense reflects the following:
Interest expense on the New Credit Facility (assumed 9.0% rate) $1,656
Interest expense on the Senior Notes (assumed 10.25% rate)......... 15,888
Amortization of debt issuance costs over 6-10 years................ 1,407
-------
Total adjustment............................................... $18,951
=======
A 0.125% increase or decrease in the assumed average interest rate on the
Senior Notes would change the pro forma interest expense by $193. The pro
forma net income (loss) would change by $126.
(10) Consists of non-recurring pre-tax income of $11,900 related to the
one-time licensing of the Farberware name for use on cookware and
bakeware.
(11) The adjustment reflects the tax effect of the pro forma adjustments at a
37.5% effective tax rate.
(12) Dividends on shares of Cumulative Redeemable Preferred Stock are
cumulative from the date of issue and are payable when and as may be
declared from time to time by the Board of Directors of the Company. Such
dividends shall accrue on a daily basis (whether or not declared) from the
original date of issue at an annual rate per share equal to 12% of the
original purchase price per share, with such amount to be compounded
annually on each December 31 so that if the dividend is not paid from any
year the unpaid amount shall be added to the original purchase price of
the Cumulative Redeemable Preferred Stock for the purpose of calculating
succeeding year's dividends.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
See "Forward Looking Statements"
The following analysis of the financial condition and results of operations
of the Company is qualified in its entirety by the more detailed information and
financial data, including the Condensed Consolidated Financial Statements and
related notes thereto, appearing elsewhere herein.
General
The Company has historically expanded its product lines through
acquisitions. The Company has integrated these acquisitions into its existing
operations, resulting in increased sales and a broader product line. All
acquisitions of businesses were accounted for under the purchase method of
accounting, and, accordingly, the results of operations of each acquired company
have been included in the Consolidated Statements of Earnings since its
respective acquisition date.
Due to the number, magnitude and timing of the Company's acquisitions, the
Company's operating results, as reflected in the Consolidated Financial
Statements, are not directly comparable on a year-to-year basis. See
"Business--Recent Transactions."
Results of Operations
The following table sets forth certain financial data as a percentage of
net sales of the Company for each of the periods presented.
<TABLE>
<CAPTION>
Percentage of Net Sales
----------------------------------------
Year Ended December 31,
----------------------------------------
1994 1995 1996
--------- --------- -------------
<S> <C> <C> <C>
Net Sales............................................ 100.0% 100.0% 100.0%
Cost of sales........................................ 71.0 70.7 71.6
------- ------- --------
Gross profit........................................ 29.0 29.3 28.4
Selling, general and administrative expenses......... 21.5 20.2 21.3
Other operating income............................... 1.4(1)
--------
Income from operations.............................. 7.5 9.1 8.5
Interest income (expense), net....................... (0.3) 2.7 (0.9)
Other income......................................... 4.4(2)
- ----------------------------------------------------- --------
Income before income taxes.......................... 7.2 11.8 12.0
Provision for income taxes........................... 1.9 4.0 4.5
------- ------- --------
Income from continuing operations................... 5.3% 7.8% 7.5%
======= ======= ========
</TABLE>
- ------------
(1) Includes income from the sale of Farberware inventory and other operating
income, net of certain selling, general and administrative expenses
relating to the sale of Farberware inventory. The Company licensed the
right to manufacture, market and distribute these products to a third
party. See "Business--Recent Transactions."
(2) Consists of non-recurring pre-tax income related to the one-time licensing
of the Farberware name for cookware and bakeware.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net sales increased 59.8% to $270.9 million for the year ended December 31,
1996 from $169.5 million for the year ended December 31, 1995. Excluding the
impact of acquisitions of businesses and product lines completed in 1996, net
sales increased 8.1%. This increase reflects primarily increased sales volume of
giftware items (including seasonal items, picture frames and silver plated
items) and of sterling silver flatware. The changes in product prices did not
materially impact net sales.
Gross profit increased 54.6% to $76.8 million for the year ended December
31, 1996 from $49.7 million for the year ended December 31, 1995. Gross profit
as a percentage of sales was 28.4% for the year ended December 31,
29
<PAGE>
1996 compared to 29.3% for the year ended December 31, 1995. The decrease in
gross profit percentage was primarily a result of the acquisition of Rauch,
which gross profit margin is lower than that of certain of the Company's other
product lines and a $1.3 million nonrecurring compensation expense charge
related to the transfer of shares to one of the executive officers. See note 11
to the Company's consolidated financial statements. Partially offsetting this
decrease was the gross profit on the recently acquired high end Silvestri
seasonal productline. Excluding the impact of acquisitions, the gross profit
percentage was 30.3% for the year ended December 31, 1996. This increase in
gross profit percentage, exclusive of acquisitions, was due to increased
sterling flatware sales which have a higher profit margin than other tabletop
and giftware items and also to a change in product mix in the giftware lines to
higher margin items including frames and certain seasonal products. The increase
in gross profit margin was not materially impacted by change in product prices.
Selling, general and administrative expenses ("S,G & A expenses") increased
to 21.3% as a percentage of net sales of $57.7 million for the year ended
December 31, 1996 from 20.2% or $34.2 million for the year ended December 31,
1995. S,G & A expenses were $39.5 million or 21.5% as a percentage of net sales
excluding S,G & A expenses incurred at Rauch, Silvestri, C.J. Vander and
Potpourri. These acquired companies had $18.2 million of S,G & A expenses
including the allocation of existing and continuing corporate expenses.
Substantial resources were dedicated and additional expenses were incurred as a
result of acquiring productlines, integrating functions (including selling and
marketing, customer service and general and administrative functions) and in the
case of Farberware, general and administrative costs of disposing of the
productline during 1996. Allocated corporate costs incurred to sell the
Farberware product line of $2.6 million are not included in the other operating
income line and are included in the Company's S,G & A expenses. Also included in
S,G & A expenses in 1996 was $2.6 million of nonrecurring compensation expense
related to the transfer of shares to two other executive officers. See note 11
to the Company's consolidated financial statements.
Income from operations increased 49.6% to $23.1 million in the year ended
December 31, 1996. Included in income from operations for the year ended
December 31, 1996, was $3.5 million, net of certain S,G & A expenses, from the
disposal of Farberware inventory. The Company does not expect to incur any loss
on the disposal of the remaining Farberware inventory at December 31, 1996 of
$3.3 million.
Interest expense, net was $2.4 million for the year ended December 31, 1996
compared to interest income, net of $4.6 million for the year ended December 31,
1995. This change results from a reduction in invested cash used to purchase and
retire 3,064,751 shares of the Company's Common Stock, for recent acquisitions
and for seasonal working capital needs.
The provision for income taxes was $12.2 million for the year ended
December 31, 1996 compared to $6.9 million for the year ended December 31, 1995.
The effective income tax rate was 37.5% for the year ended December 31, 1996
compared to 34.3% for the year ended December 31, 1995. This increase in the
effective income tax rate in 1996 is due to a higher proportion of income earned
in tax jurisdictions with higher income tax rates, including but not limited to
the Farberware income.
Net income for the year ended December 31, 1996, all of which was income
from continuing operations, was $20.4 million or $2.32 per share, on shares of
8,799,000, compared to income from continuing operations of $13.2 million, or
$1.12 per share, on shares of 11,803,000, for the year ended December 31, 1995.
The year ended December 31, 1996 included non-recurring pre-tax income of $11.9
million, net of costs, resulting from a license agreement. Net income for the
year ended December 31, 1995 was $46.2 million or $3.91 per share. The year
ended December 31, 1995 included income from discontinued operations, net of
income taxes, of $2.6 million and the gain on sale of Syroco, Inc. of $30.5
million totaling $2.79 per share.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net sales increased by 15.1% to $169.5 million in 1995 from $147.3 million
in 1994 primarily due to expanded product offerings within the giftware line, as
well as increased demand for the Company's giftware products and an increase in
its seasonal product category. The Company's sales increased despite a difficult
retail environment in 1995.
The Company's gross profit increased 16.4% to $49.7 million in 1995 from
$42.7 million in 1994. The gross profit as a percentage of net sales increased
to 29.3% in 1995 from 29.0% in 1994. This increase was due primarily to improved
product mix in the giftware lines.
30
<PAGE>
Selling, general and administrative expenses increased to $34.2 million in
1995 from $31.6 million in 1994 but decreased as a percentage of net sales to
20.2% in 1995 from 21.5% in 1994. The decrease of 1.3 percentage points was due
to the Company's cost reduction program following the sale of Syroco.
Income from operations increased 39.4% to $15.4 million in 1995 from $11.1
million in 1994 as a result of the factors discussed above.
Interest income, net, was $4.6 million in 1995 compared to net interest
expense of $0.5 million in 1994. Interest income was earned primarily as a
result of investing the net proceeds from the sale of Syroco in short-term,
investment grade securities.
The provision for income taxes in 1995 was $6.9 million compared with $2.8
million in 1994. The effective income tax rate increased to 34.3% in 1995 from
26.0% in 1994. The 1995 effective income tax rate increased primarily due to an
increase in the proportion of the Company's earnings in tax jurisdictions with
higher tax rates, primarily interest income earned in the United States.
Liquidity and Capital Resources
On March 28, 1995, the Company sold its casual furniture and accessories
business of Syroco, Inc. to Marley Plc for net proceeds of $133.9 million after
transaction costs and income taxes. The Company has used the net proceeds from
the sale of Syroco for working capital requirements to grow its existing
business, to effect the Katy Stock Repurchase and to make several acquisitions
in 1996.
Net cash provided by operating activities for the year ended December 31,
1996 was approximately $23.8 million. The primary sources of cash were the
decrease in marketable securities as a result of the repayment of temporary
borrowings used to effect the Katy Stock Repurchase and income generated which
includes the non-
recurring pre-tax Farberware gain of $11.9 million. Partially offsetting these
sources was acquisition related increases in accounts receivable and
inventories.
At December 31, 1996, accounts receivable increased to $60.0 million from
$31.9 million at December 31, 1995. This increase is primarily the result of
sales of Farberware inventory, seasonality, the recent acquisitions and
increased sales volume in the tabletop and giftware product lines. The increase
in inventory from $41.2 million at December 31, 1995 to $79.4 million at
December 31, 1996 is due to recent acquisitions, including purchased Farberware
inventory. During 1996, $23.8 million was collected from the final settlement
agreement for the Rauch fire loss which occurred prior to the Company's
acquisition of Rauch.
The Company's working capital requirements are seasonal and tend to be
highest in the period from September through December due to the Christmas
selling season. Accounts receivable tend to decline during the first quarter as
receivables generated during the third and fourth quarters are collected and
remain lower until the next peak season beginning in September. Accordingly, the
Company's debt level under its revolving credit facilities generally peaks in
the third quarter and reduces during the first quarter. This seasonality has
increased as a result of the acquisition of Rauch and the Silvestri product
line. See "Risk Factors--Seasonality".
Capital expenditures were approximately $15.1 million for the year ended
December 31, 1996. These expenditures were primarily for a warehouse in South
Carolina, computer software and hardware, improvements at the Company's East
Boston facility, machinery, tools and dies for the Company's manufacturing
facilities and for a building and equipment for C.J. Vander.
The Company expects capital expenditures for the year ended December 31,
1997 to be approximately $17 million, including land and construction costs for
a warehouse facility on the West Coast, the cost of certain machinery and
equipment for Rauch.
On December 29, 1995, the Company effected the Katy Stock Repurchase. The
aggregate purchase price of $52.1 million represented approximately $17 per
share. The purchase was substantially financed by the issuance of two promissory
notes due January 2, 1996 to subsidiaries of Katy and the assumption of short
term bank debt, all aggregating $51.7 million. The two promissory notes and the
short-term bank debt were repaid on January 2, 1996.
Effective October 31, 1996, the Company's Loan Agreement was amended to add
Rauch, Farberware and Silvestri as borrowers and limited total borrowings,
including amounts reserved for drawings on letters of credit, to $100.0 million
through December 31, 1996 and thereafter to $60.0 million under the earlier of
April 30, 1997
31
<PAGE>
or the completion of refinancing contemplated with respect to the
Recapitalization. As of December 31, 1996, the amount of outstanding borrowings
under the Loan Agreement was $5.9 million.
The revolving credit facility of one of the Company's Puerto Rican
subsidiaries expired on May 30, 1996; however, the Company received a letter of
commitment increasing the line from $4.0 million to $10.0 million and extending
it to May 31, 1997. On October 15, 1996, the Puerto Rican subsidiary and the
lender entered into an Amended and Restated Line of Credit Agreement increasing
the facility to $10.0 million and renewing it to May 31, 1997. As of December
31, 1996, the amount of outstanding borrowings under the line was $0.6 million.
On December 31, 1996, credit availability, net of $10.3 million of
outstanding letters of credit, under the Loan Agreement and the Puerto Rican
subsidiary's line totaled $83.8 million and $9.4 million, respectively. On
January 1, 1997, the availability under the Loan Agreement was reduced by $40.0
million.
The Company anticipates, assuming that the Recapitalization was consummated
on December 31, 1996, that up to approximately $301.2 million of financing will
be required in connection with the Recapitalization and related transactions for
(i) the consummation of the Merger, (ii) the repayment of the existing bank debt
of the Company and (iii) the payment of fees and expenses associated with the
Recapitalization. The Company expects to obtain the necessary funds from (i) the
Equity Investment, (ii) the issuance and sale of the Senior Notes in the
Offering and (iii) borrowings under the New Credit Facility. See "The
Recapitalization" and "Use of Proceeds".
At the time of the execution of the amendment to the Merger Agreement, a
commitment letter to provide senior credit financing was presented to the
Company. The New Credit Facility will provide for $130.0 million of revolving
credit borrowings. The New Credit Facility will mature on the fifth anniversary
of the Recapitalization. Interest on loans under the New Credit Facility will
bear interest at rates based upon federal or Eurodollar Rates plus an applicable
margin. Loans under the New Credit Facility will be guaranteed by any and all
current or future domestic subsidiaries of the Company and will be secured by
security interests in the accounts receivable and inventory of the Company and
its domestic subsidiaries. For a more complete description of the New Credit
Facility, see "Risk Factors--Significant Leverage and Debt Service; Effective
Subordination" and "Description of Other Indebtedness."
Upon consummation of the Recapitalization, the Company would have on a pro
forma basis (as of December 31, 1996) outstanding debt of approximately $162.3
million. The transaction is expected to close in the second quarter of 1997. It
is intended that the transaction will be accounted for as a recapitalization.
The Company anticipates that its principal use of cash following the
Recapitalization will be working capital requirements, debt service requirements
and capital expenditures as well as expenditures relating to acquisitions and
integrating acquired businesses. Based upon current and anticipated levels of
operations, the Company believes that its cash flow from operations, together
with amounts available under the New Credit Facility, will be adequate to meet
its anticipated requirements through December 31, 1998 for working capital,
capital expenditures and interest payments. There can be no assurance, however,
that the Company's business will continue to generate sufficient cash flow from
operations in the future to service its debt, and the Company may be required to
refinance all or a portion of its existing debt or to obtain additional
financing. There can be no assurance that any such refinancing would be possible
or that any additional financing could be obtained. The inability to obtain
additional financing could have a material adverse effect on the Company.
32
<PAGE>
Accounting Pronouncements
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting For Stock-Based Compensation"
("Statement 123"). The Company has continued to account for its stock-based
transactions to employees in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and will include the pro
forma disclosures required by Statement 123, if material, in its annual
financial statements. For stock option grants to non-employees, the Company
follows the provisions of Statement 123, calculates compensation expense using a
fair value based method and amortizes compensation expense over the vesting
period. During the year ended December 31, 1996, the Company did not grant any
options to purchase shares of common stock to non-employees.
Also, effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("Statement 121"). Statement
121 requires that long-lived assets held and used by an entity be reviewed for
impairment whenever circumstances indicate that the carrying amount of an asset
may not be recoverable. It also requires that long-lived assets to be disposed
of be reported at the lower of the carrying amount or fair value less the cost
to sell. The adoption of Statement 121 did not have a material effect on the
Company's financial position or results of operations for the year ended
December 31, 1996.
33
<PAGE>
BUSINESS
Overview
Syratech designs, manufactures, imports and markets a diverse portfolio of
tabletop, giftware and seasonal products. The Company is a leading domestic
manufacturer and marketer of sterling silver flatware, sterling silver and
silver-plated hollowware. The Company also offers a number of other
complementary tabletop and giftware items, including stainless steel flatware,
brass hollowware, picture frames and photo albums, glassware, woodenware and
ceramics. Tabletop and giftware products generated approximately 63.4% of net
sales for the year ended December 31, 1996. The Company also is a leading
domestic manufacturer and marketer of seasonal products including Christmas
ornaments as well as a distributor of Christmas trim, lighting and tree skirts.
Seasonal products generated approximately 36.6% of net sales for the year ended
December 31, 1996.
Syratech has positioned itself as a single-source supplier to retailers by
offering a wide assortment of products across multiple price points through its
"good-better-best" strategy. This strategy enables the Company to sell its
products through a broad array of distribution channels, including retail
specialty stores, department stores, mass market merchandisers, catalogue
showrooms and warehouse clubs. Syratech markets its products under numerous
Company-owned tradenames including the Towle Silversmiths[RegTM], Wallace
International Silversmiths[RegTM]and International Silver Company[RegTM]
tradenames which are used in connection with the sale of tabletop and giftware
items and the Rauch[RegTM], Silvestri[RegTM] and Potpourri[RegTM] tradenames
which are used in connection with the sale of Christmas and other seasonal
merchandise.
Syratech has made a number of recent acquisitions to broaden and complement
its existing product lines. The Company has significantly enhanced the value of
acquired product lines by integrating them into the Company's existing
infrastructure. During 1996, the Company acquired Rauch, a leading domestic
manufacturer and marketer of Christmas ornaments, and C.J. Vander, a U.K.
manufacturer and marketer of prestigious sterling silver flatware and
hollowware. Also in 1996, the Company acquired certain assets, including the
tradenames, of Silvestri, a high-end manufacturer and marketer of Christmas
ornaments, collectibles, lighting and trim as well as other giftware and
decorative accessories, and Potpourri, a manufacturer and marketer of Christmas
products. The Company continually introduces new products and expands the
distribution of its existing products. As a result, the Company has generated
significant growth in net sales and Adjusted EBITDA from $103.7 million and
$11.8 million, respectively, in 1992 to $271.5 million and $29.8 million,
respectively, on a pro forma basis, in 1996. For the year ended December
31, 1996, the Company had net sales of $270.9 million, an increase of 59.8%
from the same period in 1995. Furthermore, the Company believes that the
continued integration of the acquisitions into its existing business will
position it to increase sales and profitability.
Competitive Strengths
The Company's goal is to become the leading domestic, single-source
supplier of tabletop, giftware and seasonal products to retailers. To achieve
this goal, the Company will rely on its core competitive strengths, which are as
follows:
Leading Market Positions. The Company is one of the leading domestic
manufacturers and marketers of sterling silver flatware and sterling silver and
silverplated hollowware. These products are sold under the Wallace, Towle and
International Silver tradenames, which are well-recognized and date back to the
American Colonial period. In addition, the Company is one of the leading
domestic manufacturers of Christmas ornaments. These products are sold under the
Rauch, Silvestri and Potpourri tradenames, which are well-established brands for
Christmas and other seasonal merchandise. Historically, the Company has been
able to increase sales by leveraging its leading market positions, strong
presence with retailers and strong brand identity with consumers to introduce
new products and product categories.
Broad Portfolio of Products with Well-Recognized Tradenames. The Company
provides a broad offering of quality products at multiple price points. These
items range from exclusive prestige products, such as sterling silver flatware
and hollowware, to moderately priced products, including silverplated and
stainless steel flatware, silverplated and brass hollowware and other giftware
and seasonal merchandise.
Syratech uses Company-owned and licensed tradenames as merchandising tools
to assist retailers in coordinating their product offerings and differentiating
their products from those of their competitors. In addition to the Wallace,
Towle, International, Rauch, Silvestri and Potpourri tradenames, the Company
markets giftware
34
<PAGE>
products under numerous other tradenames, including Rochard[RegTM], Holiday
Workshop[RegTM], Melannco[RegTM] and Elements[RegTM]. The Company believes that
its strongest brands draw customers into retail stores specifically to purchase
products bearing those tradenames. In addition to its own tradenames, the
Company produces a variety of products under license from certain entities
including The Walt Disney Company[RegTM], Cuisinart[RegTM], Victoria & Albert
Museum[RegTM] and Faberge, Inc.[RegTM].
The Company recently acquired certain assets, including the intellectual
property, of Farberware Inc. Following this acquisition, the Company licensed
the Farberware tradename to third parties for use on cookware and bakeware,
small electric and certain other commercial electric items. The Company is
currently marketing certain products under the Farberware tradename and believes
there are significant opportunities to develop the tradename in other product
categories which have not been otherwise licensed to third parties.
The Company's diverse product lines allow it to target a wide range of
customers and to respond more effectively to changes in retail distribution and
consumer preferences. Furthermore, the vendor consolidation trend in the retail
industry increases demand for vendors, like the Company, who can make timely
deliveries of a broad range of quality products and provide advertising and
other sales support.
Diversified Distribution Channels. The Company sells its products to
approximately 30,000 customers in most major distribution channels, including
retail specialty stores, such as jewelry, seasonal and nonseasonal giftware and
collectible stores, department stores, mass market merchandisers, catalogue
showrooms, warehouse clubs, premium and incentive marketers, drug store chains
and home centers. The Company believes that the recent Rauch and Silvestri
acquisitions will strengthen the Company's presence with mass market
merchandisers and department and specialty stores, respectively. In addition,
the Company has a policy of not owning or operating Company outlet stores and
believes that this policy further strengthens relationships with customers. The
Company's broad customer base, both in terms of number of customers and
distribution channels, reduces exposure to any single customer or distribution
channel. In 1996, no single customer accounted for more than 8% of the Company's
net sales.
Innovative Product Development. The vast majority of the Company's
products, including products that are sourced from outside vendors, are designed
by the Company's design team and independent designers in conjunction with the
Company's product development and marketing teams. The Company's design and
product development and marketing teams collaborate (i) to introduce innovative
new products and product categories, such as the Holiday Workshop line of
seasonal products, the Hostess Helpers[RegTM] sterling accessory line and a
dinnerware category that coordinates with sterling silver flatware and (ii) to
develop acquired brands into successful product lines for the Company, such as
the Melannco lines of picture frames and photo albums and the Elements glassware
lines.
Integrated Manufacturing and Sourcing. The Company relies both on its own
domestic manufacturing capabilities and on a variety of suppliers located
primarily in the Asia Pacific Rim to deliver quality products at competitive
prices to its customers. The Company's decision to manufacture or to import is
based largely upon expertise, quality, availability and cost. In order to ensure
quality, imported products are generally manufactured using Company-owned tools
and dies. In 1996, through its import organization comprised of approximately
150 employees, both in the U.S. and overseas, the Company sourced products from
approximately 480 manufacturers, with whom in many cases it has had
long-standing relationships.
Business Strategy
The Company has developed and is implementing a business strategy to build
upon its core operating strengths and enhance profitability.
Leverage Recent Acquisitions. The Company believes that opportunities for
growth in sales and profitability exist through successfully integrating its
recent acquisitions into the Company's sales and marketing organization and
consolidating and rationalizing certain operations. Historically, the Company
has expanded and augmented acquired product lines through leveraging internal
marketing expertise and existing distribution relationships.
The Company plans to expand the distribution of Rauch, Silvestri and
Potpourri products by marketing them through the Company's established
distribution channels and also plans to add new products to their existing
lines. By integrating Rauch, Silvestri and Potpourri with the Company's
internally developed Holiday Workshop lines of seasonal products, the Company
has significantly expanded its product offerings in this product category, both
in terms of types of product and retail price points, and strengthened its
presence in major retail channels. In addition,
35
<PAGE>
the Company believes that such strengthened presence will provide opportunities
to cross-sell the Company's tabletop and giftware product lines through Rauch
and Silvestri distribution channels.
Through the acquisition of C.J. Vander, the Company believes that it will
be able to expand the distribution of Wallace and Towle sterling silver and
silverplated product lines into the European market, primarily through C.J.
Vander's existing distribution channels. In addition, the Company intends to
expand the distribution of C.J. Vander products in the United States through the
Company's independent representatives who sell to high-end specialty and
department stores.
In addition, the Company believes that the recent acquisitions will enable
it to achieve cost savings through (i) the consolidation of warehouses,
showrooms and manufacturing facilities, (ii) efficiencies resulting from
increasing sales volume through its existing distribution network and (iii)
reductions in certain general and administrative expenses, such as MIS, human
resources and credit analysis. For example, the Company is consolidating its
distribution facilities in the Western United States by building its own
warehouse to reduce costs, increase capacity and serve its customers more
efficiently.
Expand Distribution of Existing Product Lines. The Company believes that it
has significant opportunities to expand the distribution of its existing product
lines by increasing the penetration of existing retailer customers and the
number of retail outlets to which it sells. Beginning in 1994, the Company
implemented a program with a specialty retailer and franchisee, whereby the
Company sources, markets and distributes giftware products for the customer's
retail system comprised of several thousand stores. As a result, the Company has
identified several growth opportunities, both in terms of expanded product
offerings and additional store coverage. In addition, the Company intends to
expand the distribution of several product lines introduced in the past several
years, such as Melannco and Elements, which the Company believes are growth
opportunities that have not yet been fully exploited.
Broaden Product Offerings. The Company expects to make a number of new
product introductions each year. As a result of the planned investments in
tools, dies and machinery, the Company believes that it will be able to broaden
significantly its offering of Christmas and other seasonal merchandise beginning
in 1997. The Company intends to capitalize on the Farberware tradename by
introducing new products in categories as to which exclusive rights to the
tradename have not been granted to third parties. In addition, the Company
continues to expand and upgrade its line of sterling silver, silverplated and
other tabletop and giftware products.
Invest Further in Technology and Productivity to Maintain a Low-Cost
Structure. In order to support the growth of its business, during 1997 the
Company plans to invest $15 million to expand its manufacturing, warehousing and
distribution capabilities. In addition, the Company intends to invest in
application solutions to enhance its Electronic Data Interchange (EDI) and
warehousing capabilities. The Company plans to add a Warehousing Management
System (WMS) to each of its warehouses. These systems will enhance the Company's
ability to service its customers by improving its order processing and logistics
and storage utilization, minimizing order cycle times, enhancing inventory
management, and ensuring that customer orders are processed efficiently.
Additionally, the Company is planning to expand its manufacturing capabilities
by acquiring new tools, dies and machinery. The Company also has purchased a
828,000 square foot manufacturing and distribution facility in Chester, South
Carolina which will increase production capacity and reduce costs.
Make Selected Acquisitions. The Company believes that the giftware and
seasonal markets and, to a lesser extent, the tabletop market are highly
fragmented with a number of small manufacturers and marketers of limited
products lines. The Company believes that these industry dynamics and the
continuing trend among retailers to consolidate their vendor base should
generate attractive opportunities to acquire complementary brands, products,
product categories and businesses that will provide operating synergies.
Recent Transactions
Rauch
On February 15, 1996, the Company, through an indirect wholly owned
subsidiary, acquired the outstanding shares of Rauch for approximately $49.6
million, including costs of the transaction. The acquisition was accounted for
under the purchase method of accounting, and the results of operations of Rauch
have been included with the results of the Company from February 15, 1996. The
purchase price in excess of net assets acquired of $7.2 million is being
amortized on the straight line basis over 30 years. During the year ended
December 31, 1996, the Company
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<PAGE>
received $23.8 million in connection with an insurance claim relating to a 1994
fire at Rauch. During the fiscal year ended December 31, 1995, net sales of
Rauch were $58.9 million.
Farberware Inc.
On April 2, 1996, the Company, through its indirect wholly owned
subsidiary, Far-B Acquisition Corp. ("Far-B"), together with Lifetime Hoan
Corporation ("Lifetime"), acquired certain assets from Farberware Inc., a
subsidiary of U.S. Industries, Inc. ("USI") Lifetime and the Company are not
affiliates.
Farberware Inc. was a manufacturer of aluminum clad, stainless steel
cookware and bakeware and small electric kitchen appliances. The aggregate
consideration paid by Far-B and Lifetime was approximately $45.8 million,
subject to adjustment, of which Far-B paid approximately $32.6 million. The
amount of the adjustment was the subject of a dispute, as noted below. The
assets acquired by the Company included certain of the inventory, the tradename
"Farberware" and the intellectual property (including the intellectual property
that relates to cookware and bakeware and electric products other than major
kitchen appliances) and certain tools and dies and machinery and equipment.
Effective April 2, 1996, the Company, through Far-B, entered into a
manufacturing services agreement with Farberware Inc. for transitional
manufacturing services for certain finished goods previously produced by
Farberware Inc. The Company entered into the manufacturing services agreement in
part to provide continuity of product during a transition period in order to
protect the strength of the Farberware name in the marketplace. The
manufacturing services agreement has terminated.
Upon disposal of acquired inventory, the Company will not manufacture or
sell Farberware cookware and bakeware products or noncommercial electric
products. Accordingly, net sales for the year ended December 31, 1996 exclude
sales of Farberware inventory, and $3.5 million, net of certain selling, general
and administrative expenses, from these sales has been recorded as other
operating income.
Pursuant to an agreement made with Lifetime contemporaneously with the
agreement for acquisition of assets of Farberware Inc., the Company and Lifetime
agreed to share the rights to receive, and the obligation to pay certain
commissions in respect of, royalties under specified license agreements assigned
to the Company by the prior owner of the Farberware trade name. Through a joint
venture to be, but which has not yet been, formally established pursuant to the
agreement with Lifetime and subject to certain intellectual property rights that
the Company has reserved exclusively for itself, the Company and Lifetime expect
to continue to grant licenses to third parties for use of the Farberware trade
name, The Company itself also intends to market specified products from time to
time under the Farberware trade name. The agreement with Lifetime provides that
for a period of sixty days following a change of control of either Syratech or
Lifetime, the other co-owner of the joint venture will have the right to require
the co-owner that has experienced the change in control to set a price for a
one-half interest in the venture, and thereupon the other co-owner (i.e., the
one that has not experienced a change of control) can elect either to buy its
co-owner's interest at the price so set or to sell its own interest at such
price to the co-owner that set it.
On June 27, 1996, the Company's Farberware Inc. subsidiary (formerly Far-B)
("Farberware") entered into a license agreement with Meyer Marketing Co. Ltd.
("Meyer") pursuant to which Meyer was granted for a term of 200 years (i) an
exclusive worldwide license to use the Farberware name and certain related
intellectual property rights in connection with the sourcing, manufacture and
distribution of cookware and bakeware products for home use and commercial,
industrial and institutional size pots, pans and roasters, and (ii)
non-exclusive (shared) rights to use certain Farberware technology and other
intellectual property. For such grant, Meyer made a one-time payment to the
Company of $25.5 million, which resulted in recognition by the Company of $11.9
million of non-recurring income. On July 12, 1996, Farberware granted to a major
retail chain the exclusive license to use the Farberware name and related
intellectual property in connection with the sourcing, manufacture, marketing
and sale of certain electric products for annual royalty payments. On October
25, 1996 Farberware Inc. granted to FCI Corp. a license to use the Farberware
name in connection with the sourcing, manufacturing, marketing and sale of
certain Commercial Products (defined as six specified commercial urns and one
specified commercial convection oven plus cookware, bakeware and electric
products developed by the Licensee solely and exclusively for commercial,
industrial or institutional use with the prior written approval of Farberware)
for the payment of annual royalties.
On February 3, 1997 the Company, Farberware, and Lifetime reached an
agreement (the "Settlement Agreement"), with USI and Bruckner Manufacturing
Corp. (formerly Farberware Inc., the USI subsidiary)("BMC") to settle all
previous outstanding legal disputes arising out of the Farberware asset purchase
agreement and the
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<PAGE>
manufacturing services agreement. The Settlement Agreement provides for no
change to the aggregate consideration paid for the acquired assets, and
eliminates certain restrictions on the disposition of acquired tools, machinery
and equipment. The Company expects to recognize a gain of approximately $2.5
million before taxes in 1997 on the disposition and sale of certain of the tools
and equipment. Under the terms of the Settlement Agreement, Farberware will
receive certain finished goods inventory at no cost which the Company estimates
has a net realizable value of approximately $1.2 million, and agreed to pay for
certain finished goods inventories purchased under the manufacturing services
agreement. The Settlement Agreement also resolved outstanding claims and
disputes related to purchase price adjustments, trade accounts receivable,
advertising commitments, and the administration of consumer warranties.
Silvestri
On April 16, 1996, the Company purchased finished goods inventory and
intangible assets of the Silvestri division of FFSC, Inc. for approximately $8.6
million. Prior to the Company's purchase of such assets, FFSC, Inc., its
subsidiaries and affiliated companies had filed for protection under Chapter 11
of the Bankruptcy Code in the United States Bankruptcy Court for the Northern
District of Texas (the "Bankruptcy Court"). The Bankruptcy Court approved this
acquisition by the Company. Silvestri products include Christmas ornaments,
collectibles, lighting and trim as well as other seasonal and nonseasonal
giftware and decorative accessories.
The Company has given a guaranty (limited to $4 million), dated as of May
21, 1996, of the obligations of FF Holding Company, FFSC, Inc. and certain
related entities to The CIT Group/Business Credit, Inc. under a certain debtor
in possession financing agreement dated May 21, 1996 and, at the request of the
Company, NationsBank N.A. (South) has issued its letter of credit, dated May 21,
1996 in the amount of $4 million to CIT Group/Business Credit, Inc. to secure
the Company's aforesaid guaranty. Certain funds which are affiliates of the
Thomas H. Lee Company are creditors of FFSC, Inc.
C.J. Vander
On May 8, 1996, the Company, through one of its subsidiaries, acquired all
of the outstanding common stock of C.J. Vander, a manufacturer of sterling
silver and silverplated flatware and hollowware in Sheffield and London,
England. The purchase price was immaterial to the Company's consolidated
financial statements. The acquisition was accounted for under the purchase
method of accounting.
Potpourri
On November 26, 1996, a wholly-owned subsidiary of the Company acquired
inventory, tangible property, intellectual property rights, certain key records
(including customer lists, customer files, supplier information, catalogs) and
certain contract rights (selected by the Company's subsidiary) of Potpourri
Press, a North Carolina-
based manufacturer and marketer of Christmas products for a purchase price of
approximately $2.3 million plus a $0.2 million promissory note.
Syroco, Inc.
On April 11, 1995, pursuant to an agreement entered into on March 28, 1995,
the Company, through its subsidiary, Syratech Holding Corporation, sold Syroco.
The net proceeds received after costs of the sale and income taxes were $133.9
million. On September 25, 1995, the Company reached a final settlement regarding
the sale of Syroco. Under the terms of the settlement, the Company reacquired
certain assets and reassumed certain liabilities of Syroco which have been
recorded at their estimated net fair value amounting to $1.8 million at December
31, 1995. The Company does not expect that the liquidation of the assets will
have a material effect on the previously recognized gain on disposal. The sale
resulted in the discontinuation of the Company's casual furniture and
accessories business and resulted in an after tax gain on disposal of $30.5
million which was recognized in the second quarter of 1995. The assets and
liabilities relating to the discontinued business are included in the caption,
net assets of discontinued operations, in the Consolidated Balance Sheets at
December 31, 1995. The results of operations for the discontinued segment are
included in discontinued operations in the Consolidated Income Statements for
the years ended December 31, 1994 and 1995 and Statements of Cash Flows for the
years ended December 31, 1994, 1995 and 1996.
Products
The Company designs, manufactures, imports and markets a diverse offering
of quality tabletop, giftware and seasonal products. The Company defines
seasonal products as Christmas tree ornaments, other Christmas
38
<PAGE>
decorations and a variety of other products sold for Halloween, Easter,
Thanksgiving, Mothers Day and Valentines Day. Seasonal products are marketed
under a variety of the Company's tradenames. Seasonal products are included in
the Tabletop and Giftware product category and are marketed under the Wallace,
Towle, and International Silver tradenames. For example, the Company considers
picture frames a tabletop and giftware item and also considers it seasonal
simply by changing the packaging slightly (e.g., a red colored box at Christmas
time). Therefore, a number of the Company's products and/or product lines cannot
be categorized between Tabletop and Giftware and Seasonal.
The majority of the Company's products are sold through the same
distribution channels. Customers in each distribution channel purchase a wide
range of the Company's products. Distribution costs are not tracked by product
category and therefore are not distinguishable between Tabletop and Giftware and
Seasonal. In addition, selling and marketing costs, including product design,
trade shows and travel, are not tracked separately and are not reasonably
allocable by product category.
A significant portion of the Company's products are also sourced overseas.
This function is also not performed by product or product line and is therefore
not reasonably allocable by product category.
The Company also believes that a significant change in sales of specific
products will not materially impact operating results.
The following table presents a breakdown of the Company's net sales by
major product categories for the periods presented. For the purpose of this
table, seasonal products include the Rauch (including Rochard), Silvestri and
Holiday Workshop product lines. Certain seasonal products marketed under
Wallace, Towle and International Silver trademarks are included in the tabletop
and giftware product category.
Year Ended December 31,
-----------------------------------------
1994 1995 1996
----------- ----------- ----------
(in thousands)
Tabletop and Giftware......... $139,510 $153,170 $171,824
Seasonal...................... 7,781 16,350 99,107
--------- --------- ---------
Total......................... $147,291 $169,520 $270,931
========= ========= =========
- ------------
The Company's products include those shown in the table below, all of which
are marketed under one of the Company's many well-recognized tradenames as shown
in the table:
<TABLE>
<CAPTION>
Product Category Representative Products Principal Tradenames
- ------------------- ----------------------------------------- ------------------------------------------------
<S> <C> <C>
TABLETOP Sterling Silver Flatware and Wallace Silversmiths[RegTM], Towle
AND Hollowware, Silverplated Flatware Silversmiths[RegTM], International Silver
GIFTWARE and Hollowware, Stainless Steel Company[RegTM], Farberware[RegTM], C.J.
Flatware, Picture Frames and Photo Vander, Ltd.[TM], Roberts and Belk,
Albums, Porcelain Boxes, Ltd.[TM], Tuttle Sterling[RegTM], Rochard[TM],
Candlesticks, Cosmetic Accessories, Melannco[RegTM], 1847 Rogers Bros.[RegTM],
Glassware, Woodenware, Ceramics, Elements[RegTM]
Brassware
SEASONAL Waterglobes, Figurines, Collectibles, Rauch Industries[RegTM], Silvestri[RegTM],
Christmas Ornaments, Christmas Holiday Workshop[RegTM], Potpourri[RegTM],
Stockings, Tree Skirts, Trim, Lighting International Christmas[TM], Holiday
Products[TM], Rochard[TM]
</TABLE>
Tabletop and Giftware
Sterling Silver and Silverplated Flatware and Hollowware. The Company
designs, markets and distributes a variety of products in these categories,
including flatware, serving pieces, cosmetic accessories and hollowware, such as
candlesticks, casseroles and coffee and tea services, that are marketed under
the tradenames Wallace Silversmiths[RegTM], Towle Silversmiths[RegTM],
International Silver Company[RegTM], C.J. Vander[TM] and Tuttle Sterling[RegTM].
A vast
39
<PAGE>
majority of the Company's products in this category are manufactured at the
Company's plants in Puerto Rico and Massachusetts. These products are sold
primarily to specialty stores, including jewelry stores and gift stores, and
department stores and are generally included in bridal registries.
Stainless Steel Flatware. The Company designs, markets and distributes
several lines of stainless steel flatware ranging from premium mass-produced
sets to high-end flatware place settings. The Company markets these products
under tradenames such as Wallace Silversmiths[RegTM], Towle Silversmiths[RegTM],
International Silver Company[RegTM], 1847 Rogers Bros.[RegTM] and, under a
license agreement, the tradename Cuisinart[RegTM]. The Company's products in
this category are imported from the Company's third-party vendors located
primarily in the Asia Pacific Rim. The primary channels of distribution include
department stores, mass market merchandisers, warehouse clubs and specialty
stores and are also included in bridal registries.
Picture Frames and Photo Albums. The Company designs, markets and
distributes several product lines of picture frames and photo albums. The
picture frames range from sterling silver on the high end to a variety of other
frames produced in wood, resin, ceramic, metal and other mediums. The photo
albums are produced in metal, fabric and resin. The Company markets these
products under tradenames such as Melannco International[RegTM], International
Silver Company[RegTM], Wallace Silversmiths[RegTM] and Towle Silversmiths[RegTM]
and under license from The Walt Disney Company[RegTM]. The Company's products in
this category are imported from the Company's third-party vendors located
primarily in the Asia Pacific Rim. The channels of distribution include
department stores, including stationery departments, specialty stores and mass
market merchandisers.
Glassware, Woodenware and Ceramics. The Company designs, markets and
distributes several lines of glassware products, including beverageware, glass
dinnerware and salad sets. The Company markets these products under the
tradenames International Silver Company[RegTM] and Elements[RegTM]. The Company
intends to market a woodenware and ceramics line in 1997 under the
Farberware[RegTM] tradename. The Company's products in this category are
imported from the Company's third-party vendors located primarily in the Asia
Pacific Rim. The channels of distribution of the Company's glassware line
include mass market merchandisers, warehouse clubs and specialty stores.
Porcelain Boxes. The Company designs, markets and distributes a diverse
range of high-end, hand-painted porcelain boxes under the Rochard [TM] tradename
which are primarily manufactured by third-party vendors located primarily in
France. The channels of distribution include specialty stores, including jewelry
stores and department stores.
Other Tabletop and Giftware. The Company designs, markets and distributes a
wide range of other tabletop and giftware products, including premium products
such as picture frames and cosmetic accessories as "gift with purchase" items,
brassware, napkin rings and decorative clocks. The primary channels of
distribution include department stores, mass market merchandisers, warehouse
clubs and specialty stores.
Seasonal Products
Christmas Ornaments. The Company designs, markets and distributes Christmas
tree ornaments made of glass, satin, ceramic and resin. The Company's products
are distributed through specialty stores, department stores, jewelry stores,
mass market merchandisers and warehouse clubs. These products are marketed under
the tradenames Rauch[RegTM], Silvestri[RegTM], Holiday Workshop[RegTM] and
International Christmas[TM]. The Company also manufactures limited edition,
sterling silver Christmas ornaments that are marketed under the tradenames
Wallace Silversmiths[RegTM] and Towle Silversmiths[RegTM].
Other Christmas Decorations. The Company designs, markets and distributes a
diverse product offering of other Christmas decorations including figurines,
waterglobes, collectibles, trim, lighting, tree skirts and other decorative
items produced in wood, resin, metal, paper, textiles, glass and ceramic. These
products are marketed under the tradenames Silvestri[RegTM], Rauch[RegTM],
Holiday Workshop[RegTM], International Christmas[TM] and Elements[RegTM]. These
products are distributed through specialty stores, department stores, mass
market merchandisers and warehouse clubs.
Other Seasonal Products. The Company designs, markets and distributes a
variety of other seasonal products for Halloween, Easter, Thanksgiving, Mothers
Day and Valentines Day. These products include figurines, vases, bowls, trays
and other items comprised of metal, resin, wood, ceramic and glass. These
products are distributed through specialty stores, department stores, mass
market merchandisers and warehouse clubs.
40
<PAGE>
Sales, Marketing and Distribution
On January 17, 1997, the Company, through one of its indirect wholly-owned
subsidiaries, acquired approximately 42 acres of land in Mira Loma, California.
The Company intends to construct a warehouse and distribution center on the
property to serve as its western region warehouse and distribution center.
The Company sells many different types of products, with a variety of price
points and target customers. Accordingly, the Company sells its products through
a variety of distribution channels including department and speciality stores,
mass market merchandisers, warehouse clubs, catalogue showrooms, premium and
incentive marketers, drug store chains, supermarkets, and jewelry stores. The
Company maintains separate sales forces for its product lines so as to provide
the specialized expertise and attention necessary to service its customer base.
The Company's sales and marketing staff coordinates with individual retailers to
devise marketing strategies and merchandising concepts and to furnish advice on
advertising and product promotion. The Company has developed several promotional
programs for use in the ordinary course of business to promote sales throughout
the year.
The Company's various sales and marketing efforts are supported from its
principal office and showroom in East Boston, Massachusetts and, for certain of
its products, from its offices and showrooms in Hong Kong and London. The
Company maintains additional showrooms in New York, Los Angeles, Atlanta, Dallas
and Chicago. The Company's sales and marketing staff at December 31, 1996,
consisted of approximately 150 employees who are salaried, paid commissions
based on sales or, in some instances, paid a base salary plus commissions. The
Company also distributes certain of its products through independent sales
representatives who work on a commission basis only.
Retailing Customers
During 1996, 20 customers accounted for approximately 43% of the Company's
net sales. No one customer represented more than 8% of the Company's net sales.
<TABLE>
<CAPTION>
Channels of Distribution % of 1996 Net Sales
- ------------------------------------------------------------------------ --------------------
<S> <C>
Mass Market Merchandisers, Catalogue Showrooms, Warehouse Clubs,
Drug Store Chains, Supermarkets........................................ 39%
Department Stores...................................................... 19%
Specialty Stores, Jewelry Stores, Premium and Incentive Marketers...... 42%
</TABLE>
In order better to service its customers, the Company has invested in
equipment and software to allow its customers to transmit their orders
electronically throughout the EDI system.
Manufacturing and Raw Materials
The Company produces its sterling silver flatware at its manufacturing
facility in San German, Puerto Rico, where it fabricates and manufactures
sterling silver into finished products for the Wallace, International, Towle and
Tuttle lines, and in Sheffield, England for C.J. Vander, Ltd. and Roberts and
Belk. The Company also designs, produces and maintains the tools required for
manufacturing sterling silver flatware.
The Company has maintained, in the aggregate, approximately six months of
inventory. The Company's silver fabrication operation in its Puerto Rico
manufacturing plant became fully operational during 1994. This process reduces
the need for purchasing fabricated silver from outside vendors. The Company uses
substantial quantities of fabricated silver in its manufacturing operations.
Fabricated sterling silver made from fine silver purchased by the Company may be
readily obtainable from outside resources as well. The Company purchases fine
silver in the spot market in quantities the Company believes are adequate to
meet reasonably foreseeable consumer demand for its silver products. The Company
does not engage in speculative purchases of fine silver. In the five-year period
ended December 31, 1996, the closing price of silver as quoted by Handy & Harman
Inc. has ranged from $3.54 per troy ounce to $6.01 per troy ounce ($5.23 at
February 21, 1997).
