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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1998 Commission file No. 0-17038
Concord Camera Corp.
(Exact name of registrant as specified in its charter)
New Jersey 13-3152196
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) identification no.)
35 Mileed Way, Avenel, New Jersey 07001
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (732) 499-8280
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
As of September 17, 1998 the aggregate market value of the Common Stock (based
upon the high and low trading prices) held by non-affiliates of the Company
was approximately $37,848,772.
As of September 17, 1998 the number of shares outstanding of the Company's
Common Stock was 11,214,451.
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DOCUMENTS INCORPORATED BY REFERENCE
See Exhibit Index -- Page 44
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PART I
Unless the context indicates otherwise, when used in this report the word
"Company" or "Concord" refers to Concord Camera Corp. and its subsidiaries and
unless otherwise indicated, any twelve-month period ending or ended on June
30, will be referred to as "Fiscal" with the appropriate year specified. For
example, Fiscal 1998 refers to the twelve-month period ended June 30, 1998.
This report contains certain "forward-looking statements" concerning the
Company's operations, economic performance and financial condition, which are
subject to inherent uncertainties and risks. Actual results could differ
materially from those anticipated in this report. When used in this report,
the words "estimate," "project," "anticipate," "expect," "intend," "believe"
and similar expressions are intended to identify forward-looking statements.
Item 1. Business.
Summary
Founded in 1982, the Company is a global developer, designer, manufacturer,
and marketer of high quality, low cost Advanced Photo System, 35mm and 110mm
traditional and single-use cameras.
Growth Strategy. Concord's strategy for growth is to capitalize on the trend
of vertically integrated camera and toy companies to outsource their design,
development, and manufacturing from low cost, third party original equipment
manufacturers ("OEMs") such as Concord, which conducts its manufacturing
activities in the People's Republic of China ("PRC") at a monthly cost per
production worker of only $120. Since implementing its strategy in Fiscal
1995, Concord has built sufficient strength in its engineering, design, and
manufacturing capabilities to capture OEM business of several of the world's
largest film, camera, and toy companies, including Eastman Kodak Company
("Kodak"), Polaroid Corporation ("Polaroid"), Agfa-Gevaert AG ("Agfa") (a
subsidiary of Bayer AG), Imation Corp. ("Imation") (formerly Minnesota Mining
and Manufacturing Co. (a 3M subsidiary)) and Mattel, Inc. ("Mattel").
The Company seeks to obtain additional business from these and potential new
OEM relationships by positioning itself as an innovative designer and
manufacturer of high quality, low cost products. Additionally, Concord
differentiates its OEM capability by providing its customers with dedicated
design and development expertise during pre-contract discussions, and with
local (Americas, European and Asian) management presence, thereby adding
significant customer value, comfort and reliability.
The Company has also increased its sales of single-use cameras at a 20.4%
compounded annual growth rate, increasing from approximately $27 million in
1995, or 43.6% of sales, to approximately $47 million in 1998, or 45.9% of
sales. The Company believes that it is currently the fourth largest SUC
manufacturer in the world, behind Kodak, Fuji Photo Film Co. Ltd. ("Fuji") and
Konica Corporation ("Konica"). The Company estimates that it produced 8.6% of
all single-use cameras sold worldwide in 1997 and 13.7% of all single-use
cameras sold worldwide excluding Japan, which accounted for approximately 85
million units. Market size estimates are based on industry sources. Concord
estimates the worldwide single-use camera market will grow from 192 million
units in 1997 to 281 million units in 2000, a compound annual growth rate of
13.5%.
Overall Company sales for 1998 were $102.7 million, an increase of 56.1% over
1997.
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1998 EBITDA and Earnings Growth: EBITDA for Fiscal 1998 grew by 194.9%, to
$11.5 million, from $3.9 million for Fiscal 1997. Net income for Fiscal 1998
grew to $6.0 million or $.52 per diluted share from a $.8 million loss or
($.08) per share for Fiscal 1997.
Strong Sales, Earnings and Cash Flow. These incremental sales, coupled with
the Company's investments in new product development and manufacturing
facilities, enabled the Company to achieve its previously announced Fiscal
1998 projected sales level of more than $100 million, and its Fiscal 1998
projected profit level of more than $5 million. Actual results for Fiscal 1998
were reported on August 26, 1998 and amounted to sales of $102,663,000 and net
income of $6,013,000 ($0.55 of basic earnings and $0.52 of diluted earnings per
share).
Recent Events
During Fiscal 1995, the Company underwent a management change with current
Chairman and chief executive officer, Ira B. Lampert, replacing the former
Chairman and Chief Executive Officer, who was discharged for cause. Mr.
Lampert's management team conceptualized a new strategic plan and began the
implementation of that plan in Fiscal 1995.
This plan was based on three key concepts:
(1) Improve sales and manufacturing stability by developing a
stronger OEM business that would not be subject to the erratic volume
swings and pricing pressure of the retail channel, permitting
substantially lower investment in finished goods inventory,
distribution of the Company's products by companies with extensive
sales and marketing capabilities, and the elimination of competitors;
(2) Develop, design, and manufacture products that produce superior
picture performance and quality since film companies will only be
associated with products that produce superior picture performance
and quality; and
(3) Establish a position in the single-use camera market, which would
grow rapidly throughout Europe and North America as it had in Japan.
To implement this strategy the Company knew it needed to improve two aspects
of its operations. First, the Company needed to improve the quality and
capacity of its manufacturing operations to a world class standard. Second,
the Company needed to acquire additional core technology, design, and
engineering expertise to improve product performance and picture quality and
to respond quickly to customer requirements. These improvements would provide
the Company with the ability to obtain business from the world's top tier of
photographic and film companies.
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Modernization of Manufacturing Facilities
In Fiscal 1996, the Company commenced construction of a new manufacturing
facility on a production site in the PRC previously acquired by the Company.
The Company commenced manufacturing in the new facility on July 1, 1996. In
Fiscal 1995, the Company began investing in new equipment for the new
facility. The Company also implemented new training and quality programs in
Fiscal 1995 and 1996 (which are ongoing). The result of these initiations was
the establishment of a world class manufacturing operation. The Company funded
these expenditures internally by shrinking finished goods inventory,
consolidating operations and better utilizing working capital.
OEM Relationships and New Product Development
Concurrent with its program to modernize its manufacturing facilities and
improve its manufacturing processes to a world class level, management focused
on improving the Company's product development expertise. The Company
significantly increased its product development budget from $598,000 in Fiscal
1995 to approximately $4.0 million in Fiscal 1998, resulting in a significant
increase in technical personnel. The Company's in-house product and
development team has grown from 31 persons at the end of Fiscal 1995 to 63
persons in the first quarter of Fiscal 1999. The increased funding was used to
develop products and long-term relationships with several of the world's
largest and most successful photographic and film manufacturers including
Imation (formerly part of Minnesota Mining and Manufacturing Co.), Agfa,
Fisher-Price (a division of Mattel) and Kodak.
Imation. The Company established its contractual OEM relationship with Imation
for the production of single-use cameras in Fiscal 1995. Products developed
under this contract, which continues in effect, included the Company's first and
second generation daylight and flash single-use cameras.
Agfa. In Fiscal 1996, the Company and Agfa developed the world's first
two-format Advanced Photo System single-use cameras under a co-development
agreement. The Company continues to manufacture single-use cameras for Agfa
under the OEM contract with Agfa.
Fisher-Price. In Fiscal 1996, the Company was the successful bidder for a design
and manufacturing agreement with Mattel under which the Company designed and now
manufactures for Fisher-Price a "child-proof" 35mm manual camera product. This
led to the award to the Company by Mattel of a co-development and production
agreement for the successor to the Viewmaster(TM) product. This product, set for
release in Fiscal 1999, is expected to be sold by both Fisher-Price and under a
branding arrangement with Fisher-Price and The Discovery Channel.
Kodak. The Company was awarded a long-term supply agreement for a traditional
motorized Advanced Photo System camera in Fiscal 1997. Shipments of the camera
began in the first quarter of Fiscal 1998, and the Company believes the camera
is now the best selling Advanced Photo System camera in the world in its
category in terms of unit volume. The Company has retained the right to sell
these cameras under its brand names, and shipments of the Company's branded
versions began in the first quarter of Fiscal 1999. The Company is involved in
discussions with Kodak looking toward the production of additional products by
the Company for Kodak.
Polaroid. Capitalizing on a pre-existing relationship with Polaroid for the
production of single-use cameras, the Company was awarded a co-development and
long-term supply agreement to design and manufacture an instant single-use
camera for Polaroid in the fourth quarter of Fiscal 1997. Shipment of this
product commenced in the first quarter of Fiscal 1999. Revenues from this
contract are expected to aggregate between $15 and $20 million for Fiscal 1999.
Future OEM Relationships. The Company seeks to obtain additional business from
these customers and establish new OEM relationships by positioning itself as
an innovative developer, designer and manufacturer of high quality, low cost
products. Additionally, Concord differentiates its OEM capability by providing
its customers with dedicated design and development expertise during
pre-contract discussions, and with local (Americas, European and Asian)
management presence, thereby adding significant customer value, comfort and
reliability.
The Company targets potential OEM customers that have an established brand
name, existing channels of distribution, the potential to outsource multiple
products (cameras and/or non-cameras), and whose products match the
manufacturing and value added skills of Concord. This approach is geared to
capitalize on the trend of vertically integrated consumer product companies to
outsource their development, design, and low cost manufacturing from third
party OEMs such as Concord.
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Consolidation and Overhead Cost Reductions. The Company has consolidated its
direct sales operations to reduce costs, increase efficiency, centralize
warehousing and shipping, and better utilize capital. In connection therewith,
the Company transferred its operations in Hungary to an independent sales
agent in 1996, and relocated its Latin American sales and administrative
offices from Panama to New Jersey in 1997. The Company now has three
centralized warehouse distribution operations: Concord Americas -- servicing
the United States, Canada and South America, Concord Europe -- servicing the
UK, Germany and France, Concord HK -- servicing the Far East and major retail
customers on an FOB Hong Kong basis.
Product Line Diversification. Since 1995, management has also diversified the
Company's product base from single-use cameras, which accounted for 67.1% and
70.1% of sales in Fiscal 1997 and Fiscal 1996, respectively, to 45.9% of
Fiscal 1998 sales. This decrease resulted, in part, from management's Fiscal
1995 implementation of a new product development program that has led to the
Company's agreements to produce low cost Advanced Photo System and 35mm
cameras in Fiscal 1998 and to produce single-use and manual instant cameras in
Fiscal 1999.
Concord's Mission and Growth Strategy:
Mission Statement. Concord has adopted the following Mission Statement:
Concord's mission is to be a world class, high quality, low cost
developer, designer and manufacturer of popularly priced, easy-to-use
cameras and consumer products, with performance that results in
appropriate equity returns for shareholders.
This statement embodies the Company's commitment to maintaining the highest
quality workmanship in the engineering, design, and manufacture of low cost,
high quality consumer products, as well as its commitment to earning
appropriate equity returns for its shareholders.
Growth Strategy. Concord's strategy for growth is to capitalize on the trend
of vertically integrated photographic, camera and consumer product companies
to outsource their design, development and manufacturing from low cost, third
party OEMs such as Concord, which conducts its manufacturing activities in the
PRC at a monthly cost per production worker of approximately $120. Since
beginning implementation of its strategy in Fiscal 1995, Concord has built
sufficient strength in its engineering, design and manufacturing capabilities to
capture OEM business of several of the world's largest film, camera and toy
companies, including Kodak, Polaroid, Agfa, Imation and Mattel.
The Company seeks to obtain additional business from these customers and
establish new OEM relationships by positioning itself as an innovative
developer, designer and manufacturer of high quality, low cost products.
In addition to offering low cost, high quality products, Concord
differentiates its OEM capability by providing its customers with dedicated
design and development expertise. The Company's contracts with AGFA, Imation,
Kodak, Polaroid, and Mattel, for example, were obtained and executed through
the Company's ability to provide its own co-development and design resources.
Although the Company sometimes shares development costs with its customers, it
generally requires customer investment to cover custom tooling costs.
Domestic and Foreign Sales, Markets and Marketing
The Company markets its products both directly, under Company brand names and
private label brands, and on an OEM basis. Historically, direct sales
constituted the majority of the Company's annual sales, accounting for 54.3%
of Fiscal 1997 consolidated net sales. However, OEM sales, which have
experienced strong growth, accounted for 66.2% of consolidated net sales in
Fiscal 1998. This trend is expected to continue in the future.
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The Company sells its products to both United States and foreign customers. In
Fiscal 1998, approximately 52.0% of the Company's consolidated sales were made
to customers in the United States. Approximately 48.0% of the Company's
consolidated sales were made to customers outside the United States.
Direct Sales. Direct sales are made worldwide through Concord operations in
the U.S. for the U.S., Latin American and Canadian markets (the "Americas"
operations), in the U.K., France and Germany (the "Europe" operations), and in
Hong Kong, China and Japan (the "Asia" operations). These divisions market the
Company's products under the following brand names:
o Concord(R) o Argus(R)
o Keystone(R) o Apex(R)
o Le Clic(R) o Fun Shooter(R)
Cameras are also sold and distributed under licensed trademarks such as
Crayola(R) in the U.S., Canada and U.K., and "Thomas the Tank Engine &
Friends" in the U.K.
The Company's worldwide direct sales customers include but are not limited to
the following major discount, drug and retail chains: Walgreen, Walmart,
Boots, Auchan, Target, Price Costco, Argos, Shoppers Drug Mart, Sears, Family
Dollar, K-Mart, Caldors, Kay Bee, Press Nogoce, Japan Diffusion, Ames, Loceda,
Continent, Photo Color, Porst, Index and Meijers. The Company also sells and
distributes its products through independent retail stores, distributors, and
accounts which use the cameras as premiums in connection with their product
sales.
A large portion of the Company's U.S. sales are made by in-house sales
personnel, with the assistance of approximately 21 non-affiliated sales agents
serving specific geographic areas. Sales agents generally receive commissions
of 1% to 3% of net sales, depending on the type of customer, and may act as
selling agents for manufacturers and distributors of other products.
The Company's direct sales (to retailers) have declined over the last few
years from $43.8 million in Fiscal 1995, or 78% of Fiscal 1995 consolidated
net sales, to $34.6 million in Fiscal 1998, or 34% of Fiscal 1998 consolidated
net sales. Aside from the growth in OEM sales, management attributes the
decline of direct sales to its intentional phase-out of older motorized and
manual models and to increased competition for single-use cameras, among other
reasons. On a regional basis, only direct (F.O.B.) Asian sales have increased
since 1995.
OEM Sales. The Company sells various camera products to OEM customers who
re-market these products under their own brand names and private labels
through their own distribution channels. The Company's strategy is to expand
its OEM sales by capitalizing on the trend of vertically integrated
photographic, camera, toy and consumer products companies to outsource their
requirements for the development, design and manufacture of low cost products.
Since Fiscal 1995, Concord's OEM sales have grown from 22% of Fiscal 1995 sales
to 66.2% of Fiscal 1998 sales. OEM sales have increased at a compounded annual
rate of 71.4% since Fiscal 1995.
Concord Americas and Concord Europe. Consolidated sales of the Company's
United States, Canadian and Latin American operations (collectively "Concord
Americas"), including FOB Hong Kong sales to customers in these regions for
Fiscal 1998, 1997 and 1996 were approximately $19,132,000, $22,076,000 and
$26,224,000, respectively. Consolidated sales of Concord Camera GmbH ("Concord
Germany"),
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Concord Camera Europe (formerly Concord Camera UK Limited) ("Concord UK") and
Concord Camera France SARL ("Concord France"), collectively "Concord Europe,"
including FOB Hong Kong sales to customers in these regions were approximately
$14,744,000, $12,532,000 and $13,910,000 in Fiscal 1998, 1997 and 1996,
respectively. These net decreases are due to lower sales of traditional and
single-use camera models. The decrease in sales to Concord Americas resulted
from an aging product line of traditional cameras and intensified competition
in the sale of single-use cameras.
Far East. Sales by Concord HK (excluding FOB Hong Kong sales to customers in
the Americas and Europe) were approximately $68,047,000, $30,032,000 and
$26,648,000 in Fiscal 1998, 1997 and 1996, respectively. The increase is due
to the continued acceptance of the Company's newer products, principally the
single-use and slim-line camera models, and the successful implementation of
F.O.B. Hong Kong sales programs with the Company's larger customers. The
Company believes that sales in the Far East will continue to represent a
significant percentage of total sales.
Licensing Activities. In Fiscal 1995, the Company executed a license agreement
with Hallmark Licensing, Inc., as agent for Binney & Smith Properties, Inc.
("Binney & Smith"), under which the Company licensed certain Binney & Smith
trademarks with regard to Crayola and certain associated marks, tradenames and
logos for use with single-use cameras, pocket 110 cameras and 35 millimeter
cameras. The agreement expires December 31, 1998, but the Company may renew
the agreement for an additional one-year term if actual royalties payable
under the agreement exceed a pre-determined minimum level.
In Fiscal 1997, the Company executed a license agreement with Britt Allcroft
(Thomas) Limited under which the Company licensed certain trademarks with
regard to "Thomas the Tank Engine & Friends" and certain associated marks,
trademarks and logos for use with single-use cameras, pocket 110 cameras, 35
millimeter cameras, Advanced Photo System cameras, photograph albums and
camera cases. The agreement expires March 31, 1999. In addition, the Company
is seeking to license other high-profile brands.
Customers. In Fiscal 1998 and 1997, approximately 83.6% and 67.1%,
respectively, of the Company's sales were to its ten largest customers. The
consolidated sales to the Company's three largest customers, Kodak, Imation
and Agfa in Fiscal 1998 amounted to approximately $28,152,000 (27.4%),
$14,513,000 (14.1%) and $13,926,000 (13.6%), respectively. The loss of any of
these three customers, in management's opinion, could have a material adverse
impact on the Company.
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Imation and Agfa-Gevaert AG have renewed agreements with the Company for the
Company to supply single-use cameras as an OEM. Each agreement is for a
one-year term and requires minimum purchases of several million single-use
cameras by each of these customers. In addition, as noted above, the Company
has executed an agreement to supply a low cost Advanced Photo System camera to
Kodak, which includes minimum purchase requirements. The Company has also
executed an agreement with Polaroid to co-develop and exclusively manufacture
specialized, traditional and single-use cameras for Polaroid, which includes
minimum purchase requirements.
Advertising. The Company engages in a limited amount of advertising and in the
past has given allowances to customers who advertise its products. Advertising
allowances and other discounts were approximately $793,000, $876,000 and
$889,000 in Fiscal 1998, 1997 and 1996, respectively.
Manufacturing
General. The Company conducts all of its manufacturing activities in the PRC.
During Fiscal 1998, the Company completed an expansion and conversion program
which increased the Company's PRC manufacturing and related dormitory
facilities to over 500,000 square feet.
The Company purchases and stores its raw materials and components at its PRC
facilities. Raw materials and components include film, batteries, glass
lenses, plastic resins, metal, packaging, and electronic component parts. The
Company also purchases and resells photographic accessories, including
flashes, vinyl pouches, and carrying cases for its cameras. The Company's
operations and profitability are substantially dependent upon its
manufacturing and assembly activities. The Company conducts engineering,
design, purchasing and certain distribution and warehouse activities in Hong
Kong. The Company's manufacturing activities in the PRC are conducted pursuant
to the PRC agreements (the "PRC Agreements") with various local municipal and
government agencies and sub-divisions located in Baoan County, Shenzhen
Municipality, PRC (collectively, the "PRC Entities"). The Company's initial
agreement in Baoan County was approved on September 12, 1985 by the local
Foreign Economic Relations Office ("FERO"), which was necessary to assure the
validity and enforceability of the PRC Agreements. The Company's most recent
PRC Agreement covering its manufacturing activities was approved by the PRC
Entities and FERO in 1993 and expires in 2002. The Company intends to continue
to expand its operations in the PRC, although there can be no assurance that
it will be able to do so.
Products
General.
Camera Products. Concord is primarily engaged in the development, design,
manufacture, marketing, distribution and sale of popularly-priced, easy-to-use
cameras. The Company currently produces traditional and single-use 35mm
cameras, traditional and single-use Advanced Photo System cameras, and 110
film cartridge cameras, and has contracted to produce single-use and manual
instant cameras in 1999. The Company manufactures and assembles its products
in the PRC for both direct sale under Company brand names and on an OEM basis.
Retail prices of the Company's products range from $5.99 to $60.00. A detailed
listing and description of the Company's products is contained in Appendix C.
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In 1991, the Company began to sell single-use cameras, which accounted for
45.9% of Fiscal 1998's consolidated net sales. In addition to its own
single-use camera technology in Fiscal 1996, the Company obtained a license to
use certain single-use camera patents owned by Fuji.1
In Fiscal 1995, the Company commenced a product development program with the
goal of developing and designing new products for major consumer products
companies with established brand names and distribution channels. This program
continues today, and has already resulted in a new low cost Advanced Photo
System camera2 marketed by Kodak and a contract to co-develop and, in 1999,
begin providing Polaroid3 with significant quantities of single-use and manual
instant cameras.
In Fiscal 1996, the Company decided to terminate production of certain 35mm
traditional motorized camera models that it had produced in the past and had
anticipated producing in the future. The Company made this decision in part
because of the aged design of these products and the anticipated introduction
of Advanced Photo System cameras to the marketplace. During the fourth quarter
of Fiscal 1996, the Company recorded provisions totaling approximately
$3,035,000 with respect to this line of 35mm cameras and related finished
goods and components inventories to fairly reflect their net realizable value,
as well as with respect to certain tools, molds and other related fixed
assets.
Non-Camera Products. From time to time, the Company has also sold various
non-camera products on an OEM basis. However, such sales have not been
material. In Fiscal 1998, the Company began to manufacture cameras for the
largest toy company in the world, Mattel. The Company believes that it can
build on this relationship to design, develop, and manufacture additional
products for Mattel and other non-camera companies. The Company has contracted
with Mattel for the manufacture of Viewmaster products to be sold and
distributed by Mattel under Mattel's brand name.
New Products. The Company's manufactured products are created, designed and
engineered principally in Hong Kong. As of June 30, 1998, the Company employed
59 engineers and designers in its Hong Kong offices. In August 1998, the
Company opened a temporary design center in Chicago, Illinois, which currently
employs four engineers and designers. These employees will move to a 10,000
square foot design center in Florida in December 1998. The Company expects to
employ 10 engineers and designers at the Florida design center.
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(1) The Company instituted an action in December 1997 in the Southern District
of New York seeking to prevent Fuji from terminating a license agreement
previously entered into between the parties. Fuji has alleged that the Company
by entering into one or more commercial transactions violated the terms of a
license agreement between the parties. Fuji has filed a counterclaim seeking
to terminate the license agreement and seeking unspecified damages. The matter
is in discovery. Fuji has not yet fully responded to the Company's discovery
demands. In addition, on February 13, 1998, Fuji filed a complaint with the
International Trade Commission seeking (1) to halt the importation of
unlicensed single-use cameras into the United States and (2) to ban the
unlicensed re-manufacture of single-use cameras in the United States. The
Company is not a party to this proceeding. Nevertheless, Fuji's action, if
successful, could lessen competition for the Company in the domestic
single-use camera market. See Item 3, "Legal Proceedings."
(2) The Company licenses certain Advanced Photo System technology from the
Advanced Photo System development companies.
(3) The Company licenses certain technology from Polaroid in connection with its
products.
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New products are, and are expected to continue to be, designed both
independently and on a co-development basis with existing and potential new
OEM customers. In addition to its ability to manufacture low cost and high
quality products, Concord differentiates its OEM capability by providing its
customers with dedicated design and development expertise.
The results of the Company's new product development program began to appear
in Fiscal 1996 with the introduction of single-use Advanced Photo System
cameras, and in Fiscal 1997 with the introduction of a new traditional 35mm
camera. Also, in the first quarter of Fiscal 1998, the Company began delivery
of a new Advanced Photo System traditional camera to Kodak. The Company has
designed and expects to introduce a number of innovative Advanced Photo System
and 35mm, traditional and single-use cameras in the future, as well as the
Polaroid single-use and manual instant cameras.
Product Development. The Company expended approximately $3,963,000, $3,130,000
and $1,722,000 in Fiscal 1998, 1997 and 1996, respectively, for product design
and development. The large increase in these costs over these years was due to
the significant development costs incurred with respect to new Advanced Photo
System single-use and conventional cameras, as well as new 35 millimeter
single-use cameras. The Company anticipates product development costs to
continue to increase in Fiscal 1999 with the opening of its U.S. design center
and as management continues to develop new products.