The Company manufactures silverplated giftware and tabletop products,
including hollowware, at its manufacturing and silverplating facilities in North
Dighton, Massachusetts and Sheffield, England. These facilities have all the
stamping, processing, soldering, finishing, polishing, silverplating and
packaging capabilities necessary to turn unfinished metal into finished
products.
41
<PAGE>
The Company's imported products originate as designs created by its
internal design staff or by independent designers, in each case in conjunction
with the Company's product development and marketing staffs. Products based on
these designs are manufactured to the Company's specifications in various
countries including Hong Kong, India, Korea, Taiwan, China, Japan, Indonesia,
Malaysia and certain European countries.
In 1996, the Company purchased an aggregate of approximately $104 million
of products from approximately 480 foreign manufacturers. No vendor accounted
for ten percent or more of such purchases in 1996. The Company does not have
information on the financial condition of its major foreign vendors, all of
which are privately held, but is not aware of any unfavorable information
related to their respective financial condition. Of the Company's foreign
purchases in 1996, approximately 92% were from vendors located in the Far East
and approximately 4% were from vendors located in India and approximately 4% in
the aggregate from vendors in other locations. The Company does not believe that
the loss of any single foreign supplier would have a material long-term adverse
impact on the Company's source of supply, because other manufacturers with whom
the Company does business would be able to increase production to fulfill the
Company's requirements. See "Risk Factors--Foreign Sources of Supply."
The Company intends to invest in increasing production capacity and
improving productivity related to its Rauch operations. For several of the prior
selling seasons, the Company believes that Rauch had operated under capacity
constraints. The Company has developed and is in the process of installing new
automatic machinery with a production capacity exceeding 150% of the capacity of
its current machines. The Company expects that the new machinery will start
operating during the first quarter of 1997. The Company also purchased an
828,000 (approximately) square foot building in Chester, South Carolina, which
is in close proximity to the existing Rauch manufacturing plant. This new
facility will provide adequate space for the new machinery and allow for
automated material handling which is expected to reduce costs substantially.
This large warehouse and distribution center will also provide the Company an
opportunity to consolidate its outside warehouse and manufacturing. The Company
continuously looks for new equipment intended to reduce production costs.
The recently acquired Rauch Christmas decoration manufacturing process uses
three basic raw materials: (i) expandable polystyrene ("EPS") for unbreakable
ornaments, (ii) glass ornament blanks and (iii) acetate or polyester yarn
materials including boxes and packaging. To produce Christmas stockings, tree
skirts and Santa Claus hats and suits, Rauch purchases non-woven and knitted
pile fabric. Rauch has not experienced difficulty in obtaining raw materials or
other supplies from its suppliers and does not anticipate any such difficulty in
the foreseeable future. Rauch imports ornament hangers, small glass and satin
balls and assorted tree and off-the-tree decorations from Taiwan, Hong Kong,
Mexico and Colombia. See "Risk Factors--Foreign Sources of Supply."
Competition
The tabletop, giftware and seasonal products industries in which the
Company is engaged are highly competitive. Competition is affected not only by
the large number of domestic manufacturers, but also by the large volume of
foreign imports. Several of the Company's competitors are larger and have
greater financial resources than the Company. The Company's products compete
indirectly with a broad range of household products not offered by the Company.
Within the overall tabletop products industry, the production of sterling silver
flatware in the United States is relatively concentrated, with five
manufacturers, including the Company, accounting for substantially all of the
sterling silver flatware manufactured and sold in the United States. The other
principal manufacturers and marketers of sterling silver flatware are Gorham,
Inc. and its affiliate The Kirk Steiff Company, Reed & Barton Corp. and Lunt
Silversmiths, all of which have been in business for many years. The giftware
and seasonal products industries, however, are very fragmented with numerous
small manufacturers and marketers of a limited number of products. The Company
is not aware of any competitor having the same product line breadth.
A number of factors affect competition in the sale of products of the type
manufactured, imported and sold by the Company. Among these are brand
identification, style, design, packaging, price, quality, promotion, sales staff
and the level of service provided to customers. The importance of these
competitive factors varies from customer to customer and from product to product
and no one of these factors is dominant in all cases. The Company believes that
its ability to compete effectively can be attributed to its performance in all
of these areas. Certain of the Company's foreign competitors have tried to gain
market share in the United States by producing low-cost items and by taking
advantage of the increased purchasing power of the dollar in times when the
dollar is relatively strong as compared to foreign countries. Rising labor costs
in many foreign countries and the relative weakness of the
42
<PAGE>
dollar, as compared to the exchange rates prevailing in the mid-1980's, have
reduced these advantages to some extent in recent years. See "Risk
Factors--Competition".
Trademarks, Copyrights and Patents
The success of the Company's various businesses depends in part on the
Company's ability to exploit certain proprietary designs, trademarks and brand
names on an exclusive basis in reliance upon the protections afforded by
applicable copyright, patent and trademark laws and regulations. The loss of
certain of the Company's rights to such designs, trademarks and brand names or
the inability of the Company effectively to protect or enforce such rights could
adversely affect the Company. See "Risk Factors--Trademarks, Copyrights and
Patents."
Seasonality
Sales are generally higher in the third and fourth quarters and are
strongly influenced by the buying patterns associated with the Christmas season.
The acquisitions of Rauch and Silvestri will intensify the seasonality of the
Company since the majority of Rauch and Silvestri products are Christmas items
and sales of these products are strongest in the third and fourth quarters. The
Company continues to introduce products appropriate to other holidays and
seasons in order to increase sales during the first and second quarters. See
"Risk Factors--Seasonality."
Backlog and Warranty
The Company's backlog consists of cancelable orders and is dependent upon
trends in consumer demand throughout the year. Customer order patterns vary from
year to year, largely because of annual differences in consumer acceptance of
product lines, product availability, marketing strategies, inventory levels of
retailers and differences in overall economic and weather conditions. Orders for
the Company's products are generally subject to cancellation until shipment. As
a result, comparison of backlog as of any date in a given year with backlog at
the same date in a prior year are not necessarily indicative of sales trends.
The Company had (exclusive of Farberware) a backlog of approximately $24.3
million as of December 31, 1996, compared to approximately $24.0 million as of
December 31, 1995. See "Seasonality." The Company does not believe that backlog
is necessarily indicative of the Company's future results of operations or
prospects.
The Company's warranty policy is to accept returns of products with defects
in materials or workmanship. The Company will also accept returns of incorrectly
shipped goods where the Company has been notified on a timely basis and, in
certain cases, to maintain customer goodwill. In accordance with normal retail
industry practice, the Company ordinarily accepts returns only from its
customers and does not ordinarily accept returns directly from consumers.
Certain of the products returned to the Company by its customers, however, may
have been returned to those customers by consumers. The Company will routinely
accept returns for imported products that are received late by the customer. The
majority of the returned products are resold into the same distribution channel.
During the three year period ended December 31, 1996, returns and allowances
amounted to approximately 2.1% of sales.
Incident to its acquisition of certain assets of Farberware Inc. (now known
as Bruckner Manufacturing Company), the Company agreed to assume all obligations
and liabilities with respect to warranties for replacement or repair of products
manufactured by Farberware under the latter's printed warranty forms and certain
other product warranties. The Company is entitled, subject to certain
conditions, to be indemnified by Bruckner Manufacturing Company and its parent
for the expenses incurred incident to such warranties.
Environmental Regulation
The Company's manufacturing operations including, silverplating, chrome
plating, tool making and painting, routinely involve the handling of waste
materials that are classified as hazardous. The Company is subject to certain
domestic federal, state and local laws and regulations concerning the handling,
containment and disposal of hazardous substances and, therefore, in the ordinary
course of its business, the Company incurs compliance costs and may be required
to incur clean-up costs. In addition, the Company's C.J. Vander facility is
subject to many environmental regulations related to its manufacturing
operations in the United Kingdom. Actions by federal, state and local
governments concerning environmental matters could result in laws or regulations
that could increase the cost of producing the products manufactured by the
Company or otherwise adversely affect the demand for its products. In addition,
the future costs of compliance with environmental laws and regulations and
liabilities resulting from currently unknown circumstances or developments could
be substantial and could have a material
43
<PAGE>
adverse effect on the Company. For example, certain laws and regulations could
impose liability upon the Company for any historic releases of hazardous
substances from facilities that it has owned or operated, or, from facilities to
which its waste materials have been transported for treatment or disposal.
Properties
The following table sets forth information with respect to the Company's
properties as of January 31, 1997:
<TABLE>
<CAPTION>
Approximate
Square
Footage or
Location Type of Facility Acreage Status
- ---------------------------- ----------------------------------- -------------- --------
<S> <C> <C> <C>
Chester, SC(1)............. Warehouse/Manufacturing/Showroom 828,000 Owned
Revere, MA................. Warehouse/Distribution 580,000 Owned
Gastonia, NC............... Manufacturing/Distribution 425,000 Owned
East Boston, MA............ Office/Showroom 292,000 Owned
El Paso, TX................ Warehouse 125,000 Owned
Sheffield, England......... Manufacturing/Warehouse/Foundry 39,920 Owned
Mira Loma, CA.............. Land 42 Acres Owned
Cramerton, NC.............. Land 34.1 Acres Owned
Ontario, CA................ Warehouse/Distribution 285,000 Leased
Dallas, TX*................ Warehouse 189,100 Leased
North Dighton, MA.......... Manufacturing/Warehouse/Office 134,042 Leased
Crisfield, MD.............. Manufacturing/Warehouse 71,754 Leased
San German, PR............. Manufacturing/Office 70,296 Leased
China...................... Warehouse 56,512 Leased
New York, NY............... Showroom 45,361 Leased
Hong Kong.................. Office/Warehouse/Showroom 42,009 Leased
Atlanta, GA................ Showrooms 15,050 Leased
Los Angeles, CA............ Showroom 10,095 Leased
Dallas, TX................. Showrooms 9,716 Leased
Chicago, IL................ Showroom 7,452 Leased
Taiwan..................... Office 6,253 Leased
Philippines................ Office 4,380 Leased
London, England............ Office/Showrooms/Retail Store 4,000 Leased
New York, NY............... Warehouse 3,800 Leased
Wallingford, CT............ Office 2,800 Leased
Dallas, TX*................ Office Leased
</TABLE>
- ------------
* Includes Silvestri space, the leasing of which has not yet been approved by
the Bankruptcy Court.
(1) Scheduled to be operational by March 31, 1997.
Employees
As of December 31, 1996, the Company had approximately 1,925 employees. The
Company believes that its relationship with its employees is good.
The Company's employees are not represented by labor unions; however,
Rauch, which merged with the Company on February 15, 1996, was a subject of
efforts by UNITE (the "Union") in the fall of 1995 to organize Rauch's
employees. A scheduled Union election was postponed because the Union filed
unfair labor practice charges against Rauch with the National Labor Relations
Board (the "NLRB"). These charges, which related to allegations of threats and
promises by Rauch officials and the termination of certain employees, were
settled pursuant to an agreement between Rauch and the Union. On May 2, 1996,
the NLRB approved the agreement and the Union's request that the petition for an
election be withdrawn with prejudice.
On March 31, 1994 an Administrative Law Judge ("ALJ") designated by the
National Labor Relations Board ("NLRB") determined that the Company's
subsidiaries Wallace International de P.R., Inc. and International Silver
44
<PAGE>
de P.R., Inc. (the "P.R. Subsidiaries") had engaged in unfair labor practices
incident to a union election (won by the P.R. Subsidiaries) held in February,
1993 and ordered the P.R. Subsidiaries to refrain from certain conduct and to
take certain affirmative action. The ALJ's decision was affirmed by the NLRB on
September 22, 1994. Incident to a second union election (also won by the P.R.
Subsidiaries) held on June 22, 1994 pursuant to stipulation, the P.R.
Subsidiaries were again charged with unfair labor practices. The ALJ again found
that the P.R. Subsidiaries had engaged in unfair labor practices. The Company
has appealed to the NLRB, and the appeal is pending.
Legal Proceedings
The Company has been named as a defendant in several legal actions arising
from its normal business activities, including routine copyright and trademark
litigation, which actions are considered normal in the businesses in which the
Company is engaged.
The Company carries insurance against liability for certain types of risks.
Although the amount of liability that could result from any litigation cannot be
accurately predicted, in the opinion of management, the Company's potential
liability on all known claims would not have a material adverse effect on the
results of operations or financial condition of the Company.
45
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table provides information concerning the directors and
executive officers of the Company following the Recapitalization. All directors
will hold office until the next annual meeting of stockholders of the Company
and until their successors have been duly elected and qualified. All officers
will serve at the discretion of the Board of Directors.
Name Age Positions with the Company
- --------------------------- ------ --------------------------------------
Leonard Florence.......... 65 Chairman of the Board,
President, Chief Executive
Office and Director
E. Merle Randolph......... 64 Vice President, Treasurer, Chief
Financial Officer and Director
Melvin L. Levine.......... 65 Vice President of Purchasing and
Director
Alan R. Kanter............ 44 Vice President of Sales and Director
Faye A. Florence.......... 40 Vice President, General Counsel
and Secretary
David V. Harkins.......... 55 Director
Thomas M. Hagerty......... 33 Director
Scott A. Schoen........... 38 Director
Kent R. Weldon............ 29 Director
Seth W. Lawry............. 32 Director
Leonard Florence is the Chairman of the Board, Chief Executive Officer and
President of the Company. He has served in the capacity of Chairman of the Board
and Chief Executive Officer continuously since September 1986. He has also been
President and a director of certain of its subsidiaries since their respective
dates of organization. Mr. Florence previously served as President of the
Company from 1986 to 1994 and resumed the position in 1995. Mr. Florence has
been an executive in the tabletop and giftware products industry for more than
35 years.
E. Merle Randolph has been Vice President, Chief Financial Officer and
Treasurer of the Company since September 1986. He became a director of the
Company in May 1989. Mr. Randolph is also an officer of certain of the Company's
subsidiaries. For 17 years prior to joining the Company, Mr. Randolph was
employed in various financial positions by Rockwell International Corporation.
Melvin L. Levine has been Vice President of the Company and certain of its
subsidiaries since September 1986. Mr. Levine has been an executive in the
tabletop and giftware products industry for more than 35 years. He became a
director of the Company in May 1989. Mr. Levine is also an officer and director
of certain of the Company's subsidiaries.
Alan R. Kanter, who will become a director of the Company following the
Merger, has been a Vice President of the Company and a subsidiary of the Company
since September 1986. Mr. Kanter has been employed in the tabletop and giftware
products industry for more than 20 years.
Faye A. Florence, an attorney, has been Vice President and General Counsel
of the Company since June 1987 and Secretary since August 1987. Ms. Florence is
also an officer of certain of the Company's subsidiaries. Ms. Florence is the
daughter of Leonard Florence.
David V. Harkins will become a director of the Company following the
Merger. Mr. Harkins is Senior Managing Director of Thomas H. Lee Company and
joined Thomas H. Lee Company in 1986. Mr. Harkins is the President and a Trustee
of THL Equity Trust III, the General Partner of THL Equity Advisers III Limited
Partnership, which is the General Partner of Thomas H. Lee Equity Fund III, L.P.
and is the Chairman of National Dentex Corporation since 1983. Mr. Harkins is a
director of Stanley Furniture Company, Inc., National Dentex Corporation,
HomeSide, Inc., Freedom Securities, Inc. and First Alert, Inc.
46
<PAGE>
Thomas M. Hagerty will become a director of the Company following the
Merger. Mr. Hagerty is the Treasurer and a director of THL I. Mr. Hagerty is a
Managing Director of the Thomas H. Lee Company since 1993 and he joined Thomas
H. Lee Company in 1988. Mr. Hagerty is a Vice President and Trustee of THL
Equity Trust III, the General Partner of THL Equity Advisers III Limited
Partnership, which is the General Partner of Thomas H. Lee Equity Fund III, L.P.
Mr. Hagerty is a director of Select Beverages, Inc., Freedom Securities, Inc.
and HomeSide, Inc.
Scott A. Schoen will become a director of the Company following the Merger.
Mr. Schoen is the President and a director of THL I. Mr Schoen is a Managing
Director of the Thomas H. Lee Company since 1991 and he joined Thomas H. Lee
Company in 1986. Mr. Schoen is a Vice President and Trustee of THL Equity Trust
III, the General Partner of THL Equity Advisers III Limited Partnership, which
is the General Partner of Thomas H. Lee Equity Fund III, L.P. Mr. Schoen is a
director of First Alert, Inc., Rayovac Corporation, Anchor Advanced Products,
Inc., Alliance International Group, Inc., Health o meter Products, Inc. and
LaSalle Re Holdings Ltd.
Kent R. Weldon will become a director of the Company following the Merger.
Mr. Weldon is the Secretary and a director of THL I. Mr. Weldon is an Associate
of Thomas H. Lee Company since 1995; he worked at Thomas H. Lee Company from
1991 to 1993 and rejoined in 1995. Mr. Weldon is a Vice President of THL Equity
Trust III, the General Partner of THL Equity Advisers III Limited Partnership,
which is the General Partner of Thomas H. Lee Equity III, L.P. From 1989 to
1991, Mr. Weldon worked in the Mergers & Acquisitions Department of Morgan
Stanley & Co. Incorporated. From 1993 to 1995, Mr. Weldon attended the Harvard
Graduate School of Business Administration.
Seth W. Lawry will become a director of the Company following the Merger.
Mr. Lawry is a Vice President of Thomas H. Lee Company since 1995; he worked at
Thomas H. Lee Company from 1989 to 1990 and rejoined in 1994. Mr. Lawry is a
Vice President of THL Equity Trust III, the General Partner of THL Equity
Advisers III Limited Partnership, which is the General Partner of Thomas H. Lee
Equity III, L.P. From 1990 to 1992, Mr. Lawry attended Stanford Graduate School
of Business. From 1992 to 1994, Mr. Lawry worked in the Mergers & Acquisitions
Department of Morgan Stanley & Co. Incorporated. Mr. Lawry is a director of
Freedom Securities, Inc.
Committees of the Board of Directors
It is expected that the Board of Directors will establish an Audit
Committee and a Compensation Committee to replace those committees as now
constituted. The membership of the reconstituted committees has not yet been
determined. The Compensation Committee will make recommendations concerning the
salaries and incentive compensation of employees of and consultants to Syratech,
and will oversee and administer the Company's stock option plans. The Audit
Committee will be responsible for reviewing the results and scope of audits and
other services provided by Syratech's independent auditors.
Employment Agreements
Effective August 16, 1991, the Company entered into an employment agreement
with Leonard Florence (the "Florence Employment Agreement") providing for the
employment of Mr. Florence as Chief Executive Officer of the Company at an
annual base salary, payable in semi-monthly installments, of not less than $0.35
million as well as for certain other benefits and the reimbursement of expenses.
Unless otherwise terminated by the Company as provided in the Florence
Employment Agreement, Mr. Florence's term of full-time employment will continue
until the earlier of (i) the fifth anniversary of receipt of a notice of
termination given by either party to the other or (ii) the first anniversary of
receipt of a notice of termination given by Mr. Florence to the Company. The
Company may, at its discretion, but without any obligation, increase Mr.
Florence's base salary during the term of full-time employment. Once the base
salary shall have been increased, it shall not thereafter be decreased without
his written consent. Mr. Florence's current base salary is $0.7 million per
annum. The Florence Employment Agreement obligates Mr. Florence to provide
certain advisory services to the Company during the five-year period following
the term of Mr. Florence's full-time employment (the "Advisory Period") and
provides for Mr. Florence to receive annual compensation during the Advisory
Period in an amount equal to not less than 25% of his base salary during the
final year of his full-time employment. During the period of his full-time
employment and the Advisory Period, Mr. Florence is prohibited from engaging in
any business that is competitive with any line of business in which the Company
is engaged that contributes three percent or more of the gross revenues of the
Company. The Florence Employment Agreement also provides for payment to Mr.
Florence of a retirement benefit.
47
<PAGE>
The Company entered into a similar employment agreement, also effective as
of August 16, 1991, with Melvin L. Levine, Vice President of Purchasing of the
Company, except in Mr. Levine's case the base salary was $0.225 million for the
year ended December 31, 1992. Mr. Levine's current base salary is $0.350 million
per annum.
As of May 1995 and July 1995, the employment agreements with Messrs. Levine
and Florence were amended with respect to the computation and payment of
retirement benefits to each and, in the case of Mr. Florence, to provide for
payment of a survivor's benefit to his surviving spouse. Specifically, the
amendments provided for annual retirement benefit payments in amounts equal to
2% of their respective average total compensation (i.e., base salary and bonus
compensation) in the three years preceding attainment by the relevant executive
of age sixty-five or termination of such executive's full time employment,
whichever occurs later, multiplied by the number of years of such executive's
employment by the Company.
The Employment Agreements with Messrs. Florence and Levine, as amended,
provide for retirement benefit payments determined and payable in accordance
with the agreements. The following table shows the estimated annual benefits
payable to Messrs. Florence and Levine upon retirement based upon various
compensation levels and years of service.
Pension Plan Table
Years of Service
---------------------------------
Renumeration 5 10 15
- --------------- --------- --------- ---------
400,000 40,000 80,000 120,000
500,000 50,000 100,000 150,000
600,000 60,000 120,000 180,000
700,000 70,000 140,000 210,000
800,000 80,000 160,000 240,000
900,000 90,000 180,000 270,000
1,000,000 100,000 200,000 300,000
1,100,000 110,000 220,000 330,000
1,200,000 120,000 240,000 360,000
1,300,000 130,000 260,000 390,000
1,400,000 140,000 280,000 420,000
Messrs. Florence and Levine have each completed ten years of credited
service. Retirement benefits under the employment agreements are computed on the
basis of a straight-life annuity and are not reduced by the benefits received
under Social Security, but would be reduced by any benefits received under any
Company funded pension plan that hereafter may be adopted.
Upon the consummation of the Merger, the Employment Agreement with Leonard
Florence will be amended so as to (i) change his term of full-time employment
from a rolling five-year term to a fixed five-year term, (ii) provide for a
minimum base compensation of $1.15 million per annum, (iii) establish $1.15
million as the minimum amount upon which his retirement benefit (and the
survivor's benefit of his surviving spouse) will be computed and (iv) create
contractual rights with respect to certain perquisites that are accorded to him
informally under his present arrangements with the Company. Under Section 162(m)
of the Internal Revenue Code, so much of the compensation paid to Mr. Florence
as exceeds $1 million annually may not be deductible by the Company for federal
income tax purposes. The Employment Agreement with Melvin L. Levine will be
amended, as of the Effective Time, to change his term of full-time employment
from a rolling five-year term to a fixed five-year term.
The Company has also entered into employment agreements, effective as of
August 16, 1991, with E. Merle Randolph, Vice President, Chief Financial Officer
and Treasurer, and Alan R. Kanter, Vice President of Sales of the Company. The
agreements with Messrs. Randolph and Kanter are similar to those with Messrs.
Florence and Levine described above, except that (i) the term of full-time
employment of each of Messrs. Randolph and Kanter will continue until the third
anniversary of receipt of a notice of termination given by the Company to the
executive involved or by such executive to the Company, (ii) the period during
which each of Messrs. Randolph and Kanter has agreed to provide advisory
services to the Company (and to be bound by a non-competition agreement)
following the term of his full-time employment will be the lesser of three years
or six months for each year of his full-time employment beginning with the date
of the employment agreement, with such advisory period and the
48
<PAGE>
coextensive non-competition covenant being subject to termination at the
election of the Company on six months prior notice to the executive involved,
and (iii) no provision was originally made therein for a payment of a retirement
benefit.
The employment agreements of Messrs. Randolph and Kanter were amended in
July 1996, to provide, and during the same month Faye A. Florence and the
Company entered into a Retirement Benefit Agreement that provides, inter alia,
for the payment at age 65 or upon termination of such officer's employment,
whichever is later, of an annual retirement benefit to each such officer equal
to a percentage of his or her average annual compensation for the three fiscal
years ended immediately prior to the date on which such officer ceases to be a
full time employee of the Company multiplied by the number of years of such
officer's service to the Company. The minimum annual retirement benefit for each
such officer will be $75,000.
It is not contemplated that any changes will be made in the agreements with
Messrs. Randolph and Kanter and Ms. Florence.
On December 31, 1996, the Company, THL I and Leonard Florence entered into
three separate agreements, one with each of Alan R. Kanter, Melvin L. Levine and
E. Merle Randolph (each an "Executive Party"). Pursuant to each of the three
agreements (i) Mr. Florence agreed to contribute to the Company (a) on December
31, 1996, 10,604 shares of Syratech Common Stock, (b) on January 14, 1997,
10,628 shares of Syratech Common Stock and (c) on January 14, 1998, the largest
number (not exceeding 3,124) of shares of Syratech Common Stock as shall have an
aggregate value of approximately $99,991, (ii) on each of the dates of
contribution of such shares of Syratech Common Stock by Mr. Florence to the
Company, such shares were to be canceled and the Company was to issue to the
Executive Party, that number of shares of Syratech Common Stock that would be
equal to the number of shares of Syratech Common Stock contributed to the
Company on such date by Mr. Florence; (iii) on December 31, 1996 the Company
paid to each Executive Party the sum of $234,346; (iv) on January 14, 1997 the
Company paid to each Executive Party an amount equal to the lesser of (x) the
income tax benefit of the Company from the issuance of shares of Syratech Common
Stock and the cash payment required to be made to him on such date or (y) the
aggregate amount of federal, state and local income taxes to be owed by each
Executive Party as a result of the issuance of such shares and the making of
such cash payment; and (v) on January14, 1998 the Company is required to pay to
each Executive Party an amount equal to the lesser of (x) the income tax benefit
to the Company from the issuance of shares of Common Stock and the cash payments
to be made to each Executive Party on such date or (y) the aggregate amount of
federal, state and local income taxes that will be owed by each Executive Party
as a result of the issuance of shares of Common Stock and cash payment to be
made to him on such date. Each agreement provides that the manner in which the
payments to be made to each Executive Party for the purpose of transferring to
each Executive Party the tax benefits to the Company from such transactions are
to be calculated and subsequently adjusted is to be in the sole discretion of
the Company.
The Company and each Executive Party also entered into an agreement to the
respective Executive Party's Employment Agreement (each an "Amendment No. 2 to
Employment Agreement") dated January 31, 1997, to be effective as of December
31, 1996, to clarify and ensure that the transfer of shares referenced in the
above paragraph did not alter the compensation of the relevant Executive Party
for purposes of calculating the Executive Party's retirement benefit.
Stock Option Plan
1997 Stock Option Plan. The Company expects that the 1997 Stock Option Plan
(the "1997 Plan") will be adopted by the Board of Directors and approved by the
Company's stockholders promptly following the Closing. A maximum of 273,438
shares of Common stock will be issuable pursuant to the 1997 Plan upon exercise
of options. Under the 1997 Plan, incentive stock options may be granted to
employees and officers of the Company and non-qualified stock options may be
granted to consultants, directors, employees and officers of the Company.
The 1997 Plan will be administered by the Board of Directors of the Company
or a committee thereof consisting of two or more directors. Subject to the
provisions of the 1997 Plan, the Board of Directors will have the authority to
select optionees and determine the terms of the options granted, including (i)
the number of shares subject to each option, (ii) when the option becomes
exercisable, (iii) the exercise price of the options (which in the case of an
incentive stock option cannot be less than the fair market value of the Common
Stock on the date of grant, or less than 110% of fair market value in the case
of employees or officers holding 10% or more of the voting stock of the
Company), (iv) the duration of the option and (v) the time, manner and form of
payment upon exercise of an option.
49
<PAGE>
An option will not be transferable by the optionee except by will or by the
laws of descent and distribution. Options will be exercisable only while the
optionee remains in the employ of the company or for a period of time
thereafter. If an optionee remains in the employ of the Company or for a period
of time thereafter. If an optionee becomes disabled or dies while in the employ
of the Company, the option will be exercisable prior to the last day of the
third and sixth month, respectively following the date of termination of
employment. If the optionee leaves the employ of the Company for any other
reason, the option will be terminated immediately upon termination of
employment; provided that the Board of Directors may extend this period up to
the original expiration date of such option. Options which are exercisable
following termination of employment will be exercisable only to the extent that
the optionee was entitled to exercise such options on the date of such
termination.
50
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of Syratech Common Stock after giving effect to the
Recapitalization (i) by each stockholder who owns beneficially in excess of 5%
of the outstanding Syratech Common Stock, (ii) by each director, and (iii) by
all officers and directors as a group. Except as otherwise indicated, all
persons listed below have (i) sole voting power and investment power with
respect to their shares of Syratech Common Stock, except to the extent that
authority is shared by spouses under applicable law, and (ii) record and
beneficial ownership with respect to their shares of Syratech Common Stock. The
following table assumes that no stockholders other than Management retain shares
in the Recapitalization.
<TABLE>
<CAPTION>
Shares of
Common Stock
Beneficially
Name Owned Percentage
- ------------------------------------------------------- --------------- ------------
<S> <C> <C>
Leonard Florence (a)................................... 528,472 14.0%
E. Merle Randolph...................................... 30,875 *
Melvin L. Levine....................................... 41,132 1.1%
Alan R. Kanter......................................... 48,232 1.3%
Faye A. Florence....................................... 3,527 *
David V. Harkins (b)................................... 3,131,780 82.8%
Scott A. Schoen (b).................................... 3,131,780 82.8%
Thomas M. Hagerty (b).................................. 3,131,780 82.8%
Seth W. Lawry (b)...................................... 3,131,780 82.8%
Kent R. Weldon (b)..................................... 3,131,780 82.8%
Thomas H. Lee Equity Fund III, L.P. (c)................ 2,686,817 71.0%
THL-CCI Limited Partnership (d)........................ 278,710 7.4%
Officers and Directors as a group (10 persons)......... 3,784,018 100.0%
</TABLE>
- ------------
* Less than 1% of the issued and outstanding Syratech Common Stock.
(a) The business address for Leonard Florence is c/o Syratech Corporation, 175
McClellan Highway, East Boston, Massachusetts, 02128-9114.
(b) The business address of this stockholder is c/o Thomas H. Lee Company, 75
State Street, Boston, Massachusetts 02109. All such voting securities are
owned by Thomas H. Lee Equity Fund III, L.P., Thomas H. Lee Foreign Fund
III, L.P. and THL-CCI Investors Limited Partnership and may be deemed to be
beneficially owned by Messrs. Harkins, Hagerty, Schoen, Lawry and Weldon,
officers of Thomas H. Lee Company. Each of such persons disclaims beneficial
ownership of such shares.
(c) THL Equity Advisors III Limited Partnership ("Advisors"), the general
partner of Thomas H. Lee Equity Fund III, L.P. and Thomas H. Lee Foreign
Fund III, L.P., THL Equity Trust III ("Equity Trust"), the general partner
of Advisors, Thomas H. Lee, Messrs. Harkins, Hagerty and Schoen and other
managing directors of Thomas H. Lee Company may be deemed to be beneficial
owners of the shares of Syratech Common Stock held by such funds. Each of
such persons maintains a principal business address at Suite 2600, 75 State
Street, Boston, Massachusetts 02109. Each of such persons disclaims
beneficial ownership of such shares.
(d) THL Investment Management Corp., the general partner of THL-CCI Limited
Partnership, and Thomas H. Lee, as director and sole shareholder of THL
Investment Management Corp., may also be deemed to be beneficial owners of
the shares of Syratech Common Stock held by THL-CCI Limited Partnership.
Each of such persons maintains a principal business address at Suite 2600,
75 State Street, Boston, Massachusetts 02109. Each of such persons disclaims
beneficial ownership of such shares.
51
<PAGE>
CERTAIN TRANSACTIONS
Following the Recapitalization, affiliates of Thomas H. Lee Company will
own between 60.7% and 82.8% of the Common Stock of the Company. See "The
Recapitalization."
At Closing, the Company will enter into a management agreement with Thomas
H. Lee Company pursuant to which the Company will pay Thomas H. Lee Company a
closing fee of $3.0 million in connection with the Recapitalization and an
annual fee of $450,000 for each of five successive years, for management
services to the Company. Such management services consist of on-going
operational, financial, accounting and strategic planning analysis and advice.
Following the initial five-year term of such agreement, such agreement
automatically continues for successive one year terms unless any party thereto,
at least ninety days prior to the end of any term, provides all other parties
thereto with notice of the intent to terminate the agreement.
The Company will enter into amended employment agreements with each of
Messrs. Florence and Levine in connection with the Recapitalization and is party
to existing employment agreements with Messrs. Kanter and Randolph as well as a
Retirement Benefits Agreement with Ms. Florence. See "Management--Employment
Agreements." Each of the Company's executive officers will be eligible to
participate in a stock option plan to be adopted by the Company. See
"Management--Stock Option Plan."
The Company will enter into a stockholders agreement (the "Stockholders'
Agreement") with affiliates of Thomas H. Lee Company and Management in
connection with the Recapitalization. Pursuant to the Stockholders' Agreement,
the stockholders party thereto will be required to vote their shares of Common
Stock to elect a Board of Directors of the Company consisting of certain
directors designated by affiliates of Thomas H. Lee Company and certain
management directors. The Stockholders' Agreement also grants those stockholders
who are affiliates of Thomas H. Lee Company the right to require the Company to
effect the registration of shares of Common Stock they hold for sale to the
public, subject to certain conditions and limitations. In addition, under the
terms of the Stockholders' Agreement, if the Company proposes to register any of
its securities under the Securities Act of 1933, as amended, whether for its own
account or otherwise, the stockholders party thereto are entitled to notice of
such registration and are entitled to include their shares therein, subject to
certain conditions and limitations. All fees, costs and expenses of any
registration effected on behalf of such stockholders under the Stockholders'
Agreement (other than underwriting discounts and commissions) will be paid by
the Company.
Shares of Syratech Common Stock held by executive officers and directors of
the Company will be entitled to receive the same consideration as shares of
Syratech Common Stock held by other stockholders, except that (i) Leonard
Florence will be required to retain 528,472 of his shares of Syratech Common
Stock, (ii) Leonard Florence will receive $28 per share and (iii) the other
Management Stockholders are required to retain 123,766 shares of Syratech Common
Stock, which amount will not be subject to proration. In addition, certain
executive officers and directors hold options to purchase Syratech Common Stock
which will vest and be converted into cash in connection with the Merger.
Ocean State Jobbers, Inc. ("Ocean State") purchased from the Company
merchandise in the amount of approximately $2.450 million for the year ended
December 31, 1996. Alan Perlman, a director of the Company, has been an officer
and director of Ocean State since 1977.
Service Merchandise Co. Inc., ("Service") purchased from the Company
merchandise in the amount of approximately $22.598 million for the year ended
December 31, 1996. Effective July 12, 1996, the Company, through an indirect
wholly-owned subsidiary, granted a license to Service to use certain trademarks,
patents and copyrights relating to certain electric and other products. An
indirect beneficial owner of less than 1% of the Company's Common Stock holds a
significant management position in Service. Harold Roitenberg, a director of the
Company, is also a director of Service.
Wacker Industrial Company ("Wacker"), a major supplier, is owned by a
holder of less than 1% of Syratech Common Stock. For the year ended December 31,
1996, the Company had purchases from Wacker of approximately $4.478 million.
The Company believes that the transactions described or referred to above
were effected on terms no less favorable to the Company than those that could
have been obtained from unaffiliated third parties.
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Pursuant to the Merger Agreement, the Company has agreed for six years
after the consummation of the Merger to indemnify all present and former
directors and officers of the Company and its subsidiaries and will, subject to
certain limitations, maintain for six years its current directors' and officers'
insurance and indemnification policy.
Additional information relating to executive compensation and various
benefit arrangements of the Company is set forth and incorporated herein by
reference to the Company's Proxy Statement for its Annual Meeting of
Stockholders held on May 9, 1996. See "Available Information" and "Incorporation
of Certain Documents by Reference."
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DESCRIPTION OF SENIOR NOTES
General
The Senior Notes will be issued pursuant to an Indenture (the "Indenture")
between the Company and State Street Bank and Trust Company, as trustee (the
"Trustee"). The terms of the Senior 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 Senior Notes are subject to all such
terms, and Holders of Senior Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of the material
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below. Copies of the proposed form of Indenture have been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part and are available as set forth below under "-- Available 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 Syratech, as survivor of the Merger, and not to any of its
Subsidiaries.
The Senior Notes will be general unsecured obligations of the Company and
will rank pari passu in right of payment with all current and future
unsubordinated Indebtedness of the Company, including borrowings under the New
Credit Facility. However, all borrowings under the New Credit Facility will be
secured by a first priority Lien on the accounts receivable and inventory of the
Company and its domestic subsidiaries. Consequently, the obligations of the
Company under the Senior Notes will be effectively subordinated to its
obligations under the New Credit Facility to the extent of such assets. As of
December 31, 1996, on a pro forma basis after giving effect to the
Recapitalization, approximately $17.5 million principal amount of indebtedness
would have been outstanding under the New Credit Facility (including amounts
outstanding under letters of credit) and $112.5 million (subject to borrowing
base calculations) would have been available to be borrowed thereunder. See
"Risk Factors -- Substantial Leverage and Debt Service; Effective
Subordination."
The Company also conducts substantial operations through its direct and
indirect subsidiaries which are not incorporated in the United States (the
"Foreign Subsidiaries"). The Foreign Subsidiaries will not provide guarantees
of, or other credit support for, the Senior Notes. Consequently, the Company's
obligations under the Senior Notes will be effectively subordinated to the
indebtedness and other liabilities (including trade payables) of the Foreign
Subsidiaries. As of December 31, 1996, the Foreign Subsidiaries had identifiable
assets of $14.9 million and for the year then ended the Foreign Subsidiaries had
income from operations of $7.7 million. See Note 13 to Consolidated Financial
Statements of Syratech. As of December 31, 1996, the Foreign Subsidiaries had
indebtedness and other liabilities (including trade payables) of $3.7 million.
Principal, Maturity and Interest
The Senior Notes offered hereby will be limited in aggregate principal
amount to $155.0 million and will mature on , 2007. The Indenture provides
for the issuance of up to $50.0 million aggregate principal amount of additional
Senior Notes having identical terms and conditions to the Senior Notes offered
hereby (the "Additional Senior Notes"), subject to compliance with the covenants
contained in the Indenture. Any Additional Senior Notes will be part of the same
issue as the Senior Notes offered hereby and will vote on all matters with the
Senior Notes offered hereby. For purposes of this "Description of Senior Notes,"
references to the Senior Notes do not include Additional Senior Notes. Interest
on the Senior Notes will accrue at the rate of % per annum and will be payable
semi-annually in arrears on and , commencing on , 1997, to Holders of
record on the immediately preceding and . Interest on the Senior Notes
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest on the Senior Notes will be payable at
the office or agency of the Company maintained for such purpose within the City
and State of New York or, at the option of the Company, payment of interest may
be made by check mailed to the Holders of the Senior Notes at their respective
addresses set forth in the register of Holders of Senior Notes; provided that
all payments of principal, premium and interest with respect to Senior 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 Senior Notes will be issued in
denominations of $1,000 and integral multiples thereof.
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Optional Redemption
The Senior Notes will not be redeemable at the Company's option prior to
, 2002. Thereafter, the Senior Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on of the years indicated below:
Year Percentage
- ----------------------------- ------------
2002........................ %
2003........................
2004........................
2005 and thereafter......... 100.00%
Notwithstanding the foregoing, during the first 36 months after the date of
the Indenture, the Company may redeem up to an aggregate of 35% in aggregate
principal amount of the Senior Notes originally issued at a redemption price of
% of the principal amount thereof, plus accrued and unpaid interest thereon,
if any, to the redemption date, with the net cash proceeds of a public offering
of common stock of the Company provided that at least $100.0 million in
aggregate principal amount of Senior Notes remain outstanding immediately after
the occurrence of such redemption; and provided, further, that such redemption
shall occur within 45 days of the date of the closing of such public offering.
Selection and Notice
If less than all of the Senior Notes are to be redeemed at any time,
selection of Senior 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 Senior Notes are listed, or, if the Senior Notes are not so
listed, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate; provided that Senior Notes redeemed with the proceeds of a
public offering of common stock shall be selected on a pro rata basis. No Senior
Notes of $1,000 or less in principal amount 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 Senior Notes to be redeemed
at its registered address. Notices of redemption may not be conditional. If any
Senior Note is to be redeemed in part only, the notice of redemption that
relates to such Senior Note shall state the portion of the principal amount
thereof to be redeemed. A new Senior 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 Senior Note. Senior Notes called for redemption
become due on the date fixed for redemption. On and after the redemption date,
interest ceases to accrue on Senior Notes or portions of them called for
redemption.
Mandatory Redemption
Except as set forth 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 Senior Notes.
Repurchase at the Option Of Holders
Change of Control
Upon the occurrence of a Change of Control, each Holder of Senior 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 Senior 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 thereon, if any, to the date of purchase (the
"Change of Control Payment"). 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
Senior 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 Senior Notes
as a result of a Change of Control.
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On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Senior 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 Senior
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Company. The Paying Agent will promptly mail to
each Holder of Senior Notes so tendered the Change of Control Payment for such
Senior Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Senior Note equal in
principal amount to any unpurchased portion of the Senior Notes surrendered, if
any; provided that each such new Senior 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 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 Senior Notes validly tendered and not withdrawn under such Change
of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Senior Notes to require the Company
to repurchase such Senior Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
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 Senior Notes to require that the
Company repurchase or redeem the Senior Notes in the event of a takeover,
recapitalization or similar transaction.
The Company's other senior indebtedness contains prohibitions of certain
events that would constitute a Change of Control. In addition, the Company's
ability to pay cash to the Holders of Senior Notes upon a repurchase may be
limited by the Company's then existing financial resources. See "Risk
Factors -- Change of Control."
Asset Sales
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, consummate an Asset Sale unless (i) the Company (or
the Subsidiary, as the case may be) receives consideration at the time of such
Asset Sale at least equal to the fair market value (evidenced by a resolution of
the Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or otherwise disposed
of and (ii) at least 75% of the consideration received therefor by the Company
or such Subsidiary is in the form of cash.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option (a) to permanently reduce
indebtedness under the Credit Facilities (and correspondingly reduce commitments
thereunder) or (b) to acquire a controlling interest in another business, to
make a capital expenditure or to acquire other long-term assets, in each case,
in the same or a similar line of business as the Company is engaged in on the
date of the Indenture. Pending the final application of any such Net Proceeds,
the Company may temporarily reduce Indebtedness under its Credit Facilities or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0
million, the Company will be required to make an offer to all Holders of Senior
Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Senior
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 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 Senior Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess
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Proceeds for general corporate purposes. If the aggregate principal amount of
Senior Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Senior 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.
Subsidiary Guarantees
The Company's payment obligations under the Senior Notes will be jointly
and severally guaranteed (the "Subsidiary Guarantees") by the Guarantors. The
Company conducts all of its business through its subsidiaries, including the
Guarantors. In 1996, the Guarantors accounted for, in the aggregate, 78.4%,
66.5% and 93.5% of the Company's net sales, income from operations and
identifiable assets, respectively. The obligations of each Guarantor under its
Subsidiary Guarantee will be limited so as not to constitute a fraudulent
conveyance under applicable law. See, however, "Risk Factors -- Fraudulent
Conveyance Matters." The obligations of each Guarantor are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Subsidiary Guarantee or pursuant
to its contribution obligations under the Indenture, will result in the
obligations of such Guarantor under the Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law.
The Indenture will provide that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such 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
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Senior Notes, the Indenture and Subsidiary Guarantee 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 Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such 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 Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "Redemption or
Repurchase at Option of Holders -- Asset Sales."
Certain Covenants
Restricted Payments
The Indenture will provide that the Company will not, and will not permit
any of its 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 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 Subsidiaries'
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of the
Company); (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, any Subsidiary of
the Company or any Affiliate of the Company (other than any such Equity
Interests owned by the Company or any Wholly Owned 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 pari passu with
or subordinated to the Senior Notes (other than Senior Notes and Indebtedness
outstanding under Credit Facilities incurred in accordance with the Indenture),
except a payment of interest or principal at Stated Maturity; 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
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(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 above under 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 and its Subsidiaries after the
date of the Indenture (excluding Restricted Payments permitted by clause (ii)
of the next succeeding paragraph), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the date of the Indenture to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available at
the time of such Restricted Payment (or, if such Consolidated Net Income for
such period is a deficit, less 100% of such deficit), plus (ii) 100% of the
aggregate net cash proceeds received by the Company from the issue or sale
since the date of the Indenture of Equity Interests of the Company (other
than Disqualified Stock) or of Disqualified Stock or debt securities of the
Company that have been converted into such Equity Interests (other than
Equity Interests (or Disqualified Stock or convertible debt securities) sold
to a Subsidiary of the Company and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified
Stock), plus (iii) to the extent that any Restricted Investment that was made
after the date of the Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (A) the cash return of capital with respect to
such Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment.
The foregoing provisions will not prohibit (i) the payment of any dividend
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 pari passu or subordinated Indebtedness 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 Subsidiary of the Company) of,
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of pari passu or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Subsidiary of the Company to the holders of its common stock on a pro rata
basis; (v) the redemption of up to $10 million in liquidation preference of
Cumulative Redeemable Preferred Stock in the aggregate subsequent to the Issue
Date at a redemption price not exceeding the liquidation preference thereof at a
redemption price equal to the liquidation preference thereof plus accrued and
unpaid dividends thereon if (x) no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof, (y) 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 under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock" and (z) the
Company's Debt to Cash Flow Ratio 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, would have been no
greater than 4.5 to 1.0. and (vi) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any Subsidiary of the Company held by any member of the Company's (or any of its
Subsidiaries') management upon termination of employment; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $750,000 in any twelve-month period (with
unused amounts in any calendar year being available for such purposes in the
next two succeeding calendar years, with a maximum of $1,500,000 so available in
any one year) in any twelve-month period and no Default or Event of Default
shall have occurred and be continuing immediately after such transaction.