Suppliers, Raw Materials and Production
General. The Company owns or leases the tools and equipment necessary to
manufacture most of the components used in its cameras. Numerous manufacturers
and suppliers in the Far East and other parts of the world supply the Company
with components, materials and film it does not manufacture.
Sourcing. From time to time, the Company purchases finished products from
third-party manufacturers. The Company depends on non-affiliated suppliers for
its required glass lenses, motors, film and certain electronic components such
as transistors and diodes. In the past, the Company has experienced, and may
in the future experience, difficulties in obtaining in a timely manner certain
components and film necessary for its finished products. The Company believes,
however, that it is not dependent on any single supplier for any component or
film and that it could find alternate sources on relatively short notice at
prices competitive with those it currently pays.
Advance Commitments. To secure adequate production materials, components and
film the Company must make substantial advance commitments to suppliers
ranging from one to six months prior to the receipt of firm orders from
customers. However, many of these commitments are subject to changes in
numbers, assortments or delivery dates. Although, from time-to-time, the
Company has experienced difficulties obtaining needed materials, components
and film on a timely basis, it has been able to operate under such conditions.
The Company believes these conditions to be standard in its industry.
Quality Control. The Company devotes substantial effort to quality control,
including testing components and raw materials when purchased or produced,
testing during the assembly process and final quality control testing of
finished products. The Company's terms with all of its United States customers
include the right to return defective merchandise for credit. Foreign
customers are permitted to exchange defective merchandise for the same
product, and the Company believes those practices to be standard in its
industry.
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Trademarks and Patents
The Company owns trademarks on the CONCORD(R), KEYSTONE(R), Funshooter(R), LE
CLIC(R) and Apex(R) names for cameras sold in the United States and numerous
foreign countries. In addition, the Company owns the trademark ARGUS(R) in
numerous countries other than in the United States and Mexico. The Company
purchased several of the patents used in its Keystone cameras. In addition,
the Company was granted United States patents for its data imprinting system,
its film counter in the back of the camera, and its method for film loading,
and it has applied for United States and Japanese patent protection for
certain camera related processes and anticipates filing for patent protection
on those processes in other countries. Concord HK has applied for United
States and foreign patent protection for a film drive system used in certain
cameras it produces. The Company believes that its competitiveness and market
share are not dependent on the ultimate disposition of its patent
applications.
Employees
On June 30, 1998, the Company had 157 employees: 22 in the United States,
three in Germany, six in Canada, 111 in Hong Kong and the PRC, one in Japan,
two in France and 12 in the UK. Sixty-five Company employees are in executive,
administrative or clerical capacities, 15 in direct merchandising and sales,
18 in warehouse and shipping and 59 in engineering and design. No Company
employee is represented by a union. The PRC Entities currently provide the
Company with approximately 3,500 workers at its PRC facilities. To date the
Company has not had any of its operations interrupted due to labor disputes
and it considers its working relationship with employees and workers to be
good.
In conjunction with the opening of the Company's U.S. Design Center in Chicago
during the first quarter of Fiscal 1999, the Company has hired four additional
experienced design engineers.
Risk Factors
Dependence on Agreements with the PRC
General. The Company manufactures a majority of the components used in its
cameras and assembles all of its manufactured finished products in the PRC
pursuant to the PRC Agreements. FERO approval is required on all of the PRC
Agreements to ensure their enforceability. See "Manufacturing--General."
Operating Practices. The Company's PRC Agreements provide for the production
and manufacture of cameras at the Company's owned facilities in the PRC with
labor supplied by PRC Entities. The PRC Entities currently supply the Company
with approximately 3,500 workers to manufacture and assemble cameras. During
Fiscal 1996, the Company completed construction of a new factory building on
the Company-leased land next to the other Company-owned buildings and moved
the manufacturing and assembling operations from the leased assembly plants to
the new factory and existing Company-owned buildings. During the first quarter
of Fiscal 1997, the Company completed the conversion of certain production
facilities on the Company-leased land. Consequently, the Company no longer
leases manufacturing facilities from the PRC Entity. See "Item 2. Properties".
Although a substantial number of the Company's workers are employees of the
PRC Entities, the Company is responsible for their food and housing and
substantially all of them live in Company maintained dormitories. The current
average cost per production line worker is approximately $120 per month
including room and board and the Company's payments to the PRC Entities
allocable to the provision of those workers. If any worker fails to work
efficiently or to improve after instruction, the Company has the right to
request that the PRC Entities replace that individual. Additionally, the
Company has completed an expansion and conversion program that increased the
aggregate size of the PRC manufacturing and related dormitory facilities to
over 500,000 square feet.
11
<PAGE>
PRC Taxes and Import/Export Duties. The Company has never paid any income or
turnover tax to the PRC on account of its business activities in the PRC.
Existing PRC statutes can be construed as providing for a minimum of 10% to
15% income tax and a 3% turnover tax on the Company's business activities;
however, the PRC has never attempted to enforce such statutes. The Company has
been advised that the PRC's State Tax Bureau is reviewing the applicability of
those statutes to processing activities similar to those engaged in by the
Company, but it has not yet announced any final decisions as to the taxability
of such activities. After consultation with its tax advisors, the Company
believes that any tax exposure it may have on account of its operations in the
PRC will not be material to its financial condition. The Company does not pay
import/export duties to the PRC, but, as with any tax, there can be no
assurance that the Company will not be required to pay such duties in the
future.
Other PRC Risks. If the PRC Entities fail to honor the PRC Agreements, the
Company believes that within a six-month period it could resume production
activities elsewhere in the PRC through the use of subcontractor agreements
with other third-party manufacturers. The Company is not able to estimate the
amount of time required to enter into a new PRC Agreement. In order to
minimize this risk, the Company obtained a land use certificate for the land
on which the Company-owned plant is situated and to which it has obtained
title. However, in addition to lost assets and revenues attributable to the
discontinuance of its operations at the Baoan County facilities, the Company
would likely experience some loss on account of such interruption depending
upon where and under what arrangements the Company was able to resume
production. If, for any reason, the Company could not continue production in
its existing PRC locations, all manufacturing activities would cease for at
least six months until the Company was able to resume production elsewhere. If
the Company were required to move its production operations from the PRC, the
Company's profitability would be substantially impaired, its competitiveness
and market position would be materially jeopardized and there could be no
assurance that it would be able to profitably manufacture and distribute its
products.
Risk of Expropriation and Restrictions
There is a risk of expropriation of the Company's assets by the PRC and the
imposition of restrictions or embargoes on the export of finished products, or
the import of components and materials used in the Company's PRC operations.
At June 30, 1998, the net book value of Company assets in the PRC was
approximately $13,302,000. The amount of Company assets in the PRC is expected
to increase as operations in that country continue to grow. The Company
maintains property and casualty insurance covering the cost of assets in its
PRC facilities and has insured those assets against expropriation. The Company
also maintains political risk insurance on certain equipment up to $4,000,000.
If the Company were required to relocate and could not remove the assets it
owns or leases in the PRC, the cost of replacement of such assets would be
significantly higher than their book value.
Interruptions as a Result of Political Events
The Company did not experience any interruption in its manufacturing or other
operations as a result of political events (Tiananmen Square) in the PRC in
June 1989 other than a brief interruption of deliveries between Hong Kong and
the PRC. There can be no assurance that similar events will not occur in the
PRC in the future and, if they do occur, that they will not result in material
interruption of the Company's manufacturing or other operations.
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<PAGE>
Backlog
The Company's general practice is to fill orders within delivery dates
required by customers. Substantially all of the Company's cameras are produced
in accordance with specifications and production schedules determined by the
Company on the basis of projected sales and orders placed by its primary
customers. Production schedules for sales are determined in accordance with
customers' orders and the Company's anticipation of the demand for its
products. The amount of unfilled orders at a particular time is affected by a
number of factors, including availability of finished inventory, manufacturing
and assembly capability and product shipments. Accordingly, the amount of
unfilled orders from period to period is not necessarily meaningful and may
not be indicative of actual shipments to be made to customers in any period.
Dependence on Key Personnel
The Company is run by a small number of key management personnel, the loss of
certain of whom could have a material adverse impact on the Company. The
Company believes that its future success will depend in large part on its
continued ability to attract and retain highly-skilled and qualified
personnel.
Dependence on OEM Customers
The loss by the Company of any of its major OEM customers could have a
material adverse impact on its revenues and profits.
Competition
The camera and photographic products industry is highly competitive. As a
manufacturer and distributor of inexpensive cameras, the Company encounters
substantial competition from a number of firms, many of which have longer
operating histories, established markets and more extensive facilities. Many
of the Company's competitors have greater resources than the Company has or
may reasonably be expected to have in the foreseeable future. The Company
considers Vivitar, Ansco Photo Optical Products Corporation ("Ansco") and the
Achiever Group as its chief competitors in United States markets. W. Haking
Enterprises Limited, the parent of Ansco, the Achiever Group and several small
Taiwanese and Hong Kong companies are the Company's chief competitors in
worldwide markets other than the United States. The Company also competes with
certain major film manufacturers (including Eastman Kodak, Fuji and Konica) in
the single-use camera market, primarily on the basis of product cost and
responsiveness to customer needs. The Company's competitive position is
dependent upon its ability to continue to produce in the PRC. See "Dependence
on Agreements with the PRC."
Considerations Relating to the Company's Business Outside of the United States
The Company conducts a substantial portion of its administrative, finance,
accounting and sales activities and all of its engineering, design, product
development, purchasing and warehousing activities in Hong Kong. It conducts
all of its manufacturing in the PRC.
Foreign Currencies. Since 1983, the Hong Kong dollar has been pegged to the
United States dollar at an approximate rate of U.S.$l = HK$7.73. There can be
no assurance, however, that the exchange rate of the Hong Kong dollar will not
fluctuate in the future. Certain obligations under the PRC Agreements and the
Company's Hong Kong suppliers are paid in Hong Kong dollars. In addition, the
Company is exposed to currency risks in Japan and various other countries
where it purchases materials for its products or sells those products.
Hong Kong 1997. Effective July 1, 1997 the exercise of sovereignty over Hong
Kong was transferred from the United Kingdom to the PRC pursuant to a
Sino-British Joint Declaration on the Question of
13
<PAGE>
Hong Kong (the "Joint Declaration") signed on December 19, 1984. Hong Kong is
now a Special Administrative Region ("SAR") of the PRC. The Joint Declaration
provides that the Hong Kong SAR shall be directly under the authority of the
PRC, shall enjoy a high degree of autonomy except in foreign and defense
affairs and shall be vested with executive, legislative and independent
judicial powers. It also provides that the current social and economic systems
in Hong Kong shall remain unchanged for 50 years after June 30, 1997 and that
Hong Kong shall retain its status as an international financial center.
The Joint Declaration provides that the basic policies of the PRC regarding
Hong Kong and the elaboration of these policies in the Joint Declaration will
be stipulated in the Basic Law of the Hong Kong SAR (the "Basic Law"). The
Basic Law was adopted on April 4, 1990 and is now effective. It provides, in
part, that the "socialist system and policies shall not be practiced in the
Hong Kong SAR and the previous capitalist system and way of life shall remain
unchanged for 50 years."
The Company cannot predict how the PRC will interpret and implement the Basic
Law and Joint Declaration, what actions the PRC may take in the future
regarding Hong Kong and the effect any such action may have on the Company's
business activities in Hong Kong, or its operations or financial condition in
general.
Importation of Products and Tax Considerations. The importation of camera
products into the United States and other jurisdictions in which Company
products are sold is subject to numerous risks including non-Company related
labor strikes, shipping delays, fluctuation in currency exchange rates and
import duties. There can be no assurance that the United States, the PRC, Hong
Kong or other countries will not in the future impose trade restrictions which
could adversely affect the Company's operations. The United States duty on
imported cameras of the type that the Company sells from countries of origin
which enjoy United States normal trading relations ("NTR") status (formerly
known as "most favored nation status") range from 3% to 4%. There are
currently no United States import quotas on the type of products manufactured
and distributed by the Company. NTR status entitles imports from the PRC to
enter the United States subject to the same rate of duty which applies to
imports from other NTR countries. The PRC's current NTR status was renewed on
July 22, 1998, with such status to be reviewed annually. The President may
recommend that NTR status for the PRC be extended for successive 12-month
periods, but the Company can give no assurances or make any predictions as to
what actions the President may take regarding the PRC's NTR status.