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 Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5.0 million. Not later than the date of making any Restricted
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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 Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock or sell or otherwise directly or indirectly transfer any
preferred stock of any of its Subsidiaries to any other person and will not
permit any of its Subsidiaries to issue any shares of preferred stock other than
to the Company; provided, however, that the Company may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal 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 to 1, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The Indenture will also provide that the Company will not incur any
Indebtedness that is contractually subordinated to any other Indebtedness of the
Company unless such Indebtedness is also contractually subordinated to the
Senior Notes on substantially identical terms; provided, however, that no
Indebtedness of the Company shall be deemed to be contractually subordinated to
any other Indebtedness of the Company solely by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of revolving credit Indebtedness and
letters of credit (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company thereunder) under
the Credit Facilities; provided that the aggregate principal amount of all
revolving credit Indebtedness and letters of credit outstanding under all Credit
Facilities after giving effect to such incurrence, does not exceed an amount
equal to $130.0 million less the aggregate amount of all Net Proceeds of Assets
Sales applied to permanently repay any such Indebtedness pursuant to the
covenant described above under the caption "-- Asset Sales";
(ii) the incurrence by the Company and its Subsidiaries of Indebtedness
represented by the Senior Notes, other than any Additional Senior Notes, and the
Subsidiary Guarantees;
(iii) the incurrence by the Company or any of its 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
Subsidiary, in an aggregate principal amount not to exceed $10.0 million at any
time outstanding;
(iv) the incurrence by any corporation that becomes a Subsidiary after the
Issue Date of Acquired Debt, which Indebtedness is existing at the time such
corporation becomes a Subsidiary; provided, however, that (A) immediately after
giving effect to such corporation becoming a Subsidiary the Company could incur
at least $1.00 of additional Indebtedness (other than Permitted Debt) in
accordance with the Indenture, (B) such Indebtedness is without recourse to the
Company or to any Subsidiary or to any of their respective properties or assets
other than Person becoming a Subsidiary or its properties and assets and (C)
such Indebtedness was not incurred as a result of or in connection with or in
contemplation of such entity becoming a Subsidiary;
(v) the incurrence by the Company or any of its Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are used
to refund, refinance or replace, Indebtedness that is permitted by the Indenture
to be incurred;
(vi) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Wholly
Owned Subsidiaries; provided, however, that (i) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all
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Obligations with respect to the Senior Notes and (ii)(A) any subsequent issuance
or transfer of Equity Interests that results in any such Indebtedness being held
by a Person other than the Company or a Wholly Owned Subsidiary and (B) any sale
or other transfer of any such Indebtedness to a Person that is neither the
Company nor a Wholly Owned Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such Subsidiary,
as the case may be;
(vii) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging currency risk or interest rate
risk with respect to any Indebtedness that is permitted by the terms of this
Indenture to be outstanding;
(viii) the Guarantee by any of the Guarantors of Indebtedness of the
Company or another Guarantor that was permitted to be incurred by the Indenture;
and
(ix) Indebtedness for letters of credit relating to workers' compensation
claims and self-insurance or similar requirements in the ordinary course of
business;
(x) Indebtedness arising from Guarantees of Indebtedness of the Company or
any Subsidiary or other agreements of the Company or a Subsidiary providing for
indemnification, adjustment of purchase price or similar obligations, in each
case, incurred or assumed in connection with the disposition of any business,
assets or Subsidiary, other than Guarantees of Indebtedness incurred by any
Person acquiring all or any portion of such business, assets or Subsidiary for
the purpose of financing such acquisition, provided that the maximum aggregate
liability in respect of all such Indebtedness shall at no time exceed the gross
proceeds actually received by the Company and its Subsidiaries in connection
with such disposition;
(xi) obligations in respect of performance bonds and completion guarantees
provided by the Company or any Subsidiary in the ordinary course of business;
and
(xii) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding not to exceed $10.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest and the accretion of accreted
value will not be deemed to be an incurrence of Indebtedness for purposes of
this covenant.
Liens
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or on any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture will provide that the Company will not, and will not permit
any of its 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 Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (1) on its Capital Stock
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any Indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries or (iii) transfer any of its properties or assets to the Company or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) applicable law, (b) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
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, (c) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices,
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(d) purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (iii) above
on the property so acquired, or (e) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
Merger, Consolidation, or Sale of Assets
The Indenture will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Senior Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (iii) immediately
after such transaction no Default or Event of Default exists; (iv) each of the
Guarantors confirms its obligations under the Subsidiary Guarantees and the
Indenture pursuant to a supplement in a form reasonably satisfactory to the
Trustee; and (v) except in the case of a merger of the Company with or into a
Wholly Owned Subsidiary of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) will, at the
time of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of their respective 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 (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 Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such Subsidiary
with an unrelated Person and (ii) the Company delivers to the Trustee (a) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$7.5 million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; provided that (v) any employment
agreement entered into by the Company or any of its Subsidiaries or any employee
benefit plan available to employees of the Company generally, in each case, in
the ordinary course of business and consistent with the past practice of the
Company or such Subsidiary, (w) transactions between or among the Company and/or
its Subsidiaries, (x) Restricted Payments (other than Restricted Investments)
that are permitted by the provisions of the Indenture described above under the
caption "-- Restricted Payments," (y) investment banking and management fees in
an aggregate amount no greater than $450,000 in any calendar year (plus
reimbursement of expenses) to be paid by the Company to Thomas H. Lee Company
and (z) a cash fee of $3 million payable by the Company to Thomas H. Lee Company
on the date of the Indenture, in each case, shall not be deemed Affiliate
Transactions.
Sale and Leaseback Transactions
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company or one of its Subsidiaries may enter into a sale and
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leaseback transaction if (i) the Company or such subsidiary could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt relating to
such sale and leaseback transaction pursuant to the covenant described above
under the caption "-- Incurrence of Additional Indebtedness and Issuance of
Preferred Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to
the covenant described above under the caption "-- Liens," (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 "-- Asset Sales."
Limitation on Issuances and Sales of Capital Stock of Wholly Owned Subsidiaries
The Indenture will provide that, except to the extent permitted under the
covenant entitled "Restricted Payments", the Company (i) will not, and will not
permit any Wholly Owned Subsidiary of the Company to, transfer, convey, sell,
lease or otherwise dispose of any Capital Stock of any Wholly Owned Subsidiary
of the Company to any Person (other than the Company or a Wholly Owned
Subsidiary of the Company), unless (a) such transfer, conveyance, sale, lease or
other disposition is of all the Capital Stock of such Wholly Owned Subsidiary
and (b) the cash Net Proceeds from such transfer, conveyance, sale, lease or
other disposition are applied in accordance with the covenant described above
under the caption "-- Asset Sales," and (ii) will not permit any Wholly Owned
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Subsidiary of
the Company.
Payments for Consent
The Indenture will provide that neither the Company nor any of its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Senior Notes for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the Indenture or the Senior Notes unless such
consideration is offered to be paid or is paid to all Holders of the Senior
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.
Additional Subsidiary Guarantees
The Indenture will provide that (a) the Company will not permit any of its
Subsidiaries that is not a Guarantor to guarantee or secure through the granting
of Liens the payment of any Indebtedness of the Company or any Guarantor and (b)
the Company will not and will not permit any of its Subsidiaries to pledge any
intercompany notes representing obligations of any of its Subsidiaries, to
secure the payment of any Indebtedness of the Company or any Guarantor, in each
case unless such Subsidiary, the Company and the Trustee execute and deliver a
supplemental indenture evidencing such Subsidiary's Guarantee (providing for the
unconditional Guarantee by such Subsidiary, on a senior basis, of the Senior
Notes).
Reports
The Indenture will provide that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Senior Notes are outstanding, the Company will furnish to the
Trustee and the Holders of Senior Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, the Company will
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
Events of Default and Remedies
The Indenture will provide that each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due of interest on the
Senior Notes; (ii) default in the payment when due of the principal of or
premium, if any, on the Senior Notes; (iii) failure by the Company to comply
with the provisions described under
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the captions "-- Change of Control," "-- Asset Sales," "-- Restricted Payments"
or "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; (iv) failure
by the Company for 60 days after notice to comply with any of its other
agreements in the Indenture or the Senior Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries), whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture, 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 $10.0 million or more; (vi) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $10.0 million, which judgments are not paid, discharged or stayed for
a period of 60 days; (vii) except as permitted by the Indenture, any Subsidiary
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 or any
Guarantor, or any Person acting on behalf of any Guarantor, shall deny or
disaffirm its obligations under its Subsidiary Guarantee; and (vii) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior Notes
may declare all the Senior 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, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Senior Notes will become
due and payable without further action or notice. Holders of the Senior Notes
may not enforce the Indenture or the Senior Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Senior 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 Senior 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 Senior Notes. If an Event of Default occurs prior
to , 2002 by reason of any willful action (or inaction) taken (or not taken)
by or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Senior Notes prior to , 2002, then the premium specified
in the Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Senior Notes.
The Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior 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 Senior Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, past, present or future officer, employee, incorporator or
stockholder of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or the Guarantors under the Senior Notes, the
Indenture or the Subsidiary Guarantees, as applicable, or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of Senior Notes by accepting a Senior Note waives and
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releases all such liability. The waiver and release are part of the
consideration for issuance of the Senior Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding Senior Notes and the Subsidiary Guarantees ("Legal Defeasance")
except for (i) the rights of Holders of outstanding Senior Notes to receive
payments in respect of the principal of, premium, if any, and interest on such
Senior Notes when such payments are due from the trust referred to below, (ii)
the Company's and the Guarantors' obligations with respect to the Senior Notes
concerning issuing temporary Senior Notes, registration of Senior Notes,
mutilated, destroyed, lost or stolen Senior Notes and the maintenance of an
office or agency for payment and money for security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and the
Company's obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and at
any time, elect to have the obligations of the Company released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not constitute
a Default or Event of Default with respect to the Senior Notes. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Senior Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding Senior Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Senior Notes
are being defeased to maturity or to a particular redemption date; (ii) in the
case of Legal Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Senior Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Senior Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit (other than a Default or Event of Default resulting from
the borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under, any material agreement or instrument (other than
the Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company must
have delivered to the Trustee an opinion of counsel to the effect that after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (vii) the Company must deliver to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Senior Notes over any of
the other creditors of the Company with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others; and (viii)
the Company must deliver to the Trustee an Officers' Certificate and an opinion
of counsel, each stating that all conditions precedent provided for or relating
to the Legal Defeasance or the Covenant Defeasance have been complied with.
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Transfer and Exchange
A Holder may transfer or exchange Senior 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 Senior Note selected for redemption. Also, the Company is not required to
transfer or exchange any Senior Note for a period of 15 days before a selection
of Senior Notes to be redeemed.
The registered Holder of a Senior Note will be treated as the owner of it
for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture,
the Subsidiary Guarantees or the Senior Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Senior Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Senior Notes), and any existing default or compliance with any provision of
the Indenture, the Subsidiary Guarantees or the Senior Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Senior Notes (including consents obtained in connection with a
tender offer or exchange offer for Senior Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Senior Notes held by a non-consenting Holder): (i) reduce
the principal amount of Senior Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Senior Note or alter the provisions with respect to the redemption of the
Senior Notes (other than provisions relating to the covenants described above
under the caption "-- Repurchase at the Option of Holders"), (iii) reduce the
rate of or change the time for payment of interest on any Senior Note, (iv)
waive a Default or Event of Default in the payment of principal of or premium,
if any, or interest on the Senior Notes (except a rescission of acceleration of
the Senior Notes by the Holders of at least a majority in aggregate principal
amount of the Senior Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Senior Note payable in money other than
that stated in the Senior Notes, (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of
Senior Notes to receive payments of principal of or premium, if any, or interest
on the Senior Notes, (vii) waive a redemption payment with respect to any Senior
Note (other than a payment required by one of the covenants described above
under the caption "-- Repurchase at the Option of Holders"), (viii) release any
Guarantor from any of its obligations under its Subsidiary Guarantee or the
Indenture, except in accordance with the terms of the Indenture, or (ix) make
any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Senior
Notes, the Company, the Guarantors and the Trustee may amend or supplement the
Indenture, the Subsidiary Guarantees or the Senior Notes to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Senior Notes in addition
to or in place of certificated Senior Notes, to provide for the assumption of
the Company's or a Guarantor's obligations to the Holders of Senior Notes in the
case of a merger or consolidation, to provide for the issuance of a Subsidiary
Guarantee by a Subsidiary of the Company, to provide for the issuance of
Additional Senior Notes in accordance with the limitations set forth in the
Indenture on the Issue Date, to make any change that would provide any
additional rights or benefits to the Holders of Senior Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of 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 Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding
Senior 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
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to certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Senior Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
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 Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "-- Change of Control" and/or the
provisions described above under the caption "-- Merger, Consolidation or Sale
of Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Company or any of its Subsidiaries of Equity Interests of
any of the Company's Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $1,000,000 or (b) for Net Proceeds in
excess of $1,000,000. Notwithstanding the foregoing: (i) a transfer of assets by
the Company to a Subsidiary or by a Subsidiary to the Company or to a Wholly
Owned Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned
Subsidiary to the Company or to another Wholly Owned Subsidiary, and (iii) a
Restricted Payment that is permitted by the covenant described above under the
caption "-- Restricted Payments" will not be deemed to be Asset Sales.
"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
lessor, be extended).
"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, shares of corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months
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and overnight bank deposits, in each case with any lender party to the New
Credit Facility or with any domestic commercial bank having capital and surplus
in excess of $500 million and a Keefe Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above and (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after 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 Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Related Parties, (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),
other than the Principals and their Related Parties, 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 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 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). For purposes of this definition, any transfer of an equity interest
of an entity that was formed for the purpose of acquiring Voting Stock of the
Company will be deemed to be a transfer of such portion of such Voting Stock as
corresponds to the portion of the equity of such entity that has been so
transferred.
"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 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 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 Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP.
"Consolidated Indebtedness" of any Person as of any date of determination
means the sum (without duplication) of (i) the total amount of Indebtedness and
Attributable Debt of such Person and its Subsidiaries, plus (ii) the total
amount of other Indebtedness shown on the balance sheet of the primary obligor
on such Indebtedness, to the extent that such Indebtedness has been Guaranteed
by such Person or one of its Subsidiaries, plus (iii) the aggregate liquidation
value or redemption amount (if larger) of all Disqualified Stock of such Person
(other than
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any Cumulative Redeemable Preferred Stock outstanding on such date) and all
preferred stock of Subsidiaries of such Person, in each case, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its 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 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 Subsidiary thereof, (ii) the Net Income of any Subsidiary
shall be excluded to the extent that the declaration or payment of dividends or
similar distributions by that 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 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 Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities (including, without limitation, the New Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness under Credit Facilities
outstanding on the date on which Senior Notes are first issued and authenticated
under the Indenture shall be deemed to have been incurred on such date in
reliance on the exception provided by clause (i) of the definition of Permitted
Indebtedness.
"Debt to Cash Flow Ratio" means, as of any date of determination, the ratio
of (a) the Consolidated Indebtedness as of such date to (b) the Consolidated
Cash Flow of the Company and its Subsidiaries on a consolidated basis for the
four most recent full fiscal quarters ending immediately prior to such date for
which internal financial statements are available. For purposes of calculating
Consolidated Cash Flow for the computation referred to above, (i) acquisitions
that have been made by the Company or any of its 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 date on which such Ratio is being calculated (the
"Calculation Date") shall be deemed to have occurred on the first day of the
four-quarter reference period and Consolidated Cash Flow for such reference
period shall be calculated without giving effect to clause (iii) of the proviso
set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded.
"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.
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"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Senior Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Subsidiaries for such period, whether paid or accrued (including, without
limitation, original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, 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 (but excluding
amortization of debt issuance costs) and (ii) the consolidated interest expense
of such Person and its Subsidiaries that was capitalized during such period, and
(iii) any interest expense on Indebtedness of another Person that is guaranteed
by such Person or one of its Subsidiaries or secured by a Lien on assets of such
Person or one of its 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
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests (other than Disqualified Stock) of the Company, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"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 and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) each domestic subsidiary of the Company and
(ii) any other subsidiary that executes a Subsidiary Guarantee in accordance
with the provisions of the Indenture, and their respective successors and
assigns.
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"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or of the values of foreign currencies purchased or received by the
Company of any of its Subsidiaries in the ordinary course of business.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company, the Company shall be deemed to have made an Investment on the date of
any such sale or disposition equal to the fair market value of the Equity
Interests of such 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."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the Credit Facilities) secured by a Lien on the
asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"New Credit Facility" means that certain credit facility, dated as of April
, 1997, by and among the Company and NationsBank, N.A., as agent and a lender,
providing for up to $130 million of revolving credit borrowings, including any
related notes, Guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
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"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Subsidiary of the Company in a Persons,
if as a result of such Investment (i) such Person becomes a Wholly Owned
Subsidiary of the Company 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 Wholly Owned Subsidiary of
the Company; (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; and (f) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (f) that are at the time
outstanding, not to exceed $5 million.
"Permitted Liens" means (i) Liens on accounts receivable and inventory
securing Indebtedness under the Credit Facilities that will be permitted by the
terms of the Indenture to be incurred; (ii) Liens in favor of the Company; (iii)
Liens on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any 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 Subsidiary of the Company,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (iii) of the third
paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only the assets acquired with such Indebtedness; (vii)
Liens existing on the date of the Indenture; (viii) 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 concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; and
(ix) Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not exceed $2.5
million 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) 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 Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund Existing
Indebtedness or other Indebtedness of the Company or any of its Subsidiaries
incurred in accordance with the Indenture (other than Indebtedness incurred in
accordance with clauses (i), (vi), (vii), (viii), (ix), (x), (xi) and (xii) of
the third paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock;" provided that: (i) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness 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 Senior 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 Senior Notes on terms at least as favorable to the Holders of
Senior Notes 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 by the Subsidiary who is
the obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
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"Principals" means Thomas H. Lee Equity Fund III, L.P. and its
co-investors, Thomas H. Lee Foreign Fund III, L.P. and Thomas H. Lee Company,
and any Affiliates of Thomas H. Lee Company.
"Related Party" with respect to any Principal means (A) any controlling
stockholder or 80% (or more) owned Subsidiary of such Principal or (B) any
trust, corporation, partnership or other entity of which the beneficiaries,
stockholders, partners, owners or other Persons beneficially holding an 80% or
more controlling interest of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date of the
Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Voting Stock" means, with respect to any Person, 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" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
DESCRIPTION OF OTHER INDEBTEDNESS
In connection with the Recapitalization, the banks will provide senior
financing to the Company and its domestic subsidiaries as co-borrowers pursuant
to the $130.0 million New Credit Facility. The New Credit Facility will include
a $30.0 million sublimit for the issuance of standby and commercial letters of
credit.
Borrowings made under the New Credit Facility shall bear interest at a rate
equal to, at the Company's option, NationsBank's Eurodollar Rate plus 225 basis
points or the Prime Rate plus 50 basis points. The "Prime Rate" is a fluctuating
interest rate equal to the higher of (i) the rate of interest announced publicly
by NationsBank as its prime rate and (ii) a rate equal to 1/2 of 1% per annum
above the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers, as
determined for any day by NationsBank. The Eurodollar Rate and Prime Rate
margins will be subject to step-downs commencing twelve months from the closing,
based on the Company's performance. Interest based on the Base Rate shall be
payable monthly in arrears. Interest based on the Eurodollar Rate shall be
payable in arrears at the earlier of the end of (a) the applicable interest
period and (b) month-end. Eurodollar Rate borrowings are available in 1-, 2-, 3-
or 6-month interest periods.
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The New Credit Facility expires five (5) years from the consummation of the
Merger. Pursuant to the terms of the New Credit Facility, the Company is
required during February and March of each year to maintain excess availability
(i.e. borrowing capacity in excess of the borrowings outstanding under the New
Credit Facility) of at least $45.0 million. The obligations of the Company under
the New Credit Facility are secured by inventory, accounts receivable and the
proceeds of the foregoing of the Company and its domestic subsidiaries.
The New Credit Facility contains customary covenants of the Company and the
subsidiary borrowers, including, without limitation, restrictions on (i) the
incurrence of debt, (ii) the sale of assets, (iii) mergers, acquisitions and
other business combinations, (iv) voluntary prepayment of other debt of the
Company, (v) transactions with affiliates (as defined in the New Credit
Facility), (vi) investments, as well as prohibitions on the payment of dividends
to, or the repurchase or redemption of stock from, shareholders and various
financial covenants. Pursuant to the terms of the New Credit Facility, the
Company would be in default under the New Credit Facility upon the non-payment
of principal or interest when due under the notes issued in connection with the
New Credit Facility or, subject to applicable grace periods in certain
circumstances (ranging from zero to ten days), upon the non-fulfillment of the
covenants described above, certain changes in control of the ownership of the
Company or various other defaults described in the New Credit Facility. If such
a default occurs, the banks will be entitled to take all actions permitted to be
taken by a secured creditor under the uniform commercial code and to accelerate
the amounts due under the New Credit Facility and may require all such amounts
to be immediately paid in full.
DESCRIPTION OF CUMULATIVE REDEEMABLE PREFERRED STOCK
Following the consummation of the Merger, 25,000 shares will be designated
as Cumulative Redeemable Preferred Stock, par value $.01 per share. In
connection with the Recapitalization, the preferred stock of THL I will be
converted into an aggregate of 18,000 shares of the Company's Cumulative
Redeemable Preferred Stock. Such shares will be held, following the Merger, by
Lee Affiliates.
The liquidation preference of the Cumulative Redeemable Preferred Stock
will be $1,000 per share plus accrued but unpaid dividends. Holders of the
Cumulative Redeemable Preferred Stock will be entitled, subject to the rights of
creditors, in the event of any voluntary or involuntary liquidation of the
Company, to an amount in cash equal to $1,000 for each share outstanding plus
all accrued and unpaid dividends. The rights of holders of the Cumulative
Redeemable Preferred Stock upon liquidation of the Company rank prior to those
of the holders of Syratech Common Stock.
Dividends on shares of Cumulative Redeemable Preferred Stock will be
cumulative from the date of issue and will be payable when and as may be
declared from time to time by the Board of Directors of the Company. Such
dividends will accrue on a daily basis (whether or not declared ) from the
original date of issue at an annual rate per share equal to 12% of the original
purchase price per share, with such amount to be compounded annually on each
December 31 so that if the dividend is not paid for any year the unpaid amount
will be added to the original purchase price of the Cumulative Redeemable
Preferred stock for the purpose of calculating succeeding years' dividends.
The Cumulative Redeemable Preferred Stock will be redeemable at any time at
the option of the Company, in whole or in part, at $1,000 per share plus all
accumulated and unpaid dividends, if any, to the date of redemption. Subject to
the Company's existing debt agreements, the Company must redeem all outstanding
Cumulative Redeemable Preferred Stock in the event of a public offering of
equity, a change of control or certain sales of assets.
The holders of Cumulative Redeemable Preferred Stock will have no voting
rights with respect to their Cumulative Redeemable Preferred Stock except as may
be required by applicable law.
73
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions of the Underwriting Agreement
(the "Underwriting Agreement") among Syratech, the Guarantors, NationsBanc
Capital Markets, Inc. ("NCMI"), and Chase Securities Inc. ("CSI" and, together
with NCMI the "Underwriters"), the Underwriters have agreed to purchase from the
Company and the Company has agreed to sell to the Underwriters, the respective
principal amount of Senior Notes set forth opposite their names below.
Principal
Amount
--------------
NationsBanc Capital Markets, Inc......... $
Chase Securities Inc..................... $
------------
Total.................................... $155,000,000
============
In the Underwriting Agreement the Underwriters have agreed, subject to
certain conditions, to purchase all of the Senior Notes, if any are purchased.
The Company has been advised by the Underwriters that they propose to offer
the Senior Notes to the public initially at the price set forth on the cover
page of this Prospectus, to certain securities dealers (who may include the
Underwriters) at such price less a concession not in excess of % of the
amount per Senior Note and that the Underwriters and such dealers may reallow a
discount not in excess of % of the amount per Senior Note to other dealers,
including the Underwriters. After the closing of the public offering, the public
offering price, the concession and the discount to other dealers may be changed
by the Underwriters.
There is no currently existing trading market for the Senior Notes, and
although the Underwriters have advised the Company that it currently intends to
make a market in the Senior Notes, they are not obligated to do so and any such
market making may be discontinued at any time, without notice, in the sole
discretion of the Underwriters. Accordingly, there can be no assurance as to the
development or liquidity of any market that may develop for the Senior Notes.
The Company and the Guarantors have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act"), or to contribute to payments the
Underwriters may be required to make in respect thereof.
The Underwriters have informed the Company that they do not expect to
confirm sales of Senior Notes offered hereby to any accounts over which they
exercise discretionary authority.
In accordance with Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc., (the "NASD"), no member of the NASD
participating in the Offering will execute a transaction in the Senior Notes in
an account over which it exercises discretion without the prior specific written
approval of the customer.
NationsBridge L.L.C. and NationsBank, N.A., affiliates of NCMI have
delivered commitments to provide the Company interim financing for the
Recapitalization and will receive customary fees (and reimbursement of expenses)
in connection therewith. Such interim financing commitments will terminate upon
consummation of the Offering and a portion of the proceeds of the Offering will
be used to pay such fees and reimbursement. NationsBank of Georgia, N.A. is the
agent and a lender under the Company's existing credit facility and NationsBank,
N.A. will be the agent and a lender under the New Credit Facility. In addition,
NCMI and its affiliates provide or have provided banking, advisory and other
financial services for the Company and Thomas H. Lee Company in the ordinary
course of business for which they have received customary compensation.
Affiliates of CSI and NCMI are limited partners of Thomas H. Lee Equity Fund
III, L.P.
Under the Rules of Fair Practice of the NASD, if more than 10% of the net
proceeds of a public offering of debt securities, not including underwriting
compensation, are intended to be paid to members of the NASD or affiliated or
associated persons that are participating in the distribution of the offering,
the yield at which the debt securities are distributed to the public must be no
lower than that recommended by a "qualified independent underwriter", as defined
in Rule 2720 of the Conduct Rules of the NASD. NationsBank of Georgia, N.A., is
expected to receive in the aggregate more than 10% of the net proceeds of the
Offering as a result of the repayment by the Company of outstanding indebtedness
under the Company's existing credit facility provided by NationsBank of Georgia,
N.A. Accordingly, CSI has agreed to act as the qualified independent underwriter
in connection with this
74
<PAGE>
Offering. The yield on the Senior Notes, when sold to the public at the public
offering price set forth on the cover of this Prospectus, will be no lower than
that recommended by CSI.
In order to facilitate the offering of the Senior Notes, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Senior Notes. Specifically the Underwriters may overallot in
connection with the offering, creating a short position in the Senior Notes for
their own account. In addition, to cover overallotments or to stabilize the
price of the Senior Notes, the Underwriters may bid for, and purchase, Senior
Notes in the open market. Any of these activities may stabilize or maintain the
market price of Senior Notes above independent market levels. The Underwriters
are not required to engage in these activities, and may end any of these
activities at any time.
LEGAL MATTERS
The validity of the Senior Notes offered hereby will be passed upon for the
Company by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York. As of
January 31, 1997, lawyers of Paul, Weiss, Rifkind, Wharton & Garrison
beneficially owned an aggregate of 36,681 shares of Syratech individually or in
various fiduciary capacities. Certain legal matters in connection with the
Offering will be passed upon for the Underwriter by Latham & Watkins, New York,
New York.
EXPERTS
The consolidated financial statements and schedule of Syratech and its
subsidiaries for each of the three years in the period ended December 31, 1996,
included in this Prospectus, have been audited by Deloitte & Touche LLP,
independent accountants, as stated in their reports appearing herein and
elsewhere in the Prospectus and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. The financial statements of Rauch Industries, Inc. for the fiscal year
ended December 31, 1995 included in the Company's Form 8-K/A dated February 27,
1997 (which supersedes a Current Report on Form 8-K/A dated April 29, 1996),
amending the Company's Current Report on Form 8-K dated February 29, 1996, have
been incorporated by reference in this Prospectus and have been audited by
Coopers & Lybrand L.L.P., independent accountants, as indicated in their report,
also incorporated by reference in this Prospectus from the Form 8-K/A, with
respect thereto, and have been so incorporated in reliance upon the authority of
said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
No person is authorized to give any information or to make any
representations, other than as contained in this Prospectus, and, if given or
made, such information or representations may not be relied upon as having been
authorized by Syratech. This Prospectus does not constitute an offer to sell or
a solicitation of an offer to buy the securities to which it relates in any
jurisdiction in which, or to any person to whom, it is unlawful to make such an
offer or solicitation. Neither the delivery of this Prospectus nor any offer or
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the information set forth herein or in the affairs
of the Company since the date hereof.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or at
its regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov. The Company's Common
Stock is listed on the New York Stock Exchange, Inc., and reports, proxy
statements and other information concerning the Company may be inspected and
copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New
York, New York 10005.
75
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
SYRATECH CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
Report of Deloitte & Touche LLP........................................................... F-2
Consolidated Financial Statements:
Consolidated balance sheets as of December 31, 1995 and December 31, 1996................ F-3
Consolidated income statements for the years ended December 31, 1994, December 31, 1995
and December 31, 1996................................................................... F-4
Consolidated statements of stockholders' equity for the years ended December 31, 1994,
December 31, 1995 and December 31, 1996................................................. F-5
Consolidated statements of cash flows for the years ended December 31, 1994, December
31, 1995 and December 31, 1996.......................................................... F-6
Notes to consolidated financial statements............................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Syratech Corporation:
We have audited the accompanying consolidated balance sheets of Syratech
Corporation and subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Syratech Corporation and
subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 7, 1997 (February 14, 1997 as to Note 15)
F-2
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31,
------------------------
Notes 1995 1996
----------- ----------- ----------
<S> <C> <C> <C>
ASSETS....................................................... 1, 7
Current assets:
Cash and equivalents........................................ $ 78,493 $ 3,605
Marketable securities....................................... 4 30,561 --
Accounts receivable, net.................................... 12 31,893 60,020
Inventories................................................. 5 41,151 79,355
Deferred income taxes....................................... 8 5,105 8,940
Prepaid expenses and other.................................. 10 1,602 3,803
Net assets of discontinued operations....................... 3 1,834 --
-------- --------
Total current assets..................................... 190,639 155,723
Property, plant and equipment, net.......................... 6 29,560 63,955
Purchase price in excess of net assets acquired............. -- 7,032
Other assets................................................ 367 544
------- --------
Total.................................................... $220,566 $227,254
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and notes payable................. 7 $ 51,735 $ 6,636
Accounts payable............................................ 12 6,438 9,689
Accrued expenses............................................ 4,436 11,049
Accrued compensation........................................ 11 2,478 4,228
Accrued advertising......................................... 1 1,991 3,273
Income taxes payable........................................ 1, 8 1,511 930
-------- --------
Total current liabilities................................ 68,589 35,805
Deferred income taxes........................................ 1, 2, 8 3,657 17,706
Pension liability............................................ 10 1,724 3,288
Other long-term liabilities.................................. 11 -- 207
Commitments and contingencies................................ 9, 10,14
Stockholders' equity:........................................ 1, 11,15
Preferred stock, $.10 par value, 500,000 shares authorized;
no shares issued or outstanding (135,000 shares are
designated Series A Preferred Stock)....................... -- --
Common stock, $.01 par value, 20,000,000 shares authorized,
8,667,249 and 8,695,449 shares issued in 1995 and 1996,
respectively............................................... 87 87
Additional paid-in capital................................. 9,699 12,480
Retained earnings........................................... 7 136,728 157,117
Cumulative translation adjustment........................... 85 567
Less: Treasury stock; 218 shares, at cost................... (3) (3)
-------- --------
Total stockholders' equity................................ 146,596 170,248
-------- --------
Total..................................................... $220,566 $227,254
======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
Notes 1994 1995 1996
-------- --------- --------- ----------------
<S> <C> <C> <C> <C>
Net sales..................................................... 1 $147,291 $169,520 $ 270,931
Cost of sales................................................. 104,600 119,836 194,113
-------- -------- ----------
Gross profit.............................................. 42,691 49,684 76,818
Selling, general and administrative expenses.................. 31,613 34,239 57,664
Other operating income........................................ 2, 12 -- -- 3,948(1)
-------- -------- ---------------
Income from operations.................................... 11,078 15,445 23,102
Interest expense.............................................. 7 (559) (287) (3,150)
Interest income............................................... 4 98 4,881 771
Other income................................................. 2 -- -- 11,900(2)
-------- -------- ---------------
Income before provision for
income taxes.............................................. 10,617 20,039 32,623
Provision for income taxes.................................... 1, 8 2,758 6,863 12,234
-------- -------- ----------
Income from continuing
operations............................................... 7,859 13,176 20,389
Discontinued operations:
Income from discontinued operations net
of income taxes of $7,421 and $1,645, respectively.......... 3 12,068 2,572 --
Gain on sale of Syroco, Inc., net of income taxes of $16,599 3 -- 30,451 --
-------- -------- ----------
Net income................................................ $ 19,927 $ 46,199 $ 20,389
======== ======== ==========
Earnings per share: 1
Continuing operations........................................ $ .67 $ 1.12 $ 2.32
Discontinued operations...................................... 1.02 2.79 --
-------- -------- ----------
Net income................................................ $ 1.69 $ 3.91 $ 2.32
======== ======== ==========
Weighted average common and common equivalent shares
outstanding.................................................. 1 11,809 11,803 8,799
======== ======== ==========
</TABLE>
- ------------
(1) Consists of income from the sale of Farberware inventory and other operating
income, net of certain selling, general and administrative expenses.
(2) Consists of non-recurring pre-tax income related to licensing the Farberware
name on cookware and bakeware.
See notes to consolidated financial statements.
F-4
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
Common Stock
----------------------- Additional Cumulative
Paid-in Retained Translation Treasury
Shares Amount Capital Earnings Adjustment Stock Total
------------- --------- ------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994......... 11,649,432 $116 $ 60,214 $70,602 $76 $ (3) $131,005
Exercise of stock options....... 38,200 297 297
Compensation related to stock
options........................ 116 116
Tax effect of stock options..... 746 746
Net income...................... 19,927 19,927
Translation adjustment.......... 9 9
----------- ---- -------- -------- ---- ---- --------
Balance, December 31, 1994....... 11,687,632 116 61,373 90,529 85 (3) 152,100
Exercise of stock options....... 44,150 1 326 327
Compensation related to stock
options........................ 102 102
Tax effect of stock options..... (78) (78)
Purchase of common stock for
retirement (Note 11)........... (3,064,751) (30) (52,024) (52,054)
Net income...................... 46,199 46,199
----------- ---- -------- -------- ---- ---- --------
Balance, December 31, 1995....... 8,667,031 87 9,699 136,728 85 (3) 146,596
Exercise of stock options....... 28,200 202 202
Compensation related to stock
options......................... 78 78
Tax effect of stock options..... 250 250
Transfer of shares (Note 11) 2,338 2,338
Rights redemption (Note 11)..... (87) (87)
Net income...................... 20,389 20,389
Translation adjustment.......... 482 482
----------- ---- -------- -------- ---- ---- --------
Balance, December 31, 1996....... 8,695,231 $ 87 $ 12,480 $157,117 $567 $ (3) $170,248
=========== ==== ======== ======== ==== ==== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1994 1995 1996
----------- ----------- ----------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income...................................................... $ 19,927 $ 46,199 $ 20,389
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization.................................. 3,270 3,253 4,767
Deferred income taxes.......................................... (452) (2,229) (2,756)
Acquisition of Farberware assets............................... -- -- (9,500)
Disposal of Farberware assets.................................. -- -- 13,600
Farberware electrics license................................... -- -- 500
Transfer of shares............................................. -- -- 3,655
Pension liability.............................................. 208 1,155 1,564
Compensation related to stock options.......................... 116 102 78
Gain (loss) on disposal of assets and other.................... 8 3 (17)
Increase (decrease) in cash, net of effect of businesses
acquired:
Marketable securities.......................................... -- (30,561) 30,561
Accounts receivable............................................ (7,984) (3,649) (18,356)
Inventories.................................................... (6,590) (817) (17,106)
Prepaid expenses and other..................................... 711 (1,446) (471)
Accounts payable and accrued expenses.......................... 4,155 595 (2,870)
Income taxes payable........................................... 3,699 (2,306) (2,095)
Discontinued operations....................................... (27,660) (49,915) 1,834
-------- -------- --------
Net cash provided by (used in) operating activities............. (10,592) (39,616) 23,777
-------- -------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment...................... (2,603) (2,679) (15,125)
Net proceeds from sale of Syroco, Inc........................... -- 133,931 --
Proceeds from disposal of assets................................ 336 -- 66
Insurance claim proceeds........................................ -- -- 23,771
Acquisitions of businesses, net of cash acquired................ -- -- (48,540)
Other........................................................... (529) 61 (186)
-------- -------- --------
Net cash provided by (used in) investing activities............. (2,796) 131,313 (40,014)
-------- -------- --------
Cash flows from financing activities:
Change in revolving loan facilities and notes payable........... 11,944 (14,504) (59,075)
Repayment of borrowings......................................... (1,624) (875) (300)
Tax effect on stock options..................................... 746 (78) 250
Exercise of stock options....................................... 297 327 202
Deferred financing costs and other.............................. 62 60 (24)
-------- -------- --------
Net cash provided by (used in) financing activities............. 11,425 (15,070) (58,947)
Effect of exchange rate changes on cash and equivalents......... -- -- 296
-------- -------- --------
Net increase (decrease) in cash and equivalents................. (1,963) 76,627 (74,888)
Cash and equivalents, beginning of year......................... 3,829 1,866 78,493
-------- -------- --------
Cash and equivalents, end of year............................... $ 1,866 $ 78,493 $ 3,605
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars except share and per share data)
1. Business and Summary of Significant Accounting Policies
Business
Syratech Corporation designs, manufactures, imports and markets a diverse
portfolio of tabletop, giftware and seasonal products, including: sterling
silver, silverplated and stainless steel flatware; sterling silver, silverplated
and brass holloware; picture frames and photo albums; glassware, woodenware and
ceramics; fine porcelain boxes; figurines, waterglobes and Christmas ornaments,
trim, lighting and tree skirts.
Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements include the accounts of Syratech
Corporation and its subsidiaries (the Company), Syratech Holding Corporation and
its subsidiaries, Syratech Security Corporation, Wallace International
Silversmiths, Inc. and its subsidiaries (Wallace), Leonard Florence Associates,
Inc. (LFA), Towle Manufacturing Company and its subsidiaries (Towle), Rauch
Industries, Inc. and its subsidiaries (Rauch), Silvestri Inc. and subsidiaries
(Silvestri), Syratech (H.K.) Ltd. and its subsidiaries (Syratech H.K.). All
significant intercompany balances and transactions have been eliminated.
Adoption of New Accounting Pronouncements
Effective January 1, 1996, the Company adopted, prospectively, Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
requires that long-lived assets be reviewed for impairment whenever
circumstances indicate that the carrying value of an asset may not be
recoverable. The adoption of SFAS No. 121 did not have a significant effect on
the Company's consolidated financial position or results of operations for the
year ended December 31, 1996.
Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting
For Stock-Based Compensation." As permitted by SFAS No. 123, the Company has
continued to account for its stock-based transactions to employees in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." As required by SFAS No. 123, for stock option grants to
non-employees, the Company calculates compensation expense using a fair value
based method and amortizes compensation expense over the vesting period. During
the year ended December 31, 1996, the Company did not grant any options to
purchase shares of common stock to non-employees.
Marketable Securities
The Company's marketable securities have been classified as trading
securities and are carried at their fair value on the consolidated balance
sheet.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amount of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and revenues and expenses during the reporting period. Actual results
could differ from these estimates.
F-7
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Revenue Recognition
Revenue is recognized when products are shipped. The Company provides
allowances for estimated doubtful accounts and sales returns based on historical
experience and evaluation of specific accounts. Such allowances, excluding
amounts related to Farberware Inc. (see Note 2), were comprised of the
following:
December 31,
--------------------
1995 1996
--------- --------
Sales returns and allowances......... $2,604 $3,501
Doubtful accounts.................... 1,603 1,861
------- -------
$4,207 $5,362
======= =======
Customers
Substantially all customers are retailers. No base of customers in one
geographic area constitutes a significant portion of sales. No single customer
represented 10% or greater of consolidated net sales in 1994, 1995 or 1996.
Inventories
Inventories are stated at the lower of cost or market. Two subsidiaries
determine cost on the last-in, first-out (LIFO) method for silver and certain
non-silver inventories. For all other inventories, cost is determined on the
first-in, first-out (FIFO) method.
Property, Plant and Equipment
Purchased property, plant and equipment is recorded at cost. Leased
equipment is recorded at the present value of the minimum lease payments
required during the lease term. Depreciation is provided using the straight-line
method over the estimated useful lives of the related assets and over the terms,
if shorter, of the related leases, as follows:
Years
---------
Buildings and improvements......... 4 to 39
Tools and dies..................... 3 to 10
Machinery and equipment............ 3 to 10
Other.............................. 3 to 10
Purchase Price in Excess of Net Assets Acquired
Purchase price in excess of net assets acquired is amortized using the
straight-line method over 30 years (Note 2). The Company evaluates the carrying
value of goodwill based upon current and anticipated net income and undiscounted
cash flows, and recognizes an impairment when it is probable that such estimated
future net income and/or cash flows will be less than the carrying value of
goodwill. Measurement of the amount of impairment, if any, is based upon the
difference between carrying value and estimated fair value.
Other Assets
Other assets consist principally of deposits, deferred fees, deferred
financing costs and deferred long-term rent. Deferred financing costs are being
amortized using the straight-line method over the terms of the related loans.
Accumulated amortization aggregated approximately $100 and $125 at December 31,
1995 and 1996 respectively.
Advertising Costs
Advertising costs are charged to operations when incurred. These costs
totaled $3,035, $3,064 and $3,690 in the years ended December 31, 1994, 1995 and
1996, respectively.
F-8
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Financial Instruments
The carrying values of cash and equivalents, accounts receivable, accounts
payable and borrowings under revolving credit facilities approximate fair value
due to the short-term nature of these instruments.
Income Taxes
The Company and its domestic subsidiaries (except for Wallace's Puerto
Rican subsidiaries) file a consolidated federal income tax return. The Puerto
Rican subsidiaries file separate returns in accordance with Section 936 of the
Internal Revenue Code. Deferred income taxes are provided for certain income and
expense items which are accounted for differently for financial reporting and
income tax purposes.
Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are translated
into U.S. dollars at year-end exchange rates and income and expense items are
translated at the average rates of exchange prevailing during each year. The
effects of foreign currency fluctuations on the foreign subsidiaries assets and
liabilities have been reflected as a separate component of stockholders' equity.
Transaction gains and losses have been insignificant.
Earnings Per Share
Earnings per share are computed based on the weighted average common and
common equivalent shares outstanding during each period presented. Common stock
equivalents include common stock options (treasury stock method). Primary and
fully diluted earnings per share are the same for each of the periods presented.
Reclassification
Certain prior year amounts have been reclassified to conform with the 1996
presentation.
Cash Flow Information
Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1994 1995 1996
---------- ---------- ---------
<S> <C> <C> <C>
Cash paid during the year for:
Interest................................................. $ 827 $ 268 $2,383
======= ======= =======
Income taxes............................................. $10,741 $30,593 $16,791
======= ======= =======
Supplemental schedule of non-cash investing and financing
activities:
Purchase of common stock for retirement, financed by
issuance of promissory notes and assumption of bank debt $51,735
=======
Rights redemption obligation............................. $ 87
=======
Share transfer by principal stockholder.................. $2,338
=======
</TABLE>
2. Acquisitions
Acquisitions of Businesses
On February 15, 1996, the Company, through an indirect wholly owned
subsidiary, acquired the outstanding shares of Rauch for approximately $49,626
including costs of the transaction. The acquisition was accounted for under the
purchase method of accounting, and the results of operations of Rauch have been
included with the results of the Company from February 15, 1996.
F-9
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The purchase price in excess of net assets acquired of $7,224 is being
amortized on the straight line basis over 30 years. Rauch is a leading domestic
manufacturer and marketer of Christmas and other seasonal products, in
particular glass and satin tree ornaments. During 1996, the Company received
$23,771 in connection with an insurance claim relating to a 1994 fire at Rauch.
The allocation of purchase price is as follows:
Cash paid to Rauch shareholders.......................... $ 48,042
Acquisition costs incurred............................... 1,584
--------
Total purchase price..................................... $ 49,626
========
Allocated to:
Cash.................................................... $ 2,084
Accounts receivable.................................... 8,461
Insurance receivable................................... 23,771
Inventories............................................ 19,206
Deferred income taxes.................................. 2,518
Prepaid expenses and other............................. 983
Property, plant and equipment, net..................... 23,081
Other assets........................................... 89
Purchase price in excess of net assets required........ 7,224
Current liabilities.................................... (22,303)
Deferred income taxes.................................. (15,488)
--------
$ 49,626
========
The following summarized pro forma (unaudited) information assumes the
acquisition had occurred on January 1, 1995.
Year Ended December 31,
---------------------------
1995 1996
----------- ----------
Net sales................................. $228,439 $271,540
========= =========
Income from continuing operations......... $ 15,316 $ 19,657
========= =========
Net income................................ $ 48,339 $ 19,657
========= =========
Earnings per share:
Continuing operations.................... $ 1.30 $ 2.23
========= =========
Net income............................... $ 4.10 $ 2.23
========= =========
On May 8, 1996, the Company, through one of its subsidiaries, acquired all
of the outstanding common stock of C.J. Vander Ltd., a manufacturer of sterling
silver and silverplated flatware and hollowware in Sheffield and London,
England. The purchase price was immaterial to the Company's consolidated
financial statements. The acquisition was accounted for under the purchase
method of accounting.
Acquisition of Assets
In February of 1996, the Company entered into an agreement to acquire
certain assets, including a major portion of the tangible assets, intellectual
property and the corporate name, of Farberware Inc. ("Farberware Inc.").
Effective April 2, 1996, the Company, through its indirect wholly-owned
subsidiary, Far-B Acquisition Corp. ("Far-B"), together with Lifetime Hoan
Corporation ("Lifetime") acquired certain assets from Farberware Inc., a
subsidiary of U.S. Industries, Inc. The Company and Lifetime are not affiliates.
Farberware Inc. was a manufacturer of aluminum clad, stainless steel
cookware and bakeware and small electric kitchen appliances. The aggregate
consideration paid by Far-B and Lifetime was $45,771, subject to adjustment, of
which Far-B paid approximately, $32,611. The amount of the adjustment was the
subject of a dispute
F-10
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
which was settled on February 3, 1997. The assets acquired by the Company
included certain of the inventory, the tradename "Farberware" and the
intellectual property (including the intellectual property that relates to
cookware and bakeware and electric products other than major kitchen appliances)
and certain tools and dies and machinery and equipment. Effective April 2, 1996,
the Company, through Far-B, entered into a manufacturing services agreement with
Farberware Inc. for transitional manufacturing services for certain finished
goods previously produced by Farberware Inc. The Company entered into the
manufacturing services agreement in part to provide continuity of product during
a transition period in order to protect the strength of the Farberware name in
the marketplace. The manufacturing services agreement has terminated.