As a result of trade disputes between the United States and the PRC, the
United States Trade Representative ("USTR") has published lists of products
imported from the PRC that are potentially subject to increased tariffs in the
event the trade dispute is not resolved. At the present time, there are no
pending trade disputes in connection with which such lists have been
published. The United States has published such a list, which list did not
include cameras, in connection with a dispute over intellectual property
rights protection in the PRC, but the two sides settled that dispute on
February 26, 1995 by reaching a comprehensive agreement designed to ensure
greater protection for U.S. intellectual property in the PRC. The United
States revisited the intellectual property rights issue in 1996, publishing a
proposed retaliation list which focused on PRC textile exports and did not
include cameras, before reaching an accord on June 17, 1996, to strengthen
enforcement of the 1995 agreement.
In addition, the United States is currently monitoring various PRC practices
including trade, investment and government procurement, as well as the PRC's
compliance with various multilateral and bilateral agreements. The Company
cannot predict whether the Untied States will take future trade actions
against the PRC that may result in increased tariffs against PRC products
including products imported by the Company.
14
<PAGE>
The PRC is currently engaged in talks concerning its possible accession to the
World Trade Organization ("WTO"). Successful conclusion of these talks could
result in the application of comprehensive rules to the PRC's trade with other
WTO members, including the United States. However, the Company cannot predict
when such talks may conclude, or when such rules may come into effect.
Furthermore, PRC accession to the WTO would not necessarily eliminate the need
for successive yearly determinations by the United States regarding the PRC's
NTR status.
Possible United States Taxation of Foreign Earnings
Concord HK. Concord HK is a controlled foreign corporation ("CFC") for United
States tax purposes. Under certain circumstances, a United States shareholder
of a CFC is required to include some or all of the CFC's earnings in its own
taxable income as if the CFC had distributed those earnings as a dividend. The
possibility of deferring inclusion of Concord HK's earnings in the Company's
taxable income depends on the ability of the Company and Concord HK to meet
the requirements of several provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), as well as on the absence of adverse future tax
legislation.
Certain provisions of the Code currently tax the Company on Concord HK's
"foreign base company income" if such income is equal to or greater than the
lesser of $1,000,000 or 5% (the "De Minimis Amount") of Concord HK's gross
income. "Foreign base company income" is defined to include income derived
from certain types of activities including "foreign personal holding company
income" and "foreign base company sales income". Concord HK believes that it
earns "foreign base company sales income" because a portion of its earnings
might be attributable to selling activities as opposed to manufacturing or
production activities and thereby result in some "foreign base company sales
income."
The Company includes such foreign base company income in its United States
taxable income. Due to the availability of net operating loss carryovers, such
inclusion does not currently have a material impact on the Company's U.S. tax
liability.
Another provision of the Code would tax the Company currently if Concord HK
makes certain investments in United States property, as specifically defined.
An investment in such property includes, among other things, ownership of
tangible property in the United States, or stock or obligations of United
States persons, or a guarantee of an obligation of a United States person.
There is an exception to the rule treating obligations of United States
persons as constructive dividends for obligations arising in connection with
the sale of property, such as trade accounts payable if the amount of the
obligation is not commercially excessive by reference to transactions between
unrelated persons. The Company does not believe that the Company's obligations
to Concord HK, arising from the purchase of Concord HK products, are in an
amount or on terms such as would cause such obligations to be deemed
commercially excessive and the Company will attempt to secure financing
without requiring Concord HK to guarantee it.
If Concord HK's earnings are taxed to the Company as deemed dividends prior to
the time that the earnings actually are remitted to the Company as dividends,
the Company generally can claim a foreign tax credit on the deemed dividends
just as if actual dividends had been paid. If and to the extent the Company is
subjected to United States income tax on such deemed dividends, Concord HK may
subsequently distribute an amount equal to such previously taxed income
without additional tax consequences to the Company.
If Concord HK distributes a portion of its earnings to the Company in excess
of the earnings, if any, that have already been taxed to the Company as deemed
dividends, such dividends will constitute taxable
15
<PAGE>
income. If it so elects, the Company generally will be entitled to a foreign
tax credit to the extent that the distributed earnings have borne an income
tax in Hong Kong.
The Company's carryforward net operating losses will be applied to reduce the
Company's current taxable income and the federal income tax on any remaining
taxable income will be reduced by foreign tax credits subject to statutory
limitations on such credits.
Other Subsidiaries. Concord Canada, Concord Europe, Concord France, Concord
Germany and Concord Panama are also CFC's to which the United States tax laws,
as discussed above, are applicable. Due to the nature of their operations,
some of those CFC's may earn or generate "foreign base company income" above
the De Minimis Amount. However, the Company does not believe that the United
States tax on "foreign base company income" generated by the Company's CFC's
in excess of available foreign tax credits would represent a substantial
percentage of its total income. It is not expected that those foreign
subsidiaries will make investments in United States property and no United
States taxes have been provided on the earnings of those subsidiaries since
management intends to permanently reinvest such earnings abroad.
Forward-Looking Statements
The statements contained in this report that are not historical facts are
"forward-looking statements" (as such term is defined in the Private
Securities Litigation Reform Act of 1995) which can be identified by the use
of forward-looking terminology such as; "estimates," "projects,"
"anticipates," "expects," "intends," "believes," or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in such forward-looking
statements. Management wishes to caution the reader that these forward-looking
statements, such as statements regarding development of the Company's
business, the Company's anticipated capital expenditures and other statements
contained in this report regarding matters that are not historical facts are
only estimates or predictions. No assurance can be given that future results
will be achieved; actual events for results may differ materially as a result
of risks facing the Company or actual results differing from the assumptions
underlying such statements. In particular, expected revenues could be
adversely affected by production difficulties or economic conditions adversely
affecting the market for the Company's products. To obtain the results
expected from the introduction of the Company's new products will require
timely completion of development, successful ramp-up of full-scale production
on a timely basis and customer and consumer acceptance of those products. In
addition, the OEM agreements require an ability to meet high quality and
performance standards, successful implementation of production at greatly
increased volumes and an ability to sustain production at greatly increased
volumes as to all of which there can be no assurance. There also can be no
assurance that products under development will be successfully developed or
that once developed such products will be commercially successful.
Item 2. Properties.
United States Offices and Warehouses. The Company's principal offices
containing the Company's domestic warehouse and administrative offices are in
a 35,000 square foot facility located at 35 Mileed Way, Avenel, N.J. The
Company's lease on this facility provides for a rent of approximately $13,300
per month and expires on December 31, 1998.
The Company plans to move its principal offices to a 10,100 square foot
facility including a 2,900 square foot design center located at 400 Hollywood
Blvd., Hollywood, Florida 33021, and relocate its domestic warehouse to a 13,700
square foot facility
16
<PAGE>
located at Port 95 Distribution Center #500, 398 SW 30th Avenue, Ft.
Lauderdale, Florida 33312, commencing December 1998. The Company's leases on
these facilities provide for a rent of approximately $13,300 and $6,900 per
month, respectively, with annual increases of 4% and 3%, respectively, and
expire in August 31, 2008, and 120 months from the completion of warehouse
improvements (or approximately November 30, 2008), respectively. In August
1998, the Company opened a temporary design center in Chicago, Illinois.
Hong Kong. The Company owns one floor and leases three floors constituting
approximately 23,000 square feet of warehouse and business space at Fortei
Building, 98 Texaco Road, Tsuen Wan, New Territories, Hong Kong at a cost of
approximately $15,800 per month including rent and maintenance.
Other Jurisdictions. The Company leases warehouse and/or office space in
France, Canada, Germany and the UK in connection with the activities of its
subsidiaries in those jurisdictions.
PRC--Operations. Cameras and components are manufactured and assembled at the
Company-owned manufacturing facilities located in Baoan County, Shenzhen
Municipal, PRC (the "Company Facility"). The Company leases three employee
dormitories and a canteen (the "Dormitories") at a cost of approximately
$12,800 per month. The aggregate square footage of the Company Facility and
the Dormitories is in excess of 500,000 square feet.
In Fiscal 1996, the Company completed construction of an additional factory
building and in Fiscal 1997 completed the conversion of a Company-owned
dormitory to office, administrative space, engineering facilities, factory
space for pilot runs and living quarters for foreign employees on the same
plot of land as the current Company facility (the "Addition") to accommodate
increased production and to facilitate the consolidation of the leased
facilities into the Company Facility. The Company also completed certain
improvements to the new leased dormitory in Fiscal 1996. Additionally, the
Company has completed an expansion program that increased the aggregate size
of the PRC manufacturing and related dormitory facilities. In connection with
these construction activities in China, the Company incurred costs of
approximately $2,702,000. Such cost will be amortized over the expected useful
life of the Addition. If production requirements continue to increase, the
Company may be required to provide for an additional dormitory.
The Company has Land Use Agreements (the "Land Use Agreements") with PRC
Entities for the use of PRC Land (the "PRC Land") for the Company Facility and
the Addition. Under the Land Use Agreements, which have FERO approval, the
Company obtained land use rights for approximately eight acres of land from a
PRC Entity for the Company Facilities, the Addition and construction of
factories, dormitories and other ancillary buildings. The Company has the
right to use the PRC Land through 2042 (the "Term"). Under the Land Use
Agreements, the Company paid approximately $825,000 in fees and related
expenses to obtain the Land Use Rights Certificate from the PRC Entity. The
Company is responsible for stipulated land management fees and for the
installation of certain utilities. The Land Use Agreements permit the Company
to transfer, lease or mortgage its rights under the Land Use Agreements and in
the buildings developed thereunder during the Term. At the end of the Term,
all facilities on the PRC Land will belong to the PRC Entity and the Company
shall have the right to lease the PRC Land and facilities thereon at the
prevailing rent under regular lease terms.
17
<PAGE>
Item 3. Legal Proceedings.
Jack C. Benun. On November 18, 1994, the Company filed a demand for
arbitration in New Jersey for money damages in excess of $1.5 million against
Jack C. Benun ("Benun"), its former chief executive officer who was discharged
for cause in Fiscal 1995. This action was taken due to Benun's failure to
fully compensate the Company for damages it sustained as a result of Benun's
breaching his employment obligations, his fiduciary obligations and
perpetrating frauds upon the Company including the misappropriation of funds
from the Company. Benun has submitted a counterclaim in which he alleges
wrongful termination of his employment and denial of benefits by the Company.
The Company is vigorously pursuing its action as well as defending the
counterclaim. The matter is currently in discovery. The Company has reserved
its rights under any other claims it may have against Mr. Benun.
Fuji. On December 30, 1997, the Company commenced in the United States
District Court of the Southern District of New York (the "Court") an action
against Fuji seeking to enforce the terms of a Settlement Agreement between
the Company and Fuji (the "Settlement Agreement") and to restrain Fuji from
terminating the Settlement Agreement. Under the terms of the Settlement
Agreement, the Company has been granted a worldwide (subject to certain
geographic limitations), non-exclusive license to use certain Fuji technology
in connection with the manufacture and sale of single-use cameras. On January
9, 1998, the Court granted the Company's request for an order restraining Fuji
from terminating the Settlement Agreement. Pending a final judicial
determination of the dispute, the restraining order will continue in effect as
long as the Company refrains from making any further shipments pursuant to the
purchase order which gave rise to the dispute.
Item 4. Submission of Matters to a Vote of Security Holders.
On April 23, 1998, the Company held its Annual Meeting of Shareholders at
which all of the Company's nominees for directors were elected. The
shareholders' vote electing each of the directors was as follows:
Mr. Ira B. Lampert 10,275,506 for, 168,587 withheld;
Mr. Steve Jackel 10,275,546 for, 168,547 withheld;
Mr. Eli Arenberg 10,270,845 for, 173,248 withheld;
Mr. Morris H. Gindi 10,275,905 for, 168,188 withheld;
Mr. Joel Gold 10,275,905 for, 168,188 withheld;
Mr. J. David Hakman 10,275,906 for, 168,187 withheld;
Mr. Ira J. Hechler 10,270,844 for, 173,249 withheld; and
Mr. Kent M. Klineman 10,274,805 for, 169,288 withheld.
The shareholders also ratified the selection of Ernst & Young LLP as the
Company's independent auditors by a vote of 10,357,662 for, 10,101 against and
76,330 abstain.
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PART II
Item 5. Market for Company's Common Equity and Related Shareholder Matters.
The Company's common stock, no par value per share ("Common Stock"), is traded
on the NASDAQ National Market System under the symbol LENS. The approximate
high and low bid prices for the shares tabulated below are as reported by the
NASDAQ National Market System and represent interdealer quotations which do
not include retail mark-ups, mark-downs or commissions. They do not
necessarily represent actual transactions. As of September 17, 1998, there
were 11,214,451 shares of Common Stock ("Common Shares") outstanding, held by
1,103 record holders. There are in excess of 3,300 beneficial holders of the
Company's Common Stock.