Upon disposal of the acquired inventory, the Company will not manufacture
or sell Farberware cookware and bakeware products or noncommercial electric
products. Accordingly, net sales for the year ended December 31, 1996 exclude
revenue from sales of Farberware inventory, and $3,948, net of certain selling,
general and administrative expenses, from these sales has been recorded as other
operating income. At December 31, 1996, accounts receivable, net and inventories
of the Company included $4,972 and $3,289, respectively related to Faberware.
In a separate transaction, the Company and Far-B entered into an agreement
with Lifetime, which provided for the allocation between them of the assets
acquired from Farberware Inc., the granting of a long-term license to Lifetime
for use of the Farberware name in connection with an extensive list of products,
the granting to Lifetime of long-term exclusive rights to operate Farberware
outlet stores, the reservation of certain exclusive rights to Far-B (including
exclusive rights to use of the Farberware name for corporate purposes and for
the marketing of cookware and bakeware products as well as electric products)
and for the future formation of a joint venture to administer certain licensing
rights.
On June 27, 1996, the Company's Farberware Inc. subsidiary (formerly Far-B)
("Farberware") entered into a license agreement with Meyer Marketing Co. Ltd.
("Meyer") pursuant to which Meyer was granted for a term of 200 years (i) an
exclusive worldwide license to use and exploit the Farberware name and certain
related intellectual property rights in connection with the sourcing,
manufacture and distribution of cookware and bakeware products for home use and
commercial, industrial and institutional size pots, pans and roasters, and (ii)
non-exclusive (shared) rights to use certain Farberware technology and other
intellectual property. For such grant, Meyer made a one-time payment to the
Company of $25,500 which resulted in recognition by the Company of $11,900 of
non-recurring income. Under the terms of the licensing agreement, the Company
has no further obligation with respect to the amount paid by Meyer. As such, the
entire proceeds received were recognized as revenue in the second quarter of
1996. On July 12, 1996, Farberware granted to a major retail chain the exclusive
license to use and exploit the Farberware name and related intellectual property
in connection with the sourcing, manufacture, marketing and sale of certain
electric products for annual royalty payments. On October 25, 1996 Farberware
granted to FCI Corp. a license to use and exploit the Farberware name in
connection with the sourcing, manufacturing, marketing and sale of certain
commercial products (defined as six specified commercial urns and one specified
commercial convection oven plus cookware, bakeware and electric products
developed by the Licensee solely and exclusively for commercial, industrial or
institutional use with the prior written approval of Farberware) for the payment
of annual royalties. See Note 12.
On February 3, 1997 the Company, Farberware, and Lifetime reached an
agreement (the "Settlement Agreement"), with Bruckner Manufacturing Corp.
("BMC") and U.S. Industries Inc. ("USI") to settle all previous outstanding
legal disputes arising out of the Farberware Asset Purchase Agreement ("APA")
and the Manufacturing Services Agreement ("MSA"). Under the terms of the
Settlement Agreement, Farberware will receive certain finished goods inventory
at no cost, and pay for certain finished goods inventories purchased under the
MSA. Farberware will also receive a waiver of certain restrictions in the APA on
disposing of tools, machinery, and equipment formerly used by BMC in the
manufacture of Farberware products. The Company intends to sell the majority of
the tools, machinery and equipment and will retain the remainder for use in its
existing businesses. The settlement did not result in any adjustment to the
original purchase price and no loss is expected to be incurred as a result of
the settlement.
F-11
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
On April 16, 1996, the Company purchased finished goods inventory and
intangible assets of the Silvestri division of FFSC, Inc. ("Silvestri") for
approximately $8,600. Prior to the Company's purchase of such assets, FFSC,
Inc., its subsidiaries and affiliated companies had filed for protection under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
Northern District of Texas (the "Bankruptcy Court"). The Bankruptcy Court
approved this acquisition by the Company. Silvestri products include Christmas
ornaments, collectibles, lighting and trim as well as other seasonal and
nonseasonal giftware and decorative accessories.
The Corporation has given a Guaranty (limited to $4,000), dated as of May
21, 1996, of the obligations of FF Holding Company, FFSC, Inc. and certain
related entities to The CIT Group/Business Credit, Inc. under a certain debtor
in possession financing agreement dated May 21, 1996 and, at the request of the
Company, NationsBank N.A. (South) has issued its letter of credit, dated May 31,
1996 in the amount of $4,000 to CIT Group/Business Credit, Inc. to secure the
Company's aforesaid guaranty.
On November 26, 1996, a wholly-owned subsidiary of the Company acquired
inventory, tangible property, intellectual property rights, certain records
(including customer lists, customer files, supplier information, catalogs) and
certain contract rights of Potpourri Press, Inc., a North Carolina- based
manufacturer and marketer of Christmas products, for a purchase price of
approximately $2,300 plus a $240 promissory note (Note 7).
3. Discontinued Operations
On April 11, 1995, pursuant to an agreement entered into on March 28, 1995,
the Company, through its subsidiary, Syratech Holding Corporation, sold Syroco,
Inc. ("Syroco"). The net proceeds received after costs of the sale and income
taxes were $133,931. On September 25, 1995, the Company reached a final
settlement regarding the sale of Syroco. Under the terms of the settlement, the
Company reacquired certain assets and reassumed certain liabilities of Syroco
which have been recorded at their estimated net fair value of $1,834 at December
31, 1995. The Company does not expect that the liquidation of the assets will
have a material effect on the previously recognized gain on disposal. An after
tax gain on disposal of Syroco of $30,451 was recognized in the second quarter
of 1995.
The sale resulted in the discontinuation of the Company's casual furniture
and accessories business. The assets and liabilities relating to the
discontinued business are included in net assets of discontinued operations in
the consolidated balance sheets at December 31, 1995. The results of operations
and cash flows for the discontinued segment are included in discontinued
operations in the consolidated income statements and the consolidated statements
of cash flows for years ended December 31, 1994, 1995 and 1996.
Net assets of discontinued operations at December 31, 1995 consisted of the
following:
Inventories, net........................... $ 1,778
Property, plant and equipment, net......... 227
Other assets............................... 875
Liabilities................................ (1,046)
-------
Total.................................... $ 1,834
=======
Operating results of the discontinued segment consisted of the following:
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended March 31,
1994 1995
--------------- -----------------
(unaudited)
<S> <C> <C>
Net sales........................................ $94,883 $33,626
======== ========
Income before provision for income taxes......... $19,489 $ 4,217
Provision for income taxes....................... 7,421 1,645
-------- --------
Income from discontinued operations.............. $12,068 $ 2,572
======== ========
</TABLE>
The operating results of the discontinued segment exclude previously allocated
corporate expenses.
F-12
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
4. Marketable Securities
At December 31, 1995, marketable securities consisted of $30,000 of
short-term high grade notes having original maturities of six months. Marketable
securities are carried at fair value which approximates cost plus accrued
interest. Interest earned at December 31, 1995 but not paid, of $561, is
included in interest income for the year ended December 31, 1995. There were no
marketable securities at December 31, 1996.
5. Inventories
Inventories were comprised of the following:
December 31,
----------------------
1995 1996
---------- ---------
Raw Materials........... $3,908 $9,020
Work-in-process......... 1,744 5,980
Finished goods.......... 35,499 64,355
------- -------
Total................. $41,151 $79,355
======= =======
Inventories would have been approximately $2,752 and $3,430 higher at
December 31, 1995 and 1996, respectively, if the FIFO method had been used for
all inventories. Decreases in LIFO inventory quantities had the effect of
increasing consolidated net income by $4 in 1994, and decreasing consolidated
net income by $59 in 1996. There were no decreases in LIFO inventory quantities
in 1995.
6. Property, Plant and Equipment
Property, plant and equipment was comprised of the following:
December 31,
---------------------------
1995 1996
------------ ------------
Land and improvements.................. $ 7,813 $ 8,305
Buildings and improvements............. 18,780 41,838
Tools and dies......................... 13,808 14,635
Machinery and equipment................ 6,046 25,388
Other.................................. 1,169 1,619
Construction in progress............... 1,239 4,923
-------- --------
Total................................ 48,855 96,708
Less: accumulated depreciation......... (19,295) (32,753)
-------- --------
Net.................................. $ 29,560 $ 63,955
======== ========
Capitalized interest was not material to the Company's consolidated
financial statements.
On January 17, 1997, the Company purchased a parcel of land in Mira Loma,
California for $3,179. The Company plans to begin construction of a warehouse
and distribution facility on this land in 1997.
7. Revolving Loan Facilities and Notes Payable
Revolving Loan Facilities
Effective October 31, 1996, the Company's Amended and Restated Loan and
Security Agreement (the "Company Loan Agreement") provides for maximum permitted
borrowings of $100,000 through December 31, 1996 and to $60,000 until the
earlier of April 30, 1997 or the completion of refinancing contemplated with
respect to the Agreement and Plan of Merger with THL Transaction I Corp. (Note
15). Interest on borrowings is charged at the bank's prime rate less .75% (7.5%
at December 31, 1996) or at an option to borrow at 1.0% over the Eurodollar
F-13
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
rate (6.53% using the 30 day Eurodollar rate, at December 31, 1996). The
weighted average interest rate on borrowings outstanding under this facility for
the year ended December 31, 1996 was 7.29%. The Company Loan Agreement as
amended expires on April 30, 1997. At December 31, 1996, there was $5,878
outstanding under the Company Loan Agreement and credit availability (net of
letters of credit outstanding) was $83,770. On January 1, 1997 availability was
reduced by $40,000. Borrowings are collateralized by substantially all of the
assets of the Company and its subsidiaries with the exception of C.J. Vander.
The Company Loan Agreement restricts the payment of cash dividends to 331/3% of
net income for the prior year. In addition, it limits repurchases of the
Company's outstanding capital stock and capital expenditures, and contains
covenants which require, among other things, minimum levels of consolidated
tangible net worth and the maintenance of certain financial ratios. In December
1995, the restriction to repurchase outstanding capital stock was modified to
allow the Company to repurchase all of the 3,064,751 shares of the Company's
stock owned by affiliates of Katy Industries, Inc. (the "Katy Stock
Repurchase"). The agreement was modified in December 1995 to permit the
acquisition of Rauch referred to in Note 2. During 1996, further modifications
were made to permit the Farberware, Silvestri, C.J. Vander and Potpourri
acquisitions. At December 31, 1996, the Company had $6,783 unrestricted retained
earnings available for payment of cash dividends.
During 1996, one of Wallace's Puerto Rican subsidiaries and its lender
entered into an Amended and Restated Line of Credit Agreement (the "Facility")
which provides for borrowings up to a maximum of $10,000 and expires on May 31,
1997. Interest on borrowings is charged at the bank's prime rate minus .30%
(7.95% at December 31, 1996 or at an option to borrow at the Eurodollar rate
plus 1.70% (7.2313%, using the 30 day Eurodollar rate, at December 31, 1996).
The weighted average interest rate on borrowings outstanding under this Facility
for the year ended December 31, 1996 was 8.08%. At December 31, 1996 $558 was
outstanding under the Facility and the credit availability was $9,442.
Borrowings are uncollateralized; however, the pledge of assets owned by one of
the subsidiaries as collateral for other loans is prohibited. Borrowings under
the Facility are guaranteed by the Company and cross-guaranteed by certain other
subsidiaries.
Notes Payable
At December 31, 1996, the Company had a note payable of $200 related to the
purchase of Potpourri (Note 2). At December 31, 1995, the Company had notes
payable of $51,735 related to the purchase of 3,064,751 shares of the Company's
common stock on December 29, 1995 (Note 11). These notes were paid on January 2,
1996.
F-14
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
8. Income Taxes
The provisions for income taxes were comprised of the following:
Year Ended December 31,
--------------------------------------
1994 1995 1996
--------- ---------- ----------
Current:
Federal......... $1,356 $ 6,518 $11,379
State........... 524 1,674 3,542
Foreign......... 625 937 1,307
------ ------- -------
2,505 9,129 16,228
------ ------- -------
Deferred:
Federal......... (561) (1,805) (3,344)
State........... 87 (383) (900)
Foreign......... (19) -- --
------ ------- -------
(493) (2,188) (4,244)
------ ------- -------
Tax effect of stock options:
Federal......... 574 (60) 193
State........... 172 (18) 57
------ ------- -------
746 (78) 250
------ ------- -------
Total.......... $2,758 $ 6,863 $12,234
====== ======= =======
The reconciliations between the Company's effective income tax rate and the
U.S. federal statutory rate are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1994 1995 1996
-------- -------- ----------
<S> <C> <C> <C>
Federal statutory rate.............................. 35.0% 35.0% 35.0%
State taxes, net of federal income tax benefit...... 3.1 2.5 4.9
Hong Kong........................................... (6.6) (4.8) (4.3)
Puerto Rico......................................... (6.0) (3.8) (2.4)
United Kingdom...................................... -- -- 0.6
Provision for undistributed foreign earnings........ 1.6 5.0 1.6
Valuation allowance................................. -- -- 1.6
Other............................................... (1.1) 0.4 0.5
------ ------ ------
Effective income tax rate.......................... 26.0% 34.3% 37.5%
====== ====== ======
</TABLE>
The components of income before provision for income taxes were comprised
of the following:
Year Ended December 31,
--------------------------------------
1994 1995 1996
---------- ---------- ---------
Domestic......... $7,081 $14,480 $25,457
Foreign.......... 3,536 5,559 7,166
------- -------- --------
Total.......... $10,617 $20,039 $32,623
======= ======== ========
Provisions have been made for taxes on the undistributed earnings of
Syratech H.K. and Wallace's Puerto Rican subsidiaries which are ultimately
expected to be remitted to the parent company. The Company has permanently
invested a portion of the undistributed earnings of its Puerto Rican and
Syratech H.K. subsidiaries. It is not practical to estimate the amount of
unrecognized deferred tax liability attributable to these undistributed foreign
earnings.
F-15
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Wallace's Puerto Rican subsidiaries operate under grants from the
Commonwealth of Puerto Rico exempting 90% of their income from taxation until
December 2003. Had the Company not been eligible for the tax exemption, net
income in 1994, 1995, and 1996 would have been reduced by approximately $1,330,
$1,198, and $1,211, and earnings per share would have been decreased by
approximately $.11, $.10, and $.14, respectively.
The tax effects of significant items comprising the Company's net deferred
tax asset (liability) are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1995 1996
------------------- ----------------
<S> <C> <C>
Deferred tax liability:
Property, plant and equipment................ $ (2,349) $ (17,263)
Foreign earnings............................. (1,994) (2,525)
-------- ---------
Deferred tax liability...................... (4,343) (19,788)
-------- ---------
Deferred tax assets:
Accounts receivable.......................... 2,171 4,475
Inventory.................................... 1,447 2,336
Reserves and accruals........................ 1,567 2,266
Pension...................................... 522 1,876
Other deductible amounts..................... 84 69
Contribution carryforwards................... -- 433
Foreign operating loss carryforwards......... -- 175
-------- ---------
Deferred tax asset.......................... 5,791 11,630
-------- ---------
Valuation allowance.......................... -- (608)
-------- ---------
Net deferred tax asset (liability)........... $ 1,448 $ (8,766)
======== =========
</TABLE>
The valuation allowance relates to the potential unusable portion of
foreign tax loss carryforwards of $530 and contribution carryforwards of $1,066.
9. Commitments and Contingencies
The Company and its subsidiaries have various operating lease commitments
for buildings and equipment. The lease agreements generally require the Company
to pay insurance, real estate taxes, and maintenance and contain various renewal
options. Future minimum rental payments for all noncancellable operating leases
for each of the next five years and thereafter are as follows:
1997....................... $ 3,552
1998....................... 1,887
1999....................... 1,632
2000....................... 1,123
2001....................... 628
Subsequent to 2001......... 480
Rent expense for all operating leases was approximately $1,789, $1,821, and
$5,209 in 1994, 1995 and 1996, respectively.
Certain subsidiaries were contingently obligated for outstanding letters of
credit, trade acceptances and similar instruments aggregating $10,348 at
December 31, 1996 (Note 7). The assets of Syratech H.K. are pledged as
collateral for certain of these contingent obligations.
10. Employee Benefit Plans
The Company has three 401(k) savings plans. The 401(k) savings plans cover
substantially all employees of its domestic and Puerto Rican subsidiaries. The
401(k) plans are subject to certain minimum age and length of employment
requirements. Under two of these plans, the Company matches 30% of participants'
contributions up to 6% of compensation. Under the other plan, the Company
matches 50% of the first five hundred twenty dollars
F-16
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
contributed and 25% thereafter, of the participants' contributions up to 15% of
compensation. The Company also has a savings plan, established in 1991, covering
substantially all employees of the Company's Hong Kong subsidiary. Under the
Hong Kong plan, the Company contributes up to 10% of the participants'
compensation. The Company contributed an aggregate of $197, $256 and $597 to all
of these Plans in 1994, 1995 and 1996.
The Company's C. J. Vander subsidiary also has an employee benefit plan.
The Company's obligation under the plan is not material to the Company's
consolidated financial position or results of operations.
The Company has employment agreements with certain officers and employees
for terms ranging from three to five years, which provide for minimum annual
salaries aggregating $2,451 and certain other benefits.
Agreements with the Company's five officers provide for retirement benefit
payments. With respect to two of these officers, for the year ended December 31,
1994, the agreements provided for benefit payments in amounts equal to two
percent of the officers' final year base salaries multiplied by the number of
years of service with the Company. In 1995, these two agreements were amended to
provide that the benefit payments be based upon two percent of the average total
annual compensation (salary and bonus) for the three year period preceding the
executives' retirement dates multiplied by the number of years of service. In
addition, one of the agreements was amended (the "1995 Plan Amendment") to
provide for a 100% survivor benefit for the executive's spouse. In 1996 existing
employment agreements with two officers were amended to also provide for a
retirement benefit. Additionally, a third officer who does not have an
employment agreement with the Company was granted a retirement benefit. Two of
these agreements were amended to provide for benefit payments based upon the
greater of (i) $75,000 or (ii) one half of one percent of the average total
annual compensation (salary and bonus) for the three year period preceding the
executives' retirement dates multiplied by the number of years of service. One
of these agreements was amended to provide for benefit payments based upon the
greater of (i) $75,000 or (ii) one percent of the average total annual
compensation (salary and bonus) for the three year period preceding the
executives' retirement dates multiplied by the number of years of service.
Upon consummation of the Merger (Note 15), an employment agreement with an
officer will be amended so as to (i) change the officer's term of full-time
employment from a rolling five-year term to a fixed five-year term, (ii) provide
for a minimum base salary of $1,150 per annum, (iii) establish $1,150 as the
minimum amount upon which the officer's retirement benefit (and the survivor's
benefit of his surviving spouse) will be computed and (iv) create contractual
rights with respect to certain perquisites that he is accorded informally under
present arrangements with the Company. Additionally, an employment agreement
with another officer will be amended to change the officer's term of full-time
employment from a rolling five-year term to a fixed five-year term.
Pension expense is determined using assumptions at the beginning of the
year. Assumptions used in determining the actuarial present value of the
projected benefit obligation include: a discount rate of 8.5% in 1994 and 1995
and 7.5% in 1996 and a rate of future increases in benefit compensation of 5%.
The effect of the change in discount rate was not material to the consolidated
financial statements.
Net pension cost included the following components:
1994 1995 1996
------- ------- --------
Service cost for benefits earned........... $137 $196 $ 317
Interest cost benefit obligation........... 71 123 199
Amortization of prior service cost......... -- 476 620
Amortization of (gain)/loss................ -- -- 191
----- ----- ------
Net periodic pension cost.................. $208 $795 $1,327
===== ===== ======
The following table summarizes the amounts recognized in the consolidated
balance sheets as of December 31, 1995 and 1996:
F-17
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
1995 1996
--------- --------
<S> <C> <C>
Actuarial present value of obligations:
Vested benefit obligation.................................... $1,724 $3,287
Projected benefit obligation................................. 2,012 3,612
Fair value of plan assets..................................... -- --
Projected benefit obligation in excess of plan assets......... 2,012 3,612
Unrecognized prior service cost............................... (603) (610)
Unrecognized gain/(loss)...................................... (45) (311)
Additional minimum liability.................................. 360 597
------ ------
Net accrued pension liability................................. $1,724 $3,288
====== ======
</TABLE>
11. Stockholders' Equity
Key Employee Stock Option Plans
Under the Company's 1986 Key Employee Stock Option Plan ("1986 Plan"),
qualified and non-qualified options to purchase up to a maximum of 1,300,000
shares of common stock were granted to certain employees at exercise prices not
less than 85% of the fair market value at the date of grant. Options become
exercisable ratably over a five-year period and expire ten years from the date
of grant. There were no shares available for grant under the 1986 Plan at
December 31, 1996. Compensation cost has been recognized for the Company's 1986
Plan for the amount equal to 15% of the fair market value at the date of grant
ratably over the five year period that they became exercisable over.
In 1993, the Company established the 1993 Key Employee Stock Option Plan
("1993 Plan"), with provisions similar to the 1986 Plan. Under the 1993 Plan,
qualified and non-qualified options to purchase up to a maximum of 400,000
shares of common stock may be granted to certain employees at an exercise price
not less than fair market value at the date of grant. At December 31, 1996,
67,000 options were outstanding under the 1993 plan.
In 1995, the Company established the 1995 Key Employee Stock Option Plan
("1995 Plan"). The 1995 Plan contains certain provisions similar to the 1993
Plan and would allow the grant of 800,000 options at an exercise price not less
than fair market value at the date of grant. At December 31, 1996, 20,000
options were outstanding under the 1995 plan.
No compensation cost has been recognized for the Company's 1993 and 1995
Plans.
F-18
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
A summary of stock option activity under the Plans is as follows:
<TABLE>
<CAPTION>
Weighted Average
Exercise Price Exercise Price
Shares Per Share Per Share
----------- ----------------- ------------------
<S> <C> <C> <C>
Outstanding at January 1, 1994........... 297,350 $.0038--$13.70 $9.66
Canceled................................. (8,400) $ 10.67 $10.67
Granted.................................. 50,000 $ 14.35 $14.35
Exercised................................ (38,200) $.0038--$10.67 $7.88
---------
Outstanding at December 31, 1994......... 300,750 $.0038--$14.35 $10.64
Canceled................................. (90,900) $10.67--$14.56 $12.91
Granted.................................. 54,500 $14.56--$18.75 $16.87
Exercised................................ (44,150) $.0038--$10.67 $7.29
---------
Outstanding at December 31, 1995......... 220,200 $.0038--$18.75 $11.92
Canceled................................. (102,000) $10.67--$24.75 $24.47
Granted.................................. 139,500 $23.00--$24.75 $24.68
Exercised................................ (28,200) $.0038--$10.67 $7.17
---------
Outstanding at December 31, 1996......... 229,500 $10.67--$24.75 $14.68
=========
Exercisable at December 31, 1996......... 107,080 $10.67--$18.75
=========
</TABLE>
The following table sets forth information regarding options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
Weighted
Weighted Average
Weighted Average Exercise
Range of Number Average Remaining Price for
Number of Exercise Currently Exercise Contractual Currently
Options Prices Exerciseable Price Years Exerciseable
- ------------ ------------------- --------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
142,500 $10.67 to $14.56 97,580 $11.11 5.97 $11.03
87,000 $17.13 to $24.75 9,500 $20.52 8.66 $ 17.22
-------- --------
229,500 107,080 $14.68 6.99 $ 11.58
======== ========
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its stock option and other employee stock
based compensation plans. Had compensation cost for the Company's stock option
plans been determined based on fair value at the grant dates for awards under
those plans which were granted on or after January 1, 1995 consistent with the
method of SFAS No. 123, the Company's net income and earnings per share for the
two years ended December 31, 1996 would have been reduced to the pro forma
amounts indicated below:
Year Ended December 31,
-------------------------
1995 1996
---------- ---------
Net income:
As reported......... $46,199 $20,389
======== ========
Pro forma........... $45,762 $20,036
======== ========
Net income per share
As reported......... $ 3.91 $ 2.32
======== ========
Pro forma........... $ 3.88 $ 2.28
======== ========
The pro forma results are not necessarily indicative of results that would
have been reported if all options had been measured under SFAS No. 123.
F-19
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The weighted average remaining contractual life of options outstanding at
December 31, 1996 was 6.99 years. The weighted average fair value of options
granted during 1995 and 1996 was $8.03 and $8.94 per share, respectively.
The fair value of options granted under the Company's stock option plans
during 1995 and 1996 was estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions used: no
dividend yield, expected volatility of 30.6%, risk free interest rate of 6.0%,
and expected lives of either 5.3 or 7.7 years.
Transfer of Shares
On December 31, 1996, the Company's Chief Executive Officer and principal
shareholder (the "Principal Shareholder") of the Company, the Company and THL
Transaction I Corp. entered into agreements with three executive officers
whereby the Principal Shareholder will transfer up to 73,068 shares (the Shares)
of his Syratech common stock to the Company to effect the transfer of an equal
number of newly issued shares to the executive officers. In connection with each
transfer of shares of stock, the agreements also provide for each executive to
receive, from the Company, as additional compensation, an annual lump sum cash
payment (the "Lump Sum Payments") for the reimbursement of income taxes owed by
the executive as a result of such transfer and payment. The transfer of Shares
by the Principal Shareholder and the Lump Sum Payments to the executives are
irrevocable and unconditional and are not based upon the executives future
employment with the Company. On December 31, 1996, 31,812 shares were
transferred and Lump Sum Payments totaling $703 were made to the executives.
Shares aggregating 31,884 were transferred as of January 14, 1997. Additional
shares of up to 9,372 will be transferred on January 14, 1998.
The estimated value of the shares has been recorded as an addition to
additional paid-in capital of $2,338. Total compensation expense equal to the
estimated fair value of the Shares plus an estimate of the aggregate Lump Sum
Payments, or $3,953 was recorded in the fourth quarter of 1996.
Short and long-term compensation payable was $705 and $207, respectively at
December 31, 1996.
The weighted average fair value of the shares was $31.50. The fair value of
the shares based on the provision of SFAS No. 123 was not materially different
from the amounts recorded.
Purchase of Common Stock
On December 29, 1995, the Company effected the Katy Stock Repurchase. The
aggregate purchase price of $52,054 represented approximately $17 per share. The
purchase was financed by the issuance of two promissory notes due January 2,
1996 to subsidiaries of Katy and the assumption of short-term bank debt, all
aggregating $51,735. The two promissory notes and the short-term bank debt were
paid on January 2, 1996. The Company's par and additional paid-in capital values
have been decreased to reflect the purchase.
Shareholder Rights Plan
On October 26, 1992 the Company's Board of Directors adopted a Shareholder
Rights Plan (the "Plan"). Under the Plan, the Company distributed a dividend of
one right (a "Right") to purchase shares of preferred stock to stockholders of
record on October 31, 1992 and further authorized the issuance of one Right to
each share of common stock which becomes outstanding after the record date. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of a new series of preferred stock ("Series A Preferred
stock") at a price of $50, subject to adjustment. As amended on July 5, 1994,
the Rights become exercisable only if an individual or group (an "Acquiring
Person") acquires 15% or more of the outstanding common stock or commences a
tender offer which would result in its ownership of 30% or more of the
outstanding common stock, or in the case of a person who beneficially owned 20%
or more of the outstanding common stock on October 26, 1992, such person
acquires an additional 1% or more of the outstanding common stock.
F-20
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
As required by the Agreement and Plan of Merger (Note 15), effective on
November 8, 1996, the Company redeemed all outstanding Rights and terminated the
Shareholder Rights Plan pursuant to which the Rights were issued. The redemption
price for each Right is one cent and if holders of Rights have not received
payment of the redemption price prior to the Effective Time they will have the
redemption price of their Rights added to the payment of the cash price for
their shares of Company Common Stock in the Merger.
12. Related Party Transactions
A beneficial owner of less than 1% of the Company holds a significant
management role in Service Merchandise Co., Inc. ("Service"). A different person
is a director of the Company and is also a director of Service. The Company had
net sales to Service of approximately $9,909, $10,706 and $12,432 in 1994, 1995
and 1996, respectively. The Company had accounts receivable from Service of
approximately $756 and $1,260 at December 31, 1995 and 1996, respectively.
Effective July 12, 1996, the Company, through an indirect wholly-owned
subsidiary, granted a license to Service to use certain trademarks, patents and
copyrights relating to certain electric and other products. The agreement is
subject to cancellation with six months notice by the licensee.
Wacker Industrial Company ("Wacker"), a major supplier, is owned by a
holder of less than 1% of the Company's common stock. In 1994, 1995 and 1996,
the Company had purchases from this supplier of approximately $6,176, $5,371 and
$4,478 respectively. Accounts payable to this supplier approximated $75 and $93
at December 31, 1995 and 1996 respectively.
Other transactions with companies affiliated with certain
directors/stockholders include net sales of approximately $297, $735 and $790
and purchases of products and services of $1,228 and $746 in 1994 and 1995,
respectively. There were no purchases of products and services in 1996. As of
December 31, 1996, amounts receivable from these companies approximated $7,
there were no accounts payable.
In addition, included in other operating income in 1996 was revenue from
the disposal of Farberware inventory of $10,166 to Service, $5,033 to Lifetime
and $1,660 to a company affiliated with a certain director/stockholder. At
December 31, 1996 amounts receivable from Service and Lifetime were $316 and
$455, respectively.
13. Foreign Operations
The Company's foreign operations relate to its Hong Kong subsidiary, and as
of May 8, 1996, its C.J. Vander subsidiary, the sales of the Hong Kong
subsidiary are substantially to customers in the United States and the sales of
its C.J. Vander subsidiary are primarily to foreign customers. Summarized
financial information about the Company's operations in different geographic
areas is as follows:
F-21
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Year Ended December 31,
-----------------------------------
1994 1995 1996
----------- ----------- ----------
Net sales:
United States................. $114,457 $122,950 $212,516
Hong Kong..................... 32,834 46,570 54,749
Other foreign................. -- -- 3,666
--------- --------- --------
Total........................ $147,291 $169,520 $270,931
========= ========= ========
Income (loss) from operations:
United States................. $ 7,497 $ 9,846 $ 15,372
Hong Kong..................... 3,581 5,599 8,235
Other foreign................. -- -- (505)
--------- --------- --------
Total........................ $ 11,078 $ 15,445 $ 23,102
========= ========= ========
Identifiable assets:
United States................. $185,632 $213,162 $212,377
Hong Kong..................... 5,052 7,404 7,754
Other foreign................. -- -- 7,123
--------- --------- --------
Total........................ $190,684 $220,566 $227,254
========= ========= ========
14. Litigation
The Company has been named as a defendant in several legal actions arising
from its normal business activities. The Company carries insurance against
liability for certain types of risks. Although the amount of liability that
could result from any litigation cannot be predicted, in the opinion of
management, the Company's potential liability on all known claims would not have
a material adverse effect on the consolidated financial position or results of
operations of the Company.
15. Agreement and Plan of Merger
On October 23, 1996, the Company and THL Transaction I Corp., a company
organized and controlled by affiliates of Thomas H. Lee Company, entered into an
Agreement and Plan of Merger, dated November 27, 1996, effective, as of October
23, 1996, as amended effective as of February 14, 1997, pursuant to which THL
Transaction I Corp. will be merged into the Company (the "Merger"). Pursuant to
the transaction, stockholders of the Company will receive $32.00 in cash per
share (except that the Principal Shareholder will receive only $28.00 in cash
per share) or may elect to receive a portion of their consideration by retaining
stock of the surviving entity.
Upon consummation of the Merger, the Company would have on a pro forma
basis, as of December 31, 1996, outstanding debt of approximately $162,319
(unaudited). The transaction is expected to close in the first half of 1997. It
is intended that the transaction will be accounted for as a recapitalization.
The common equity contribution to be made by THL I Transaction Corp. will
constitute approximately $100,217 (unaudited) and up to $18,000 (unaudited) of
Cumulative Redeemable Preferred Stock will be issued (less the value of the
shares retained by stockholders other than the Company's Principal Shareholder
and 63,696 shares that were issued to, and will be retained by, certain
management stockholders). The Company's stockholders' equity on a pro forma
basis is $22,048 (unaudited) at December 31, 1996 considering the effects of the
Merger, because the distribution to stockholders, as well as approximately
one-third of the Merger expenses, will reduce common stockholders' equity.
The consummation of the Merger is conditioned upon the availability of
adequate financing (both debt and equity). It is expected that the financing
will include the issuance of $155,000 of Senior Notes (the "Senior Notes"). The
Senior Notes are expected to be general unsecured obligations of the Company
ranking senior to all existing and future subordinated indebtedness of the
Company, including indebtedness of up to $130,000, including a $30,000 letter of
credit sublimit, under a 5 year Credit Facility (the "Revolving Credit
Facility"). However, the
F-22
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
obligations of the Company under the Revolving Credit Facility are expected to
be secured by the accounts receivable and inventory of the Company and its
domestic subsidiaries and, accordingly, such indebtedness would effectively rank
senior to the Senior Notes to the extent of such assets. The Revolving Credit
Facility is expected to include a requirement to maintain excess availability of
at least $45.0 million at certain periods during the year. The Senior Notes will
be fully and unconditionally guaranteed on a joint and several basis by each of
the Company's wholly-owned domestic subsidiaries. (The "Guarantor
Subsidiaries").
The following condensed consolidating financial statements as of December
31, 1995 and 1996 and for each of the three years in the period ended December
31, 1996, present separate financial information for the Company
("Issuer/Guarantor Parent"), the Guarantor Subsidiaries, the Non Guarantor
Subsidiaries, and Discontinued Operations. Separate financial statements of each
guarantor are not presented because management believes that such statements
would not be materially different from the information presented herein.
F-23
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 1995
<TABLE>
<CAPTION>
Issuer
Guarantor Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents............... $ 63,354 $ 11,786 $ 3,353 $78,493
Marketable securities.............. 30,561 30,561
Accounts receivable, net........... 30,129 1,764 31,893
Inventories........................ 39,415 1,695 $ 41 41,151
Deferred income taxes.............. 1,582 3,523 5,105
Prepaid expenses and other......... 516 854 232 1,602
Net assets of discontinued
operations......................... 1,834 1,834
-------- -------- ------- --------- --------
Total current assets.............. 97,847 85,707 7,044 41 190,639
Property, plant and
equipment, net.................... 29,256 351 (47) 29,560
Other assets....................... 130,914 358 9 (130,914) 367
-------- -------- ------- --------- --------
Total............................ $228,761 $115,321 7,404 $(130,920) $220,566
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and
notes payable..................... $ 51,735 $ 51,735
Accounts payable................... $ 4,964 $ 1,474 6,438
Accrued expenses................... 922 3,314 199 $ 1 4,436
Accrued compensation............... 2,212 266 2,478
Accrued advertising................ 1,991 1,991
Income taxes payable............... 20,152 (19,104) 469 (6) 1,511
-------- -------- ------- --------- --------
Total current liabilities......... 72,809 (6,623) 2,408 (5) 68,589
Deferred income taxes.............. 1,819 1,838 3,657
Pension liability.................. 1,724 1,724
Intercompany (receivable)
payable........................... (63,540) 68,727 (5,590) 403
Stockholders' equity............... 217,673 49,655 10,586 (131,318) 146,596
-------- -------- ------- --------- --------
Total............................ 228,761 $115,321 $ 7,404 $(130,920) $220,566
======== ======== ======= ========= ========
</TABLE>
F-24
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 1996
<TABLE>
<CAPTION>
Issuer/ Non-
Guarantor Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents............... $ 18 $ 146 $ 3,441 $ 3,605
Accounts receivable, net........... 56,719 3,301 60,020
Inventories........................ 74,134 5,180 $ 41 79,355
Deferred income taxes.............. 729 8,211 8,940
Prepaid expenses and
other............................. 2,653 1,150 3,803
Total current assets............. 747 141,863 13,072 41 155,723
Property, plant and
equipment, net.................... 62,219 1,805 (69) 63,955
Purchase price in excess
of net assets acquired............ 7,032 7,032
Other assets....................... 179,442 544 (179,442) 544
-------- -------- ------- --------- --------
Total........................... $180,189 $211,658 $14,877 $(179,470) $227,254
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities
and notes payable................. $ 6,604 $ 32 $ 6,636
Accounts payable................... 7,637 2,052 9,689
Accrued expenses................... $ 1,058 9,420 571 11,049
Accrued compensation............... 3,812 416 4,228
Accrued advertising................ 3,273 3,273
Income taxes payable............... 19,907 (19,581) 598 $ 6 930
-------- -------- ------- --------- ---------
Total current
liabilities..................... 20,965 11,165 3,669 6 35,805
Deferred income taxes............... 2,295 15,411 17,706
Pension liability................... 3,288 3,288
Other long-term liabilities......... 207 207
Intercompany (receivable)
payable............................ (62,863) 62,863 (5,718) 5,718
Stockholders' equity................ 219,792 118,724 16,926 (185,194) 170,248
-------- -------- ------- --------- ---------
Total........................... $180,189 $211,658 $14,877 $(179,470) $227,254
======== ======== ======= ========= =========
</TABLE>
F-25
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING INCOME STATEMENTS
Year Ended December 31, 1994
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor Discontinued
Parent Subsidiaries Subsidiaries Operations Eliminations Consolidated
------------ --------------- ---------------- -------------- --------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net sales...................... $114,457 $53,495 $(20,661) $147,291
Cost of sales.................. 81,946 43,315 (20,661) 104,600
-------- ------- -------- --------
Gross profit.................. 32,511 10,180 42,691
Selling, general and
administrative expenses....... 25,269 6,599 (255) 31,613
-------- ------- -------- --------
Income from operations........ 7,242 3,581 255 11,078
Interest expense............... (496) (63) (559)
Interest income................ 80 18 98
Other income................... $2,000 2,000 (4,000)
------- -------- ------- -------- -------
Income before provision for
income taxes................. 2,000 8,826 3,536 (3,745) 10,617
Provision for income taxes..... 157 1,995 606 2,758
------- -------- ------- -------- --------
Income from continuing
operations................... 1,843 6,831 2,930 (3,745) 7,859
Discontinued operations, net $12,068 -- 12,068
------- -------- ------- -------- -------- --------
Net income................... $1,843 $ 6,831 $ 2,930 $12,068 $ (3,745) $ 19,927
======= ======== ======= ======== ======== ========
</TABLE>
F-26
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING INCOME STATEMENTS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
----------- --------------- --------------- --------------------- --------------
<S> <C> <C> <C> <C> <C>
Net sales............................ $122,950 $67,354 $(20,784) $169,520
Cost of sales........................ 87,593 53,027 (20,784) 119,836
-------- ------- -------- --------
Gross profit........................ 35,357 14,327 49,684
Selling, general and administrative
expenses............................ 25,522 8,728 (11) 34,239
-------- ------- -------- --------
Income from operations.............. 9,835 5,599 11 15,445
Interest expense..................... (198) (89) (287)
Interest income...................... $4,496 336 49 4,881
Other income......................... 1,300 1,300 (2,600)
------- -------- ------- -------- --------
Income before provision for
income taxes....................... 5,796 11,273 5,559 (2,589) 20,039
Provision for income taxes........... 2,623 3,303 937 6,863
------- -------- ------- ------- --------
Income from continuing
operations......................... 3,173 7,970 4,622 (2,589) 13,176
Discontinued operations, net......... 33,023 33,023
------- -------- ------- ------- --------
Net income......................... $36,196 $ 7,970 $ 4,622 $(2,589) $ 46,199
======= ======== ======= ======= ========
</TABLE>
F-27
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING INCOME STATEMENTS
Year Ended December 31, 1996
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
----------- --------------- --------------- --------------------- --------------
<S> <C> <C> <C> <C> <C>
Net sales........................... $212,530 $85,498 $(27,097) $270,931
Cost of sales....................... 154,622 66,582 (27,091) 194,113
-------- ------- -------- --------
Gross profit....................... 57,908 18,916 (6) 76,818
Selling, general and administrative
expenses........................... $(360) 46,844 11,880 (700) 57,664
Other operating income.............. 3,948 3,948
----- -------- ------ -------- --------
Income from operations............. 360 15,012 7,036 694 23,102
Interest expense.................... (3,114) (36) (3,150)
Interest income..................... 70 535 166 771
Other income........................ 11,900 11,900
----- -------- ------- -------- --------
Income before provision for
income taxes...................... 430 24,333 7,166 694 32,623
Provision for income taxes.......... 1,092 9,835 1,307 12,234
----- -------- ------- -------- --------
Net (loss) income................. $(662) $ 14,498 $ 5,859 $ 694 $ 20,389
===== ======== ======= ======== ========
</TABLE>
F-28
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 1994
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor Discontinued
Parent Subsidiaries Subsidiaries Operations Eliminations Consolidated
----------- --------------- ---------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................ $ 1,843 $ 6,831 $ 2,930 $ 12,068 $ (3,745) $ 19,927
Adjustments to reconcile net
income to net cash provided
by (used in) operations:
Depreciation and
amortization.................... 3,074 451 (255) 3,270
Deferred income taxes............ 1,439 (1,870) (21) (452)
Other............................ 116 217 (1) 332
Increase (decrease) in cash:
Accounts receivable............. (7,738) (246) (7,984)
Inventories..................... (6,350) (240) (6,590)
Prepaid expenses and other 566 145 711
Accounts payable and
accrued expenses............... 3,661 494 4,155
Income taxes payable............ (1,283) 5,046 (64) 3,699
Intercompany account............ (3,158) (13,235) (3,199) 15,592 4,000
Discontinued operations.......... (27,660) (27,660)
------- -------- ------- ------- ----- ---------
Net cash provided by (used in)
operating activities............. (1,043) (9,798) 249 (10,592)
------- -------- ------- ------- ----- ---------
Cash flows from investing
activities:
Purchases of property, plant and
equipment........................ (2,391) (212) (2,603)
Other............................. (194) 1 (193)
------- -------- ------- ------- ----- --------
Net cash used in investing
activities....................... (2,585) (211) (2,796)
------- -------- ------- ------- ----- --------
Cash flows from financing
activities:
Change in revolving loan
facilities....................... 11,944 11,944
Repayment of borrowings........... (1,624) (1,624)
Other............................. 1,043 62 1,105
------- -------- ------- ------- ------ --------
Net cash provided by financing
activities....................... 1,043 10,382 11,425
------- -------- ------- ------- ------ --------
Net (decrease) increase in cash
and equivalents.................. (2,001) 38 (1,963)
Cash and equivalents,
beginning of year................ 2,475 1,354 3,829
------- -------- ------- -------- ------ --------
Cash and equivalents, end of
year............................. $ -- $ 474 $ 1,392 $ -- $ -- $ 1,866
======= ======== ======= ======== ====== ========
</TABLE>
F-29
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
----------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................. $ 36,196 $ 7,970 $ 4,622 $ (2,589) $ 46,199
Adjustments to reconcile net
income to net cash provided
by (used in) operations:
Depreciation and
amortization......................... 3,089 175 (11) 3,253
Deferred income taxes................. (1,202) (1,027) (2,229)
Other................................. 102 1,158 1,260
Increase (decrease) in cash:
Marketable securities................ (30,561) (30,561)
Accounts receivable.................. (3,273) (376) (3,649)
Inventories.......................... (772) (45) (817)
Prepaid expenses and other (516) (914) (16) (1,446)
Accounts payable and
accrued expenses.................... 922 (686) 359 595
Income taxes payable................. 21,241 (23,837) 290 (2,306)
Intercompany account................. (47,093) 47,421 (2,928) 2,600
Discontinued operations............... (49,915) (49,915)
-------- -------- ------- ------- --------
Net cash (used in) provided by
operating activities.................. (70,826) 29,129 2,081 (39,616)
-------- -------- ------- ------- --------
Cash flows from investing activities:
Net proceeds on sale of Syroco, Inc 133,931 133,931
Purchases of property, plant and
equipment............................. (2,559) (120) (2,679)
Other.................................. 61 61
-------- -------- ------- ------- --------
Net cash provided by (used in)
investing activities.................. 133,931 (2,498) (120) 131,313
-------- -------- ------- ------- --------
Cash flows from financing activities:
Change in revolving loan
facilities............................ (14,504) (14,504)
Repayment of borrowings................ (875) (875)
Other.................................. 249 60 309
-------- -------- ------- ------- --------
Net cash provided by (used in)
financing activities.................. 249 (15,319) (15,070)
-------- -------- ------- ------- --------
Net increase in cash and
equivalents........................... 63,354 11,312 1,961 76,627
Cash and equivalents,
beginning of year..................... 474 1,392 1,866
-------- -------- ------- ------- --------
Cash and equivalents, end of
year.................................. $ 63,354 $ 11,786 $ 3,353 $ -- $ 78,493
======== ======== ======= ======= ========
</TABLE>
F-30
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 1996
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
----------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income............................. $ (662) $ 14,498 $ 5,859 $ 694 $ 20,389
Adjustments to reconcile net (loss)
income to net cash provided by
(used in) operations:
Depreciation and amortization................ 4,466 279 22 4,767
Deferred income taxes........................ 1,329 (4,085) (2,756)
Acquisition of Farberware assets............. (9,500) (9,500)
Disposal of Farberware assets................ 13,600 13,600
Farberware electrics license................. 500 500
Transfer of shares........................... 2,338 1,317 3,655
Other........................................ 78 1,542 5 1,625
Increase (decrease) in cash net of
effect of businesses acquired:
Marketable securities....................... 30,561 30,561
Accounts receivable......................... (18,129) (227) (18,356)
Inventories................................. (16,352) (754) (17,106)
Prepaid expenses and other.................. 516 (816) (171) (471)
Accounts payable and accrued
expenses................................... 49 (2,235) (684) (2,870)
Income taxes payable........................ (245) (1,979) 129 (2,095)
Intercompany account........................ 689 1,147 (122) (1,714)
Discontinued operations..................... 1,834 1,834
-------- -------- ------- ------- ---------
Net cash provided by (used in) operating
activities................................... 36,487 (16,026) 4,314 (998) 23,777
-------- -------- ------- ------- --------
Cash flows from investing activities:
Insurance claim proceeds...................... 23,771 23,771
Acquisitions of businesses net of cash
acquired..................................... (48,540) (998) 998 (48,540)
Purchases of property, plant and
equipment.................................... (13,643) (1,482) (15,125)
Other......................................... (130) 10 (120)
-------- -------- ------- ------- --------
Net cash used in investing activities......... (48,540) 9,998 (2,470) 998 (40,014)
-------- -------- ------- ------- --------
Cash flows from financing activities:
Change in revolving loan facilities........... (51,735) (5,296) (2,044) (59,075)
Repayment of borrowings....................... (300) (300)
Other......................................... 452 (16) (8) 428
-------- -------- ------- ------- --------
Net cash used in financing activities......... (51,283) (5,612) (2,052) (58,947)
-------- -------- ------- ------- --------
Effect of exchange rate changes on cash
and equivalents.............................. 296 296
Net increase (decrease) in cash and
equivalents.................................. (63,336) (11,640) 88 (74,888)
Cash and equivalents, beginning of year....... 63,354 11,786 3,353 (78,493)
-------- -------- ------- ------- --------
Cash and equivalents, end of year............. $ 18 $ 146 $ 3,441 $ -- $ 3,605
======== ======== ======= ======= ========
</TABLE>
F-31
<PAGE>
================================================================================
No dealer, salesperson, or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the Offering covered by this Prospectus, and,
if given or made, such information or representations must not be relied upon
as having been authorized by the Company or the Underwriters. This Prospectus
does not constitute an offer to sell, or the solicitation of an offer to buy
the securities in any jurisdiction where, or any person to whom, it is unlawful
to make such offer for solicitation. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create an
implication that there has been a change in the facts set forth in this
Prospectus or in the affairs of the Company since the date hereof.