Period Bid Price
- - ------ ---------
Quarter Ended High Low
- - ------------- ---- ---
September 30, 1996 3 1/8 1 15/16
December 31, 1996 2 7/16 1 9/16
March 31, 1997 2 13/16 1 21/32
June 30, 1997 2 25/32 1 3/4
September 30, 1997 4 3/4 2 3/8
December 31, 1997 5 1/16 2 7/16
March 31, 1998 4 7/8 2 5/8
June 30, 1998 7 7/16 4 3/8
The Company has never paid cash dividends and has no present intention to pay
cash dividends.
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<PAGE>
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales $102,663 $ 65,747 $ 66,782 $ 62,139 $54,817
-------- -------- -------- -------- -------
Cost of Product sold 74,771 48,722 49,293 41,984 37,684
-------- -------- -------- -------- -------
Gross Profit 27,892 17,025 17,489(4) 20,155 17,133
Operating expenses 21,892 17,864 19,173 18,685 17,734
-------- -------- -------- -------- -------
6,000 (839) (1,684) 1,470 (601)
Other (income) expenses, net (517) (123) (30) 154 221
-------- -------- -------- -------- -------
Income (loss)
before income taxes 6,517 (716) (1,654) 1,316 (822)
Income taxes 504 117 80 107 123
-------- -------- -------- -------- -------
Net income (loss) $ 6,013 ($833) ($1,734) $1,209 ($945)
======== ======== ======== ======== =======
Basic earnings (loss) per share $0.55 ($0.08) ($0.16) $0.12 ($0.09)
======== ======== ======== ======== =======
Diluted earnings (loss) per share $0.52 ($0.08) ($0.16) $0.12 ($0.09)
======== ======== ======== ======== =======
BALANCE SHEET DATA:
Working Capital $20,813 $13,994 $16,696 $17,432 $21,115
======== ======== ======== ======== =======
Total assets $72,082 $53,088 $49,850 $50,189 $48,182
======== ======== ======== ======== =======
Long-term debt $3,871 $2,397 $2,379 $ 388 $ 3,998
======== ======== ======== ======== =======
Total stockholders' equity $36,105 $29,502 $30,478 $32,264 $31,055
======== ======== ======== ======== =======
</TABLE>
- - ------------
(4) Gross profit in Fiscal 1996 included a provision for inventory and related
items of approximately $3,035 in certain 35mm camera products and related
inventory.
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and notes thereto presented
elsewhere in this Report.
Results of Operations
The following table sets forth the relationship between total sales and
certain expenses and earnings items for the three years ended June 30, 1998,
1997 and 1996:
Year Ended June 30,
1998 1997 1996
---- ---- ----
Net Sales 100.0% 100.0% 100.0%
Cost of Product Sold 72.8 74.1 73.8
Gross Profit 27.2 25.9 26.2
Operating Expenses 21.3 27.2 28.7
Other (income), net (0.5) (0.2) 0.0
Income (loss) before income taxes 6.4 (1.1) (2.5)
Income taxes 0.5 0.2 0.1
Net income (loss) 5.9% (1.3%) (2.6%)
Fiscal 1998 Compared to Fiscal 1997
Revenues. Total revenues for Fiscal 1998 and 1997 were approximately
$102,663,000 and $65,747,000, respectively, an increase of approximately
$36,916,000 or 56.1%. Revenues from OEM sales in Fiscal 1998 increased by
approximately $38,016,000 or 126.6% to $68,048,000 in Fiscal 1998 from
$30,032,000 in Fiscal 1997, while sales to other customers decreased by
approximately $1,100,000 or 3.1% to $34,615,000 in Fiscal 1998 from
$35,715,000 for Fiscal 1997. The increase in OEM sales is attributable to
increased purchases by preexisting OEM customers together with purchases by
new OEM customers offset, in part, by decreased purchases by other preexisting
customers. The decline in sales to other customers is attributable to lower
sales of traditional and single-use camera models. This decrease in sales
resulted from an aging product line of traditional cameras and intensified
competition in the sale of single-use cameras.
One aspect of the Company's previously announced co-development project with
Polaroid is nearing completion and manufacturing on an exclusive basis by the
Company of the new Polaroid single-use flash instant camera commenced at the
end of the first quarter of Fiscal 1999. First 12 months revenues from this
contract are presently estimated to be in the range of $15 to 20 million. The
Company is also engaged in discussions with certain existing OEM customers for
the addition, in the future, of new products to the Company's manufacturing
arrangements with such customers. The Company anticipates sales in fiscal 1999
to be in the $115 million to $125 million range and net income for Fiscal 1999
to be in the range of $7 million to $8 million or $0.58 to $0.66 per diluted
share.
Single-use camera sales amounted to approximately $47,116,000 or 45.9% of
total sales in Fiscal 1998 versus $44,108,000 or 67.1% of total sales in
Fiscal 1997.
21
<PAGE>
Sales by Concord HK in Fiscal 1998 and 1997 were approximately $85,896,000 and
$46,443,000, respectively, an increase of approximately $39,453,000 or 84.9%.
The increase is due primarily to the continued growth of shipments to OEM
customers by Concord Hong Kong. The Company expects Fiscal 1999 OEM revenues
to grow as manufacturing under the Polaroid OEM contract ramps up.
Consolidated sales of Concord Americas for Fiscal 1998 and 1997, including FOB
Hong Kong sales to customers in the Americas, were approximately $19,132,000
and $22,076,000, respectively, a decrease of $2,944,000 or 13.3%. The decrease
in sales to Concord Americas resulted from an aging product line of
traditional cameras and intensified competition in the sale of single-use
cameras.
Consolidated sales of Concord Europe for Fiscal 1998 and 1997, including FOB
Hong Kong sales to customers in Europe, were approximately $14,744,000 and
$12,532,000, respectively, an increase of approximately $2,212,000 or 17.7%.
The increase in sales to Europe is primarily attributable to increased FOB
Hong Kong sales.
Gross Profit. Gross profit, expressed as a percentage of sales, increased from
25.9% in Fiscal 1997 to 27.2% in Fiscal 1998. This increase was primarily as a
result of more favorable absorption of manufacturing overhead and labor
utilization resulting from increased sales and manufacturing volume and
efficiencies. At the same time, product development costs associated with new
products increased from $3,130,000 in Fiscal 1997 to $3,963,000 in Fiscal
1998, an increase of $833,000 or 26.6%. The Company anticipates product
development costs to continue to increase in Fiscal 1999 as management
continues to expand its product lines.
Operating Expenses. As a percentage of sales, operating expenses decreased to
21.3% in Fiscal 1998 from 27.2% in Fiscal 1997. Operating expenses, consisting
of selling, general and administrative, financial expenses and litigation and
settlement costs increased to $21,891,000 in Fiscal 1998 from $17,863,000 in
Fiscal 1997, an increase of approximately $4,028,000.
As a percentage of sales, selling expenses decreased to 9.0% in Fiscal 1998
from 10.6% in Fiscal 1997. Selling expenses increased to $9,234,000 in Fiscal
1998 from $6,950,000 in Fiscal 1997. The increase was primarily attributable
to the Company's increased sales volume and increases in freight costs,
royalty expenses and promotion allowances net of benefits from the
consolidation of warehouse and administration facilities undertaken in Fiscal
1996.
As a percentage of sales, general and administrative expenses decreased to
10.5% in Fiscal 1998 from 14.1% in Fiscal 1997. General and administrative
expenses increased to $10,777,000 in Fiscal 1998 from $9,247,000 in Fiscal
1997. The increase is primarily attributable to increases in professional fees
and expenses related to new OEM customer agreements, increased rent, other
expenses and costs relating to the relocation of the Company's principal
offices to Florida.
As a percentage of sales, financial expenses decreased to 1.6 % in Fiscal 1998
from 2.2% in Fiscal 1997. Financial expenses increased to $1,668,000 in Fiscal
1998 from $1,465,000 in Fiscal 1997. Such increase was primarily a result of
an increase in average debt outstanding during Fiscal 1998.
Litigation and settlement costs in Fiscal 1998 and 1997 were approximately
$213,000 and $201,000, respectively. In Fiscal 1998, these matters consisted
primarily of the demand for arbitration and other litigation against Jack C.
Benun.
22
<PAGE>
Other (income) expense, Net. Other (income) expense, net includes interest
income, gains and losses from the sale of fixed assets, foreign exchange gains
and losses, directors' fees and certain public relations costs.
With respect to foreign exchange gains and losses, the Company operates on a
worldwide basis and its results may be adversely or positively affected by
fluctuations of various foreign currencies against the U.S. Dollar,
specifically, the Canadian Dollar, German Mark, British Pound Sterling, French
Francs, and Japanese Yen. Each of the Company's foreign subsidiaries purchases
its inventories in U.S. Dollars and sells them in local currency, thereby
creating an exposure to fluctuations in foreign currency exchange rates.
Certain components needed to manufacture cameras are priced in Japanese Yen.
The translation from the applicable currencies to U.S. Dollars is performed
for balance sheet accounts using current exchange rates in effect at the
balance sheet date and for revenue and expense accounts using a weighted
average exchange rate during the period. The impact of foreign exchange
transactions is reflected in the profit and loss statement, which in Fiscal
1998 included a gain of approximately $374,000.
In Fiscal 1998, the Company's hedging activities were immaterial and at June
30, 1998 there were no forward exchange contracts outstanding.
Income Taxes. As of June 30, 1998, Concord had net operating loss
carryforwards for U.S. tax purposes of approximately $11,951,000, which expire
as follows: $5,700,000 in 2008; $2,770,000 in 2009; and $3,481,000 in 2010.
Net operating losses for state tax purposes began to expire in 1997. Net
operating loss carryforwards cannot be used to offset certain alternative
minimum tax elements under the Internal Revenue Code.
The income tax provision for Fiscal 1998 of approximately $504,000 is
comprised of a current U.S. tax provision of approximately $69,000, a current
foreign provision of approximately $318,000 and a deferred provision of
approximately $117,000. The Company's provision for income taxes for Fiscal
1998 is primarily related to the earnings of the Company's Far East and
domestic operations, net of benefits relating to operating loss carryforwards
and overpayments/refunds on the Company's other subsidiaries.
The realization of the deferred tax assets relate directly to the Company's
ability to generate taxable income for certain foreign and U.S. federal and
state tax purposes. Management is not able to conclude that realization of
these deferred tax assets is more likely than not as a result of the Company's
earnings history. Reductions to the valuation allowance will be recorded when,
in the opinion of management, the Company's ability to generate taxable income
in these jurisdictions is more certain.
Net Income. As a result of the matters described above, the Company had net
income of approximately $6,013,000 in Fiscal 1998 compared to a net loss of
approximately $833,000 in Fiscal 1997, an increase in profit of approximately
$6,846,000.
Fiscal 1997 Compared to Fiscal 1996
Revenues. Total revenues for Fiscal 1997 and 1996 were approximately
$65,747,000 and $66,782,000, respectively, a decrease of approximately
$1,035,000 or 1.5%. Revenues from OEM sales in Fiscal 1997 increased by
approximately $3,606,000 or 13.7% to $29,880,000 in Fiscal 1997 from
$26,274,000 in Fiscal 1996, while sales to other customers decreased by
approximately $4,641,000 or 11.5% to $35,867,000 in Fiscal 1997 from
$40,508,000 for Fiscal 1996. The increase in OEM sales was attributable to
increased purchases by two preexisting OEM customers together with purchases
by two new OEM customers offset, in part, by decreased purchases by another
preexisting customer. The decline in sales to other customers was attributable
to lower sales of traditional and single-use camera models. The
23
<PAGE>
decrease in traditional camera revenues was anticipated and previously
outlined in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996 in connection with management's decision to eliminate a number
of older motorized and manual traditional models.
The Company signed an agreement with Kodak for production of a lower cost
Advanced Photo System camera to be sold and marketed by Kodak as one of its
own branded products. Shipments began in September 1997 and contributed
$28,152,000 to revenues in Fiscal 1998. In addition, the Company completed an
agreement with Polaroid to co-develop and exclusively manufacture specialized,
traditional and single-use cameras for Polaroid.
Single-use camera sales amounted to approximately $44,108,000 or 67.1% of
total sales in Fiscal 1997 versus $43,553,000 or 65.2% of total sales in
Fiscal 1996.