----------------------------------
TABLE OF CONTENTS
Page
------
Prospectus Summary................................. 4
Risk Factors....................................... 13
The Recapitalization............................... 18
Use of Proceeds.................................... 20
Capitalization..................................... 21
Pro Forma Condensed Consolidated
Financial Statements.............................. 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................................ 29
Business........................................... 34
Management......................................... 46
Security Ownership of Certain
Beneficial Owners and Management.................. 51
Certain Transactions............................... 52
Description of Senior Notes........................ 54
Description of Other Indebtedness.................. 72
Description of Cumulative Redeemable
Preferred Stock................................... 73
Underwriting....................................... 74
Legal Matters...................................... 75
Experts............................................ 75
Available Information.............................. 75
Index to Financial Statements...................... F-1
================================================================================
[LOGOTYPE]
SYRATECH(TM)
------------
CORPORATION
$155,000,000
% Senior Notes due 2007
--------------------------------------
PROSPECTUS
--------------------------------------
NationsBanc Capital Markets, Inc.
Chase Securities Inc.
, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other expenses of Issuance and Distribution
The following table set forth the expenses, other than underwriting
discounts and commissions, payable by the registrant in connection with the sale
of the Common Stock being registered. All items are estimated except the
registration, filing and listing fees.
SEC registration fee.................... $
Blue sky fees and expenses..............
Printing and engraving expenses.........
Legal fees and expenses.................
Accounting fees and expenses............
Trustee fees............................
Miscellaneous...........................
Total...................................
Item 15. Indemnification of Directors and Officers
Section 145(a) of the General Corporation Law of the State of Delaware (the
"GCL") provides that a Delaware corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Section 145(b) of the GCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted under similar standards, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the Court of Chancery or court in which such action or
suit was brought shall determine that despite the adjudication of liability,
such person is fairly and reasonably entitled to be indemnified for such
expenses which the court shall deem proper.
Section 145 of the GCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connecting therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of a director or
officer of the corporation against and liability asserted against him or
incurred by him in any such capacity or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under such Section 145.
Section 102(b)(7) of the General Corporation Law provides that a
corporation in its original certificate of incorporation or an amendment thereto
validly approved by stockholders may eliminate or limit personal liability of
members of its board of directors or governing body for each of a director's
fiduciary duty. However, no such provision may eliminate or limit the liability
of a director for breaching his duty of loyalty, failing to act in good faith,
engaging in intentional misconduct or knowingly violating a law, paying a
dividend or approving a stock repurchase which was illegal, or obtaining an
improper personal benefit. A provision of this type has no effect on the
availability of equitable remedies, such as injunction or rescission, for breach
of fiduciary duty. The Company's Restated Certificate of Incorporation contains
such a provision.
II-1
<PAGE>
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Company shall indemnify officers and directors, and to the extent authorized
by the Board of Directors, employees and agents of the Company, to the full
extent permitted by and in the manner permissible under the laws of the State of
Delaware. The Restated Certificate of Incorporation and Bylaws also permit the
Board of Directors to authorize the Company to purchase and maintain insurance
against any liability asserted against any director, officer, employee or agent
of the Company arising out of his capacity as such.
The form of the underwriting agreement, filed as Exhibit 1.1 hereto
contains provisions by which the underwriters agree to indemnify the Company,
its officers and directors and each person who controls the Company within the
meaning of the Securities Act, against certain liabilities.
Item 16. Exhibits and Financial Statement Schedules
<TABLE>
<S> <C>
(a) Exhibits
*1.1 Form of Underwriting Agreement
2.1 Restated Agreement and Plan of Merger dated November 27, 1996, effective as of October 23,
1996 between Syratech and THL Transaction I Corp. and the Amendment, dated February 14,
1997 to the Restated Agreement and Plan of Merger (Incorporated by reference from Exhibit
2.1 to Form S-4 Registration Statement No. 333-16917)
3.1 Restated Certificate of Incorporation of Syratech. Incorporated by reference from Exhibit 3.1 to
Form S-1 Registration Statement No. 33-41619.
3.2 Syratech Corporation Certificate of Designations in respect of Series A Preferred Stock dated
October 26, 1992. Incorporated by reference from Exhibit 3.2 to Form S-4 Registration
Statement No. 333-16917.
3.3 Bylaws of Syratech. Incorporated by reference from Exhibit 3.2 to Form S-1 Registration
Statement No. 33-41619.
3.4 Amendment to Section 2.9 of the Bylaws of Syratech, effective August 15, 1991. Incorporated
by reference from Exhibit 3.3 to Form S-1 Registration Statement No. 33-41619.
3.5 Certificate of Ownership and Merger of WSC Liquidating, Inc. by and into Syratech
Corporation dated May 9, 1996. Incorporated by reference from Exhibit 3.5 to Form S-4
Registration Statement No. 333-16917.
*4.1 Form of Indenture dated as of April , 1997 between Syratech Corporation as Issuer and State
Street Bank and Trust Company, as Trustee.
***5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
10.1 Form of Amended and Restated Employment Agreement dated as of April , 1997 between
Leonard Florence and the Company. (Incorporated by reference from Exhibit 2.1 to Form S-4
Registration Statement No. 333-16917)
10.2 Employment Agreement dated August 16, 1991 between E. Merle Randolph and the Company.
Incorporated by reference from Exhibit 10.17 to Form S-1 Registration Statement No. 33-41619.
10.3 Employment Agreement dated August 16, 1991, between Melvin L. Levine and the Company.
Incorporated by reference from Exhibit 10.18 to Form S-1 Registration Statement No. 33-41619.
10.4 Employment Agreement dated August 16, 1991 between Alan R. Kanter and the Company.
Incorporated by reference from Exhibit 10 to Form S-1 Registration Statement No. 33-41619.
10.5 Amendment No. 1 dated as of July 27, 1996 to Employment Agreement dated as of August 16,
1991 between E. Merle Randolph and Company. Incorporated by reference from Exhibit 10.5 to
Form S-4 Registration Statement No. 333-16917.
10.6 Amendment No. 1 dated as of May 11, 1995 to Employment Agreement dated as of August 16,
1991 between Melvin L. Levine and the Company. Incorporated by reference from Exhibit 10.8
to Form 10-K for Syratech for the year ended December 31, 1995.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.7 Amendment No. 1 dated as of July 27, 1996 to Employment Agreement dated as of August 16,
1991 between Alan R. Kanter and the Company. Incorporated by reference from Exhibit 10.8 to
Form S-4 Registration Statement No. 333-16917.
10.8 Retirement Benefit Agreement dated as of July 27, 1996 between Faye A. Florence and the
Company. Incorporated by reference from Exhibit 10.8 to Form S-4 Registration Statement
No. 333-16917.
10.9 Amendment No. 2, dated as of January 31, 1997, effective as of December 31, 1996, to
Employment Agreement dated as of August 16, 1991 between E. Merle Randolph and the
Company. Incorporated by reference to Exhibit 10.9 to Form S-4 Registration Statement
No. 333-16917.
10.10 Amendment No. 2, dated as of January 31, 1997, effective as of December 31, 1996, to
Employment Agreement dated as of August 16, 1991 between Melvin L. Levine and the
Company. Incorporated by reference to Exhibit 10.10 to Form S-4 Registration Statement
No. 333-16917.
10.11 Amendment No. 2 dated January 31, 1997 effective as of December 31, 1996, to Employment
Agreement dated as of August 16, 1991 between Alan R. Kanter and the Company.
Incorporated by reference to Exhibit 10.11 to Form S-4 Registration Statement No. 333-16917.
10.12 Agreement dated December 31, 1996 by and between the Company, THL I Transaction Corp.,
Leonard Florence and Melvin L. Levine. Incorporated by reference to Exhibit 10.12 to Form
S-4 Registration Statement No. 333-16917.
10.13 Agreement dated December 31, 1996 by and between the Company, THL I Transaction Corp.,
Leonard Florence and E. Merle Randolph. Incorporated by reference to Exhibit 10.13 to Form
S-4 Registration Statement No. 333-16917.
10.14 Agreement dated December 31, 1996 by and between the Company, THL I Transaction Corp.,
Leonard Florence and Alan R. Kanter. Incorporated by reference to Exhibit 10.14 to Form S-4
Registration Statement No. 333-16917.
10.15 Asset Purchase Agreement dated February 2, 1996 by and between Farberware Inc., the
Company, Lifetime Hoan Corporation and Far-B Acquisition Corp., Inc. Incorporated by
reference from Exhibit 1 to Form 8-K dated April 16, 1996.
10.16 Settlement Agreement dated February 3, 1997 by and among Bruckner Manufacturing Corp.
(formerly Farberware Inc.), U.S. Industries, Inc., Farberware Inc. (formerly Far-B Acquisition
Corp.) and Lifetime Hoan Corporation. Incorporated by reference to Exhibit 10.16 to Form S-4
Registration Statement No. 333-16917.
10.17 Agreement dated as of December 7, 1995 among the Company, SYR Acquisition Inc. and
Rauch Industries, Inc. Incorporated by reference from Exhibit 1 to Form 8-K of the Company
dated December 7, 1995.
10.18 Amended and Restated Line of Credit Agreement among Wallace International de Puerto Rico, Inc.,
International Silver de Puerto Rico, Inc. and Banco Popular de Puerto Rico dated October 15,
1996.
Incorporated by reference to Exhibit 10.18 to Form S-4 Registration Statement No. 333-16917.
10.19 Agreement, dated as of February 2, 1996, by and among the Company, Lifetime Hoan
Corporation and Far-B Acquisition Corp. Incorporated by reference to Exhibit 10.19 to Form
S-4 Registration Statement No. 333-16917.
10.20 Agreement, dated as of May 3, 1996, by and among the Company, Farberware Inc. and Meyer
Manufacturing Co. Ltd. Incorporated by reference to Exhibit 10.20 to Form S-4 Registration
Statement No. 333-16917.
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
10.21 License Agreement, dated as of July 12, 1996 by and between Farberware Inc. and Service
Merchandise Company, Inc. (redacted to omit certain royalty information).
10.22 Agreement, dated as of October 16, 1996, among Farberware Inc., Service Merchandise
Company, Inc. and Windmere-Durable Holdings, Inc. (amending Item 10.21). Incorporated by
reference to Exhibit 10.22 to Form S-4 Registration Statement No. 333-16917.
*12.1 Schedule Regarding Computation of Ratio of Earnings to Fixed Charges
***23.1 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the opinion filed as Exhibit
5.1)
*23.2 Consent of Deloitte & Touche LLP and Independent Auditors' Report on Schedule
*23.3 Consent of Coopers & Lybrand L.L.P.
**24.1 Power of Attorney (see signature page)
**25.1 Statement on Form T-1 of the eligibility of the Trustee
(b) Financial Statement Schedules
</TABLE>
Schedule VIII--Valuation and Qualifying Accounts
All other schedules have been omitted because the material is not
applicable or is not required or because the required information is shown in
the condensed consolidated financial statements or the notes thereto.
- ----------
* Filed herewith.
** Previously filed.
*** To be filed by amendment.
II-4
<PAGE>
Item 17. Undertakings.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended (the
"Securities Act"), 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant further undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus 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 the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, State of Massachusetts, on the
18th day of March, 1997.
SYRATECH CORPORATION
By: /s/ LEONARD FLORENCE
------------------------------------
Leonard Florence
Chairman of the Board,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------- -------------------------------------- ----------------
<S> <C> <C>
/s/ LEONARD FLORENCE Chairman of the Board, Chief March 18, 1997
- ------------------------- Executive Officer and President
Leonard Florence (Principal Executive Officer)
/s/ E. MERLE RANDOLPH Vice President, Chief Financial March 18, 1997
- ------------------------- Officer, Treasurer and Director
E. Merle Randolph (Principal Financial and Accounting
Officer)
* Director March 18, 1997
- -------------------------
Irwin Chafetz
* Director March 18, 1997
- -------------------------
Frederick H. Chicos
* Director March 18, 1997
- -------------------------
Harold Cohen
* Director March 18, 1997
- -------------------------
Jerry R. Jacob
* Director March 18, 1997
- -------------------------
Melvin L. Levine
* Director March 18, 1997
- -------------------------
Alan Perlman
* Director March 18, 1997
-------------------------
Harold Roitenberg
* Director March 18, 1997
-------------------------
Jacob Saliba
* By: /s/ E. MERLE RANDOLPH
------------------------
E. Merle Randolph
Attorney-in-fact
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Guarantors
have duly caused this Amendment No. 1 to the Registration Statement to be signed
on their behalf by the undersigned, thereunto duly authorized in the City of
Boston, State of Massachusetts, on the 18th day of March, 1997.
CHI INTERNATIONAL, INC.
FARBERWARE INC.
INTERNATIONAL SILVER COMPANY
INTERNATIONAL SILVER DE P.R., INC.
LEONARD FLORENCE ASSOCIATES, INC.
PMW SILVER DE P.R., INC.
ROSEMAR SILVER COMPANY, INC.
SILVESTRI, INC.
SILVESTRI, INC. OF SOUTH CAROLINA
SYRATECH SECURITY CORPORATION
SYRATECH SILVER SALES CORP.
TOWLE HOLLOWARE, INC.
TOWLE MANUFACTURING COMPANY
WALLACE INTERNATIONAL SILVERSMITHS,
INC.
WALLACE INTERNATIONAL DE P.R., INC.
By: /s/ LEONARD FLORENCE
------------------------------------
Leonard Florence
President and Sole Director
HOLIDAY PRODUCTS, INC.
By: /s/ ROGER S. SILVERSTEIN
------------------------------------
Roger S. Silverstein
President and Director
By: /s/ LEONARD FLORENCE
------------------------------------
Leonard Florence
Director
By: /s/ MARSHALL A. RAUCH
------------------------------------
Marshall A. Rauch
Director
By: /s/ DONALD G. WALSER
------------------------------------
Donald G. Walser
Director
II-7
<PAGE>
SYRATECH WEST COAST WAREHOUSE CORP.
By: /s/ LEONARD FLORENCE
------------------------------------
Leonard Florence
President and Director
By: /s/ FAYE A. FLORENCE
------------------------------------
Faye A. Florence
Director
By: /s/ E. MERLE RANDOLPH
------------------------------------
E. Merle Randolph
President and Director
SYRATECH HOLDING CORPORATION
By: /s/ RICHARD FREIMAN
------------------------------------
Richard Freiman
President and Sole Director
RAUCH INDUSTRIES, INC.
By: /s/ LEONARD FLORENCE
------------------------------------
Leonard Florence
President and Director
By: /s/ E. MERLE RANDOLPH
------------------------------------
E. Merle Randolph
Director
By: /s/ FAYE A. FLORENCE
------------------------------------
Faye A. Florence
Director
II-8
<PAGE>
175 AMLEGION REVERE REALTY TRUST
By: /s/ LEONARD FLORENCE
------------------------------------
Leonard Florence
President and Trustee
By: /s/ FAYE A. FLORENCE
------------------------------------
Faye A. Florence
Trustee
By: /s/ E. MERLE RANDOLPH
------------------------------------
E. Merle Randolph
Trustee
ROCHARD, INC.
By: /s/ RICHARD SONKING
------------------------------------
Richard Sonking
President and Director
By: /s/ LEONARD FLORENCE
------------------------------------
Leonard Florence
Director
NORTHSTAR SALES CORPORATION
By: /s/ LEONARD FLORENCE
------------------------------------
Leonard Florence
President and Director
By: /s/ MARSHALL A. RAUCH
------------------------------------
Marshall A. Rauch
Director
By: /s/ DONALD G. WALSER
------------------------------------
Donald G. Walser
Director
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Pagination
by
Exhibit Exhibit sequential
Number Description numbering
- --------- ------------------------------------------------------------------------------------------ -------------
<S> <C> <C>
(a) Exhibits
*1.1 Form of Underwriting Agreement
2.1 Restated Agreement and Plan of Merger dated November 27, 1996, effective as of
October 23, 1996 between Syratech and THL Transaction I Corp. and the Amendment,
dated February 14, 1997 to the Restated Agreement and Plan of Merger (Incorporated
by reference from Exhibit 2.1 to Form S-4 Registration Statement No. 333-16917)
3.1 Restated Certificate of Incorporation of Syratech. Incorporated by reference from
Exhibit 3.1 to Form S-1 Registration Statement No. 33-41619.
3.2 Syratech Corporation Certificate of Designations in respect of Series A Preferred Stock
dated October 26, 1992. Incorporated by reference from Exhibit 3.2 to Form S-4
Registration Statement No. 333-16917.
3.3 Bylaws of Syratech. Incorporated by reference from Exhibit 3.2 to Form S-1
Registration Statement No. 33-41619.
3.4 Amendment to Section 2.9 of the Bylaws of Syratech, effective August 15, 1991.
Incorporated by reference from Exhibit 3.3 to Form S-1 Registration Statement No.
33-41619.
3.5 Certificate of Ownership and Merger of WSC Liquidating, Inc. by and into Syratech
Corporation dated May 9, 1996. Incorporated by reference from Exhibit 3.5 to Form
S-4 Registration Statement No. 333-16917.
*4.1 Form of Indenture dated as of April, 1997 between Syratech Corporation as Issuer and
State Street Bank and Trust Company, as Trustee.
***5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
10.1 Form of Amended and Restated Employment Agreement dated as of April , 1997
between Leonard Florence and the Company. (Incorporated by reference from Exhibit
2.1 to Form S-4 Registration Statement No. 333-16917)
10.2 Employment Agreement dated August 16, 1991 between E. Merle Randolph and the
Company. Incorporated by reference from Exhibit 10.17 to Form S-1 Registration
Statement No. 33-41619.
10.3 Employment Agreement dated August 16, 1991, between Melvin L. Levine and the
Company. Incorporated by reference from Exhibit 10.18 to Form S-1 Registration
Statement No. 33-41619.
10.4 Employment Agreement dated August 16, 1991 between Alan R. Kanter and the
Company. Incorporated by reference from Exhibit 10 to Form S-1 Registration
Statement No. 33-41619.
10.5 Amendment No. 1 dated as of July 27, 1996 to Employment Agreement dated as of
August 16, 1991 between E. Merle Randolph and Company. Incorporated by reference
from Exhibit 10.5 to Form S-4 Registration Statement No. 333-16917.
10.6 Amendment No. 1 dated as of May 11, 1995 to Employment Agreement dated as of
August 16, 1991 between Melvin L. Levine and the Company. Incorporated by
reference from Exhibit 10.8 to Form 10-K for Syratech for the year ended December
31, 1995.
10.7 Amendment No. 1 dated as of July 27, 1996 to Employment Agreement dated as of
August 16, 1991 between Alan R. Kanter and the Company. Incorporated by reference
from Exhibit 10.7 to Form S-4 Registration Statement No. 333-16917.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pagination
by
Exhibit Exhibit sequential
Number Description numbering
- --------- -------------------------------------------------------------------------------------- -------------
<S> <C> <C>
10.8 Retirement Benefit Agreement dated as of July 27, 1996 between Faye A. Florence and
the Company. Incorporated by reference from Exhibit 10.8 to Form S-4 Registration
Statement No. 333-16917.
10.9 Amendment No. 2, dated as of January 31, 1997, effective as of December 31, 1996,
to Employment Agreement dated as of August 16, 1991 between E. Merle Randolph
and the Company. Incorporated by reference to Exhibit 10.9 to Form S-4 Registration
Statement No. 333-16917.
10.10 Amendment No. 2, dated as of January 31, 1997, effective as of December 31, 1996,
to Employment Agreement dated as of August 16, 1991 between Melvin L. Levine and
the Company. Incorporated by reference to Exhibit 10.10 to Form S-4 Registration
Statement No. 333-16917.
10.11 Amendment No. 2 dated January 31, 1997 effective as of December 31, 1996, to
Employment Agreement dated as of August 16, 1991 between Alan R. Kanter and the
Company. Incorporated by reference to Exhibit 10.11 to Form S-4 Registration
Statement No. 333-16917.
10.12 Agreement dated December 31, 1996 by and between the Company, THL I Transaction
Corp., Leonard Florence and Melvin L. Levine. Incorporated by reference to Exhibit
10.12 to Form S-4 Registration Statement No. 333-16917.
10.13 Agreement dated December 31, 1996 by and between the Company, THL I Transaction
Corp., Leonard Florence and E. Merle Randolph. Incorporated by reference to Exhibit
10.13 to Form S-4 Registration Statement No. 333-16917.
10.14 Agreement dated December 31, 1996 by and between the Company, THL I Transaction
Corp., Leonard Florence and Alan R. Kanter. Incorporated by reference to Exhibit
10.14 to Form S-4 Registration Statement No. 333-16917.
10.15 Asset Purchase Agreement dated February 2, 1996 by and between Farberware Inc.,
the Company, Lifetime Hoan Corporation and Far-B Acquisition Corp., Inc.
Incorporated by reference from Exhibit 1 to Form 8-K dated April 16, 1996.
10.16 Settlement Agreement dated February 3, 1997 by and among Bruckner Manufacturing
Corp. (formerly Farberware Inc.), U.S. Industries, Inc., Farberware Inc. (formerly
Far-B Acquisition Corp.) and Lifetime Hoan Corporation. Incorporated by reference to
Exhibit 10.16 to Form S-4 Registration Statement No. 333-16917.
10.17 Agreement dated as of December 7, 1995 among the Company, SYR Acquisition Inc.
and Rauch Industries, Inc. Incorporated by reference from Exhibit 1 to Form 8-K of
the Company dated December 7, 1995.
10.18 Amended and Restated Line of Credit Agreement among Wallace International de Puerto
Rico, Inc., International Silver de Puerto Rico, Inc. and Banco Popular de Puerto
Rico dated October 15, 1996. Incorporated by reference to Exhibit 10.18 to Form S-4
Registration Statement No. 333-16917.
10.19 Agreement, dated as of February 2, 1996, by and among the Company, Lifetime Hoan
Corporation and Far-B Acquisition Corp. Incorporated by reference to Exhibit 10.19 to
Form S-4 Registration Statement No. 333-16917.
10.20 Agreement, dated as of May 3, 1996, by and among the Company, Farberware Inc.
and Meyer Manufacturing Co. Ltd. Incorporated by reference to Exhibit 10.20 to Form
S-4 Registration Statement No. 333-16917.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pagination
by
Exhibit Exhibit sequential
Number Description numbering
- --------- ---------------------------------------------------------------------------------------- -------------
<S> <C> <C>
10.21 License Agreement, dated as of July 12, 1996 by and between Farberware Inc. and
Service Merchandise Company, Inc. (redacted to omit certain royalty information).
10.22 Agreement, dated as of October 16, 1996, among Farberware Inc., Service
Merchandise Company, Inc. and Windmere-Durable Holdings, Inc. (amending Item
10.21). Incorporated by reference to Exhibit 10.22 to Form S-4 Registration Statement
No. 333-16917.
*12.1 Schedule Regarding Computation of Ratio of Earnings to Fixed Charges
***23.1 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the opinion filed as
Exhibit 5.1)
*23.2 Consent of Deloitte & Touche LLP and Independent Auditors' Report on Schedule
*23.3 Consent of Coopers & Lybrand L.L.P.
**24.1 Power of Attorney (see signature page)
**25.1 Statement on Form T-1 of the eligibility of the Trustee
</TABLE>
<PAGE>
Schedule VIII
SYRATECH CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ---------------------------------------- --------------- -------------------------------- ----------------- ------------
(1) (2)
Balance at Charged to Balance at
Beginning of Costs and Charged to End of
Description Period Expenses Other Accts Deductions Period
- ---------------------------------------- --------------- ------------- -------------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
- ---------------------------------------
Allowance for doubtful accounts......... $1,603 $ 93 $ -- $ 165(a) $1,861
Sales returns and allowances............ 2,604 5,813 -- (4,916)(b) 3,501
------- ------ ------- ---------- -------
$4,207 $5,906 $ -- $ (4,751) $5,362
======= ====== ======= ========== =======
Year Ended December 31, 1995
- ---------------------------------------
Allowance for doubtful accounts......... $1,372 $ 602 $ -- $ (371)(a) $1,603
Sales returns and allowances............ 2,133 5,206 -- (4,735)(b) 2,604
------- ------ ------- ---------- -------
$3,505 $5,808 $ -- $ (5,106) $4,207
======= ====== ======= ========== =======
Year Ended December 31, 1994
- ---------------------------------------
Allowance for doubtful accounts......... $1,385 $ 84 $ -- $ (97)(a) $1,372
Sales returns and allowances............ 2,397 3,868 -- (4,132)(b) 2,133
------- ------ ------- ---------- -------
$3,782 $3,952 $ -- $ (4,229) $3,505
======= ====== ======= ========== =======
</TABLE>
(a) Doubtful accounts written off
(b) Sales returns and other
S-1
SYRATECH CORPORATION
___% SENIOR NOTES DUE 2007
UNDERWRITING AGREEMENT
_____________ __, 1997
NationsBanc Capital Markets, Inc.
Chase Securities Inc.
c/o NationsBanc Capital Markets, Inc.
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Dear Sirs:
SECTION 1. Introductory. Syratech Corporation, a Delaware corporation
("Syratech"), proposes to issue and sell to the several Underwriters named in
Schedule I hereto (the "Underwriters"), $160.0 million principal amount of its
___% Senior Notes due 2007 (the "Senior Notes"). The Senior Notes are to be
issued pursuant to the provisions of an indenture dated as of ______________,
1997 (the "Indenture") among the Company (as defined below), as issuer, each of
the Company's subsidiaries set forth in Schedule II hereto (collectively, the
"Guarantors") and __________________, as Trustee (the "Trustee"). The Senior
Notes will be unconditionally guaranteed (the "Subsidiary Guarantees"), on a
joint and several basis, by each of the Guarantors. The Senior Notes and the
Subsidiary Guarantees are herein collectively referred to as the "Securities."
The Securities are being issued and sold in connection with the
recapitalization (the "Recapitalization") of Syratech, pursuant to a merger
agreement, dated October 23, 1996, as amended through the date hereof (the
"Merger Agreement") between Syratech and THL Transaction I Corp., a Delaware
corporation which was formed by its parent, Thomas H. Lee Company ("THL"), for
the purpose of supporting the Recapitalization ("THLT"). The Merger Agreement
provides for the merger (the "Merger") of Syratech with THLT, with Syratech
surviving such Merger (as such survivor, the "Company"). In order to finance the
Recapitalization, in addition to the sale of the Securities hereunder, the
Company will require additional financing of up to $227.5 million. Of such
amount, (i) not less than $125 million would be provided through the issuance
and sale of common stock of the Company, including the
<PAGE>
retention of common stock of the Company with an aggregate value of not less
than $23 million by management of Syratech in the Merger, and not less than
$72.5 million in cash to be provided by THL (less amounts invested in common
stock of the Company by the Lenders and their affiliates) (the "Equity
Financing"), and (ii) the remainder would be provided through borrowings under a
$130.0 million asset-based revolving loan facility made available to the Company
(the "New Credit Facility").
The Merger Agreement and the documents entered into in connection
therewith including, without limitation, the agreements attached thereto as
exhibits, are herein collectively referred to as the "Merger Documents." This
Agreement, the Senior Notes, the Indenture and the Subsidiary Guarantees are
herein collectively referred to as the "Offering Documents." The Offering
Documents, the New Credit Facility, the Merger Documents and the documents
pursuant to which the Equity Financing will be consummated are herein
collectively referred to as the "Transaction Documents." The time of the
consummation of the Recapitalization is referred to herein as the "Effective
Time."
Syratech, each of the Guarantors and THLT hereby agree, jointly and
severally, with the several Underwriters as follows:
SECTION 2. Representations, Warranties and Agreements of Syratech and
the Guarantors. Each of Syratech and each Guarantor, jointly and severally,
represents and warrants to, and agrees with, the several Underwriters that:
(a) It has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Act"), a registration statement
on Form S-3 (No. 333-18133) (the "registration statement"), including a
preliminary prospectus subject to completion, relating to the Securities.
The registration statement, as amended at the time it becomes effective or,
if a post-effective amendment is filed with respect thereto, as amended by
such post-effective amendment at the time of its effectiveness, including
in each case financial statements and exhibits, all material incorporated
by reference therein, and the information (if any) contained in a
prospectus subsequently filed with the Commission pursuant to Rule 424(b)
under the Act and deemed to be a part of the registration statement at the
time of its effectiveness pursuant to Rule 430A under the Act, is
hereinafter referred to as the "Registration Statement;" and the prospectus
in the form first used to confirm sales of the Securities, whether or not
filed with the Commission pursuant to Rule 424(b) under the Act, including
all material incorporated by reference in such prospectus, is hereinafter
referred to as the "Prospectus." Any reference in this Agreement to the
registration statement, the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Act, as of the date of the registration statement, the
Registration Statement, such preliminary prospectus or the Prospectus, as
the case may
-2-
<PAGE>
be, and any reference to any amendment or supplement to the registration
statement, the Registration Statement, any preliminary prospectus or the
Prospectus shall be deemed to refer to and include any documents filed
after such date under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") which, upon such filing, are incorporated by reference
therein, as required by paragraph (b) of Item 12 of Form S-3. As used
herein, the term "Incorporated Documents" means the documents which are
incorporated by reference in the registration statement, the Registration
Statement, any preliminary prospectus, the Prospectus, or any amendment or
supplement thereto.
(b) Syratech, the Guarantors and the transactions contemplated by this
Agreement meet the requirements for using Form S-3 under the Act. The
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus. When any Preliminary Prospectus was filed with the
Commission it (x) complied in all material respects with the requirements
of the Act and (y) did not include any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. When the Registration Statement becomes effective and
at all times subsequent thereto up to the Closing Date (as defined herein),
the Registration Statement, the Prospectus and any amendments or
supplements thereto, will conform in all material respects with the
requirements of the Act and the rules and regulations (the "Rules and
Regulations") of the Commission thereunder, and at such effective time the
Registration Statement will not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Prospectus, as amended or supplemented at the Closing Date, if applicable,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein, in the
light of the circumstances under which they were made, not misleading;
except that the foregoing does not apply to (i) that part of the
Registration Statement that constitutes the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of 1939, as amended
(together with the rules and regulations thereunder, the "1939 Act"), of
the Trustee, and (ii) statements or omissions in the Registration Statement
or the Prospectus, as amended or supplemented if applicable, based upon
written information furnished to Syratech by any Underwriter specifically
for use therein. When the Registration Statement becomes effective,
including at the date of any post-effective amendment, at the date of the
Prospectus and any amendment or supplement thereto (if different) and at
the Closing Date, the Indenture will have been qualified under and will
conform in all material respects to the requirements of the 1939 Act.
(c) The Incorporated Documents heretofore filed, when they were filed
(or, if any amendment with respect to any such document was filed, when
such amendment was filed), conformed in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder;
any further Incorporated Documents so filed will, when they are filed,
conform in all material respects with the requirement of the Exchange
-3-
<PAGE>
Act and the rules and regulations thereunder; no such document when it was
filed (or, if an amendment with respect to any such document was filed,
when such amendment was filed), contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and no
such further document, when it is filed, will contain an untrue statement
of a material fact or will omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading.
(d) Since the respective dates of the most recent financial statements
appearing in the Registration Statement and the Prospectus, except as
otherwise stated therein, (i) neither Syratech nor any of its subsidiaries
has and, at and as of the Effective Time, neither the Company nor any of
its subsidiaries will have incurred any liabilities or obligations, direct
or contingent, or entered into or agreed to enter into any transactions or
contracts (written or oral) not in the ordinary course of business which
liabilities, obligations, transactions or contracts would, individually or
in the aggregate, be material to the condition, financial or otherwise,
earnings, affairs or business prospects of Syratech and its subsidiaries,
taken as a whole, (or, at and as of the Effective Time, the Company and its
subsidiaries, considered as a whole), (ii) neither Syratech nor any of its
subsidiaries has (and, at and as of the Effective Time, neither the Company
nor any of its subsidiaries) will have purchased any of their respective
outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on their respective capital stock
(other than with respect to any of such subsidiaries, the purchase of, or
dividend or distribution on, capital stock owned by Syratech or the
Company, respectively), except as otherwise set forth in the Registration
Statement and the Prospectus and (iii) there shall not have been any change
in the capital stock or long-term indebtedness of Syratech (or, at and as
of the Effective Time, the Company) or any of their respective subsidiaries
except for those changes in capital stock and long-term indebtedness
contemplated by the Transaction Documents.
(e) Syratech has been and, at and as of the Effective Time, the
Company will have been, duly incorporated, and Syratech is and, at and as
of the Effective Time, the Company will be, validity existing as a
corporation in good standing under the laws of Delaware with corporate
power and authority to own, lease and operate its properties and conduct
its businesses as described in the Registration Statement; Syratech is and,
at and as of the Effective Time, the Company will be, duly qualified as a
foreign corporation to transact business, and Syratech is, and at and as of
the Effective Time, the Company will be, in good standing in each
jurisdiction in which either owns or leases properties or in which the
conduct of its respective business requires such qualification, except to
the extent that the failure to be so qualified or be in good standing would
not (i) have a material adverse effect on the assets, business, condition
(financial or otherwise), results of operations or prospects of Syratech
and its subsidiaries, taken as a whole or, at and as of the Effective Time,
the Company and its subsidiaries, taken as a whole or (ii) materially and
adversely affect the offering of the Securities or any of the other
transactions
-4-
<PAGE>
contemplated by the Transaction Documents (any such event, a "Material
Adverse Effect").
(f) Each of the subsidiaries of Syratech has been and, at and as of
the Effective Time, each subsidiary of the Company will have been, duly
incorporated and each such subsidiary is, and after giving effect to the
consummation of the transaction contemplated by the Transaction Documents
will be, validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation, with all corporate power and
authority to own, lease and operate its properties and conduct its business
as described in the Registration Statement, and each such subsidiary is,
and after giving effect to the consummation of the transaction contemplated
by the Transaction Documents, will be, duly qualified to do business as a
foreign corporation in good standing in each jurisdiction in which it owns
or leases properties or in which the conduct of its business requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a Material Adverse Effect; all of the
issued and outstanding capital stock of each subsidiary of Syratech is, and
at and as of the Effective Time all of the issued and outstanding capital
stock of each subsidiary of the Company will be, duly authorized, validly
issued and fully paid and nonassessable, and all such capital stock of each
such subsidiary is owned by Syratech (and will be owned by the Company
following the consummation of the Recapitalization), directly or through
subsidiaries, free and clear of any mortgage, pledge, lien, encumbrance,
claim or equity. Other than the Guarantors, Syratech has and at and as of
the Effective Time, the Company will have, no subsidiaries incorporated or
otherwise organized in the United States of America or any state thereof.
(g) Syratech has and, at and as of the Effective Time, the Company
will have the authorized, issued and outstanding capitalization set forth
in the Prospectus; all of the outstanding shares of capital stock of
Syratech are and, at and as of the Effective Time, of the Company will be
duly authorized and validly issued, fully paid and nonassessable and not
issued in violation of any preemptive or similar rights.
(h) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens related to or
entitling any person to purchase or otherwise to acquire any shares of
capital stock of, or other ownership interest in, Syratech or any
subsidiary thereof except as otherwise disclosed in the Registration
Statement. At and as of the Effective Date, there will be no outstanding
subscriptions, rights, warrants options, calls, convertible securities,
commitments of sale or liens related to or entitling any person to purchase
or otherwise to acquire any shares of capital stock of, or other ownership
interest in, the Company or any subsidiary thereof except as otherwise
disclosed in the Registration Statement.
(i) Neither Syratech nor any of its subsidiaries is or, at and as of
the Effective Time, neither the Company nor any of its subsidiaries will be
(i) in violation of its charter documents, (ii) in breach or violation of
any law, administrative regulation or
-5-
<PAGE>
administrative or court decree or (iii) in default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any material contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which it is a party or by which its respective
properties may be bound.
(j) No consent, approval, authorization or order of any court or
governmental authority or agency, or third party is required for the
performance of any of the Transaction Documents by Syratech or any of its
subsidiaries or, at and as of the Effective Time, the Company or any of its
subsidiaries (to the extent each is a party thereto) or the consummation by
Syratech and any of its subsidiaries or, at and as of the Effective Time,
the Company or any of its subsidiaries of the transactions contemplated by
the Transaction Documents, except such as may be required under state
securities or Blue Sky laws. The execution, delivery and performance by
Syratech and each of its subsidiaries and, at and as of the Effective Time,
the Company and each of its subsidiaries, to the extent each is a party
thereto, of the Transaction Documents and the consummation of the
transactions contemplated thereby will not conflict with or constitute a
breach of, or default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of Syratech or any
of its subsidiaries or, at and as of the Effective Time, the Company or any
of its subsidiaries, pursuant to any material contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which such
entity is a party or by which it may be bound or to which any of the
property or assets of Syratech or any of its subsidiaries is, and at and as
of the Effective Time, the Company or any of its subsidiaries will be
subject, nor will such action result in any violation of the provisions of
the charter or by-laws of Syratech or any of its subsidiaries or, at and as
of the Effective Time, of the Company or any of its subsidiaries or any
law, rules, regulation or administrative or court decree.
(k) Each of Syratech and each of its subsidiaries possesses and, at
and as of the Effective Time, each of the Company and each of its
subsidiaries will possess adequate certificates, authorities, permits or
other authorizations (collectively, "Permits") including, without
limitation, under any applicable Environmental Laws (as defined herein),
issued by the appropriate state, federal or foreign regulatory agencies or
bodies necessary to conduct its respective business as now or proposed to
be conducted as set forth in the Prospectus. Each of Syratech and each of
its subsidiaries has and, at and as of the Effective Time, each of the
Company and each of its subsidiaries will have fulfilled and performed all
of their respective obligations with respect to such Permits. Neither
Syratech nor any of its subsidiaries has and, at and as of the Effective
Time, the Company or any of its subsidiaries will have received any notice
or proceedings relating to the revocation or modification of any such
Permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a Material Adverse Effect.
-6-
<PAGE>
(l) There are no legal or governmental proceedings involving or
affecting Syratech or any of its subsidiaries or any of their respective
properties or assets which are required to be described in a prospectus
pursuant to the Act or the Rules and Regulations that are not described in
the Prospectus, nor are there any material contracts or other documents
which are required to be described in a prospectus pursuant to the Act or
the Rules and Regulations that are not described in the Prospectus. There
are no material contracts or other documents which are required to be filed
as exhibits to the Registration Statement by the Act or by the Rules and
Regulations which have not been so filed. Except as set forth in the
Prospectus, there is not pending or, to the knowledge of Syratech or any
Guarantor threatened any action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, to which Syratech or
any of its subsidiaries is a party, which affects Syratech or any of its
subsidiaries or, at and as of the Effective Time, will effect the Company
or any of its subsidiaries, which, if the subject of an unfavorable
decision, ruling or finding, would have a Material Adverse Effect.
(m) Each of Syratech and each of its subsidiaries has and, at and as
of the Effective Time, each of the Company and each of its subsidiaries
will have good and marketable title in fee simple to all real property and
good and marketable title to all personal property owned by it and
necessary in the conduct of its business in each case free and clear of all
liens, encumbrances and defects except (i) such as are referred to in the
Prospectus, (ii) sales of inventory in the ordinary course of business or
(iii) such as do not materially adversely affect the value of such property
to it, and do not interfere with the use made and proposed to be made of
such property by it. All leases, contracts and agreements to which Syratech
or any of its subsidiaries is or, at and as of the Effective Time, the
Company or any of its subsidiaries will be a party or by which any of them
is bound are valid and enforceable against Syratech or any of its
subsidiaries and, at and as of the Effective Time, the Company or any of
its subsidiaries, and are valid and enforceable against the other party or
parties thereto and are in full force and effect with only such exceptions
as would not, individually or in the aggregate, have a Material Adverse
Effect.
(n) Each of Syratech and each of its subsidiaries owns or possesses
and, at and as of the Effective Time, each of the Company and each of its
subsidiaries will own or possess adequate licenses or other rights to use
all patents, trademarks, service marks, trade names, copyrights, know-how
and other intellectual property (collectively, "Trademarks") necessary to
conduct the businesses now or proposed to be operated by them as described
in the Prospectus, except as would not, individually or in the aggregate,
have a Material Adverse Effect; and the consummation of the transactions
contemplated hereby and by the Prospectus will not alter or impair any such
rights, except for such alterations or impairments as would not have a
Material Adverse Effect. Each of Syratech and each of its subsidiaries has
not and, at and as of the Effective Time, each of the Company and each of
its subsidiaries will not have received any notice of infringement of or
conflict with (or know of any such infringement of or conflict with)
alleged rights of
-7-
<PAGE>
others with respect to any Trademarks (or questioning the validity or
effectiveness of any license or other agreement or instrument relating
thereto) which, if such alleged infringement or conflict were sustained,
would have a Material Adverse Effect; and to the best knowledge of
Syratech, there is no valid basis for any such claim and the use of such
Trademarks by Syratech and its subsidiaries does not infringe on the rights
of any person.
(o) Each of Syratech and each of its subsidiaries has and, at and as
of the Effective Time, each of the Company and each of its subsidiaries
will have all the requisite corporate power and authority to executive,
deliver and perform its obligations under each of the Transaction Documents
(other than the Offering Documents) to which it is a party; the Merger
Agreement has been duly and validly authorized, executed and delivered by
Syratech and, immediately before the Effective Time, each of the
Transaction Documents (other than the Offering Documents) will have been
duly and validly authorized, executed and delivered by Syratech and each of
its subsidiaries (to the extent each is a party thereto), and at and as of
the Effective Time, will have been duly and validly authorized, executed
and delivered by the Company and each of its subsidiaries to the extent
that each is a party thereto; immediately before the Effective Time, each
of the Transaction Documents (other than the Offering Documents) to which
Syratech and each of its subsidiaries is a party will constitute a valid
and legally binding obligation of such party enforceable against Syratech
and each of its subsidiaries (to the extent each is a party thereto) and,
at and as of the Effective Time, the Company and each of its subsidiaries,
as applicable, in each case, in accordance with its terms; and the
Recapitalization has been duly authorized by the stockholders of Syratech.
(p) Each of Syratech and each of the Guarantors has and, at and as of
the Effective Time, each of the Company and each of the Guarantors will
have, all requisite corporate power and authority to execute, deliver and
perform its obligations under the Offering Documents, as applicable, and to
authorize, issue, sell and deliver the Senior Notes and the Subsidiary
Guarantees, as applicable, as provided herein and therein.
(q) There exists as of the date hereof and will exist on the Closing
Date, after giving effect to the transactions contemplated by each of the
Transaction Documents, no event or condition which would constitute a
default or an event of default or other violation or breach of any
Transaction Document. Each of the representations and warranties of
Syratech and each of its subsidiaries, as applicable, contained in any of
the Transaction Documents (other than the Offering Documents) are true and
correct in all material respects. Each of the Transaction Documents
conforms to the description thereof in the Registration Statement in all
material respects.
(r) Except as disclosed in the Prospectus, and except as would not
individually or in the aggregate have a Material Adverse Effect (w)
Syratech and each of its subsidiaries is in compliance with all applicable
Environmental Laws (as defined below), (x) Syratech and each its
subsidiaries has all permits, authorizations and approvals required
-8-
<PAGE>
under any applicable Environmental Laws and is in compliance with their
requirements, (y) there are no pending, or to the best knowledge of
Syratech or any of its subsidiaries threatened, Environmental Claims (as
defined below) against Syratech or any of its subsidiaries and (z) Syratech
and each of its subsidiaries does not have knowledge of any circumstances
with respect to any of their respective properties or operations that could
reasonably be anticipated to form the basis of an Environmental Claim
against Syratech or any of its subsidiaries or any of their respective
properties or operations and the business operations relating thereto that
would have a Material Adverse Effect. For purposes of this Agreement, the
following terms shall have the following meanings: "Environmental Law"
means, with respect to any person, any federal, state, local or municipal
statute, law, rule, regulation, ordinance, code, policy or rule of common
law and any published judicial or administrative interpretation thereof
including any judicial or administrative order, consent decree or judgment
binding on such person or any of its subsidiaries, relating to the
environment, health, safety or any chemical, material or substance,
exposure to which is prohibited, limited or regulated by any such
governmental authority. 'Environmental Claims" means any and all
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigations or proceedings relating in any way to any Environmental Law.
(s) In the ordinary course of its business, Syratech conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of Syratech and its subsidiaries, in the course
of which it identifies and evaluates associate costs and liabilities
(including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and potential liabilities to third
parties). On the basis of such review, Syratech has reasonably concluded
that such associated costs and liabilities would not, singly or in the
aggregate, have a Material Adverse Effect.
(t) Neither Syratech nor any of its subsidiaries has and, at and as of
the Effective Time, neither the Company nor any of its subsidiaries will
have violated any foreign, federal or state law relating to discrimination
in the hiring, promotion or pay of employees nor any applicable foreign,
federal or state wages and hours laws, nor any provisions of the Employee
Retirement Income Security Act or the rules and regulations promulgated
thereunder, which in each case would singly or in the aggregate, have a
Material Adverse Effect.