Sales by Concord HK in Fiscal 1997 and 1996 were approximately $46,249,000 and
$42,442,000, respectively, an increase of approximately $3,807,000 or 9.0%.
The increase was due primarily to the continued growth of shipments to OEM
customers by Concord Hong Kong. This trend continued in Fiscal 1998.
Consolidated sales of Concord Americas for Fiscal 1997 and 1996, including FOB
Hong Kong sales to customers in the Americas, were approximately $21,997,000
and $26,224,000, respectively, a decrease of $4,227,000 or 16.1%. The decrease
in sales to Concord Americas resulted from an aging product line of
traditional cameras and intensified competition in the sale of single-use
cameras.
Consolidated sales of Concord Europe for Fiscal 1997 and 1996, including FOB
Hong Kong sales to customers in Europe, were approximately $12,742,000 and
$13,910,000, respectively a decrease of $1,168,000 or 8.4%. This decrease is
primarily attributable to an aging product line, intensified competition in
the sale of single-use cameras and the effect of a United States dollar that
increase in value relative to European currencies during Fiscal 1997.
Gross Profit. Gross profit, expressed as a percentage of sales, decreased from
26.2% in Fiscal 1996 to 25.9% in Fiscal 1997. This decrease was primarily due
to increased engineering and product development costs of approximately
$3,130,000 in Fiscal 1997, an increase of $1,408,000 or 81.8% from 1996 and in
part to the sale of products with lower gross profit margins. Gross Profit in
Fiscal 1996 included a provision for inventory and related items of
approximately $3,035,000 on certain 35 millimeter camera products and related
inventory.
Operating Expenses. Operating expenses, consisting of selling, general and
administrative, financial expenses and litigation and settlement costs
decreased to $17,864,000 in Fiscal 1997 from $19,173,000 in Fiscal 1996, a
decrease of approximately $1,309,000 or 6.8%. As a percentage of sales,
operating expenses decreased to 27.2% in Fiscal 1997 from 28.7% in Fiscal
1996.
Selling expenses decreased to $6,950,000 or 10.6% of net sales in Fiscal 1997
from $7,571,000 or 11.3% of net sales in Fiscal 1996. The decrease was
primarily attributable to the decreases in royalties and sales commissions due
to decreased volume in the Americas and Europe and benefits from the
consolidation of warehouse and administration facilities undertaken in Fiscal
1996.
General and administrative expenses decreased to $9,247,000 or 14.1% of net
sales in Fiscal 1997 from $9,396,000 or 14.1% of net sales in Fiscal 1996. The
increases in amortization of goodwill ($265,000) and costs associated with new
OEM customer agreements ($511,000) were offset by decreases in bad debt
24
<PAGE>
expense ($466,000), cost savings resulting from the consolidations of the
American and European branches ($371,000) and reduced amortization and
depreciation ($88,000).
Financial expenses of $1,465,000 or 2.2% of net sales in Fiscal 1997 were
essentially unchanged from $1,489,000 or 2.2% of net sales in Fiscal 1996.
Litigation and settlement costs in Fiscal 1997 and 1996 were approximately
$201,000 and $718,000, respectively. In Fiscal 1997, these matters consisted
primarily of the demand for arbitration and other litigation against Jack C.
Benun.
Other (income) expense, Net. Other (income) expense, net includes interest
income, gains and losses from the sale of fixed assets, foreign exchange gains
and losses, directors' fees and certain public relations costs.
The impact of foreign exchange transactions is reflected in the profit and
loss statement, which in Fiscal 1997 included a loss of approximately $92,000.
In Fiscal 1997, the Company's hedging activities were immaterial and at June
30, 1997 there were no forward exchange contracts outstanding.
Income Taxes. As of June 30, 1997, Concord had net operating loss
carryforwards for U.S. tax purposes of approximately $14,394,000, which expire
as follows: $1,054,000 in 2005; $16,000 in 2006; $443,000 in 2007; $6,630,000
in 2008; $2,770,000 in 2009; and $3,481,000 in 2010. Net operating losses for
state tax purposes began to expire in 1997. Net operating loss carryforwards
cannot be used to offset certain alternative minimum tax elements under the
Internal Revenue Code.
The income tax provision for Fiscal 1997 of approximately $117,000 is
comprised of a current tax benefit of approximately $13,000 and a deferred
provision of approximately $130,000. The Company's provision for income taxes
for Fiscal 1997 is primarily related to the earnings of the Company's Far East
and domestic operations, net of benefits relating to operating loss
carryforwards and overpayments/ refunds on the Company's other subsidiaries.
Net Income (Loss). As a result of the matters described above, the Company had
a net loss of approximately $833,000 in Fiscal 1997 compared to a net loss of
$1,734,000 in Fiscal 1996 a decrease in loss of approximately $901,000.
Liquidity and Capital Resources
At June 30, 1998, the Company had working capital of $20,813,000 as compared
to $13,994,000 at June 30, 1997. Cash flow provided by operating activities
was approximately $1,146,140 for Fiscal 1998 compared to $2,798,000 for Fiscal
1997. Capital expenditures, excluding assets financed under capital leases,
for Fiscal 1998 and 1997 were approximately $4,459,000 and $3,188,000,
respectively. The Company's principal funding requirement has been and is
expected to continue to be the financing of accounts receivable and inventory.
Additionally, the combined United States operation is dependent upon funding
received from the foreign operations.
Senior Notes Payable. On July 30, 1998, the Company consummated a private
placement of $15 million of senior notes. The notes bear interest at 11%, and
the maturity date is July 15, 2005. Interest payments are due quarterly. The
agreement contains certain restrictive covenants relating to, among other
things, incurrence of additional indebtedness and dividend and other payment
restrictions affecting subsidiaries.
25
<PAGE>
Mortgage Payable. On April 9, 1998, the Company entered into a 15 month
$2,100,000 mortgage loan agreement that is secured by the Company-owned
manufacturing facilities located in Baoan County, Shenzhen Municipal, PRC and
bears interest at 12.986%. The mortgage loan agreement requires monthly payments
of interest only and a balloon payment of $2,100,000 on July 9, 1999.
Non-Notification Factoring with Recourse Facility. During the last quarter of
Fiscal 1998, Concord HK consummated a $10,000,000 Non-Notification Factoring
with Recourse Facility (the "Factoring Facility") that is guaranteed by the
Company, is secured by certain accounts receivables of the Company's Hong Kong
operations and bears interest at 1.5% above prime lending rate. Availability is
subject to advance formulas based on eligible accounts receivable with no
minimum borrowings. The Company utilized the Factoring Facility during the
fourth quarter of Fiscal 1998 to replace a one-year $1,500,000 revolving credit
facility with a U.S. bank. At June 30, 1998, approximately $7,396,000 was
outstanding and classified as short-term debt.
U.S. Credit Facility. The Company has a $4,500,000 credit facility (the "U.S.
Credit Facility") which expires on May 31, 1999, that is secured by accounts
receivable, inventory and other related assets of the Company's United States
operations and bears interest at 1.5% above prime lending rate, which was 8.5%
at June 30, 1998. Availability is subject to advance formulas based on eligible
inventory and accounts receivable with interest calculated on borrowing of
$1,500,000. At June 30, 1998, approximately $687,000 was outstanding and
classified as short-term debt under the U.S. Credit Facility.
Hong Kong Credit Facility. Concord HK has a credit facility (the "HK Facility")
that provides Concord HK with up to $6,900,000 of financing as follows: letters
of credit and standby letters of credit of up to $2,825,000, overdraft and
packing loans of up to $3,600,000 and an installment loan of $475,000. The
installment loan was utilized in part to repay the outstanding mortgage
obligation on the Hong Kong office property. See "Note 7 - Long-Term Debt." As
of June 30, 1998, approximately $3,480,000 was utilized and approximately
$2,945,000 was available under the HK Facility. Approximately $2,128,000 of the
total $3,480,000 utilized was in the form of trade finance, including but not
limited to import letters of credit. The HK Facility, which is payable on
demand, bears interest at 2% above the prime lending rate for letters of credit
and 2.25% above the prime lending rate for overdraft and packing loans. At June
30, 1998, the prime lending rate was 10%. In connection with the HK Facility,
Concord HK has placed a $1,252,000 time deposit with the lender which is
included in prepaid and other current assets at June 30, 1998 and such deposit
is pledged as collateral for the HK Facility. In addition, all amounts
outstanding under the HK Facility are guaranteed by Concord.
Canadian Working Capital Facility. On November 25, 1996, the Company obtained a
$1,090,000 working capital facility (the "Canadian Facility") with a Canadian
bank which is secured by accounts receivable, inventory and other related assets
of the Company's Canadian operations and bears interest at 1% above the prime
lending rate, which was 5.5% at June 30, 1998. Availability under the Canadian
Facility is subject to advance formulas based on eligible accounts receivable
and seasonable inventory eligibility with no minimum borrowings and is subject
to monthly covenant requirements. At June 30, 1998, approximately $611,000 was
outstanding and classified as short-term debt. Concord Canada did not meet the
effective net worth covenant at June 30, 1998.
26
<PAGE>
Other Arrangements and Future Cash Commitments. Management believes that
anticipated cash flow from operations together with financing from the Factoring
Facility, the U.S. Credit Facility, the HK Facility, the Canadian Facility and
its July 30, 1998 private offering of $15 million of its 11% senior notes, or
replacement facilities, will be sufficient to fund its operating cash needs for
the foreseeable future.
Impact of Year 2000
The Year 2000 issue is the result of computer-controlled systems using two
digits rather than four to define the applicable year. For example, computer
programs that have time-sensitive software may recognize a date ending in "00"
as the year 1900 rather than the year 2000. This could result in system
failure or miscalculations causing disruptions of operations including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Based on an assessment, the Company determined that it will be required to
modify or replace portions of its software and hardware so that its systems
will function properly with respect to dates in the year 2000 and thereafter.
The Company presently believes that with modifications to existing software
and conversions to new software and hardware, the Year 2000 issue will not
pose significant operational problems for its systems. However, if such
modifications and conversions are not made, or are not completed in timely
fashion, the Year 2000 problems could have a material impact on the operations
of the Company.
The Company is continuing to contact all of its significant suppliers and large
customers to determine the extent to which the Company's interface systems are
vulnerable to those third parties' failure to remediate their own Year 2000
issues. The Company's total Year 2000 project cost and estimates to complete
include the estimated costs and time associated with the impact of third party
Year 2000 issues based on presently available information is approximately
$100,000. However, there can be no guarantee that the systems of other companies
on which the Company's systems rely will be converted on a timely basis and will
not have a material adverse effect on the Company's systems.
The Company is actively engaged in utilizing both internal and external
resources to reprogram, or replace, and test its software and hardware for
Year 2000 compliance. The Company's objective is to complete the Year 2000
project not later than July 1, 1999, which is prior to any anticipated impact
on its operating systems. The Fiscal 1999 cost of the Year 2000 project is not
expected to have a material effect on the results of operations.
The costs of the project and the date which the Company has established to
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification
plans and other factors. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially from
those anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel
trained in this area, the ability to locate and correct all relevant computer
codes, and similar uncertainties.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company, as a result of its global operating and financial activities, is
exposed to changes in interest rates and foreign currency exchange rates which
may adversely affect its results of operations and financial position. In
seeking to minimize the risks and/or costs associated with such activities,
the Company manages exposures to changes in interest rates and foreign
currency exchange rates through its regular
27
<PAGE>
operating and financing activities. The Company's hedging activities are
immaterial and as of June 30, 1998 there were no forward exchange contracts
outstanding. The company continues to analyze the benefits and costs
associated with hedging against foreign currency fluctuations. The Company's
exposure to changes in interest rates results from its investing and borrowing
activities used to meet its liquidity needs. Long-term debt is generally used
to finance long-term investments, while short-term debt is used to meet
working capital requirements. Derivative instruments are not presently used to
adjust the Company's interest rate risk profile. The Company does not utilize
financial instruments for trading or other speculative purposes, nor does it
utilize leveraged financial instruments.
Item 8. Financial Data and Supplemental Data.
The financial statements listed in Item 14(a) (1) and (2) are included in this
Report beginning on page F-2.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
None.
28
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Company.
<TABLE>
<CAPTION>
Year First Elected/ Positions and Officers
Name of Directors Age Nominated Director with the Company
- - ----------------- --- ------------------- ----------------------
<S> <C> <C> <C>
Ira B. Lampert (1) 53 1993 Chairman, Chief Executive Officer
and Director; Director of Concord
Camera HK Limited, Concord
Camera GmbH, Concord Camera
UK Limited and Concord Camera
France.