(u) There is (i) no unfair labor practice complaint pending against
Syratech or any of its subsidiaries or, to the best knowledge of Syratech,
threatened against any of them, before the National Labor Relations Board
or any state or local labor relations board, and no significant grievance
or more significant arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against Syratech or any of
its subsidiaries or, to the best knowledge of Syratech, threatened against
any of them, and
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(ii) no significant strike, labor dispute, slowdown or stoppage pending
against Syratech or any of its subsidiaries or, to the best knowledge of
Syratech, threatened against it or any of its subsidiaries.
(v) Each of Syratech and each of Syratech's subsidiaries carries and,
at and as of the Effective Time, each of the Company and each of its
subsidiaries will carry reasonably adequate insurance (including
self-insurance) in such amounts and covering such risks as would be
obtained by companies in the same or similar businesses in the ordinary
course for the conduct of its business and the value of its properties.
(w) Each of Deloitte & Touche LLP and Coopers & Lybrand, L.L.P. (the
"Independent Accountants") are independent public accountants as required
by the Act.
(x) The financial statements, together with related schedules and
notes forming part of the Registration Statement and the Prospectus (and
any amendment or supplement thereto), present fairly the consolidated
financial position, results of operations and changes in financial position
of Syratech and its subsidiaries on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which
they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and the other financial and statistical information and data set
forth in the Registration Statement and the Prospectus (and any amendment
or supplement thereto) is, in all material respects, accurately presented
and prepared on a basis consistent with such financial statements, except
as otherwise stated therein. The statistical and market-related data
(including, without limitation, the estimated cost savings information)
included in the Registration Statement and the Prospectus are based on or
derived from sources which Syratech believes to be reliable and accurate.
(y) The pro forma financial statements (including the notes thereto)
and the other pro forma financial information included in the Prospectus
(i) comply as to form in all material respects with the applicable
requirements of Regulation S-X promulgated under the Exchange Act, (ii)
have been prepared in accordance with the Commission's rules and guidelines
with respect to pro forma financial statements and (iii) have been properly
computed on the bases described therein; the assumptions used in the
preparation of the pro forma financial data and other pro forma financial
information included in the Prospectus are reasonable in all material
respects and the adjustments used therein are appropriate in all material
respects to give effect to the transactions or circumstances referred to
therein.
(z) Neither Syratech nor any of its subsidiaries is or, at and as of
the Effective Time, neither the Company nor any of its subsidiaries will be
an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
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(aa) No holder of any security of Syratech or any of its subsidiaries
has any right to require registration of shares of common stock or any
other security of Syratech or any of its subsidiaries. At and as of the
Effective Date, no holder of any security of the Company or any of its
subsidiaries will have any right to require registration of shares of
common stock or any other security of the Company or any of its
subsidiaries.
(bb) Each of Syratech and each of the Guarantors has complied with all
provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of
Florida).
(cc) Syratech and each of its subsidiaries maintains a system of
internal accounting controls sufficient to prove reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements that conform with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(dd) Each of Syratech and each of its subsidiaries has and, at and as
of the Effective Time, each of the Company and each of its subsidiaries
will have filed all necessary federal, state and foreign income and
franchise tax returns required to be filed, other than those filings being
contested in good faith, and all material taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges due
pursuant to such returns or pursuant to any assessment received by Syratech
or any of its subsidiaries have been or, at and as of the Effective Date,
received by the Company or any of its Subsidiaries will be paid, other than
those being contested in good faith and for which adequate reserves have
been provided.
(ee) Except as stated in the Prospectus none of Syratech or any of its
subsidiaries know of any outstanding claims for services, either in the
nature of a finder's fee, financial advisory fee, origination fee or
similar fee, with respect to the transactions contemplated hereby.
(ff) This Agreement has been duly authorized, executed and delivered
by Syratech and each of the Guarantors.
(gg) The Indenture has been duly qualified under the 1939 Act and has
been duly authorized, and when executed and delivered by each of Syratech
and each of the Guarantors, will be a valid and binding agreement of each
of Syratech and each of the Guarantors (and, at and as of the Effective
Time, each of the Company and each of the Guarantors), enforceable in
accordance with its terms.
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(hh) The Senior Notes have been duly authorized by Syratech, and, when
executed and authenticated in accordance with the provisions of the
Indenture, will conform in all material respects to the description thereof
in the Prospectus and when delivered to and paid for by the Underwriters in
accordance with this Agreement, will be valid and binding obligations of
Syratech (and, at and as of the Effective Time, the Company), will be
entitled to the benefits of the Indenture and will be enforceable in
accordance with their terms.
(ii) The Subsidiary Guarantees have been duly authorized by each of
the Guarantors, and, when executed and authenticated in accordance with the
provisions of the Indenture, will conform in all material respects to the
description thereof in the Prospectus, will be valid and binding
obligations of each of the Guarantors, will be entitled to the benefits of
the Indenture and will be enforceable in accordance with their terms.
(jj) None of Syratech, any of its subsidiaries or any agent thereof
acting on the behalf of their behalf has taken, and none of them will take,
any action that might cause the New Credit Facility, this Agreement or the
issuance or sale of the Securities pursuant to the terms of this Agreement
to violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part
220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part
224) of the Board of Governors of the Federal Reserve System.
(kk) Immediately after the consummation of the Merger and the
transactions contemplated by the Transaction Documents, the fair value and
present fair saleable value of the assets of Company and its subsidiaries
(on a consolidated basis) will exceed the sum of their stated liabilities
and identified contingent liabilities; and Syratech (on a consolidated
basis) is not, nor will the Company and its subsidiaries (on a consolidated
basis) after giving effect to the execution, delivery and performance of
the Transaction Documents and the consummation of the transactions
contemplated thereby be, (i) left with unreasonably small capital with
which to carry on their respective businesses as they are proposed to be
conducted, (ii) unable to pay their debts (contingent or otherwise) as they
mature or (iii) otherwise insolvent.
SECTION 3. Representations, Warranties and Agreements of THLT. THLT
represents and warrants to, and agrees with, the several Underwriters that:
(a) THLT has been duly incorporated, and THLT is validity existing as
a corporation in good standing under the laws of Delaware.
(b) All of the outstanding shares of capital stock of THLT are duly
authorized and validly issued, fully paid and nonassessable and not issued
in violation of any preemptive or similar rights.
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(c) THLT has all the requisite corporate power and authority to
executive, deliver and perform its obligations under each of the
Transaction Documents to which it is a party; the Merger Agreement has been
duly and validly authorized, executed and delivered by THLT and, each of
the Transaction Documents to which it is a party will, as of the Closing
Date, have been duly and validly authorized, executed and delivered by THLT
and, each of the Transaction Documents to which THLT is a party constitute
or will, as of the Closing Date, constitute a valid and legally binding
obligation of THLT enforceable against THLT, in accordance with its terms.
(d) No consent, approval, authorization or order of any court or
governmental authority or agency, or third party is required for the
performance of any of the Transaction Documents by THLT or the consummation
by THLT of the transactions contemplated by the Transaction Documents. The
execution, delivery and performance by THLT, to the extent it is a party
thereto, of the Transaction Documents and the consummation of the
transactions contemplated therein will not conflict with or constitute a
breach of, or default under, any material contract to which THLT is a party
or by which it may be bound, nor will such action result in any violation
of the provisions of the charter or by-laws of THLT or any law, rule,
regulation or administrative or court decree.
(e) This Agreement has been duly authorized, executed and delivered by
THLT. THLT was formed solely for the purpose of consummating the
Recapitalization. THLT has no material assets or liabilities, conducts no
business and is a party to no material agreements other than this Agreement
and as described in the Prospectus.
(f) Except as stated in the Prospectus THLT does not know of any
outstanding claims for services, either in the nature of a finder's fee,
financial advisory fee, origination fee or similar fee, with respect to the
transactions contemplated hereby.
SECTION 4. Purchase, Sale and Delivery of Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, Syratech and the Guarantors agree to
issue and sell to the Underwriters, and each Underwriter agrees, severally and
not jointly, to purchase from Syratech and the Guarantors at a purchase price of
____________% of principal amount per Senior Note plus accrued interest, if any,
from _______________, 1997 to the date of payment and delivery, the respective
principal amount of Senior Notes set forth opposite such Underwriter's name in
Schedule I hereto.
The Company hereby confirms its engagement of Chase Securities Inc.
("Chase"), one of the Underwriters listed in Schedule I hereto, as, and Chase
hereby confirms its agreement with the Company to render services as, a
"qualified independent underwriter," within the meaning of Section (b)(15) of
Rule 2720 of the Conduct Rules of the National Association of Securities
Dealers, Inc. (the "NASD") with respect to the offering and sale of the
Securities. Chase, solely in its capacity as qualified independent underwriter
and not otherwise, is referred
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to herein as the "QIU." As compensation for the services of the QIU hereunder,
the Company agrees to pay Chase $5,000 on the Closing Date. The Company agrees
that the yield at which the Senior Notes are sold to the public will be no lower
than the yield recommended by Chase acting as QIU.
The Company will deliver the Securities to you for the accounts of the
Underwriters, against payment of the purchase price therefor by one or more
certified or official bank checks payable in New York Clearing House or other
next day funds drawn to the order of the Company, at the office of Latham &
Watkins, New York, New York at 10:00 A.M., New York time, on ___________ __,
1997 or at such other place or time not later than seven full business days
thereafter as you and the Company determine, such time being referred to herein
as the "Closing Date."
The certificates for all the Securities so to be delivered will be in
such denominations and registered in such names as you request two full business
days prior to the Closing Date and will be made available at the office of
NationsBanc Capital Markets, Inc., Charlotte, North Carolina or, upon your
request, through the facilities of The Depository Trust Company, for checking
and packaging at least one full business day prior to the Closing Date.
SECTION 5. Offering by Underwriters. After the Registration Statement
becomes effective the several Underwriters will offer the Securities for sale to
the public on the terms as set forth in the Prospectus.
SECTION 6. Certain Covenants. Each of Syratech and each Guarantor
jointly and severally covenants and agrees with the several Underwriters that:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment
thereto to be declared effective before the offering of the Securities may
commence, Syratech will endeavor to cause the Registration Statement or
such post-effective amendment to become effective as soon as possible and
will advise you promptly and, if requested by you, will confirm such advice
in writing, when the Registration Statement or such post-effective
amendment has become effective.
(b) Syratech will not file any amendment to the Registration Statement
or make any amendment or supplement to the Prospectus or file any document
which, upon filing becomes an Incorporated Document, of which you shall not
previously have been advised or to which, after you shall have received a
copy of the document proposed to be filed, you shall reasonably object.
(c) Syratech will advise you promptly and, if requested by you, will
confirm such advice in writing: (i) when the Registration Statement has
become effective, if and when the Prospectus is sent for filing pursuant to
Rule 424 under the Act and when any
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post-effective amendment to the Registration Statement becomes effective;
(ii) of any request by the Commission for amendment of or a supplement to
the Registration Statement, any preliminary prospectus or the Prospectus or
for additional information; (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
the suspension of qualification of the Securities for offering or sale in
any jurisdiction or the initiation of any proceeding for such purpose; and
(iv) of any change in the Company's condition (financial or other),
business, prospects, properties, net worth or results of operations, or of
the happening of any event, which makes any statement of a material fact
made in the Registration Statement or the Prospectus (as then amended or
supplemented) untrue or which requires the making of any additions to or
changes in the Registration Statement or the Prospectus (as then amended or
supplemented) in order to state a material fact required by the Act to be
stated therein or necessary in order to make the statements therein not
misleading, or of the necessity to amend or supplement the Prospectus (as
then amended or supplemented) to comply with the Act or any other law. If
at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible time.
(d) As soon after the execution and delivery of this Agreement as
practicable and thereafter from time to time for such period as in the
opinion of counsel for the Underwriters a Prospectus is required by the Act
to be delivered in connection with sales by the Underwriters or any dealer,
Syratech will expeditiously deliver to the Underwriters and each dealer,
without charge, as many copies of the Prospectus (and of any amendment or
supplement thereto) as you may request. Syratech consents to the use of the
Prospectus (and of any amendment or supplement thereto), in accordance with
the provisions of the Act and with the securities or Blue Sky laws of the
jurisdictions in which the Securities are offered by the Underwriters and
by all dealers to whom the Securities may be sold, both in connection with
the offering and sale of the Securities and for such period of time
thereafter as the Prospectus is required by the Act to be delivered in
connection with sales by the Underwriters or any dealer. If during such
period of time any event shall occur that in the judgment of Syratech or in
the opinion of counsel for the Underwriters is required to be set forth in
the Prospectus (as then amended or supplemented) or should be set forth
therein in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary to supplement or amend the Prospectus (or to file under the
Exchange Act any document which, upon filing, becomes an Incorporated
Document) in order to comply with the Act or any other law, Syratech will
forthwith prepare and, subject to the provisions of paragraph (b) above,
file with the Commission an appropriate supplement or amendment thereto (or
to such document), and will expeditiously furnish to the Underwriters and
dealers a reasonable number of copies thereof. In the event that Syratech
and the Underwriters agree that the Prospectus should be amended or
supplemented, the Company, if requested by you, will promptly issue a press
release announcing or disclosing the matters to be covered by the proposed
amendment or supplement.
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<PAGE>
(e) Syratech will mail and make generally available to its security
holders as soon as practicable an earnings statement covering a period of
at least twelve months after the effective date of the Registration
Statement (but in no event commencing later than 90 days after such date)
which shall satisfy the provisions of Section 11(a) of the Act and the
Rules and Regulations (including Rule 158). Syratech will also advise you
in writing when such statement has been so made available.
(f) Syratech will deliver to each of you as many signed and conformed
copies of the registration statement (as originally filed) and of each
amendment thereto (including exhibits filed therewith) as you may
reasonably request and will also deliver to you a conformed copy of the
Registration Statement and each amendment thereto for each of the
Underwriters.
(g) Syratech and each Guarantor will endeavor, in cooperation with
you, to qualify the Securities for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United States
as you may designate, and will maintain such qualifications in effect for
as long as may be required for the distribution of the Securities. Syratech
and each Guarantor will file such statements and reports as may be required
by the laws of each jurisdiction in which the Securities have been
qualified as above provided.
(h) During the period of five years hereafter, Syratech will furnish
to you and upon request, to each of the other Underwriters, as soon as
practicable after the end of each fiscal year, a copy of its annual report
to stockholders for such year, and Syratech will furnish to you (i) as soon
as available, a copy of each report (including, without limitation,
quarterly reports containing Syratech's consolidated balance sheet, a
consolidated statement of operations and a consolidated statement of cash
flows) or definitive proxy statement of Syratech filed with the Commission
under the Exchange Act or mailed to stock holders, and (ii) from time to
time, such other information concerning Syratech as you may reasonably
request.
(i) If Rule 430A of the Act is employed, Syratech will timely file the
Prospectus pursuant to Rule 424(b) under the Act and will advise you of the
time and manner of such filing. Syratech will timely complete all required
filings and otherwise fully comply in a timely manner with all provisions
of the Exchange Act.
(j) During the period beginning on the date hereof and continuing to
and including the Closing Date, Syratech and each Guarantor will not offer,
sell contract to sell or otherwise dispose of any debt securities of
Syratech or any Guarantor or warrants to purchase debt securities of
Syratech or any Guarantor substantially similar to the Securities (other
than the Securities), without your prior written consent.
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<PAGE>
(k) Each of Syratech and each Guarantor will use its best efforts to
do and perform all things required or necessary to be done and performed
under this Agreement by Syratech and the Guarantors prior to the Closing
Date and to satisfy all conditions precedent to the delivery of the
Securities.
(l) Syratech will apply the net proceeds from the sale of the
Securities (together with any other net proceeds received from the
Recapitalization) as set forth under "Use of Proceeds" in the Prospectus.
SECTION 7. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Securities
on the Closing Date will be subject to satisfaction of each of the following
conditions:
(a) Each of the representations and warranties on the part of Syratech
(and, at and as of the Effective Time, the Company), the Guarantors and
THLT contained herein shall be true and correct in all material respects on
the date herein and on the Closing Date with the same force and effect as
if made on and as of the Closing Date.
(b) The Registration Statement shall have become effective (or if a
post-effective amendment is required to be filed pursuant to Rule 430A
under the Act, such post-effective amendment shall have become effective)
not later than 5:00 P.M. New York time, on the date of this Agreement, or
such later time or date as shall have been consented to by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall have
been timely made; and prior to the Closing Date no stop order suspending
the effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been instituted, or to the
knowledge of the Company or you, shall be contemplated by the Commission,
and any request of the Commission for additional information (to be
included in the registration statement or the Prospectus or otherwise)
shall have been complied with to your satisfaction.
(c) You shall not have advised Syratech (or, at and as of the
Effective Time, the Company) that the Registration Statement or Prospectus,
or any amendment or supplement thereto, contains an untrue statement of
fact or omits to state a fact which, you have concluded, is material and in
the case of an omission is required to be stated therein or is necessary to
make the statements therein not misleading.
(d) (i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, affairs or business prospects, whether or not arising in the
ordinary course of business, of Syratech and its subsidiaries, (ii) since
the date of the latest balance sheet included in the Registration Statement
and the Prospectus there shall not have been any change, or any development
involving a prospective material
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adverse change, in the capital stock or in the long-term debt of Syratech
and its subsidiaries from that set forth in the Registration Statement and
Prospectus, (iii) Syratech and its subsidiaries shall have no liability or
obligation, direct or contingent, which is material to Syratech and its
subsidiaries (or, at and as of the Effective Time, the Company and its
subsidiaries), taken as a whole, other than those reflected in the
Registration Statement and the Prospectus and (iv) on the Closing Date you
shall have received a certificate of Syratech, dated the Closing Date,
signed on its behalf by (x) the president or any vice president and (y) a
principal financial or accounting officer of Syratech confirming, as of the
Closing Date, the matters set forth in paragraphs (a), (b), (c) and (d) of
this Section 7 and confirming that the representations and warranties
contained in Section 2 are true and correct with the same force and effect
as though made on and as of the Closing Date.
(e) As of the Closing Date, the Company will have delivered to the
Underwriters true and correct executed copies of the Transaction Documents
(other than the Offering Documents), in the form as originally executed,
together with all related documents, instruments and agreements and all
schedules or exhibits thereto; there will have been no amendments,
alterations, modifications or waivers thereto or in the exhibits or
schedules thereto other than those as to which the Underwriters shall
previously have been advised and shall not have reasonably objected after
being furnished a copy thereof.
(f) On the Closing Date you shall have received a certificate, dated
the Closing Date, of THLT, signed on behalf of such party by (x) the
president or any vice president and (y) any other officer confirming, as of
the Closing Date, the matters set forth in paragraph (a) of this Section 7
(as to THLI) and confirming that the representations and warranties of THLT
contained in Section 3 are true and correct with the same force and effect
as though made on and as of the Closing Date.
(g) None of the issuance and sale of the Securities pursuant to this
Agreement, the Recapitalization or any of the other transactions
contemplated by any of the Transaction Documents or the Prospectus shall be
enjoined (temporarily or permanently) and no restraining order or other
injunctive order shall have been issued or any action, suit or proceeding
shall have been commenced with respect to this Agreement, the Merger
Agreement, the New Credit Facility, the Recapitalization or any of the
other transactions contemplated by the Prospectus, before any court or
governmental authority.
(h) On the Closing Date, the Underwriters shall have received copies
of all certificates, documents and opinions delivered by Syratech, THL or
any of their respective affiliates, or any of their counsels and such other
certificates, documents and opinions reasonably obtainable by Syratech, THL
or any of their respective affiliates delivered to any such party under the
Transaction Documents, in each case, together with letters addressed to the
Underwriters, stating that the Underwriters may rely on such certificates,
documents and opinions as if they had been addressed to the Underwriters.
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(i) You shall have received a favorable opinion of Paul, Weiss,
Rifkind & Garrison, counsel for Syratech, dated the Closing Date to the
effect that:
(i) Syratech has been duly incorporated and is validly existing
as a corporation in good standing under the laws of Delaware with
corporate power and authority to own, lease and operate its properties
and conduct its business as described in the Registration Statement;
and Syratech is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which it owns
or leases property or in which the conduct of its business requires
such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse
Effect.
(ii) Each of the Guarantors has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and conduct its
business as described in the Registration Statement, and, to the best
of their knowledge and information, is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which it owns or leases properties or in which the
conduct of its business requires such qualification, except to the
extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect; all of the issued and
outstanding capital stock of each of the Guarantors has been duly
authorized and validly issued and is fully paid and non-assessable,
and all of such capital stock, to the best of their knowledge and
information, is owned by Syratech and, at and as of the Effective
Time, will be owned by the Company free and clear of any pledge, lien,
encumbrance, claim or equity.
(iii) Syratech has the authorized, issued and outstanding capital
stock as set forth in the Prospectus; all of the outstanding shares of
capital stock of Syratech have been duly authorized and validly
issued, are fully paid and nonassessable and were not, to the best of
such counsel's knowledge, issued in violation of any preemptive or
similar rights.
(iv) To the knowledge of such counsel, there are, and after
giving effect to the Recapitalization, will be, no outstanding
subscriptions, rights, warrants, calls, commitments of sale or options
to acquire, or instruments convertible into or exchangeable for, any
such shares of capital stock or other equity interest of Syratech, the
Company or any of the Guarantors, except as described in the
Prospectus.
(v) Each of Syratech and, after giving effect to the
Recapitalization, the Company has all the requisite corporate power
and authority to execute, deliver
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and perform its respective obligations under each of the Transaction
Documents to which it is a party.
(vi) Each of the Syratech's subsidiaries has, both before and
after giving to the Merger, all the requisite corporate power and
authority to execute, deliver and perform its respective obligations
under each of the Transaction Documents to which it is a party.
(vii) Each of Syratech and, at and as of the Effective Time, the
Company has duly authorized, executed and delivered each of the
Transaction Documents (other than the Offering Documents) to which it
is party.
(viii) Each of Syratech's subsidiaries has duly authorized,
executed and delivered each of the Transaction Documents (other than
the Offering Documents) to which it is party.
(ix) Each of Syratech and each of the Guarantors has, and after
giving effect to the Recapitalization, the Company will have duly and
validly authorized this Agreement and the consummation by Syratech,
the Company and the Guarantors of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of
Syratech and the Guarantors.
(x) The Indenture has been duly qualified under the 1939 Act.
Each of Syratech and each of the Guarantors has, and after giving
effect to the Merger, the Company will have duly and validly
authorized, executed and delivered the Indenture, and the Indenture
constitutes a valid and binding agreement of each of Syratech and each
of the Guarantors, and after giving effect to the Merger, the Company
enforceable against them in accordance with its terms except as (a)
the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (b) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability.
(xi) Syratech has, and after giving effect to the Merger, the
Company will have duly authorized the Senior Notes, which, when
executed and authenticated in accordance with the provisions of the
Indenture, and delivered to and paid for by the Underwriters in
accordance with the terms of this Agreement, will be valid and binding
obligations of Syratech and, at and as of the Effective Time, the
Company, enforceable against Syratech and, after giving effect to the
Merger, the Company in accordance with their terms except as (a) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (b) rights of
acceleration and the
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availability of equitable remedies may be limited by equitable
principles of general applicability, and will be entitled to the
benefits of the Indenture.
(xii) Each of the Guarantors has duly authorized the Subsidiary
Guarantees, which, when executed and authenticated in accordance with
the provisions of the Indenture, and delivered to and paid for by the
Underwriters in accordance with the terms of this Agreement, will be
valid and binding obligations of each of the Guarantors, enforceable
against each of them in accordance with the terms of the Subsidiary
Guarantees except as (a) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (b) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability, and will be entitled to the benefits of the Indenture.
(xiii) The Indenture, the Senior Notes and the Subsidiary
Guarantees conform in all material respects to the descriptions
thereof contained in the Prospectus.
(xiv) The Registration Statement is effective under the Act and,
to the best of their knowledge and information, no stop order
suspending the effectiveness of the Registration Statement has been
issued under the Act or proceedings therefor initiated or threatened
by the Commission.
(xv) No consent, approval, authorization or order of any court or
governmental authority or agency, or third party is required (which
has not been obtained) in connection with the consummation by Syratech
(or after giving effect to the Recapitalization, the Company) or any
of its subsidiaries of the transactions contemplated by the
Transaction Documents, except such as may be required under state
securities or Blue Sky laws.
(xvi) To the best of their knowledge and information, the
execution, delivery and performance by Syratech (or after giving
effect to the Recapitalization, the Company) or any of its
subsidiaries, to the extent each is a party thereto, of the
Transaction Documents and the consummation of the transactions
contemplated thereby will not conflict with or constitute a breach of,
or default under (or an event which with notice or passage of time or
both would constitute or a default under) or violation of any of (A)
any material contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which such entity is a party or by which
it may be bound or to which any of their respective property or assets
is, and at and as of the Effective Time will be subject, (B) the
provisions of the charter or by-laws of such entity, or (C) (assuming
compliance with all applicable state securities or Blue Sky laws) any
law, administrative regulation or administrative or court decree
applicable to such entity or any of its
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respective properties or assets, except for any such breach or
violation which would not, individually or in the aggregate, have a
Material Adverse Effect.
(xvii) None of Syratech (or after giving effect to the
Recapitalization, the Company) or any of its subsidiaries is (i) in
violation of its charter documents, (ii) to the knowledge of such
counsel, in breach or violation of any law, administrative regulation
or administrative or court decree applicable to any of them or any of
their respective properties or assets, except for any such breach or
violation which would not, individually or in the aggregate, have a
Material Adverse Effect or (iii) in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any material contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or
by which its respective properties may be bound.
(xviii) After due inquiry, such counsel does not know of any
legal or governmental proceeding pending or threatened to which
Syratech (or, after giving effect to the Recapitalization, the
Company) or any of its subsidiaries is or will be a party or to which
any of their respective properties is or will be subject that is
required to be described in the Registration Statement or the
Prospectus and is not so described or of any material contract or
other document that is required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement or in any Incorporated Document that is not so
described or filed as required.
(xix) No legal or governmental proceedings are pending or, to the
knowledge of such counsel, threatened to which Syratech or any of its
subsidiaries is and, at and as of the Effective Time, the Company will
be a party or to which any of their respective properties is subject
which, if determined adversely to such party would result,
individually or in the aggregate, in a Material Adverse Effect, or
which seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance and sale of the Securities or the
consummation of the other transactions contemplated by the Transaction
Documents.
(xx) To the best of such counsel's knowledge, Syratech and each
of its subsidiaries owns and possesses adequate Trademarks to conduct
the businesses now or proposed to be operated by them.
(xxi) To the best of such counsel's knowledge, after due inquiry,
neither Syratech nor any of its subsidiaries has violated any
Environmental Laws, which in each case might result in any Material
Adverse Effect.
(xxii) None of Syratech or any of its subsidiaries is or, at and
as of the Effective Time, the Company will be an "investment company"
or a company
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"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xxiii) Neither the consummation of the transactions contemplated
by the New Credit Facility and this Agreement nor the issuance or sale
of the Securities will violate Regulation G (12 C.F.R. Part 207),
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221)
or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System.
(xxiv) Such counsel (1) is of the opinion that the Registration
Statement (other than the financial statements included therein, as to
which no opinion need be expressed) complies as to form in all
material respects with the requirements of the Act and the Rules and
Regulations, and (2) is of the opinion that the Incorporated Documents
that have been filed with the Commission on or before the date of such
opinion (other than the financial statements included therein, as to
which no opinion need be expressed) complies as to form in all
material respects with the Exchange Act and the rules and regulations
of the Commission thereunder.
(xxv) Such counsel (1) believes that (other than the financial
statements included therein, as to which no belief need be expressed
and except for that part of the Registration Statement that
constitutes the Form T-1) the Registration Statement, at the time it
became effective, did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (2)
believes that the Prospectus, as amended or supplemented at the
Closing Date, does not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
With respect to subparagraph (xxv) of paragraph (g) above, such counsel
may state its opinion and belief is based upon its participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto and review and discussion of the contents thereof, but is
without independent check or verification except as specified.
(h) You shall have received a favorable opinion of Hutchins, Wheeler &
Dittmar, counsel for THLT, dated the Closing Date to the effect that:
(i) THLT has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Delaware.
(ii) All of the outstanding shares of capital stock of THLT have been
duly authorized and validly issued, are fully paid and nonassessable and
were not,
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to the best of such counsel's knowledge, issued in violation of any
preemptive or similar rights.
(iii) THLT has, both before and after giving to the Recapitalization,
all the requisite corporate power and authority to execute, deliver and
perform its obligations under each of the Transaction Documents to which it
is a party.
(iv) THLT has duly authorized, executed and delivered each of the
Transaction Documents to which it is a party; such Transaction Documents
will constitute valid and legally binding obligations of THLT, enforceable
against THLT (to the extent THLT is a party thereto), in accordance with
its terms, except as rights to indemnity hereunder may be limited by
applicable law.
(v) No consent, approval, authorization or order of any court or
governmental authority or agency, or third party is required for the
performance of any of the Transaction Documents by THLT (to the extent THLT
is a party thereto) or the consummation by THLT of the transactions
contemplated by the Transaction Documents. The execution, delivery and
performance by THLT, to the extent it is a party thereto, of the
Transaction Documents and the consummation of the transactions contemplated
therein will not conflict with or constitute a breach of, or default under,
any material contract to which THLT is a party or by which it may be bound,
nor will such action result in any violation of the provisions of the
charter or by-laws of THLT or any law, administrative regulation or
administrative or court decree applicable to THLT.
(vi) Such counsel (1) believes that (other than the financial
statements included therein, as to which no belief need be expressed and
except for that part of the Registration Statement that constitutes the
Form T-1) the Registration Statement, at the time it became effective, did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (2) believes that the Prospectus, as
amended or supplemented at the Closing Date, does not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
With respect to subparagraph (vi) of paragraph (h) above, Hutchins,
Wheeler & Dittmar may state its opinion and belief is based upon its
participation in the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto and review and discussion of the
contents thereof, but is without independent check or verification except as
specified.
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(i) You shall have received a favorable opinion of Latham & Watkins,
counsel for the Underwriters, dated the Closing Date, in form and substance
satisfactory to you.
(j) You shall have received from each of the Independent Accountants,
two letters, the first delivered the day of but prior to the execution of,
and dated the date of, this Agreement and the other dated the Closing Date,
addressed to the Underwriters (with conformed copies for each of the
Underwriters), in the form heretofore agreed (and in the case of the second
such letter consistent with the first such letter) with such variations as
are reasonably acceptable to you.
(k) On the Closing Date:
(1) the Certificate of Merger with respect to the Merger shall be
in form and substance satisfactory to the Underwriters and Latham &
Watkins, counsel for the Underwriters, shall have been pre-cleared for
filing with the Secretary of State of the State of Delaware and shall
be ready in all respects for filing immediately upon consummation of
each of the transactions contemplated by the Prospectus to be
consummated prior to the Merger;
(2) the New Credit Facility with aggregate commitments thereunder
of not less than $130,000,000 shall be in full force and effect, no
event shall have occurred and no event shall have failed to occur,
which would relieve the lenders under the New Credit Facility (the
"Lenders") of their obligation to advance funds, or preclude them from
advancing funds to Syratech thereunder, and concurrently with the
Closing the Lenders shall have advanced funds under the New Credit
Facility in such amounts as are necessary to fund the Recapitalization
(after giving effect to the Equity Financing and the sale of the
Securities hereunder); and
(3) The Equity Financing shall have been consummated on terms and
conditions satisfactory to the Underwriters.
(l) Simultaneously with the Closing, the closing contemplated by the
Merger Agreement, including without limitation the Merger, shall have been
consummated in accordance with the terms of the Merger Agreement.
(m) Counsel for the Underwriters shall have been furnished with such
other documents and opinions as they may reasonably require.
SECTION 8. Payment of Expenses. Whether or not any of the transactions
contemplated hereby are consummated, or this Agreement is terminated, Syratech
and the Guarantors jointly and severally agree to pay all costs, expenses, fees
and taxes incident to (i) the preparation, printing, filing and distribution
under the Act of the Registration Statement (including financial statements and
exhibits), the Prospectus, each preliminary prospectus, the Incorporated
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Documents, and all amendments and supplements to any of them, (ii) the
preparation, printing (including word processing and duplication costs) and
delivery of this Agreement, the Indenture, Preliminary and Supplemental Blue Sky
Memoranda and all other agreements, memoranda, correspondence and other
documents printed and delivered in connection with the offering of the
Securities, (iii) the registration with the Commission, and the issuance by the
Company and the Guarantors of the Securities, (iv) the registration or
qualification of the Securities for offer and sale under the securities or Blue
Sky laws of the several states as described in Section 6(e) (including the
reasonable fees and disbursements of your counsel relating to such registration
or qualification), (v) the fees and expenses of rating agencies, (vi) the
furnishing of such copies of the Registration Statement, Prospectus and
preliminary prospectus, and all amendments and supplements to any of them, as
may be reasonably requested by you; (vii) filings and clearance with the
National Association of Securities Dealers, Inc. in connection with the
offering; (viii) the listing of the Securities on a stock exchange or automated
quotation system, if any; (ix) the QIU (including fees and disbursements of
counsel for the QIU); (x) expenses of Syratech and the Guarantors in connection
with any meetings with prospective investors in the Securities; (xi) advertising
relating to the offering of the Securities (other than as shall have been
specifically approved by the Underwriters to be paid for by the Underwriters);
and (xii) the performance by Syratech and the Guarantors (and after giving
effect to the Merger, the Company and the Guarantors) of their other respective
obligations under this Agreement, including (without limitation) the fees of the
Trustee, the costs of the Trustee's personnel and other internal costs, the cost
of printing and engraving the certificates representing the Securities, all
expenses and taxes incident to the sale and the delivery of the Securities to
you, and fees and expenses of counsel for the Syratech, any Guarantor or the
Company for providing such opinions as you may reasonably request.
If this Agreement is terminated by you in accordance with the
provisions of Section 7 or Section 12, Syratech and the Guarantors jointly and
severally shall reimburse you for all of your out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters.
SECTION 9. Indemnification and Contribution. (a) Each of Syratech and
each Guarantor (and, after giving effect to the Recapitalization, each of the
Company and each Guarantor), jointly and severally, agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities or judgments
(including without limiting the foregoing the reasonable legal and other
expenses incurred in connection with any action, suit or proceeding or any claim
asserted) arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities, judgments or expenses are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to such Underwriter
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furnished in writing to Syratech or any Guarantor by such Underwriter through
you expressly for use therein. This indemnity agreement will be in addition to
any liability which Syratech and the Guarantors (and, after giving effect to the
Merger, the Company and the Guarantors) may otherwise have to the persons
referred to above in this Section 9(a) and Section 10(a).
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless Syratech, each Guarantor (and, after giving effect to the
Recapitalization, the Company and the Guarantors), their respective directors,
their respective officers who sign the Registration Statement and each person,
if any, who controls Syratech or any Guarantor (and, after giving effect to the
Recapitalization, the Company or any Guarantor) within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act from and against any and
all losses, claims, damages, liabilities, judgments and expenses caused by any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if Syratech
and the Guarantors (or, after giving effect to the Recapitalization, the Company
and the Guarantors) shall have furnished any amendments or supplements thereto)
or any preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only with reference to information
relating to such Underwriter furnished to Syratech or any Guarantor (or, after
giving effect to the Merger, the Company or any Guarantor) in writing by such
Underwriter through you expressly for use in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any preliminary prospectus.
(c) In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be instituted involving any person
in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (hereinafter called the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought
(hereinafter called the "indemnifying party") in writing and the indemnifying
party, upon request of the indemnified party, shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the indemnified
party to represent the indemnified party and any others the indemnifying party
may designate and shall pay the fees and disbursements of such counsel related
to such proceeding. In any such action or proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel, (ii) the indemnifying party shall have failed to
assume the defense and employ counsel or (iii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests among
them. It is understood that the indemnifying party shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
(a) the reasonable fees and expenses of more than one separate firm (in addition
to local counsel) for all Underwriters and all persons, if any, who control the
Underwriters within the meaning of either Section 15 of the Act or Section 20 of
the Exchange Act and (b) the reasonable fees and expenses of more than one
separate firm (in addition to local counsel) for Syratech and the
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Guarantors (or, after giving effect to the Recapitalization, the Company and the
Guarantors), their respective directors, their respective officers who sign the
Registration Statement and each person, if any, who controls Syratech and the
Guarantors (or, after giving effect to the Recapitalization, the Company and the
Guarantors) within the meaning of either such Section and that all such fees and
expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Underwriters and such control persons of the Underwriters,
such firm shall be designated in writing by NationsBanc Capital Markets, Inc. In
the case of any such separate firm for Syratech and the Guarantors (or, after
giving effect to the Recapitalization, the Company and the Guarantors), and such
directors, officers and control persons of Syratech and the Guarantors (or,
after giving effect to the Recapitalization, the Company and the Guarantors),
such firm shall be designated in writing by Syratech (or, after giving effect to
the Recapitalization, the Company). The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent; but
if settled with such consent of if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the immediately preceding sentence, if in any case where the
fees and expenses of counsel are at the expense of the indemnifying party and an
indemnified party shall have requested the indemnifying party to reimburse the
indemnified party for such fees and expenses of counsel as incurred, such
indemnifying party agrees that it shall be liable for any settlement of any
action effected without its written consent if (i) such settlement is entered
into more than twenty business days after the receipt by such indemnifying party
of the aforesaid request and (ii) such indemnifying party shall have failed to
reimburse the indemnified party in accordance with such request for
reimbursement prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Syratech and the Guarantors (and,
after giving effect to the Recapitalization, the Company and the Guarantors) on
the one hand and the Underwriters on the other from the offering of the
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 Syratech and the Guarantors (and, after giving effect to the
Recapitalization, the Company and the Guarantors) on the one hand and the
Underwriters on the other in connection with the statements or omissions or
actions or failure to act which resulted in such losses, claims, damages,
liabilities, judgments or expenses, as well as any other relevant equitable
considerations. The relative benefits received by Syratech
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and the Guarantors (or, after giving effect to the Recapitalization, the Company
and the Guarantors) on the one hand and the Underwriters on the other shall be
deemed to be in the same proportions as the total net proceeds from the offering
of the Securities (before deducting expenses) received by Syratech and the
Guarantors (and, after giving effect to the Recapitalization, the Company and
the Guarantors) bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of Syratech and the Guarantors
(and, after giving effect to the Recapitalization, the Company and the
Guarantors) on the one hand and the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by Syratech (or, after giving effect to the
Recapitalization, the Company), the Guarantors or by the Underwriters and the
party's relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(e) Syratech (and, after giving effect to the Recapitalization, the
Company), the Guarantors and the Underwriters agree that it would not be just
and equitable if contribution pursuant to Section 9(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of Section 9(d), in no event shall any
Underwriter be required to contribute any amount in excess of the amount by
which the total price at which the Securities underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages which
each Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to Section 9(d) are several in proportion to the respective aggregate
principal amount of Senior Notes set forth opposite their names in Schedule I
hereto.
SECTION 10. Indemnification of Qualified Independent Underwriter
(a) Each of Syratech and each Guarantor (and, after giving effect to
the Recapitalization, each of the Company and each Guarantor), jointly and
severally, agrees to indemnify and hold harmless the QIU and each person, if
any, who controls the QIU within the meaning of Section 15 of the Act or Section
20 of the Exchange Act from and against any and all losses, claims, damages,
liabilities or judgments (including without limiting the foregoing the
reasonable legal and other expenses incurred in connection with any action, suit
or proceeding or any claim asserted) arising out of: (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
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Statement or the Prospectus or any preliminary prospectus, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities, judgments or
expenses are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to the QIU furnished in
writing to Syratech or any Guarantor by the QIU expressly for use therein; or
(ii) the QIU having acted, failed to act or alleged to have failed to act in its
capacity as the "qualified independent underwriter" with respect to the offer
and sale of the Securities; provided, however, that to the extent that any such
loss, claim, damage, liability or judgment referred to in the foregoing clause
(ii) is found in a final judgment by a court of competent jurisdiction, not
subject to further appeal, to have resulted from the willful misconduct or gross
negligence of the QIU, neither Syratech (or, after giving effect to the
Recapitalization, the Company) nor the Guarantors will be liable to that extent.
This indemnity agreement will be in addition to any liability which Syratech and
the Guarantors (and, after giving effect to the Merger, the Company and the
Guarantors) may otherwise have to the persons referred to above in Section 9(a)
and this Section 10(a).
(b) In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought against the QIU or any
person controlling the QIU (for purposes of this Section 10(b), the QIU and/or
such controlling person, as appropriate, shall hereinafter be referred to as the
"Indemnified"), based upon (i) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or the Prospectus (as
amended or supplemented if Syratech and the Guarantors (or, after giving effect
to the Recapitalization, the Company and the Guarantors) shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only with reference to information relating to the QIU furnished to Syratech
or any Guarantor (or, after giving effect to the Merger, the Company or any
Guarantor) in writing by the QIU expressly for use in the Registration
Statement, the Prospectus, any amendment or supplement thereto, or any
preliminary prospectus or (ii) the QIU having acted, failed to act or alleged to
have failed to act in its capacity as the "qualified independent underwriter"
with respect to the offer and sale of the Securities, and with respect to which
indemnity may be sought against the Syratech (or, after giving effect to the
Recapitalization, the Company) and the Guarantors (each of Syratech, the Company
and/or any Guarantor, as appropriate, for purposes of this Section 10(b), are
hereinafter referred to as the "Indemnifier"), the QIU shall promptly notify
Syratech (or, after giving effect to the Recapitalization, the Company) in
writing and Syratech (or, after giving effect to the Recapitalization, the
Company) and the Guarantors shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified to represent
the Indemnified and any others the Indemnifier may designate and shall pay the
fees and disbursements of such counsel related to such proceeding. In any such
action or proceeding, the Indemnified shall have the right to retain its own
counsel, but the fees
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and expenses of such counsel shall be at the expense of the Indemnified unless
(i) the Indemnifier and the Indemnified shall have mutually agreed to the
retention of such counsel, (ii) the Indemnifier shall have failed to assume the
defense and employ counsel or (iii) the named parties to any such proceeding
(including any impleaded parties) include both an Indemnifier and the
Indemnified and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests among them. It is
understood that the Indemnifier shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for (a) the reasonable
fees and expenses of more than one separate firm (in addition to local counsel)
for the QIU and all persons, if any, who control the QIU within the meaning of
either Section 15 of the Act or Section 20 of the Exchange Act and (b) the
reasonable fees and expenses of more than one separate firm (in addition to
local counsel) for Syratech and the Guarantors (or, after giving effect to the
Recapitalization, the Company and the Guarantors), their respective directors,
their respective officers who sign the Registration Statement and each person,
if any, who controls Syratech and the Guarantors (or, after giving effect to the
Recapitalization, the Company and the Guarantors) within the meaning of either
such Section and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the QIU and such control
persons of the QIU, such firm shall be designated in writing by the QIU. In the
case of any such separate firm for Syratech and the Guarantors (or, after giving
effect to the Recapitalization, the Company and the Guarantors), and such
directors, officers and control persons of Syratech and the Guarantors (or,
after giving effect to the Recapitalization, the Company and the Guarantors),
such firm shall be designated in writing by Syratech (or, after giving effect to
the Recapitalization, the Company). The Indemnifier shall not be liable for any
settlement of any proceeding effected without its written consent; but if
settled with such consent of if there be a final judgment for the plaintiff, the
Indemnifier agrees to indemnify the Indemnified from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
immediately preceding sentence, if in any case where the fees and expenses of
counsel are at the expense of the Indemnifier and the Indemnified shall have
requested the Indemnifier to reimburse the Indemnified for such fees and
expenses of counsel as incurred, the Indemnifier agrees that it shall be liable
for any settlement of any action effected without its written consent if (i)
such settlement is entered into more than twenty business days after the receipt
by the Indemnifier of the aforesaid request and (ii) such Indemnifier shall have
failed to reimburse the Indemnified in accordance with such request for
reimbursement prior to the date of such settlement. No Indemnifier shall,
without the prior written consent of the Indemnified, effect any settlement of
any pending or threatened proceeding in respect of which the Indemnified is or
could have been a party and indemnity could have been sought hereunder by the
Indemnified, unless such settlement includes an unconditional release of the
Indemnified from all liability on claims that are the subject matter of such
proceeding.
-31-
<PAGE>
(c) If the indemnification provided for in this Section 10 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities, judgments and expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by Syratech and the
Guarantors (and, after giving effect to the Recapitalization, the Company and
the Guarantors) on the one hand and the QIU on the other hand from the offering
of the 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 Syratech and the Guarantors (and, after giving effect to the
Recapitalization, the Company and the Guarantors) on the one hand and the QIU on
the other hand in connection with the statements or omissions or actions or
failure to act which resulted in such losses, claims, damages, liabilities,
judgments or expenses, as well as any other relevant equitable considerations.
The relative benefits received by Syratech and the Guarantors (or, after giving
effect to the Recapitalization, the Company and the Guarantors) on the one hand
and the QIU on the other hand shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Securities (before deducting
expenses) received by Syratech and the Guarantors (and, after giving effect to
the Recapitalization, the Company and the Guarantors), as set forth in the cover
page of the Prospectus, bear to the fee received by the QIU for acting as the
"qualified independent underwriter" as set forth in Section 4 hereof. The
relative fault of Syratech and the Guarantors (and, after giving effect to the
Recapitalization, the Company and the Guarantors) on the one hand and the QIU on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by Syratech (or, after
giving effect to the Recapitalization, the Company) or any Guarantor on the one
hand or the QIU on the other hand and the party's relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission and whether the QIU's recommendation, advice or services as QIU
pursuant to Section 4 hereof involved any willful misconduct or gross negligence
on the part of the QIU.
(d) Syratech (and, after giving effect to the Recapitalization, the
Company), the Guarantors and the QIU agree that it would not be just and
equitable if contribution pursuant to Section 10(a) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 10, the QIU shall not be required
to contribute any amount in excess of the amount by which its fee received for
acting as "qualified independent
-32-
<PAGE>
underwriter" as set forth in Section 4 hereof exceeds the amount of any damages
which the QIU has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission or by reason of alleged
willful misconduct or gross negligence. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 11. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of Syratech, the Guarantors
and THLI submitted pursuant hereto, including indemnity and contribution
agreements, shall remain operative and in full force and effect, regardless of
any termination of this Agreement, or any investigation made by or on behalf of
any Underwriter or any person controlling any Underwriter by or on behalf of
Syratech (or, after giving effect to the Recapitalization, the Company), any
Guarantor, their respective officers or directors, and shall survive acceptance
and payment for the Securities hereunder.