Steve Jackel (2) 62 1996 Chief Operating Officer, President
and Director
Eli Arenberg (3) 70 1988 Director
Joel L. Gold (4) 56 1991 Director
Morris H. Gindi (5) 53 1988 Director
J. David Hakman (6) 56 1993 Director
Ira J. Hechler (7) 79 1992 Director
Kent M. Klineman (8) 65 1993 Director
</TABLE>
- - --------------------
(1) On July 13, 1994, Ira B. Lampert was appointed to the positions of
Chairman and Chief Executive Officer of the Company. Mr. Lampert was
President and Chief Operating Officer from June 1, 1993 through January
1, 1996 and has been a Director of the Company since June 29, 1993. Mr.
Lampert is also a Director of Concord HK, Concord UK, Concord Germany
and Concord France. On July 31, 1998, Mr. Lampert was appointed to the
additional position of President. From April 1992 through May 30,
1993, Mr. Lampert's services were made available to the Company under
various consulting agreements with Whitehall Enterprises Inc. ("WEI"),
an investment banking company for the middle-market, of which Mr.
Lampert was the President from August 1990 through May 1993. During
the 1980's through the early 1990's, Mr. Lampert also served as a
Director and/or Officer of Summit Ventures, Inc. and related entities
which developed and managed Ascutney Mountain Resort, a year-round
destination resort located in Vermont. Mr. Lampert is a Board Member
of the Queens College Foundation which is part of the City University
of New York and is the Treasurer of the Boys Brotherhood Republic, a
non-profit organization for underprivileged children in the New York
City area.
(2) Effective January 1, 1996, Steve Jackel was appointed President, Chief
Operating Officer and Director of the Company. Mr. Jackel resigned from
the Company as Chief Operating Officer, President and Director
effective July 31, 1998, after the end of Fiscal 1998. From May 1, 1995
to December 31, 1995, Mr. Jackel's services were rendered to the
Company pursuant to a consulting agreement dated May 1, 1995 between
the Company and Harjac Consulting Corp., a corporation owned by Mr.
Jackel. From February 1993 to November 1994, Mr. Jackel was President
of McCrory's Corporation and Chairman of McCrory Stores. From June 1992
through February 1993, he was Co-President of McCrory Stores. From
February 1991 through June 1992, he was Executive Vice President
Specialty Operation for McCrory Stores. Prior to that time, Mr. Jackel
was an independent management consultant.
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<PAGE>
(3) Eli Arenberg joined the Company in April 1984 as Vice President of
Sales and Marketing and in September 1989 was promoted to Senior Vice
President of Sales. In February 1992, Mr. Arenberg retired from such
positions and in July 1994 made his services available to the Company
under a consulting agreement with ELA Enterprises, Inc. (the "ELA
Enterprises Consulting Agreement"), a Florida corporation wholly-owned
by Mr. Arenberg.
(4) Joel L. Gold is currently Senior Managing Director of Inter Bank
Capital Group LLC, an investment bank. From March 1996 through
September 1997 Mr. Gold was an Executive Vice President at L.T.
Lawrence & Co., Inc., an investment bank. From April 1995 through March
1996, Mr. Gold was a Managing Director at Fector Detwiler & Co, Inc.,
an investment bank. From January 1992 through April 1995, Mr. Gold was
a Director at Furman Selz Incorporated, an investment bank. From April
1990 through December 1991, Mr. Gold was a Managing Director at Bear,
Stearns & Co. Inc., New York, New York. From April 1971 through
February 1990, Mr. Gold was a Managing Director at Drexel Burnham
Lambert. Mr. Gold is currently a member of the board of directors of
BCAM International, Life Medical Sciences and Sterling Vision.
(5) Morris H. Gindi is the Chief Executive Officer of Notra Trading Inc.,
located in Woodbridge, New Jersey and has served in such capacity since
1983. Notra Trading Inc. is an import agent in the housewares and
domestics industry. Mr. Gindi has over 27 years experience in
importing.
(6) J. David Hakman is the owner and Chief Executive Officer of Hakman and
Company, Inc., an investment and merchant banking concern and a member of
the National Association of Securities Dealers, Inc. Mr. Hakman has been
a Director since 1989 and a member of the Audit and Nominating Committees
since 1991 of Hanover Direct, Inc., a firm engaged in the direct
marketing business.
(7) Ira J. Hechler is a Partner and a Director of the investment firm Ira
J. Hechler & Associates located in New York, New York. Mr. Hechler has
been associated with such firm since June 1987. The firm's principal
business is holding stock, partnership interests and other property for
investment purposes. Mr. Hechler is currently a member of the board of
directors of Jan Ball Marketing, Inc., I.C. Isaacs and Company, Inc. and
United States Banknote Corporation.
(8) Kent M. Klineman has been an attorney and private investor and has
served as a Director of several closely held companies during the past
five years. Mr. Klineman is a Director, secretary and a member of the
Compensation Committee of EIS International, Inc., a Director and
Treasurer of Sonoma Cutrer Vineyards, Inc. and a Director of Dealers
Alliance Credit Corp. and Dealers Alliance Capital Corp. Mr. Klineman's
initial nomination to serve as Director of the Company in 1993 was made
by Mr. Hechler. See "Certain Relationships and Related Transactions."
Meetings and Committees
In Fiscal 1998, the Board held four meetings, of which one was telephonic. The
Board has an Audit Committee, a Compensation Committee, a Stock Option
Committee, an Executive Committee, an Ad Hoc Committee and a Nominating
Committee.
The Audit Committee, consisting of Kent M. Klineman (Chairman), J. David
Hakman and Eli Arenberg, reviews and reports to the Board with respect to
various auditing and accounting matters including recommendations to the Board
as to the selection of the Company's independent auditors, the scope of audit
procedures, general accounting policy matters and the performance of the
Company's independent auditors. The Audit Committee held four meetings in
Fiscal 1998.
The Compensation and Stock Option Committee, consisting of Joel L. Gold
(Chairman), Ira J. Hechler and Morris Gindi, reviews and makes recommendations
to the Board regarding all executive compensation. The Compensation Committee
held two meetings in Fiscal 1998.
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<PAGE>
The Nominating Committee, consisting of Ira B. Lampert, Joel Gold, Ira Hechler
and Kent Klineman nominates those persons who shall be invited to stand for
election to the Board of Directors as management nominees at any and all
ensuing meetings of the shareholders of the Company or pursuant to any actions
with respect to the election of directors to be taken by written consent of
the shareholders. The Nominating Committee held one meeting in Fiscal 1998.
Shareholder suggestions of one or more nominees for election to the Board may
be sent in writing to the Nominating Committee, Attention: Chairman, c/o
Concord Camera Corp., 35 Mileed Way, Avenel, New Jersey 07001.
In Fiscal 1998, all of the directors attended at least 75% of the aggregate of
the total number of meetings of the Board and committees of which they were
members.
Directors Compensation
Non-employee members of the Board receive (i) an annual fee of $10,000, (ii) a
$2,500 annual fee for serving on each committee of the Board with the Chairman
thereof receiving a $3,500 annual fee and (iii) a meeting fee of $750 for each
meeting attended in person and $250 for each meeting attended telephonically.
In addition, under the Company's Incentive Plan, each non-employee director is
entitled to receive options pursuant to a formula to purchase up to 20,000
Common Shares upon his/her appointment as director. The Incentive Plan also
provides for the grant of an immediately exercisable option to purchase 1,000
Common Shares on the date of the original grant and on each anniversary of the
original grant. Pursuant to this plan each non-employee director received
options to purchase 25,000 Common Shares.
As of December 22, 1996, all outstanding options held by directors of the
Company having an exercise price of $4.00 a share or more were revised as
follows:
(a) The number of shares of Common Stock covered by each option was
reduced by 25% (their reduction was applied first on a pro rata basis against
the unvested installments of each option).
(b) The exercise price for 50% of the shares covered by the revised
option was repriced to be $2.00 per share, for 25% was repriced to be $2.50
per share and for 25% was repriced to be $3.00 per share.
(c) Vesting of the repriced options remained unchanged.
Mr. Arenberg, through a company controlled by him, is a party to a consulting
agreement with the Company. See "Certain Relationships and Related
Transactions."
31
<PAGE>
EXECUTIVE OFFICERS
The names of the current executive officers(5) of the Company together with
certain biographical information for each of them (other than Mr. Lampert and
Mr. Jackel for whom biographical information is provided above) is set forth
below:
<TABLE>
<CAPTION>
Name of Executive Officer Age Positions and Offices with the Company
- - ------------------------- --- --------------------------------------
<S> <C> <C>
Ira B. Lampert 53 Chairman, Chief Executive Officer and Director
Steve Jackel 62 President, Chief Operating Officer and Director
Brian F. King 45 Senior Vice President of Corporate and Strategic Development
and Secretary; Managing Director of Concord Camera HK
Limited
Urs W. Stampfli 46 Director of Sales and Global Marketing
Harlan I. Press 34 Corporate Controller and Assistant Secretary
</TABLE>
Brian F. King was appointed to the position of Senior Vice President on August
25, 1998. Mr. King is also Secretary of the Company and Managing Director of
Concord Camera HK Limited, and he has held such positions since August 1996.
Mr. King joined the Company in March 1996 as Vice President of Corporate and
Strategic Development. From June 1991 through February 1996, Mr. King was
Managing General Partner of Cripple Creek Associates, a partnership that built
and operated two casinos in Cripple Creek, Colorado.
Urs W. Stampfli was appointed Director of Sales and Global Marketing in May
1998. From 1992 to April 1998, Mr. Stampfli was Vice President, Marketing,
Photo Imaging Systems of Agfa Division, Bayer Corporation.
Harlan I. Press is currently Corporate Controller and Assistant Secretary of
the Company and has held such positions since October 1, 1996. Mr. Press was
appointed as a Director of Concord Camera HK Limited on September 1, 1997. Mr.
Press joined the Company in April 1994 and has held the position of Chief
Accounting Officer since November 1994. Mr. Press was a Senior Field Examiner
for the CIT Group from April 1993 through April 1994. From December 1991
through April 1993, Mr. Press served as the Production Manager and Inventory
Controller for Sandberg and Sikorski Diamond Corp., a jewelry manufacturer.
Prior to then Mr. Press was a Senior Accountant in BDO Seidman's Audit
Division.
- - --------
(5) Mr. Jackel resigned as President, Chief Operating Officer and director
effective July 31, 1998. Eli Shoer resigned as Executive Vice President on
April 30, 1998. Lawrence Pesin resigned as Vice President Global Marketing on
June 11, 1998. Barry M. Shereck resigned as Vice President and Chief Financial
Officer on October 31, 1997.
32
<PAGE>
Section 16 Beneficial Ownership Reporting Compliance
The following officers and directors of the Company filed late reports under
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") relating to Fiscal 1998: (i) Eli Arenberg, Director, late
filing of a Form 4 due June 10, 1998, reporting the purchase in an open market
transaction of 5,000 shares of Common Stock, (ii) Morris Gindi, Director, late
filing of a Form 4 due October 10, 1997, reporting the sale in an open market
transaction of 5,000 shares of Common Stock to Notra Trading and (iii) Morris
Gindi, Director, late filing of a Form 4 due November 10, 1997, reporting the
sale in an open market transaction of 5,000 shares of Common Stock to Notra
Trading. There are no known failures to file a required Form 3, 4 or 5 and no
other known late filings of a required Form 3, 4 or 5 during Fiscal 1997 by
any person required to file such forms with respect to the Company pursuant to
Section 16 of the Exchange Act.
33
<PAGE>
Item 11.