SECTION 12. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon later of (x) execution and delivery hereof by the
parties hereto and (y) release of notification of the effectiveness of the
Registration Statement by the Commission.
This Agreement may be terminated for any reason at any time prior to
the Closing Date by the Underwriters upon the giving of written notice of such
termination to the Syratech, if prior to the Closing Date (i) there has been,
since the respective dates as of which information is given in the Registration
Statement, any material adverse change in the condition, financial or otherwise,
earnings, business affairs or business prospects of Syratech and its
subsidiaries (or, after giving effect to the Recapitalization, the Company and
its subsidiaries) considered as a whole, whether or not arising in the ordinary
course of business, or (ii) there has occurred any outbreak or escalation of
hostilities or other calamity or crisis or material change in existing
financial, political, economic or securities market conditions, the effect of
which is such as to make it, in the judgment of the Underwriters, impracticable
or inadvisable to market the Securities in the manner contemplated in the
Prospectus or enforce contracts for the sale of the Securities, or (iii) trading
generally on either the American Stock Exchange, the New York Stock Exchange or
the NASDAQ National Market System has been suspended, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices for securities
have been required, by either of said exchanges or the NASDAQ National Market
System or by order of the Commission or any other governmental authority, of if
a banking moratorium has been declared by either Federal or New York
authorities. In the event of any such termination, the provisions of Section 8,
the indemnity agreement and contribution provisions set forth in Sections 9 and
10, and the provisions of Sections 11 and 15 shall remain in effect.
SECTION 13. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any
-33-
<PAGE>
standard form of telecommunications. Notice to the Underwriters shall be
directed to you c/o NationsBanc Capital Markets, Inc., 100 North Tryon Street,
Charlotte, North Carolina 28255, Attention: Syndicate; notices to Syratech (and,
after giving effect to the Recapitalization, the Company) or any Guarantor shall
be directed to such party at Syratech Corporation, 175 McClellan Highway, East
Boston, MA 02128, Attention: Secretary (with a copy to the Treasurer).
SECTION 14. Parties. This Agreement shall inure to the benefit of and
be binding upon Syratech (and, after giving effect to the Recapitalization, the
Company), the Guarantors, the Underwriters, the QIU any controlling persons
referred to herein and their respective successors and assigns. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person, firm or corporation any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. No purchaser of Securities from any Underwriter shall be deemed to be
a successor by reason merely of such purchase.
SECTION 15. Governing Law. This Agreement shall be governed by the laws
of the State of New York.
This Agreement may be signed in two or more counterparts each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
If the foregoing is in accordance with your understanding of our
agreement, please sign this Agreement and return it to us.
Very truly yours,
SYRATECH CORPORATION
By:
Name: _________________
Title: _________________
SYRATECH HOLDING CORPORATION
By:
Name: _________________
Title: _________________
WALLACE INTERNATIONAL SILVERSMITHS, INC.
By:
Name: _________________
Title: __________________
-34-
<PAGE>
WALLACE INTERNATIONAL DE P.R., INC.
By:
Name: ____________________
Title: ____________________
INTERNATIONAL SILVER COMPANY
By:
Name: _________________
Title: _________________
INTERNATIONAL SILVER DE P.R., INC.
By:
Name: _________________
Title: __________________
PMW SILVER DE P.R., INC.
By:
Name: ____________________
Title: ____________________
TOWLE MANUFACTURING COMPANY
By:
Name: _________________
Title: _________________
ROSEMAR SILVER COMPANY, INC.
By:
Name: _________________
Title: __________________
TOWLE HOLLOWARE, INC.
By:
Name: ____________________
Title: ____________________
-35-
<PAGE>
FARBERWARE INC.
By:
Name: _________________
Title: _________________
SILVESTRI, INC.
By:
Name: _________________
Title: __________________
SILVESTRI, INC. OF SOUTH CAROLINA
By:
Name: ____________________
Title: ____________________
RAUCH INDUSTRIES, INC.
By:
Name: _________________
Title: __________________
ROCHARD, INC.
By:
Name: ____________________
Title: ____________________
HOLIDAY PRODUCTS, INC.
By:
Name: _________________
Title: _________________
NORTHSTAR SALES CORPORATION
By:
Name: _________________
Title: __________________
-36-
<PAGE>
LEONARD FLORENCE ASSOCIATES, INC.
By:
Name: ____________________
Title: ____________________
CHI INTERNATIONAL, INC.
By:
Name: _________________
Title: _________________
SYRATECH SECURITY CORPORATION
By:
Name: _________________
Title: __________________
SYRATECH WEST COAST WAREHOUSE CORP.
By:
Name: ____________________
Title: ____________________
175 AMLEGION REVERE REALTY TRUST
By:
Name: ____________________
Title: ____________________
SYRATECH SILVER SALES CORP.
By:
Name: ____________________
Title: ____________________
THL TRANSACTION I CORP.
By:
Name: ____________________
Title: ____________________
-37-
<PAGE>
Confirmed and Accepted, as of the date first above written:
NATIONSBANC CAPITAL MARKETS, INC.
By ______________________________
By _______________________________
CHASE SECURITIES INC.
By _______________________________
By ________________________________
-38-
<PAGE>
SCHEDULE I
PRINCIPAL AMOUNT
OF SENIOR NOTES
UNDERWRITER TO BE PURCHASED
- ----------- ---------------
NationsBanc Capital Markets, Inc. $
Chase Securities Inc.
------------
Total $155,000,000
-39-
<PAGE>
SCHEDULE II
GUARANTORS
NAME OF GUARANTOR STATE OF INCORPORATION
- ----------------- ----------------------
Syratech Holding Corporation Arkansas
Wallace International Silversmiths, Inc. Delaware
Wallace International de P.R., Inc. Delaware
International Silver Company Delaware
International Silver de P.R., Inc. Delaware
PMW Silver de P.R., Inc. Delaware
Towle Manufacturing Company Delaware
Rosemar Silver Company, Inc. Delaware
Towle Holloware, Inc. Delaware
Farberware Inc. Delaware
Silvestri, Inc. Delaware
Silvestri, Inc. of South Carolina South Carolina
Rauch Industries, Inc. North Carolina
Rochard, Inc. North Carolina
Holiday Products, Inc. North Carolina
Northstar Sales Corporation North Carolina
Leonard Florence Associates, Inc. Massachusetts
CHI International, Inc. Maryland
Syratech Security Corporation Massachusetts
Syratech West Coast Warehouse Corp. California
175 Amlegion Revere Realty Trust Massachusetts Trust
Syratech Silver Sales Corp. Georgia
-40-
[L&W Draft Dated March 4, 1997]
================================================================================
SYRATECH CORPORATION
and
SYRATECH HOLDING CORPORATION WALLACE INTERNATIONAL SILVERSMITH, INC.
INTERNATIONAL SILVER COMPANY WALLACE INTERNATIONAL DE P.R., INC.
INTERNATIONAL SILVER DE P.R., INC. PMW SILVER DE P.R., INC.
TOWLE MANUFACTURING COMPANY ROSEMAR SILVER COMPANY, INC.
TOWLE HOLLOWARE, INC. FARBERWARE INC.
SILVESTRI, INC. SILVESTRI, INC. OF SOUTH CAROLINA
RAUCH INDUSTRIES, INC. ROCHARD, INC.
HOLIDAY PRODUCTS, INC. NORTHSTAR SALES CORPORATION
LEONARD FLORENCE ASSOCIATE, INC. CHI INTERNATIONAL, INC.
SYRATECH SECURITY CORPORATION SYRATECH WEST COAST WAREHOUSE CORP.
175 AMLEGION REVERE REALTY TRUST SYRATECH SILVER SALES CORP.
US$205,000,000
___% SENIOR NOTES DUE 2007
-----------------
INDENTURE
Dated as of April __, 1997
-----------------
-----------------
STATE STREET BANK AND TRUST COMPANY
-----------------
Trustee
<PAGE>
================================================================================
*CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1).................................................. 7.10
(a)(2)................................................. 7.10
(a)(3)................................................. N.A.
(a)(4)................................................. N.A.
(a)(5)................................................. 7.10
(b).................................................... 7.10
(c).................................................... N.A.
311 (a)..................................................... 7.11
(b).................................................... 7.11
(c).................................................... N.A.
312 (a)..................................................... 2.05
(b).................................................... 10.03
(c).................................................... 10.03
313 (a)..................................................... 7.06
(b).................................................... 7.06
(c).................................................... 7.06;11.02
(d).................................................... 7.06
314 (a)..................................................... 4.03;11.05
(b).................................................... N.A.
(c)(1)................................................. 11.04
(c)(2)................................................. 11.04
(c)(3)................................................. N.A.
(d).................................................... N.A.
(e).................................................... 11.05
(f).................................................... N.A.
315 (a)..................................................... 7.01
(b).................................................... 7.05,11.02
(c).................................................... 7.01
(d).................................................... 7.01
(e).................................................... 6.11
316 (a)(last sentence)...................................... 2.09
(a)(1)(A).............................................. 6.05
(a)(1)(B).............................................. 6.04
(a)(2)................................................. N.A.
(b).................................................... 6.07
(c).................................................... 2.12
<PAGE>
================================================================================
*CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
317 (a)(1).................................................. 6.08
(a)(2)................................................. 6.09
(b).................................................... 2.04
318 (a)..................................................... 11.01
(b).................................................... N.A.
(c).................................................... 10.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions................................................. 1
Section 1.02. Other Definitions........................................... 12
Section 1.03. Incorporation by Reference of Trust Indenture Act........... 13
Section 1.04. Rules of Construction....................................... 13
ARTICLE 2
THE SENIOR NOTES
Section 2.01. Form and Dating............................................. 14
Section 2.02. Execution and Authentication................................ 14
Section 2.03. Registrar and Paying Agent.................................. 15
Section 2.04. Paying Agent to Hold Money in Trust......................... 15
Section 2.05. Holder Lists................................................ 16
Section 2.06. Transfer and Exchange....................................... 16
Section 2.07. Replacement Senior Notes.................................... 17
Section 2.08. Outstanding Senior Notes.................................... 17
Section 2.09. Treasury Senior Notes....................................... 17
Section 2.10. Temporary Senior Notes...................................... 18
Section 2.11. Cancellation................................................ 18
Section 2.12. Record Date................................................. 18
Section 2.13. CUSIP Number................................................ 18
ARTICLE 3
REDEMPTION AND REPURCHASE
Section 3.01. Notices to Trustee.......................................... 19
Section 3.02. Selection of Senior Notes to Be Redeemed.................... 19
Section 3.03. Notice of Redemption........................................ 19
Section 3.04. Effect of Notice of Redemption.............................. 20
Section 3.05. Deposit of Redemption Price................................. 20
Section 3.06. Senior Notes Redeemed in Part............................... 21
Section 3.07. Optional Redemption......................................... 21
Section 3.08. Mandatory Redemption........................................ 22
Section 3.09. Offer to Purchase by Application of Excess Proceeds......... 22
ARTICLE 4
COVENANTS
Section 4.01. Payment of Senior Notes..................................... 24
Section 4.02. Maintenance of Office or Agency............................. 24
Section 4.03. Reports..................................................... 25
Section 4.04. Compliance Certificate...................................... 25
Section 4.05. Taxes....................................................... 26
Section 4.06. Stay, Extension and Usury Laws.............................. 26
Section 4.07. Restricted Payments......................................... 26
i
<PAGE>
Page
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries................................................ 28
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.. 29
Section 4.10. Asset Sales................................................. 31
Section 4.11. Transactions with Affiliates................................ 32
Section 4.12. Liens....................................................... 32
Section 4.13. Corporate Existence......................................... 32
Section 4.14. Offer to Repurchase Upon Change of Control.................. 33
Section 4.15. Sale and Leaseback Transactions............................. 34
Section 4.16. Limitation on Issuances and Sales of Capital
Stock of Wholly Owned Subsidiaries.......................... 34
Section 4.17. Payments for Consents....................................... 34
Section 4.18. Additional Subsidiary Guarantees............................ 35
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.................... 35
Section 5.02. Successor Corporation Substituted........................... 35
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default........................................... 36
Section 6.02. Acceleration................................................ 38
Section 6.03. Other Remedies.............................................. 39
Section 6.04. Waiver of Past Defaults..................................... 39
Section 6.05. Control by Majority......................................... 39
Section 6.06. Limitation on Suits......................................... 39
Section 6.07. Rights of Holders to Receive Payment........................ 40
Section 6.08. Collection Suit by Trustee.................................. 40
Section 6.09. Trustee May File Proofs of Claim............................ 40
Section 6.10. Priorities.................................................. 41
Section 6.11. Undertaking for Costs....................................... 41
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee........................................... 41
Section 7.02. Rights of Trustee........................................... 42
Section 7.03. Individual Rights of Trustee................................ 43
Section 7.04. Trustee's Disclaimer........................................ 43
Section 7.05. Notice of Defaults.......................................... 43
Section 7.06. Reports by Trustee to Holders............................... 43
Section 7.07. Compensation and Indemnity.................................. 44
Section 7.08. Replacement of Trustee...................................... 44
Section 7.09. Successor Trustee by Merger, etc............................ 45
Section 7.10. Eligibility; Disqualification............................... 45
Section 7.11. Preferential Collection of Claims Against the Company....... 46
ii
<PAGE>
Page
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.... 46
Section 8.02. Legal Defeasance and Discharge.............................. 46
Section 8.03. Covenant Defeasance......................................... 47
Section 8.04. Conditions to Legal or Covenant Defeasance.................. 47
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions....................... 48
Section 8.06. Repayment to the Company.................................... 49
Section 8.07. Reinstatement............................................... 49
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Senior Notes.................. 50
Section 9.02. With Consent of Holders of Senior Notes..................... 50
Section 9.03. Compliance with Trust Indenture Act......................... 52
Section 9.04. Revocation and Effect of Consents........................... 52
Section 9.05. Notation on or Exchange of Senior Notes..................... 52
Section 9.06. Trustee to Sign Amendments, etc............................. 52
ARTICLE 10
SUBSIDIARY GUARANTEES
Section 10.01 Subsidiary Guarantee........................................ 53
Section 10.02 Execution and Delivery of Subsidiary Guarantee.............. 54
Section 10.03 Guarantors May Consolidate, etc., on Certain Terms.......... 54
Section 10.04 Releases Following Sale of Assets........................... 55
Section 10.05 "Trustee" to Include Paying Agent........................... 55
ARTICLE 11
MISCELLANEOUS
Section 11.01 Trust Indenture Act Controls................................ 56
Section 11.02 Notices..................................................... 56
Section 11.03 Communication by Holders with Other Holders................. 57
Section 11.04 Certificate and Opinion as to Conditions Precedent.......... 57
Section 11.05 Statements Required in Certificate or Opinion............... 57
Section 11.06 Rules by Trustee and Agents................................. 58
Section 11.07 No Personal Liability of Directors, Officers, Employees
and Stockholders............................................ 58
Section 11.08 Governing Law............................................... 58
Section 11.09 No Adverse Interpretation of Other Agreements............... 58
Section 11.10 Successors.................................................. 58
Section 11.11 Severability................................................ 58
Section 11.12 Counterpart Originals....................................... 58
Section 11.13 Table of Contents, Headings, etc............................ 59
iii
<PAGE>
EXHIBITS
Exhibit A FORM OF SENIOR NOTE AND TRUSTEE CERTIFICATE OF
AUTHENTICATION
Exhibit B FORM OF SUBSIDIARY GUARANTEE
iv
<PAGE>
INDENTURE dated as of _________ __, 1997 among Syratech Corporation a
Delaware corporation (the "Company"), as issuer, each of Syratech Holding
Corporation, a New York corporation; Wallace International Silversmiths, Inc.,
a Delaware corporation; Wallace International de P.R., Inc., a Delaware
corporation; International Silver Company, a Delaware corporation; International
Silver de P.R., Inc., a Delaware corporation; PMW Silver de P.R., Inc., a
Delaware corporation; Towle Manufacturing Company, a Delaware corporation;
Rosemar Silver Company, Inc., a Delaware corporation; Towle Holloware, Inc., a
Delaware corporation; Farberware Inc., a Delaware corporation; Silvestri, Inc.,
a Delaware a corporation; Silvestri, Inc. of South Carolina, a South Carolina
corporation; Rauch Industries, Inc., a North Carolina corporation; Rochard,
Inc., a North Carolina corporation; Holiday Products, Inc., a North Carolina
corporation; Northstar Sales Corporation, a North Carolina corporation; Leonard
Florence Associates, Inc., a Massachusetts corporation; CHI International, Inc.,
a Maryland corporation; Syratech Security Corporation, a Massachusetts
corporation; Syratech West Coast Warehouse Corp., a California corporation; 175
Amlegion Revere Realty Trust, a Massachusetts Trust; and Syratech Silver Sales
Corp., a Georgia corporation, as guarantors (collectively, the "Subsidiary
Guarantors"); and State Street Bank and Trust Company, as trustee (the
"Trustee").
The Company, the Subsidiary Guarantors and the Trustee agree as follows
for the benefit of each other and for the equal and ratable benefit of the
Holders of the Company's ___% Senior Notes due 2007 (the "Senior Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
<PAGE>
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
of any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by Section 4.14 and/or
Section 5.01 and not by Section 4.10 hereof), and (ii) the issue or sale by the
Company or any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for Net Proceeds in excess of $1.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Subsidiary or by a Subsidiary to the Company or to a Wholly Owned
Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Subsidiary to
the Company or to another Wholly Owned Subsidiary, and (iii) a Restricted
Payment that is permitted by Section 4.07, will be deemed not to be Asset Sales.
"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 capital lease included in such sale and leaseback transaction (including
any period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Board of Directors" means the board of directors, if any, of the
Company or any authorized committee thereof.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, shares of
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the New
Credit
2
<PAGE>
Facility or with any domestic commercial bank having capital and surplus in
excess of $500 million and a Keefe Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above and (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after 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 Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), other than Principals or their Related Parties, (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),
other than the Principals or their Related Parties, 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 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 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 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 share of such Voting Stock of
such surviving or transferee Person (immediately after giving effect to such
issuance). For purposes of this definition, any transfer of an equity interest
of an entity that was formed for the purpose of acquiring Voting Stock of the
Company will be deemed to be a transfer of such portion of such Voting Stock as
corresponds to the portion of the equity of such entity that has been so
transferred.
"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 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 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 Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt
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issuance costs and original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash charges (excluding any such non-cash
charge to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash charges were
deducted in computing such Consolidated Net Income, minus (v) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its 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
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 Subsidiary thereof, (ii) the Net Income of any
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that 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 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 Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date hereof in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount
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and expense and unamortized deferred charges as of such date, all of the
foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors who (i) was a member of such Board of Directors
on the date hereof 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.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 or such other address as the Trustee may give
notice to the Company.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities (including, without limitation, the New Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness under Credit Facilities
outstanding on the date on which Senior Notes are first issued and authenticated
under this Indenture shall be deemed to have been incurred on such date in
reliance on the exception provided in clause (i) of the third paragraph of
Section 4.09.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Senior Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the date hereof, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period,
without duplication, the sum of (i) the consolidated interest expense of such
Person and its Subsidiaries for such period, whether paid or accrued (including,
without limitation, original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the
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interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, 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
(but excluding amortization of debt issuance costs)) and (ii) the consolidated
interest expense of such Person and its Subsidiaries that was capitalized during
such period, and (iii) any interest expense on Indebtedness of another Person
that is guaranteed by such Person or one of its Subsidiaries or secured by a
Lien on assets of such Person or one of its 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 Subsidiaries, 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 Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"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 and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
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"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) each domestic Subsidiary of the Company
and (ii) any other Subsidiary that executes a Subsidiary Guarantee in accordance
with the provisions hereof, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or the values of foreign currencies purchased or received by
the Company or any of its Subsidiaries in the ordinary course of business.
"Holder" means a person in whose name a Senior Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all Indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be (i) the
accreted value thereof, in the case of any Indebtedness that does not require
current payments of interest, and (ii) the principal amount thereof, together
with any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests
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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 Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of the Company, the Company shall
be deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of Section 4.07 hereof.
"Issue Date" means _________ __, 1997.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the Credit Facilities) secured by a Lien on the
asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
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"New Credit Facility" means that certain credit facility, dated as of
__________ __, 1997, by and among the Company and [NationsBank], as agent and a
lender, providing for up to $130 million of revolving credit borrowings,
including any related notes, Guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers" means the Chief Executive Officer, the President, the
Executive Vice President, the Treasurer, any Assistant Treasurer, Controller,
Secretary or any Vice President of the Company.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Subsidiary of the Company in a Person,
if as a result of such Investment (i) such Person becomes a Wholly Owned
Subsidiary of the Company 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 Wholly Owned Subsidiary of
the Company; (d) any Restricted Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.10; (e) any acquisition of assets solely in exchange
for the issuance of Equity Interests (other than Disqualified Stock) of the
Company; and (f) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (g) that are at the time outstanding,
not to exceed $5.0 million.
"Permitted Liens" means (i) Liens on accounts receivable and inventory
securing Indebtedness under the Credit Facilities that are permitted by the
terms hereof to be incurred; (ii) Liens in favor of the Company; (iii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any 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
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by the Company or any Subsidiary of the Company, provided that such Liens were
in existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iii) of the third paragraph of Section 4.09
covering only the assets acquired with such Indebtedness; (vii) Liens existing
on the date hereof; (viii) 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 concluded,
provided that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; and (ix) Liens incurred in
the ordinary course of business of the Company or any Subsidiary of the Company
with respect to obligations that do not exceed $2.5 million 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) 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 Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund
Existing Indebtedness or other Indebtedness of the Company or any of its
Subsidiaries incurred in accordance with this Indenture (other than Indebtedness
incurred in accordance with clauses (i), (vi), (vii), (viii), (ix), (x), (xi) or
(xii) of the third paragraph of Section 4.09 thereof; provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness 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 Senior 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 Senior Notes on terms at least
as favorable to the Holders of Senior Notes 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 by the 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 or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
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" Principals" means Thomas H. Lee Equity III, L.P. and its co-investors
in the Company as of the Issue Date, Thomas H. Lee Foreign Fund III, L.P. and
Thomas H. Lee Company, and any Affiliates of Thomas H. Lee Company.
"Related Party" means, with respect to any Principal, (A) any
controlling stockholder or, 80% (or more) owned Subsidiary of such Principal or
(B) any trust, corporation, partnership or other entity of which the
beneficiaries, stockholders, partners, owners or other Persons beneficially
holding an 80% or more controlling interest consist of such Principal and/or
such other persons referred in the immediately preceding clause (A).
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Notes" means the Company's ___% Senior Notes due 2007 issued
under this Indenture.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of
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which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or of one or more Subsidiaries of such Person
(or any combination thereof).
"Subsidiary Guarantees" means the Guarantees, substantially in the form
of Exhibit B attached hereto, of (i) the Subsidiary Guarantors and (ii) any
other subsidiary that executes a Guarantee in accordance with the provisions of
this Indenture, and their respective successors and assigns.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under
the TIA, except as provided in Section 9.03 hereof.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"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" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction".................................. 4.11
"Asset Sale Offer"....................................... 4.10
"Case"................................................... 6.01
"Change of Control Payment Date"......................... 4.15
"Change of Control Offer"................................ 4.15
"Change of Control Payment".............................. 4.15
"Covenant Defeasance".................................... 8.03
"Custodian".............................................. 6.01
"Event of Default"....................................... 6.01
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"Excess Proceeds"........................................ 4.10
"incur".................................................. 4.09
"Legal Defeasance"....................................... 8.02
"Notice of Default"...................................... 6.01
"Offer Amount"........................................... 3.09
"Offer Period"........................................... 3.09
"Paying Agent"........................................... 2.03
"Payment Default"........................................ 6.01
"Permitted Debt"......................................... 4.09
"Purchase Date".......................................... 3.09
"Registrar".............................................. 2.03
"Restricted Payments".................................... 4.07
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Senior Notes;
"indenture security holder" means a Holder of a Senior Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Senior Notes means the Company or any successor
obligor upon the Senior Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in the
United States;
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(3) references to "generally accepted accounting principles" shall
mean generally accepted accounting principles in effect in the United
States as of the time when and for the period as to which such accounting
principles are to be applied;
(4) "or" is not exclusive;
(5) words in the singular include the plural, and in the plural
include the singular;
(6) provisions apply to successive events and transactions; and
(7) the words "he," "his," and "him" refer to both the masculine and
feminine gender.
ARTICLE 2
THE SENIOR NOTES
SECTION 2.01. FORM AND DATING.
The Senior Notes and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A hereto, which is part of this
Indenture. The Senior Notes may have notations, legends or endorsements approved
as to form by the Company and required by law, stock exchange rules and
agreements to which either of the Company or any Guarantor is subject or usage.
Each Senior Note shall be dated the date of its authentication. The Senior Notes
shall be issuable only in denominations of $1,000 and integral multiples
thereof.
The terms and provisions contained in the Senior Notes and the
Subsidiary Guarantees shall constitute, and are hereby expressly made, a part of
this Indenture and the Company, the Guarantors and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers of the Company shall sign the Senior Notes for the Company
by manual or facsimile signature. An Officer of each Guarantor shall sign the
Subsidiary Guarantee for such Guarantor by manual or facsimile signature.
If an Officer of the Company or a Guarantor whose signature is on a
Senior Note or a Note Guarantee, as the case may be, no longer holds that office
at the time a Senior Note is authenticated, the Senior Note or the Subsidiary
Guarantee, as the case may be, shall nevertheless be valid.
A Senior Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Senior Note has been
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authenticated under this Indenture. The form of Trustee's certificate of
authentication to be borne by the Senior Notes shall be substantially as set
forth in Exhibit A hereto.
The Trustee shall, upon a written order of the Company signed by two
Officers of the Company, authenticate Senior Notes for original issue up to the
aggregate principal amount stated in paragraph 4 of the Senior Notes. The
aggregate principal amount of Senior Notes outstanding at any time may not
exceed such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Senior Notes. An authenticating agent may authenticate
Senior Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Senior Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Senior Notes may be presented for payment ("Paying
Agent"). The Registrar shall keep a register of the Senior Notes and of their
transfer and exchange. The Company may appoint one or more co-registrars and one
or more additional paying agents. The term "Registrar" includes any co-registrar
and the term "Paying Agent" includes any additional paying agent. The Company
may change any Paying Agent or Registrar without prior notice to any Holder. The
Company shall notify the Trustee in writing of the name and address of any Agent
not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company may act as Paying Agent or Registrar.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and agent for service of notices and demands in connection with the
Senior Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, or premium, if any, or interest on the Senior Notes, and will
notify the Trustee of any default by the Company or any Guarantor in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company) shall have no
further liability for the money delivered to the Trustee. If the Company acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent.
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Upon any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Senior Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA s. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Senior Notes, including the aggregate principal amount of the notes held by each
thereof.
SECTION 2.06. TRANSFER AND EXCHANGE.
When Senior Notes are presented to the Registrar with a request to
register the transfer or to exchange them for an equal principal amount of
Senior Notes of other denominations, the Registrar shall register the transfer
or make the exchange if its requirements for such transactions are met;
provided, however, that any Senior Note presented or surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the Registrar and the
Trustee duly executed by the Holder thereof or by his attorney duly authorized
in writing. To permit registrations of transfer and exchanges, the Company shall
issue and the Trustee shall authenticate Senior Notes at the Registrar's
request, subject to such rules as the Trustee may reasonably require.
Neither the Company nor the Registrar shall be required (i) to issue,
register the transfer of or exchange Senior Notes during a period beginning at
the opening of business on a Business Day 15 days before the day of any
selection of Senior Notes for redemption under Section 3.02 and ending at the
close of business on the day of selection, (ii) to register the transfer of or
exchange any Senior Note so selected for redemption in whole or in part, being
redeemed in part or (iii) to register the transfer or exchange of a Senior Note
between the record date and the next succeeding interest payment date.
No service charge shall be made to any Holder of a Senior Note for any
registration of transfer or exchange (except as otherwise expressly permitted
herein), but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than such transfer tax or similar governmental charge payable upon
exchanges pursuant to Sections 2.10, 3.06, or 9.05 hereof, which shall be paid
by the Company).
Prior to due presentment to the Trustee for registration of the
transfer of any Senior Note, the Trustee, any Agent, the Company or any
Guarantor may deem and treat the Person in whose name any Senior Note is
registered as the absolute owner of such Senior Note for the purpose of
receiving payment of principal of, or premium, if any, on such Senior Note
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and for all other purposes whatsoever, whether or not such Senior Note is
overdue, and neither the Trustee, any Agent, the Company or any Guarantor shall
be affected by notice to the contrary.
SECTION 2.07. REPLACEMENT SENIOR NOTES.
If any mutilated Senior Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Senior Note, the Company shall issue and the
Trustee, upon the written order of the Company signed by two Officers of the
Company, shall authenticate a replacement Senior Note if the Trustee's
requirements for replacements of Senior Notes are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Senior Note is replaced. The Company may charge for
its expenses in replacing a Senior Note.
Every replacement Senior Note shall constitute a valid obligation of
the Company and shall evidence the same debt as the Senior Note for it is a
replacement.
SECTION 2.08. OUTSTANDING SENIOR NOTES.
The Senior Notes outstanding at any time are all the Senior Notes
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation and those described in this Section as not outstanding.
Except as set forth in Section 2.09 hereof, a Senior Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Senior
Note.
If a Senior Note is replaced pursuant to Section 2.07 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Senior Note is held by a bona fide purchaser.
If the principal amount of any Senior Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrete.
SECTION 2.09. TREASURY SENIOR NOTES.
In determining whether the Holders of the required principal amount of
Senior Notes have concurred in any direction, waiver or consent, Senior Notes
owned by the Company, any Subsidiary of the Company or any Affiliate of the
Company shall be considered as though not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Senior Notes that a Trustee knows are so
owned shall be so considered. Notwithstanding the foregoing, Senior Notes that
are to be acquired by the Company, any Subsidiary of the Company or any
Affiliate of the Company pursuant to an exchange offer, tender offer or other
agreement shall not be deemed
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to be owned by the Company, a Subsidiary of the Company or an Affiliate of the
Company until legal title to such Senior Notes passes to the Company, such
Subsidiary or such Affiliate, as the case may be.
SECTION 2.10. TEMPORARY SENIOR NOTES.
Until definitive Senior Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Senior Notes upon a written
order of the Company signed by two Officers of the Company. Temporary Senior
Notes shall be substantially in the form of definitive Senior Notes but may have
variations that the Company considers appropriate for temporary Senior Notes and
as shall be reasonably acceptable to the Trustee. Without unreasonable delay,
the Company shall prepare and the Trustee, upon a written order of the Company
signed by two Officers of the Company, shall authenticate definitive Senior
Notes in exchange for temporary Senior Notes. Holders of temporary Senior Notes
shall be entitled to all of the benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Senior Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Senior Notes surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Senior Notes surrendered
for registration of transfer, exchange, payment, replacement or cancellation and
shall destroy canceled Senior Notes (subject to the record retention requirement
of the Exchange Act). Certification of the destruction of all canceled Senior
Notes shall be delivered to the Company. The Company may not issue new Senior
Notes to replace Senior Notes that it has paid or that have been delivered to
the Trustee for cancellation.
SECTION 2.12. RECORD DATE.
The record date for purposes of determining the identity of Holders of
the Senior Notes entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in TIA s. 316(c).
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Senior Notes may use a "CUSIP" number and,
if it does so, the Trustee shall use the CUSIP number in notices of redemption
or exchange as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Senior Notes and that reliance may be
placed only on the other identification numbers printed on the Senior Notes. The
Company will promptly notify the Trustee of any change in the CUSIP number.
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ARTICLE 3
REDEMPTION AND REPURCHASE
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Senior Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Senior Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF SENIOR NOTES TO BE REDEEMED.
If less than all of the Senior Notes are to be redeemed at any time,
the Trustee shall select the Senior Notes to be redeemed among the Holders of
the Senior Notes in compliance with the requirements of the principal national
securities exchange, if any, on which the Senior Notes are listed or, if the
Senior Notes are not so listed, on a pro rata basis, by lot or in accordance
with any other method the Trustee considers fair and appropriate; provided that
Senior Notes redeemed pursuant to Section 3.07(b) hereof shall be selected on a
pro rata basis. In the event of partial redemption by lot, the particular Senior
Notes to be redeemed shall be selected, unless otherwise provided herein, not
less than 30 nor more than 60 days prior to the redemption date by the Trustee
from the outstanding Senior Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Senior
Notes selected for redemption and, in the case of any Senior Note selected for
partial redemption, the principal amount thereof to be redeemed. Senior Notes
and portions of Senior Notes selected shall be in amounts of $1,000 or whole
multiples of $1,000; except that if all of the Senior Notes of a Holder are to
be redeemed, the entire outstanding amount of Senior Notes held by such Holder,
even if not a multiple of $1,000, shall be redeemed. Except as provided in the
preceding sentence, provisions of this Indenture that apply to Senior Notes
called for redemption also apply to portions of Senior Notes called for
redemption.
In the event the Company is required to make an offer to redeem Senior
Notes pursuant to Sections 3.09 and 4.10 hereof and the amount of the Net
Proceeds from the Asset Sale is not evenly divisible by $1,000, the Trustee
shall promptly refund to the Company at the address set forth in Section 11.02
hereof of any remaining Net Proceeds.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Senior Notes are to be redeemed at its registered address.
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The notice shall identify the Senior Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Senior Note is being redeemed in part, the portion of the
principal amount of such Senior Note to be redeemed and that, after the
redemption date, upon surrender of such Senior Note, a new Senior Note or
Senior Notes in principal amount equal to the unredeemed portion shall be
issued upon cancellation of the original Senior Note;
(d) the name and address of the Paying Agent;
(e) that Senior Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Senior Notes called for redemption ceases to accrue on
and after the redemption date;
(g) the paragraph of the Senior Notes and/or Section of this Indenture
pursuant to which the Senior Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Senior
Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Senior Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Senior Notes to be redeemed on
that date. The Trustee or the Paying
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Agent shall promptly return to the Company any money deposited with the Trustee
or the Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accrued interest on, all Senior Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Senior
Notes or the portions of Senior Notes called for redemption, whether or not such
Senior Notes are presented for payment. If a Senior Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Senior Note was registered at the close of business on such record date. If
any Senior Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Senior
Notes and in Section 4.01 hereof.
SECTION 3.06. SENIOR NOTES REDEEMED IN PART.
Upon surrender of a Senior Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Senior Note
equal in principal amount to the unredeemed portion of the Senior Note
surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as otherwise provided in subsection (b) of this Section
3.07, the Company shall not have the option to redeem the Senior Notes pursuant
to this Section 3.07 prior to _______ __, 2002. Thereafter, the Company shall
have the option to redeem the Senior Notes, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon, if any, to the applicable redemption date, if redeemed during
the twelve-month period beginning on _______ __ of the years indicated below:
Year Percentage
2002.........................................______%
2003.........................................______%
2004.........................................______%
2005 and thereafter..........................100.00%
(b) At any time on or before _______ __, 2000, the Company may, at its
option, also redeem up to 37 1/2% of the aggregate principal amount of Senior
Notes originally issued hereunder at a redemption price of ____% of the
principal amount thereof, plus accrued and
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unpaid interest thereon, if any, to the redemption date, with the net cash
proceeds of a public offering of the common stock of the Company provided that
at least $100.0 million in aggregate principal amount of Senior Notes remain
outstanding immediately after the occurrence of such redemption; and provided,
further, that such redemption shall occur within 45 days of the date of the
closing such public offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.14 hereof, the Company
shall not be required to make mandatory repurchase, redemption or sinking fund
payments with respect to the Senior Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an Asset Sale Offer, they shall follow the procedures
specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Senior Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Senior Notes tendered in response to the
Asset Sale Offer. Payment for any Senior Notes so purchased shall be made in the
same manner as interest payments are made.
The Company shall comply with any tender offer rules under the Exchange
Act which may then be applicable, including Rule 14e-1, in connection with any
offer required to be made by the Company to repurchase the Senior Notes as a
result of an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 3.09,
the Company shall comply with the applicable securities laws or regulations and
shall not be deemed to have breached its obligations hereunder by virtue
thereof.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Senior Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Senior Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The
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notice shall contain all instructions and materials necessary to enable such
Holders to tender Senior Notes pursuant to the Asset Sale Offer. The Asset Sale
Offer shall be made to all Holders. The notice, which shall govern the terms of
the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Senior Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment, any
Senior Note accepted for payment pursuant to the Asset Sale Offer shall
cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Senior Note purchased pursuant to
an Asset Sale Offer may only elect to have all of such Senior Note
purchased and may not elect to have only a portion of such Senior Note
purchased;
(f) that Holders electing to have a Senior Note purchased pursuant to
any Asset Sale Offer shall be required to surrender the Senior Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Senior Note completed, or transfer by book-entry transfer, to the
Company, a depositary (if appointed by the Company) or a Paying Agent at
the address specified in the notice at least three days before the Purchase
Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receive,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Senior Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Senior
Note purchased;
(h) that, if the aggregate principal amount of Senior Notes
surrendered by Holders exceeds the Offer Amount, the Company shall select
the Senior Notes to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by the Company so that only Senior Notes in
denominations of $1,000, or integral multiples thereof, shall be
purchased); and
(i) that Holders whose Senior Notes were purchased only in part shall
be issued new Senior Notes equal in principal amount to the unpurchased
portion of the Senior Notes surrendered (or transferred by book-entry
transfer).
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On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Senior Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Senior Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Senior Notes or portions thereof were accepted for payment by the Company
in accordance with the terms of this Section 3.09. The Company, the depositary
or the Paying Agent, as the case may be, shall promptly (but in any case not
later than five days after the Purchase Date) mail or deliver to each tendering
Holder an amount equal to the purchase price of the Senior Notes tendered by
such Holder and accepted by the Company for purchase, and the Company shall
promptly issue a new Senior Note, and the Trustee, upon written request from the
Company shall authenticate and mail or deliver such new Senior Note to such
Holder, in a principal amount equal to any unpurchased portion of the Senior
Note surrendered. Any Senior Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof. No repurchase of Senior Notes under this
Section 3.09 shall be deemed to be a redemption of Senior Notes.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF SENIOR NOTES.
The Company shall pay or cause to be paid the principal of and premium,
if any, and interest on the Senior Notes on the dates and in the manner provided
in the Senior Notes. Principal, and premium, if any, shall be considered paid on
the date due if the Paying Agent, if other than the Company, holds as of 10:00
a.m. Eastern Time on the due date money deposited by the Company in immediately
available funds and designated for and sufficient to pay all principal, and
premium, if any, then due. Such Paying Agent shall return to the Company, no
later than five Business Days following the date of payment, any money
(including accrued interest) that exceeds such amount of principal of, premium,
if any, and interest required to be paid on the Senior Notes.
The Company shall pay interest (including post-petition interest in any
proceeding under any U.S. Bankruptcy Law) on overdue principal and premium, if
any, at the rate equal to 1% per annum in excess of the then applicable interest
rate on the Senior Notes to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Senior Notes may be surrendered
for registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Senior Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the
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Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Senior Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligations to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Senior Notes are outstanding, the Company will furnish to 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 Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company were required to file
such reports. In addition, whether or not required by the rules and regulations
of the SEC, the Company will file a copy of all such information and reports
with the SEC for public availability (unless the SEC will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. The Company shall also comply with the
provisions of TIA s. 314(a).
(b) The Company shall provide the Trustee with a sufficient number of
copies of all reports and other documents and information that the Trustee may
be required to deliver to the Holders of the Senior Notes under this Section
4.03.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company, the Guarantors and the Company's Subsidiaries
have kept, observed, performed and fulfilled their obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in
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existence by reason of which payments on account of the principal of the Senior
Notes is prohibited or if such event has occurred, a description of the event
and what action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any of the financial provisions of Sections 4.01, 4.07, 4.08, 4.09 or 4.12
hereof or of Article 5 of this Indenture or, if any such violation has occurred,
specifying the nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly to any Person for
any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Senior Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Senior Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company and each of the Guarantors covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefits or advantages of any such law, and covenants that
it shall not, by resort to any such law, hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its 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 Subsidiaries'
Equity Interests (including, without limitation, any payment in connection with
any merger or consolidation involving the Company) (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of the
Company; (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
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Interests of the Company, any Subsidiary of the Company or any Affiliate of the
Company (other than any such Equity Interests owned by the Company or any Wholly
Owned Subsidiary); (iii) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is pari passu with or subordinated to the Senior Notes (other than the Senior
Notes), except a payment of interest or principal at Stated Maturity; 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
Section 4.09; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date
hereof (excluding Restricted Payments permitted by clause (ii) of the next
succeeding paragraph), is less than the sum of (i) 50% of the Consolidated
Net Income of the Company for the period (taken as one accounting period)
from the beginning of the first fiscal quarter commencing after the date
hereof to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is
a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
cash proceeds received by the Company from the issue or sale since the date
hereof of Equity Interests of the Company 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 Subsidiary of the Company and other
than Disqualified Stock or convertible debt securities that have been
converted into Disqualified Stock), plus (iii) to the extent that any
Restricted Investment that was made after the date hereof is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost
of disposition, if any) and (B) the initial amount of such Restricted
Investment.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness of Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a 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
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redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (c) (ii) of the preceding paragraph;
(iii) the defeasance, redemption, repurchase or other acquisition of pari
passu or subordinated Indebtedness with the net cash proceeds from an incurrence
of Permitted Refinancing Indebtedness;
(iv) the payment of any dividend by a Subsidiary of the Company to the
holders of its common stock on a pro rata basis; and
(v) the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the Company or any Subsidiary of the Company held by
any member of the Company's (or any of its Subsidiaries') management upon
termination of employment; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$750,000 in any twelve-month period (with unused amounts in any calendar year
being available for such purposes to the next two succeeding calendar years,
with a maximum of $1,500,000 so available in any one year) and no Default or
Event of Default shall have occurred and be continuing immediately after such
transaction.
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
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $5.0 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 this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal upon which
the fair market value of any non-cash Restricted Payment was based.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its 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 Subsidiary to
(i)(a) pay dividends or make any other distributions to the Company or any of
its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
Indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or
advances to the Company or any of its Subsidiaries or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) applicable law,
(b) any instrument governing Indebtedness or Capital Stock of a Person acquired
by the Company or any of its 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
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terms of the Indenture to be incurred, (c) by reason of customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (d) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above solely on the property so acquired, or
(e) 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.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and that the
Company shall not issue any Disqualified Stock or sell or otherwise directly or
indirectly transfer any preferred stock of any of its Subsidiaries to any other
person and shall not permit any of its Subsidiaries to issue any shares of
preferred stock other than to the Company; provided, however, that the Company
may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal 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 to 1, determined
on a pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The Company shall not incur any Indebtedness that is contractually
subordinated to any other Indebtedness of the Company unless such Indebtedness
is also contractually subordinated to the Senior Notes on substantially
identical terms; provided, however, that no Indebtedness of the Company shall be
deemed to be contractually subordinated to any other Indebtedness of the Company
solely by virtue of being unsecured.
The provisions of this first paragraph of this Section 4.09 will not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company of revolving credit Indebtedness under
the Credit Facilities; provided that the aggregate principal amount of all
revolving credit Indebtedness and letters of credit outstanding under all Credit
Facilities after giving effect to such incurrence, does not exceed an amount
equal to $130.0 million less the aggregate amount of all Net Proceeds of Assets
Sales applied to permanently repay any such Indebtedness pursuant to Section
4.10 hereof.
(ii) the incurrence by the Company and its Subsidiaries of Indebtedness
represented by the Senior Notes and the Subsidiary Guarantees, respectively;
(iii) the incurrence by the Company or any of its 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
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of construction or improvement of property, plant or equipment used in the
business of the Company or such Subsidiary, in an aggregate principal amount not
to exceed $10.0 million at any time outstanding;
(iv) the incurrence by any corporation that becomes a Subsidiary after the
Issue Date of Acquired Debt, which Indebtedness is existing at the time such
corporation becomes a Subsidiary; provided, however, that (A) immediately after
giving effect to such corporation becoming a Subsidiary the Company could incur
at least $1.00 of additional Indebtedness (other than Permitted Debt) pursuant
to the Fixed Charge Coverage Ratio test set forth in the first paragraph of this
Section 4.09, (B) such Indebtedness is without recourse to the Company or to any
Subsidiary or to any of their respective properties or assets other than the
Person becoming a Subsidiary or its properties and assets and (C) such
Indebtedness was not incurred as a result of or in connection with or in
contemplation of such entity becoming a Subsidiary;
(v) the incurrence by the Company or any of its Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are used
to refund, refinance or replace, Indebtedness that is permitted by this
Indenture to be incurred;
(vi) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Wholly
Owned Subsidiaries; provided, however, that (i) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinate to the prior
payment in full in cash of all Obligations with respect to the Senior Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Company or a Wholly
Owned Subsidiary and (B) any sale or other transfer of any such Indebtedness to
a Person who is neither the Company nor a Wholly Owned Subsidiary shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by the
Company or such Subsidiary, as the case may be;
(vii) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging currency risk or interest rate
risk with respect to any floating rate Indebtedness that is permitted by the
terms of this Indenture to be outstanding;
(viii) the Guarantee by any of the Guarantors of Indebtedness of the
Company or another Guarantor that is permitted to be incurred by this Indenture;
(ix) Indebtedness for letters of credit relating to workers' compensation
claims and self-insurance or similar requirements in the ordinary course of
business;
(x) Indebtedness arising from Guarantees of Indebtedness of the Company or
any Subsidiary or other agreements of the Company or a Subsidiary providing for
indemnification, adjustment of purchase price or similar obligations, in each
case, incurred or assumed in connection with the disposition of any business,
assets or Subsidiary, other than Guarantees of Indebtedness incurred by any
Person acquiring all or any portion of such business, assets or Subsidiary for
the purpose of financing such acquisition, provided that the maximum aggregate
liability in respect all such Indebtedness shall at no time exceed the gross
proceeds actually received by the Company and its Subsidiaries in connection
with such disposition;
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(xi) obligations in respect of performance bonds and completion guarantees
provided by the Company or any Subsidiary in the ordinary course of business;
and
(xii) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness in an aggregate principal amount at any time outstanding
not to exceed $10.0 million.
For purposes of determining compliance with this Section 4.09, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09 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 and the accretion of
accreted value will not be deemed to be an incurrence of Indebtedness for
purposes of this Section 4.09.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Subsidiaries to,
consummate an Asset Sale unless (i) the Company (or the Subsidiary, as the case
may be) receives consideration at the time of such Asset Sale at least equal to
the fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration received therefor by the Company or such Subsidiary is in
the form of cash.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, (a) to permanently
reduce indebtedness under the Credit Facilities (and to correspondingly reduce
commitments with respect thereto) or (b) to acquire a controlling interest in
another business, to make a capital expenditure or to acquire other long-term
assets, in each case, in the same or a similar line of business as the Company
is engaged in on the date hereof. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce Indebtedness under the Credit
Facilities or otherwise invest such Net Proceeds in any manner that is not
prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company shall make an offer to all Holders
(an "Asset Sale Offer") to purchase the maximum principal amount of Senior 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 thereon, if any, to the date of purchase, in accordance with the
procedures set forth in this Indenture. To the extent that the aggregate amount
of Senior Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Senior Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Senior 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.
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SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of
their respective 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 (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 Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Subsidiary with an unrelated Person and (ii)
the Company delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
and (b) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $7.5 million, an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing; provided that (v) any employment agreement entered
into by the Company or any of its Subsidiaries or any employee benefit plan
available to employees of the Company generally, in each case, in the ordinary
course of business and consistent with the past practice of the Company or such
Subsidiary, (w) transactions between or among the Company and/or its
Subsidiaries, (x) Restricted Payments (other than Restricted Investments) that
are permitted by Section 4.07, (y) investment banking and management fees in an
aggregate amount no greater than $450,000 in any calendar year (plus
reimbursement of expenses) to be paid by the Company to Thomas H. Lee Company
and (z) a cash fee of $3.0 million payable by the Company to Thomas H. Lee
Company on the date hereof, in each case, shall not be deemed Affiliate
Transactions.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired, or on any income or profits therefrom or
assign or convey any right to receive income therefrom, except Permitted Liens.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Articles 5 and 10 hereof, the Company and each of the
Guarantors shall do or cause to be done all things necessary to preserve and
keep in full force and effect (i) its corporate existence, and the corporate,
partnership or other existence of each of its Subsidiaries, in accordance with
the respective organizational documents (as the same may be amended from time to
time) of the Company, such Guarantor or any such Subsidiary and (ii) the rights
(charter and statutory), licenses and franchises of the Company, each of the
Guarantors and its Subsidiaries; provided, however, that the Company and each of
the Guarantors shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of its
Subsidiaries, if the Board of Directors shall determine that the
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preservation thereof is no longer desirable in the conduct of the business of
the Company, such Guarantor and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder 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 Senior 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 thereon, to the date of purchase (the "Change of Control Payment").
Within ten days following any Change of Control, the Company shall mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Senior Notes pursuant to the
procedures described in this Section and described in such notice. The notice
will state: (1) that the Change of Control Offer is being made pursuant to this
Section 4.14 and that all Senior Notes tendered will be accepted for payment;
(2) the purchase price and the purchase date, which shall be at least 30 but not
more than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"); (3) that any Senior Note not tendered will continue to accrue
interest; (4) that, unless the Company defaults in the payment of the Change of
Control Payment, all Senior Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control Payment
Date; (5) that Holders electing to have any Senior Notes purchased pursuant to a
Change of Control Offer will be required to surrender the Senior Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Senior
Notes completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day preceding the Change of
Control Payment Date; (6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on
the second Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Senior Notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have the Senior Notes
purchased; and (7) that Holders whose Senior Notes are being purchased only in
part will be issued new Senior Notes equal in principal amount to the
unpurchased portion of the Senior Notes surrendered, which unpurchased portion
must be equal to $1,000 in principal amount or an integral multiple thereof. The
Company shall comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Senior
Notes as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Senior 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
Senior Notes or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
each Holder so tendered the Change of Control Payment for such Senior Notes, and
the Trustee shall promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new
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Senior Note equal in principal amount to any unpurchased portion of the Senior
Notes surrendered, if any; provided that each such new Senior Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in Sections 4.14(a) and 4.14(b) hereof and purchases all Senior Notes
validly tendered and not withdrawn under such Change of Control Offer.
SECTION 4.15. SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its Subsidiaries to,
enter into any sale and leaseback transaction; provided that the Company or one
of its Subsidiaries may enter into a sale and leaseback transaction if (i) the
Company or such Subsidiary could have (a) incurred Indebtedness in an amount
equal to the Attributable Debt relating to such sale and leaseback transaction
pursuant to Section 4.09 and (b) incurred a Lien to secure such Indebtedness
pursuant to Section 4.12, (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, Section 4.10.
SECTION 4.16. LIMITATION ON ISSUANCES AND SALES OF CAPITAL
STOCK OF WHOLLY OWNED SUBSIDIARIES.
Except to the extent permitted by Section 4.07 hereof, the Company (i)
shall not, and shall not permit any Wholly Owned Subsidiary to, transfer,
convey, sell, lease or otherwise dispose of any Capital Stock of any Wholly
Owned Subsidiary to any Person (other than the Company or a Wholly Owned
Subsidiary), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Wholly Owned Subsidiary and (b)
the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with Section 4.10, and (ii) shall not
permit any Wholly Owned Subsidiary of the Company to issue any of its Equity
Interests (other than, if necessary, shares of its Capital Stock constituting
directors' qualifying shares) to any Person other than to the Company or a
Wholly Owned Subsidiary.
SECTION 4.17. PAYMENTS FOR CONSENTS.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Senior Notes unless such consideration is offered to be paid or is paid
to all Holders that consent, waiver or agree to amend in the time frame set
forth in the solicitation documents relating to such consent, waiver or
agreement.
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SECTION 4.18. ADDITIONAL SUBSIDIARY GUARANTEES.
(a) The Company shall not permit any of its Subsidiaries that is not a
Guarantor to guarantee or secure through the granting of Liens the payment of
any Indebtedness of the Company or any Guarantor and (b) the Company shall not
and shall not permit any of its Subsidiaries to pledge any intercompany notes
representing obligations of any of its Subsidiaries, to secure the payment of
any Indebtedness of the Company or any Guarantor, in each case unless such
Subsidiary, the Company and the Trustee execute and deliver a supplemental
indenture evidencing such Subsidiary's Guarantee (providing for the
unconditional Guarantee by such Subsidiary, on a senior basis, of the Senior
Notes).
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate, or merge with or into (whether or
not the Company is the surviving corporation) or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation, or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Senior
Notes and this Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately after such
transaction, no Default or Event of Default exists; (iv) each of the Guarantors
confirms its obligations under the Subsidiary Guarantees and this Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee and (v) except in the case of a merger of the Company with or into a
Wholly Owned Subsidiary of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) will, at the
time of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance
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or other disposition is made shall succeed to, and be substituted for (so that
from and after the date of such consolidation, merger, sale, lease, conveyance
or other disposition, the provisions of this Indenture referring to the
"Company" shall refer instead to the successor corporation and not to the
Company, other than for purposes of calculating Consolidated Net Income in
connection with Section 4.07) and may exercise every right and power of the
Company under this Indenture with the same effect as if such successor Person
had been named as the Company herein; provided, however, that the predecessor
Company shall not be relieved from the obligation to pay the principal of, and
premium, if any, and interest on the Senior Notes except in the case of a sale
of all of the Company's assets that meets the requirements of Section 5.01
hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an "Event of Default":
(i) default by the Company in the payment of interest on any Senior
Note when the same becomes due and payable the Default continues for a
period of 30 days;
(ii) default by the Company in the payment of the principal of any
Senior Note (or premium, if any) when the same becomes due and payable at
maturity, upon redemption or otherwise;
(iii) failure by the Company to comply with Sections 4.07, 4.09, 4.10,
4.14 and 4.18 hereof;
(iv) failure by the Company to comply with any of its agreements in
this Indenture or the Senior Notes for 60 days after receiving the notice
specified below;
(v) default by the Company 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
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries), whether such Indebtedness or guarantee now exists, or
is created after the date hereof, 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 $10.0 million or more;
(vi) failure by the Company or any of its Subsidiaries to pay final
judgments for the payment of money entered by a court or courts of
competent jurisdiction against the Company or any of its Subsidiaries and
such judgment or judgments are not paid,
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discharged or stayed for a period of 60 days, provided that the aggregate
of all such undischarged judgments exceeds $10.0 million;
(vii) except as permitted by this Indenture, any Subsidiary 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 or any Guarantor,
or any Person acting on behalf of any Guarantor, shall deny or disaffirm
its obligations under its Subsidiary Guarantee.
(viii) the Company or any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of U.S. Bankruptcy Law:
(a) commences a voluntary Case,
(b) consents to the entry of an order for relief against it in an
involuntary Case,
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(d) makes a general assignment for the benefit of its creditors,
or
(e) generally is not paying its debts as they become due; or
(ix) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary in an involuntary Case;
(b) appoints a Custodian of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary or for all or substantially
all of the property of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary; or
(c) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary; and, in each case,
the order or decree remains unstayed and in effect for 60 consecutive
days; or
The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law. The term "Case" means an
application, petition, action, case or other proceeding (including the filing of
a notice of intention to file a proposal) before any court, tribunal or other
governmental authority under any applicable Bankruptcy Law (foreign or
domestic).
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A Default under clause (iv) is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in principal amount
of the then outstanding Senior Notes notify the Company and the Trustee, of the
Default and the Company does not cure the Default within 60 days after receipt
of the notice. The notice must specify the Default, demand that it be remedied
and state that the notice is a "Notice of Default."
In the case of any Event of Default pursuant to the provisions of this
Section 6.01 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 Senior Notes pursuant to Section 3.07 hereof, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Senior Notes. If an Event
of Default occurs prior to _______ __, 2002 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Senior Notes prior to _______
__, 2002 pursuant to Section 3.07 hereof, then the premium, as discussed below,
shall become immediately due and payable to the extent permitted by law upon the
acceleration of the Senior Notes. The premium payable for purposes of this
paragraph for each of the years beginning on _______ __ of the years set forth
below shall be as set forth in the following table expressed as a percentage of
the amount that would otherwise be due but for the provisions of this sentence,
plus accrued interest, if any, to the date of payment:
Year Percentage
1997. . . . . . . . . . . . . . . . . . . . . . . ______%
1998. . . . . . . . . . . . . . . . . . . . . . . ______%
1999. . . . . . . . . . . . . . . . . . . . . . . ______%
2000. . . . . . . . . . . . . . . . . . . . . . . ______%
2001. . . . . . . . . . . . . . . . . . . . . . . ______%
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (viii) or (ix) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Senior Notes may declare all the Senior Notes to be due and payable
immediately. Upon any such declaration, the Senior Notes shall become due and
payable immediately. Notwithstanding the foregoing, if an Event of Default
specified in clause (viii) or (ix) of Section 6.01 hereof occurs with respect to
the Company, any of its Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary, all
outstanding Senior Notes shall be due and payable immediately without further
action or notice. The Holders of a majority in aggregate principal amount of the
then outstanding Senior Notes by written notice to the Trustee may on behalf of
all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived. Except
as provided in Section
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6.01, in the event of any such acceleration of Senior Notes, the Company shall
become obligated to pay the aggregate principal amount of the Senior Notes
immediately.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, and premium, if any,
on the Senior Notes or to enforce the performance of any provision of the Senior
Notes, this Indenture or the Subsidiary Guarantees.
The Trustee may maintain a proceeding even if it does not possess any
of the Senior Notes or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Senior Notes by notice to the Trustee may on behalf of the
Holders of all of the Senior Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of interest on, or the principal of, or premium of, if any, the
Senior Notes. Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Senior Notes may direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture that the Trustee determines may be
unduly prejudicial to the rights of other Holders or that may involve the
Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the
Senior Notes only if:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Senior Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
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(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Senior Notes do not give the Trustee a
direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal, premium, if any, any interest on the
Senior Note, on or after the respective due dates expressed in the Senior Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, and premium, if any, and interest remaining unpaid on the Senior
Notes and interest on overdue principal and, to the extent lawful, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Senior Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization,
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arrangement, adjustment or composition affecting the Senior Notes or the rights
of any Holder, or to authorize the Trustee to vote in respect of the claim of
any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders for amounts due and unpaid on the Senior Notes for
principal, and premium, if any, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Senior Notes for
principal, and premium, if any, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Senior Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
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(i) the Trustee need perform only those duties that are specifically
set forth in this Indenture; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture and to
confirm the correctness of all mathematical computations.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii)the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section and the requirements of the TIA.
(e) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely upon any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith and without
negligence in reliance on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
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(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith and without negligence that it believes to be authorized or
within the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Senior Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Senior Notes, it shall not be accountable for the
Company's use of the proceeds from the Senior Notes or any money paid to the
Company or upon the Company's direction under any provision of this Indenture,
it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee, and it shall not be responsible for any
statement of the Company in this Indenture or any statement in the Senior Notes
or any other document in connection with the sale of the Senior Notes or
pursuant to this Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders a notice of the Default
or Event of Default within 45 days after it occurs. Except in the case of a
Default or Event of Default in payment of principal of, or premium, if any, or
interest on any Senior Note the Trustee may withhold the notice if and so long
as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with the May 15 following
the date hereof, and for so long as Senior Notes remain outstanding, the
Trustee shall mail to the Holders a brief report dated as of such reporting
date that complies with TIA s. 313(a). The Trustee also shall comply with
TIA s. 313(b). The Trustee shall also transmit by mail all reports as required
by TIA s. 313(c).
Commencing at the time this Indenture is qualified under the TIA, a
copy of each report at the time of its mailing to the Holders shall be mailed to
the Company and filed with the SEC and each stock exchange on which the Senior
Notes are listed in accordance with TIA s. 313(d).
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The Company shall promptly notify the Trustee when the Senior Notes are listed
on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable disbursements, advances and expenses incurred by it.
Such expenses shall include the reasonable compensation, disbursements and
expenses of the Trustee's agents and counsel, except such compensation,
disbursements and expenses as may be attributable to its negligence or bad
faith.
The Company shall indemnify the Trustee against any loss, liability or
expense incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, except as set forth in the
next paragraphs. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. The Company shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Senior Notes on all money or property
held or collected by the Trustee, except that held in trust to pay principal and
interest on particular Senior Notes. Such Lien shall survive the satisfaction
and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(viii) or (ix) hereof occurs, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign and be discharged from the trust hereby created
by so notifying the Company. The Holders of a majority in principal amount of
the then outstanding Senior Notes may remove the Trustee by so notifying the
Trustee and the Company. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
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(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Senior Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Senior
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10, such Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to the Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
The final paragraph of this Section shall not be operative as a part of
this Indenture until this Indenture is qualified under the TIA and until such
qualification this Indenture shall be construed as if said paragraph were not
contained herein.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $50 million
as set forth in its most recent published annual report of condition.
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This Indenture shall always have a Trustee who satisfies the
requirements of TIA s. 310(a)(1), (2) and (5). The Trustee is subject to
TIA s. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee is subject to TIA s. 311(a), excluding any creditor
relationship listed in TIA s. 311(b). A Trustee that has resigned or been
removed shall be subject to TIA s. 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Senior Notes
upon compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
deemed to have been discharged from their respective obligations with respect to
all outstanding Senior Notes and Subsidiary Guarantees on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Senior Notes, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Senior Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Senior Notes to receive solely from the trust fund described in
Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest on such Senior Notes
when such payments are due from the funds held by the Trustee in the trust, (b)
the Company's and the Guarantors' obligations with respect to such Senior Notes
under Sections 2.04, 2.06, 2.07, 2.10 and 4.02 hereof, (c) the rights, powers,
trusts, duties and immunities of the Trustee under this Indenture and the
Company's obligations in connection therewith and (d) the obligations of the
Company under this Article Eight. Subject to compliance with this Article Eight,
the Company may exercise its option under this Section 8.02 notwithstanding the
prior exercise of its option under Section 8.03 hereof.
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SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.18 and Article 5 hereof with respect to
the outstanding Senior Notes on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"), and the Senior Notes
shall thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Senior Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Senior
Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.01 hereof,
but, except as specified above, the remainder of this Indenture and such Senior
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(iii) through 6.01(vii) hereof shall not constitute Events of
Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Senior Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
on the outstanding Senior Notes on the stated maturity for payment thereof
or on the applicable redemption date, as the case may be, and the Company
must specify whether the Senior Notes are being defeased to maturity or to
a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date hereof, there has been a change in
the applicable federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the Holders
of the outstanding Senior Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will
be subject
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to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of
the outstanding Senior Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of
the proceeds of which will be used to defease the Senior Notes pursuant to
this Article Eight concurrently with such incurrence) or insofar as
Sections 6.01(viii) or 6.01(ix) hereof is concerned, at any time in the
period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Subsidiaries is a parties or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Senior
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Senior Notes and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as Paying
Agent) as the Trustee may determine, to the Holders of such Senior Notes of all
sums due and to become due
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thereon in respect of principal, premium, if any, and interest, but such money
need not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Senior
Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.06. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, or premium, if
any, or interest on any Senior Note and remaining unclaimed for two years after
such principal, and premium, if any, or interest has become due and payable
shall be paid to the Company on its request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Senior Note shall
thereafter, as a secured creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. dollars or
non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Senior
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Senior Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Senior Notes to receive such payment from
the money held by the Trustee or Paying Agent.
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ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF SENIOR NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Senior Notes without the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes;
(c) to provide for the assumption of the Company's and the Guarantors'
obligations to the Holders in the case of a merger, consolidation or sale
of all or substantially all of the assets pursuant to Article Five hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal rights
hereunder of any Holder;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that adversely affects its own rights,
duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF SENIOR NOTES.
Except as provided below in this Section 9.02, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees and the Senior Notes with the consent of the Holders of at
least a majority in principal amount of the Senior Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Senior Notes), and, subject to
Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other
than a Default or Event of Default in the payment of the principal of, or
interest on, the Senior Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture, the Subsidiary Guarantees or the Senior Notes may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Senior Notes (including consents obtained in connection with a tender offer or
exchange offer for the Senior Notes).
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Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders as aforesaid, and upon receipt by the
Trustee of the documents described in Section 9.06 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture adversely affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amended or supplemental Indenture
or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority
in aggregate principal amount of the Senior Notes then outstanding may waive
compliance in a particular instance by the Company or any Guarantor with any
provision of this Indenture or the Senior Notes. However, without the consent of
each Holder affected, an amendment or waiver may not (with respect to any Senior
Notes held by a non-consenting Holder):
(a) reduce the principal amount of Senior Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Senior
Note or alter or waive any of the provisions with respect to the redemption
of the Senior Notes except as provided above with respect to Sections 3.09,
4.10 and 4.14 hereof;
(c) reduce the rate of or change the time for payment of interest on
any Senior Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on, the Senior Notes (except a rescission
of acceleration of the Senior Notes by the Holders of at least a majority
in aggregate principal amount of the then outstanding Senior Notes and a
waiver of the payment default that resulted from such acceleration);
(e) make any Senior Note payable in money other than that stated in
the Senior Notes;
(f) make any change in the provisions of this 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 Senior Notes;
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(g) waive a redemption payment with respect to any Senior Note (other
than a payment required by Sections 4.10 or 4.14 hereof);
(h) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or this Indenture, except in accordance with the terms
of this Indenture; or
(i) make any change in the foregoing amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Senior Notes
shall be set forth in an amended or supplemental Indenture that complies with
the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Senior Note or portion of a Senior Note that evidences the same debt
as the consenting Holder's Senior Note, even if notation of the consent is not
made on any Senior Note. However, any such Holder or subsequent Holder may
revoke the consent as to its Senior Note if the Trustee receives written notice
of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
The Company may fix a record date for determining which Holders must
consent to such supplemental indenture, amendment or waiver. If the Company
fixes a record date, the record date shall be fixed at (i) the later of 30 days
prior to the first solicitation of such consent or the date of the most recent
list of Holders furnished to the Trustee prior to such solicitation pursuant to
Section 2.05, or (ii) such other date as the Company shall designate.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SENIOR NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Senior Note thereafter authenticated. The Company,
in exchange for all Senior Notes, may issue, and the Trustee shall authenticate,
new Senior Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Senior Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until its Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01) shall be fully
protected in relying upon, an Officer's Certificate and an Opinion of Counsel
stating that
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the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture and that all conditions precedent have been complied
with.
ARTICLE 10
SUBSIDIARY GUARANTEES
SECTION 10.01. SUBSIDIARY GUARANTEE.
Each of the Guarantors hereby, jointly and severally, fully and
unconditionally guarantee to each Holder of a Senior Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Senior
Notes or the obligations of the Company hereunder or thereunder, that: (a) the
principal of and interest on the Senior Notes will be promptly paid in full when
due, whether at maturity, by acceleration, redemption or otherwise, and interest
on the overdue principal of and interest on the Senior Notes, if any, if lawful,
and all other obligations of the Company to the Holders or the Trustee hereunder
or thereunder will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Senior Notes or any of such other obligations, that
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise. Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors will be jointly
and severally obligated to pay the same immediately. The Guarantors hereby agree
that their obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Senior Notes or this Indenture,
the absence of any action to enforce the same, any waiver or consent by any
Holder of the Senior Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a Guarantor. Each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenant
that this Subsidiary Guarantee will not be discharged except by complete
performance of the obligations contained in the Senior Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to return to
the Company or Guarantors, or any Custodian, Trustee, liquidator or other
similar official acting in relation to either the Company or Guarantors, any
amount paid by any such entity to the Trustee or such Holder, this Subsidiary
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor agrees that it shall not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 for
the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6, such obligations (whether or not due
and payable) shall forthwith become due and payable by
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the Guarantors for the purpose of this Subsidiary Guarantee. The Guarantors
shall have the right to seek contribution from any non-paying Guarantor so long
as the exercise of such right does not impair the rights of the Holders under
the Subsidiary Guarantee.
SECTION 10.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section 10.01, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form of Exhibit B, which is part of this Indenture, shall
be endorsed by an officer of such Guarantor on each Senior Note authenticated
and delivered by the Trustee and that this Indenture shall be executed on behalf
of such Guarantor by its President or one of its Vice Presidents.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 10.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Senior Note a notation of such Note Guarantee.
If an Officer whose signature is on this Indenture or on the Subsidiary
Guarantee no longer holds that office at the time the Trustee authenticates the
Senior Note on which a Subsidiary Guarantee is endorsed, the Subsidiary
Guarantee shall be valid nevertheless.
The delivery of any Senior Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors.
SECTION 10.03. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) Except as set forth in Articles 4 and 5, nothing contained in this
Indenture or in any of the Senior Notes shall prevent any consolidation or
merger of a Guarantor with or into the Company or another Guarantor, or shall
prevent any sale or conveyance of the property of a Guarantor as an entirety, or
substantially as an entirety, to the Company, unless immediately after giving
effect to such transaction, a Default or Event of Default exists.
(b) Except as set forth in Articles 4 and 5, nothing contained in this
Indenture or in any of the Senior Notes shall prevent any consolidation or
merger of a Guarantor with or into (whether or not such Guarantor is the
surviving Person) another corporation, Person or entity, whether or not
affiliated with such Guarantor, or successive consolidations or mergers in which
a Guarantor or its successor or successors shall be a party or parties, or shall
prevent any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety or any sale or other disposition of all the capital
stock of any Guarantor, to a corporation other than the Company (whether or not
affiliated with the Guarantor) authorized to acquire and operate the same;
provided, however, (i) that each Guarantor hereby covenants and agrees that,
upon any such consolidation, merger, sale or conveyance, the Subsidiary
Guarantee endorsed on the Senior Notes, and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture to be
performed by such Guarantor, shall be expressly assumed (in the event that the
Guarantor is not the surviving corporation in the merger), by supplemental
indenture satisfactory in form and substance to the Trustee, executed and
delivered to the Trustee, by the corporation formed by such consolidation or
into which the Guarantor shall have been merged, or by the corporation which
shall have acquired such property and (ii) that
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immediately after giving effect to such transaction, no Default or Event of
Default exists. In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form and substance to
the Trustee, of the Subsidiary Guarantee endorsed upon the Senior Notes and the
due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Guarantor, such successor corporation shall
succeed to and be substituted for the Guarantor with the same effect as if it
had been named herein as a Guarantor. Such successor corporation thereupon may
cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon
all of the Senior Notes issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee. All the Subsidiary
Guarantees so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Subsidiary Guarantees theretofore and thereafter
issued in accordance with the terms of this Indenture as though all of such
Subsidiary Guarantees had been issued at the date of the execution hereof.
SECTION 10.04. RELEASES FOLLOWING SALE OF ASSETS.
Concurrently with any Asset Sale (including, if applicable, all of the
capital stock of any Guarantor), any Liens in favor of the Trustee in the assets
sold thereby shall be released; provided that in the event of an Asset Sale, the
Net Proceeds of such sale or other disposition are applied in accordance with
the provisions of Section 4.10 hereof. If the assets sold in such sale or other
disposition include all or substantially all of the assets of any Guarantor or
all of the capital stock of any Guarantor, then such Guarantor (in the event of
a sale or other disposition of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of a Guarantor) shall be
released and relieved of its obligations under its Subsidiary Guarantee or
Section 10.03 hereof, as the case may be; provided that in the event of an Asset
Sale, the Net Proceeds from such sale or other disposition are treated in
accordance with the provisions of Section 4.10 hereof. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to
the effect that such sale or other disposition was made by the Company in
accordance with the provisions of this Indenture, including without limitation
Section 4.10 hereof, the Trustee shall execute any documents reasonably required
in order to evidence the release of any Guarantor from its obligations under its
Subsidiary Guarantee. Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of principal of and
interest on the Senior Notes and for the other obligations of any Guarantor
under this Indenture as provided in this Article 10.
SECTION 10.05. "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article 10 shall in such case (unless the context shall
otherwise require) be construed as extending to and including such Paying Agent
within its meaning as fully and for all intents and purposes as if such Paying
Agent were named in this Article 10 in place of the Trustee.
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ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA s.318(c), the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Trustee to the others
is duly given if in writing and delivered in Person or mailed by first class
mail (registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company:
Syratech Corporation
175 McClellan Highway
East Boston, Massachusetts 02128-9114
Telecopier No.: (617) 561-0275
Attention: Chief Financial Officer
With a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Telecopier No.: (617) 951-1295
Attention: James Westra
If to the Trustee:
State Street Bank and Trust Company
Corporate Trust Administration
225 Franklin Street
Boston, Massachusetts 02110
Telecopier No.: (617) ________
Attention: Patrick E. Thebado
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
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Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA s. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA s. 312(b) with other Holders
with respect to their rights under this Indenture or the Senior Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA s. 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA s. 314(a)(4)) shall comply with the provisions of TIA s. 314(e)
and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
57
<PAGE>
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied, provided, however that with
respect to matters of fact, an Opinion of Counsel may rely upon an
Officer's Certificate or a certificate of a public official.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or the Guarantors under the Senior Notes,
this Indenture or the Subsidiary Guarantees, as applicable, or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Senior Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Senior
Notes.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE SENIOR NOTES.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Senior Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Senior Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
58
<PAGE>
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
59
<PAGE>
SIGNATURES
Dated as _________ __, 1997 SYRATECH CORPORATION
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as _________ __, 1997 SYRATECH HOLDING CORPORATION
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as of _________ __, 1997 WALLACE INTERNATIONAL SILVERSMITHS, INC.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
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<PAGE>
Dated as of _________ __, 1997 WALLACE INTERNATIONAL DE P.R., INC.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as of _________ __, 1997 INTERNATIONAL SILVER COMPANY
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as of _________ __, 1997 INTERNATIONAL SILVER DE P.R., INC.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
61
<PAGE>
Dated as of _________ __, 1997 PMW SILVER DE P.R., INC.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as _________ __, 1997 TOWLE MANUFACTURING COMPANY
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as of _________ __, 1997 ROSEMAR SILVER COMPANY, INC.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
62
<PAGE>
Dated as of _________ __, 1997 TOWLE HOLLOWARE, INC.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as of _________ __, 1997 FARBERWARE INC.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as of _________ __, 1997 SILVESTRI, INC.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
63
<PAGE>
Dated as of _________ __, 1997 SILVESTRI, INC. OF SOUTH CAROLINA
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as _________ __, 1997 RAUCH INDUSTRIES, INC.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as of _________ __, 1997 ROCHARD, INC.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
64
<PAGE>
Dated as of _________ __, 1997 HOLIDAY PRODUCTS, INC.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as of _________ __, 1997 NORTHSTAR SALES CORPORATION
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as of _________ __, 1997 LEONARD FLORENCE ASSOCIATES, INC.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
65
<PAGE>
Dated as of _________ __, 1997 CHI INTERNATIONAL, INC.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as _________ __, 1997 SYRATECH SECURITY CORPORATION
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as of _________ __, 1997 SYRATECH WEST COAST WAREHOUSE CORP.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
66
<PAGE>
Dated as of _________ __, 1997 175 AMLEGION REVERE REALTY TRUST
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as of _________ __, 1997 SYRATECH SILVER SALES CORP.
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
Dated as of _________ __, 1997 [STATE STREET BANK AND TRUST COMPANY]
Trustee
By:
--------------------------------
Name:
Title:
Attest:
- ---------------------------------
67
<PAGE>
================================================================================
EXHIBIT A
(Face of Senior Note)
___% Senior Note due 2007
No. $___________
SYRATECH CORPORATION
promise to pay to
or their registered assigns, the principal sum of
__________________________________ Dollars ($___________) on _______
__, 2007.
Interest Payment Dates: _____ __ and _______ __, commencing _____ _, 1997.
Record Dates: _____ __ and _________ __
Dated: _________ __, 1997
SYRATECH CORPORATION
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
This is one of the Senior Notes referred
to in the within-mentioned Indenture:
[State Street Bank and Trust Company]
as Trustee
By:__________________________________
Authorized Signature
================================================================================
<PAGE>
(Back of Senior Note)
___% Senior Note due 2007
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Syratech Corporation, a Delaware corporation (the "Company")
promises to pay interest on the principal amount of this ___% Senior Note due
2007 (the "Senior Note") at the rate and in the manner specified below.
The Company shall pay interest on the principal amount of this Note in
cash at the rate per annum shown above. The Company shall pay interest
semi-annually on each _____ _ and _______ _, commencing _____ _, 1997, or if any
such day is not a Business Day (as defined in the Indenture referred to below),
on the next succeeding Business Day (each an "Interest Payment Date").
Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months for the actual number of days elapsed. Interest shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of the original issuance of this Note. To
the extent lawful, the Company shall pay interest on overdue principal and
premium at the rate of 1% per annum in excess of the then applicable interest
rate on this Note; it shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) at the same rate to the extent
lawful. The rates of interest specified in the Indenture and this Senior Note
are nominal rates and all interest payments and computations are to be made
without allowance or deduction for deemed reinvestment of interest.
2. METHOD OF PAYMENT. The Company will pay interest on the Senior Notes to
the Persons who are registered Holders of Senior Notes at the close of business
on the _____ __ and _________ __ next preceding the Interest Payment Date, even
if such Senior Notes are cancelled after such record date and on or before such
Interest Payment Date. The Senior Notes will be payable as to principal,
premium, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest may be made by check mailed to the
Holders at their addresses set forth in the register of Holders. Such payment
shall be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar or
co-registrar without prior notice to any Holder. The Company may act in any such
capacity.
4. INDENTURE. The Company issued the Senior Notes under an Indenture dated
as of _________ __, 1997 (the "Indenture") among the Company and each of
Syratech Holding Corporation, Wallace International Silversmiths, Inc., Wallace
International de P.R., Inc., International Silver Company, International Silver
de P.R., Inc., PMW Silver de P.R., Inc., Towle Manufacturing Company, Rosemar
Silver Company, Inc., Towle Holloware, Inc., Farberware Inc., Silvestri, Inc.,
Silvestri, Inc. of South Carolina, Rauch Industries, Inc.,
A-2
<PAGE>
Rochard, Inc., Holiday Products, Inc., Northstar Sales Corporation, Leonard
Florence Associates, Inc., CHI International, Inc., Syratech Security
Corporation, Syratech West Coast Warehouse Corp., 175 Amlegion Revere Realty
Trust, and Syratech Silver Sales Corp. (collectively, the " Subsidiary
Guarantors") and the Trustee. The terms of the Senior Notes include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code ss. 77aaa-77bbbb). The Senior
Notes are subject to all such terms, and Holders are referred to the Indenture
and such Act for a statement of such terms. The terms of the Indenture shall
govern any inconsistencies between the Indenture and the Senior Notes. The
Senior Notes are general obligations of the Company limited to $160,000,000
million in aggregate principal amount at maturity.
5. OPTIONAL REDEMPTION.
On or after _______ _, 2002, the Company may redeem all or any portion
of the Senior Notes, at any time upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on _______ _ of the years indicated below:
Year Percentage
2002...................................................______%
2003...................................................______%
2004...................................................______%
2005 and thereafter....................................100.00%
Notwithstanding the foregoing, at any time on or before _______ __,
2000, the Company may, at its option, also redeem up to 37 1/2% of the aggregate
principal amount of Senior Notes originally issued hereunder at a redemption
price of ____% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the redemption date, with the net cash proceeds of a public
offering of the common stock of the Company provided that at least $100.0
million in aggregate principal amount of Senior Notes remain outstanding
immediately after the occurrence of such redemption; and provided, further, that
such redemption shall occur within 45 days of the date of the closing such
public offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company is not required to
make mandatory, repurchase, redemption or sinking fund payments with respect to
the Senior Notes.
7. CHANGE OF CONTROL OFFER AND ASSET SALE OFFER.
(a) If there is a Change of Control, each Holder of Senior Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
in principal amount or an integral multiple thereof) of each Holder's Senior
Notes pursuant to the offer described in the Indenture (a "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon the date of purchase.
Within
A-3
<PAGE>
10 days following any Change of Control, the Company will mail a notice to each
Holder setting forth the procedures governing the Change of Control Offer as
required by the Indenture.
(b) If the Company or any of its Subsidiaries consummate any Asset Sales,
when the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company
will commence an offer to all Holders (an "Asset Sale Offer") to purchase the
maximum principal amount of Senior 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 thereon to the date of purchase.
(c) In the event of either 7(a) or 7(b), Holders may elect to have all or a
portion of their Senior Notes purchased by completing the form entitled "Option
of Holder to Elect Purchase" appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Senior Notes are to be redeemed at his registered address. Senior Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Senior Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Senior
Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Senior Notes may be registered and Senior Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
exchange or register the transfer of any Senior Note or portion of a Senior Note
selected for redemption, except for the unredeemed portion of any Senior Note
being redeemed in part. Also, it need not exchange or register the transfer of
any Senior Notes for a period of 15 days before a selection of Notes to be
redeemed or during the period between a record date and the corresponding
Interest Payment Date.
10. PERSONS DEEMED LEGAL OWNERS. The registered Holder of a Senior Note may
be treated as its legal owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture, the Subsidiary Guarantees or the Senior Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Senior Notes (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Senior Notes), and any existing Default or Event of Default (other
than a Default or Event of Default in the payment of the principal of, or
interest on, the Senior Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of the
Indenture, the Subsidiary Guarantees or the Senior Notes may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Senior Notes. Without the consent of any Holder of a Senior Note, the Indenture
or the Senior Notes may be amended or supplemented to cure any ambiguity, defect
or inconsistency, to provide for uncertificated Senior Notes in addition to or
in place of
A-4
<PAGE>
certificated Senior Notes, to provide for the assumption of the Company's and
Guarantors' obligations to Holders in case of a merger, consolidation or sale of
all or substantially all of the Company's assets, 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 of any such Holder, or to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest on the Senior Notes; (ii) default in
payment when due of the principal of, or premium, if any, on the Senior Notes;
(iii) failure by either of the Company to comply with any of the provisions of
Sections 4.07, 4.09, 4.10 or 4.14 of the Indenture; (iv) failure by the Company
for 60 days after notice to comply with any of its other agreements in the
Indenture or the Senior Notes; (v) default by the Company 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 Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries), whether such Indebtedness or Guarantee now exists, or is
created after the date hereof, 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 $10.0 million or more; (vi) failure
by the Company or any of its Subsidiaries to pay final judgments for the payment
of money entered by a court or courts of competent jurisdiction against the
Company or any of its Subsidiaries and such judgment or judgments are not paid,
discharged or stayed for a period of 60 days, provided that the aggregate of all
such undischarged judgments exceeds $10.0 million; (vii) except as permitted by
the Indenture, any Subsidiary 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 or any Guarantor, or any Person acting on behalf of any Guarantor,
shall deny or disaffirm its obligations under its Subsidiary Guarantee; and
(viii) certain events of bankruptcy or insolvency with respect to the Company or
any of its Significant Subsidiaries. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Senior Notes may declare all the Senior Notes to be due and
payable. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, all outstanding Senior
Notes will become due and payable without further action or notice. Holders may
not enforce the Indenture or the Senior Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest) if
it determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Senior Notes then outstanding by
notice to the Trustee may on behalf of the Holders of all of the Senior 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
principal of, or interest on, the Senior Notes, except a payment default
resulting from an acceleration that has been rescinded. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture,
A-5
<PAGE>
and the Company is required upon becoming aware of any Default or Event of
Default, to deliver to the Trustee a statement specifying such Default or Event
of Default.
13. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator
or stockholder, of the Company or the Guarantors as such, shall not have any
liability for any obligations of the Company or the Guarantors under the Senior
Notes, the Indenture and the Subsidiary Guarantees or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Senior Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Senior Notes.
15. SUBSIDIARY GUARANTEES. The Company's payment obligations under the
Senior Notes are jointly and severally unconditionally guaranteed by the
Guarantors.
16. AUTHENTICATION. This Senior Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Senior Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Senior Notes
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Syratech Corporation
175 McClellan Highway
East Boston, Massachusetts 02128-9114
Telecopier No.: (617) 561-0275
Attention: Chief Financial Officer
A-6
<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date:
----------------------------
Your Signature:
--------------------------
(Sign exactly as your name appears
on the face of this Senior Note)
Signature Guarantee.
A-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Senior Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature:
---------------------- --------------------------------
(Sign exactly as your name appears
on this Senior Note)
Tax Identification No.:
-----------------------
Signature Guarantee.
A-8
<PAGE>
================================================================================
EXHIBIT B
(Form of Subsidiary Guarantee)
SUBSIDIARY GUARANTEE
SYRATECH HOLDING CORPORATION WALLACE INTERNATIONAL SILVERSMITH, INC.
INTERNATIONAL SILVER COMPANY WALLACE INTERNATIONAL DE P.R., INC.
INTERNATIONAL SILVER DE P.R., INC. PMW SILVER DE P.R., INC.
TOWLE MANUFACTURING COMPANY ROSEMAR SILVER COMPANY, INC.
TOWLE HOLLOWARE, INC. FARBERWARE INC.
SILVESTRI, INC. SILVESTRI, INC. OF SOUTH CAROLINA
RAUCH INDUSTRIES, INC. ROCHARD, INC.
HOLIDAY PRODUCTS, INC. NORTHSTAR SALES CORPORATION
LEONARD FLORENCE ASSOCIATE, INC. CHI INTERNATIONAL, INC.
SYRATECH SECURITY CORPORATION SYRATECH WEST COAST WAREHOUSE CORP.
175 AMLEGION REVERE REALTY TRUST SYRATECH SILVER SALES CORP.
Each Guarantor, hereby, jointly and severally with the other Guarantors,
unconditionally guarantees to each Holder of Senior Notes authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of the Indenture, the Senior
Notes or the Obligations of the Company to the Holders or the Trustee under the
Senior Notes or under the Indenture, that: (a) the principal of, and premium, if
any, and interest on the Senior Notes shall be promptly paid in full when due,
whether at maturity, by acceleration, redemption or otherwise, and interest on
overdue principal of interest on the Senior Note, if any, if lawful and all
other Obligations of the Company to the Holders or the Trustee under the
Indenture or under the Senior Notes shall be promptly paid in full or performed,
all in accordance with the terms thereof; and (b) in case of any extension of
time of payment or renewal of any Senior Notes or any of such other Obligations,
the same will be promptly paid in full when due in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed, for whatever
reason, the Guarantors will be jointly and severally obligated to pay the same
immediately.
The Obligations of the Guarantors to the Holders and to the Trustee
pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth
in Article 10 of the Indenture, and reference is hereby made to such Indenture
for the precise terms of this Subsidiary Guarantee. The terms of Article 10 of
the Indenture are incorporated herein by reference.
No director, officer, employee, incorporator or stockholder, as such, past,
present or future, of the Guarantor shall have any personal liability under this
Subsidiary Guarantee by reason of his or its status as such director, officer,
employee, incorporator or stockholder.
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<PAGE>
This is a continuing Subsidiary Guarantee and shall remain in full force
and effect and shall be binding upon each Guarantor and its respective
successors and assigns to the extent set forth in the Indenture until full and
final payment of all of the Company' Obligations under the Senior Notes and the
Indenture and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder of or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions hereof. This a
Subsidiary Guarantee of payment and not a guarantee of collection.
In certain circumstances more fully described in the Indenture, any
Guarantor may be released from its liability under this Subsidiary Guarantee,
and any such release will be effective whether or not noted hereon.
This Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Senior Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
For purposes hereof, each Guarantor's liability will be that amount from
time to time equal to the aggregate liability of such Guarantor hereunder, but
shall be limited to the lesser of (i) the aggregate amount of the Obligations of
the Company under the Senior Notes and the Indenture and (ii) the amount, if
any, which would not have (A) rendered such Guarantor "insolvent" (as such term
is defined in the federal Bankruptcy Law and in the Debtor and Creditor Law of
the State of New York) or (B) left it with unreasonably small capital at the
time its Subsidiary Guarantee of the Senior Notes was entered into, after giving
effect to the incurrence of existing Indebtedness immediately prior to such
time; provided that, it shall be a presumption in any lawsuit or other
proceeding in which such Guarantor is a party that the amount guaranteed
pursuant to its Subsidiary Guarantee is the amount set forth in clause (i) above
unless any creditor, or representative of creditors of such Guarantor, or debtor
in possession or trustee in bankruptcy of such Guarantor, otherwise proves in
such a lawsuit that the aggregate liability of such Guarantor is limited to the
amount set forth in clause (ii). The Indenture provides that, in making any
determination as to the solvency or sufficiency of capital of a Guarantor in
accordance with the previous sentence, the right of such Guarantor to
contribution from other Guarantors and any other rights such Guarantor may have,
contractual or otherwise, shall be taken into account.
Capitalized terms used herein have the same meanings given in the Indenture
unless otherwise indicated.
B-2
<PAGE>
SYRATECH CORPORATION
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
SYRATECH HOLDING CORPORATION
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
WALLACE INTERNATIONAL SILVERSMITHS, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
WALLACE INTERNATIONAL DE P.R., INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
INTERNATIONAL SILVER COMPANY
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
INTERNATIONAL SILVER DE P.R., INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
B-3
<PAGE>
PMW SILVER DE P.R., INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
TOWLE MANUFACTURING COMPANY
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
ROSEMAR SILVER COMPANY, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
TOWLE HOLLOWARE, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
FARBERWARE INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
SILVESTRI, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
B-4
<PAGE>
SILVESTRI, INC. OF SOUTH CAROLINA
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
RAUCH INDUSTRIES, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
ROCHARD, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
HOLIDAY PRODUCTS, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
NORTHSTAR SALES CORPORATION
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
LEONARD FLORENCE ASSOCIATES, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
B-5
<PAGE>
CHI INTERNATIONAL, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
SYRATECH SECURITY CORPORATION
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
SYRATECH WEST COAST WAREHOUSE CORP.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
175 AMLEGION REVERE REALTY TRUST
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
SYRATECH SILVER SALES CORP.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
B-6
EXHIBIT 12.1
SYRATECH CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS
BEFORE FIXED CHARGES TO FIXED CHARGES
(in thousands, except ratios)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
Pro forma
1992 1993 1994 1995 1996 1996
--------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Excess of earnings available to cover fixed charges (1)......
Earnings:
Income before income taxes.................................. $6,276 $9,446 $10,617 $20,039 $32,623 $12,053
Add: Fixed charges........................................... 3,307 1,482 1,155 894 4,886 29,322
------ ------ ------- ------- ------- -------
Less: Pre-tax preferred stock dividends...................... -- -- -- -- -- 3,456
Earnings, as adjusted....................................... 9,583 10,928 11,772 20,933 37,509 37,919
------ ------ ------- ------- ------- -------
Fixed charges:
Interest on indebtedness.................................... 2,757 948 559 287 3,150 22,713
Amortization of debt issuance costs......................... -- -- -- -- -- 1,407
Pre-tax preferred stock dividends accrued................... -- -- -- -- -- 3,456
Portion of rents representative of the interest factor...... 550 534 596 607 1,736 1,746
------ ------ ------- ------- ------- -------
Fixed charges............................................... 3,307 1,482 1,155 894 4,886 29,322
------ ------ ------- ------- ------- -------
Excess of earnings to fixed charges.......................... $6,276 $9,446 $10,617 $20,039 $32,623 $12,053
====== ====== ======= ======= ======= =======
Ratio of earnings to fixed charges........................... 2.9x 7.4x 10.2x 23.4x 7.7x 1.3x
</TABLE>
- ----------
(1) For purposes of these computations, earnings consist of income before income
taxes plus fixed charges. Fixed charges consist of interest on indebtedness
and amortization of debt issuance costs, pre-tax preferred stock dividends
accrued plus that portion of operating lease rental expense representative of
the interest factor. The pro forma ratio of earnings to fixed charges for the
year ended December 31, 1996 gives effect to the Recapitalization and the
acquisition of Rauch as if such transactions were consummated on January 1,
1996.
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and Stockholders of Syratech Corporation:
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-18133 of Syratech Corporation (the "Company") on Form S-3 of our report
dated February 7, 1997 (February 14, 1997 as to Note 15), appearing in the
prospectus, which is a part of this registration statement, and to references to
us under the headings "Summary Consolidated Historical and Unaudited Pro Forma
Financial Data" and "Experts" in such Registration Statement.
Our audits of the consolidated financial statements referred to in our
aforementioned report also included the consolidated financial statement
schedule of the Company, listed in Item 16(b). This consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 18, 1997
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Amendment No. 1 to the
registration statement of Syratech Corporation on Form S-3 (File No. 333-18133)
of our report dated March 12, 1996, as contained in Form 8-K/A dated February
27, 1997 on our audits of the consolidated balance sheet of Rauch Industries,
Inc. as of December 31, 1995 and 1994 and the consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1995. We also consent to the reference to our firm under the
caption "Experts."
COOPERS & LYBRAND L.L.P.
Charlotte, North Carolina
March 17, 1997