EXECUTIVE COMPENSATION
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation Awards
(a) (b) (c) (d) (e) (f) (g)
Securities All Other
Other Annual Underlying Compen-
Salary Bonus Compensation Options sation
Name and Principal Position Fiscal Year ($) ($) ($) (#) ($)
- - --------------------------- ----------- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
1998 $541,667 -- $210,383 (4) -- $14,973 (9)
Ira B. Lampert
Chief Executive Officer, 1997 545,205 -- 200,141 (5) 695,000 (7) 10,350 (9)
and Chairman
1996 551,282 $100,000 (19) 220,432 (6) 245,000 (8) 18,289 (9)
1998 438,462 -- 83,545 (10) -- 42,415 (9)
Steve Jackel (1)
Chief Operating Officer, 1997 400,000 -- 66,210 (11) 306,250 (7) 26,821 (9)
President
1996 377,346 25,000 (19) 36,237 (12) 300,000 (8) 38,631 (9)
1998 313,000 -- 66,527 (13) -- 4,277 (9)
Eli Shoer (2)
Director of Operations -- 1997 210,000 -- 75,000 (14) 66,250 (7) 1,600 (9)
Concord HK
1996 214,039 42,000 (19) 75,000 (14) 10,000 (8) --
Brian F. King 1998 231,738 -- 78,938 (15) -- 1,721 (9)
Vice President of Corporate
and Strategic Development; 1997 170,000 -- 73,000 (16) 147,500 (7) 783 (9)
Managing Director of
Concord Camera HK Limited 1996 44,265 -- 3,105 (17) 87,500 (8) --
1998 195,833 -- 18,000 (18) -- 3,669 (9)
Lawrence Pesin (3)
General Manager - Americas 1997 181,250 -- 18,000 (18) 72,500 (7) --
1996 43,750 -- 4,500 (18) 87,500 (8) --
</TABLE>
- - --------------------
(1) Mr. Jackel resigned from the Company on July 31, 1998.
(2) Mr. Shoer resigned from the Company on April 30, 1998.
(3) Mr. Pesin resigned as an executive officer from the Company on June 11,
1998 and is currently the General Manager - Americas.
(4) Includes $30,939, $108,300 and $62,594 paid for and to Mr. Lampert for
auto lease and costs, reimbursement of taxes and partial housing costs,
respectively.
34
<PAGE>
(5) Includes $38,068, $102,036 and $45,360 paid for and to Mr. Lampert for
auto lease and costs, reimbursement of taxes and partial housing costs,
respectively.
(6) Includes $35,012, $122,775 and $54,461 paid for and to Mr. Lampert for an
auto lease and costs, reimbursement of taxes and partial housing costs,
respectively.
(7) These options include options issued prior to Fiscal 1997 that were
canceled and repriced during Fiscal 1997.
(8) Includes shares purchased from the Company for $5.375 per share by a loan
from the Company and evidenced by full recourse promissory note secured
by the Common Stock and does not include an equal number of shares
underlying a contingent restricted stock award ("restricted stock award")
which vest as follows: 33 1/3% upon the Common Stock reaching a market
price of $10.00 by August 31, 1997; 66 2/3% upon the Common Stock
reaching a market price of $15.00 by February 28, 1999; and 100% upon the
Common Stock reaching a market price of $20.00 by August 31, 2000. See
"Certain Relationships and Related Transactions" for information
regarding substitution of options to purchase Common Stock for contingent
restricted stock awards.
(9) Represents amount paid by the Company for insurance premiums.
(10) Includes $26,969 and $56,576 paid to Mr. Jackel for an auto lease, costs
and tax reimbursement, respectively.
(11) Includes $33,825 and $32,385 paid to Mr. Jackel for an auto lease, costs
and tax reimbursement, respectively.
(12) Includes $27,414 and $8,823 paid to Mr. Jackel for an auto lease and
costs and travel expenses reimbursed to Harjac Consulting, of which Mr.
Jackel was a principle, respectively.
(13) Includes $62,594 paid to Mr. Shoer for housing allowance for living
arrangements in the Far East and $6,000 paid to Mr. Shoer for auto
allowances.
(14) Represents housing allowance paid to Mr. Shoer for living arrangements in
the Far East.
(15) Includes $18,000 and $60,000 paid to Mr. King for an auto allowance and
housing allowance paid for living arrangements in the Far East,
respectively.
(16) Includes $18,000 paid to Mr. King for auto allowances and $55,000 for
housing allowance paid to Mr. King for living arrangements in the Far
East.
(17) Represents auto allowances paid to Mr. King.
(18) Represents auto allowances paid to Mr. Pesin.
(19) Represents bonus determined and paid by the Company in Fiscal 1996 on
account of Fiscal 1995 performance.
35
<PAGE>
II. OPTION GRANTS IN FISCAL 1998
None.
III. AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Shares
Acquired Number of Securities Value of Unexercised In-the-
on Value Underlying Unexercised Money Options at FY End
Exercise Realized Options at FY End (#) ($)(1)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----- ----- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ira B. Lampert -- $-- 686,250 18,750 $2,502,442 $64,454
Steve Jackel -- -- 311,000 20,250 1,109,719 69,616
Eli Shoer 131,250 741,430 -- -- -- --
Lawrence Pesin 2,500 15,845 35,000 7,500 93,594 51,563
Brian F. King -- -- 136,250 40,000 487,500 121,875
</TABLE>
- - -----------
(1) The closing price of the Company's Common Stock at 1998 Fiscal Year End
was $5 13/16.
Executive Employment Contracts, Termination of Employment and Change in Contract
Arrangements
The employment agreement between the Company and Ira B. Lampert effective July
1, 1993 was amended and restated as of May 1, 1997 (the "Lampert Agreement").
The Lampert Agreement provides that Mr. Lampert serve in the additional
capacities of Chairman and Chief Executive Officer of the Company. The Lampert
Agreement provides for an annual salary of $500,000, has a term of four years
and provides for the term of employment to be automatically extended for one
additional day for each day of the term of employment that elapses in the
event that neither party notifies the other at any time during the term of
employment that it does not want the term of employment extended.
Under the Lampert Agreement, Mr. Lampert has been granted two sets of Common
Stock options. The first, an option to purchase 340,000 Common Shares was
amended and restated to 127,500 Common Shares at an exercise price of $2.00
per share, 63,750 Common Shares at an exercise price of $2.50 per share and
63,750 Common Shares at an exercise price of $3.00 per share. This option is
currently exercisable as to 245,625 Common Shares and the balance of 9,375
Common Shares became vested on July 31, 1998. These options to acquire a total
of 255,000 shares of Common Stock were not granted pursuant to the Company's
incentive plan and are currently exercisable through July 2003, and such
options have anti-dilution provisions. The second option, an option to
purchase 260,000 Common Shares was amended and restated to 97,500 Common
Shares at an exercise price of $2.00 per share, 48,750 Common Shares at an
exercise price of $2.50 per share and 48,750 Common shares at an exercise
price of $3.00 per share. This option is currently exercisable as to 185,625
Common Shares and the balance of 9,375 Common Shares became vested on August
31, 1998 and currently exercisable through
36
<PAGE>
September 2004, and such options also have anti-dilution provisions.
In the Lampert Agreement, the Company agreed to adopt a supplemental executive
retirement plan (the "SERP") for the benefit of Mr. Lampert and shall cause to
be credited to this account $14,167 each month ("Monthly Credit") for the
benefit of Mr. Lampert. The balance in the SERP account will always be 100%
vested and non-forfeitable. Each time the Company credits a monthly credit to
the SERP account, the Company will also simultaneously contribute an amount
equal to such credit to a trust established for the purpose of accumulating
funds to satisfy the obligations incurred by the Company pursuant to the
establishment of the SERP. The Lampert Agreement prohibits Mr. Lampert from
competing with the Company for a one-year period upon expiration of the
Lampert Agreement.
As of January 1, 1996, the Company and Steve Jackel entered into an Employment
Agreement (the "Jackel Agreement") whereby Mr. Jackel is employed as President
and Chief Operating Officer of the Company. Mr. Jackel resigned from the
Company on July 31, 1998, after the end of Fiscal 1998. Prior to entering into
the Jackel Agreement, Mr. Jackel rendered consulting services to the Company
pursuant to a Consulting Agreement, dated May 1, 1995, between the Company and
Harjac Consulting Corp., a corporation owned by Mr. Jackel, which agreement
was terminated upon the effective date of the Jackel Agreement. The Jackel
Agreement provides for an annual salary of $400,000, has a term of three years
commencing on January 1, 1996 and provides for automatic one-year renewals
unless prior written notice is given by either party. The Jackel Agreement
prohibits Mr. Jackel from competing with the Company for at least one year
following the termination of Mr. Jackel's employment.
Under the Jackel Agreement, Mr. Jackel has been granted Common Stock options.
The option to purchase 300,000 Common Shares was amended and restated to
103,125 shares of the Company's Common Stock at an exercise price of $2.00 per
share, 51,562 shares of the Company's Common Stock at an exercise price of
$2.50 per share and 76,563 shares of the Company's Common Stock of an exercise
price of $3.00 per share of which 226,000 were exercisable as of September 17,
1998 with the balance becoming exercisable in equal allotments of 750 Common
Shares on the Thursday of each successive week after September 17, 1998
through and including December 31, 1998, as of which date such options shall
be exercisable. These options to acquire a total of 231,250 shares of Common
Stock were not granted pursuant to the Company's Incentive Plan. The options
contain anti-dilution provisions and are exercisable through February 15,
2006.
37
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of September 17, 1998
with respect to (i) those persons or groups known to the Company to
beneficially own more than 5% of the Common Stock, (ii) each of the directors
and nominees of the Company, (iii) the Company's executive officers named in
the summary compensation table and (iv) the Company's directors and executive
officers as a group:
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership(1) of Class(1)
- - ------------------------------------ -------------------- --------
<S> <C> <C>
(i) Beneficial Owners of More than 5%
of the Common Shares
Theodore H. Kruttschnitt........................................ 1,205,000 10.7%
1350 Bayshore Blvd., Suite 850
Burlingame, California 94010
Deltec Asset Management......................................... 1,708,060 15.2%
535 Madison Avenue
New York, New York 10002
(ii) Directors and Nominees of the Company
Ira B. Lampert.................................................. 1,801,017(2)(3) 16.1%
Concord Camera Corp.
35 Mileed Way
Avenel, New Jersey 07001
Steve Jackel.................................................... 1,801,017(2)(4) 16.1%
Concord Camera Corp.
35 Mileed Way
Avenel, New Jersey 07001
Eli Arenberg.................................................... 82,750(5) *
9578 Harbour Lake Circle
Boynton Beach, Florida 33437
Joel L. Gold.................................................... 30,250(6) *
Inter Bank
630 Fifth Avenue, Suite 1820
New York, New York 10111
Morris Gindi.................................................... 29,750(7) *
Notra Trading Inc.
One Woodbridge Center
Woodbridge, New Jersey 07095
J. David Hakman................................................. 96,750(8) *
Hakman & Co. Inc.
1350 Bayshore Highway - Suite 300
Burlingame, California 94010
Ira J. Hechler.................................................. 465,750(9) 4.2%
45 Rockefeller Plaza
New York, New York 10111
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership(1) of Class(1)
- - ------------------------------------ -------------------- --------
<S> <C> <C>
Kent M. Klineman................................................ 128,000(10) 1.2%
c/o Klineman Assoc., Inc.
1270 Avenue of the Americas
New York, New York 10020
(iii) Executive officers
Brian F. King................................................... 1,801,017(2)(11) 16.1%
Concord Camera Corp.
35 Mileed Way
Avenel, New Jersey 07001
Keith Lampert................................................... 1,801,017(2)(12) 16.1%
Concord Camera Corp.
35 Mileed Way
Avenel, New Jersey 07001
Arthur Zawodny.................................................. 1,801,017(2)(13) 16.1%
Concord Camera Corp.
35 Mileed Way
Avenel, New Jersey 07001
(iv) All executive officers and directors as a group (11 Persons) 2,634,267 23.5%
</TABLE>
- - --------------------
* Indicates less than 1%.
(1) All information is as of September 17, 1998 and was determined in
accordance with Rule 13d-3 under the Exchange Act based upon information
furnished by the persons listed or contained in filings made by them with
the Commission. As of September 17, 1998, the Company had issued and
outstanding 11,214,451 Common Shares, the Company's only class of voting
securities outstanding. Unless otherwise indicated, beneficial ownership
disclosed consists of sole voting and dispositive power.
(2) Represents the total number of shares which are beneficially owned by a
group comprising Ira B. Lampert, Steve Jackel, Brian F. King, Keith
Lampert and Arthur Zawodny as a result of the terms of an Amended and
Restated Voting Agreement, dated as of February 28, 1997 (the "Voting
Agreement") pursuant to which each party to the Voting Agreement agreed to
vote any purchased shares or option shares acquired by such party under
the Company's Incentive Plan in accordance with the will of the holders of
a majority of all the shares issued under the Company's Incentive Plan.
(3) Includes 53,850 shares purchased in the open market, 245,000 shares
purchased pursuant to a purchase agreement with the Company, 55,000 shares
purchased in a private transaction from former employees of the Company
pursuant to the Management Equity provision of the Company's Stock
Incentive Plan and 705,000 shares underlying stock options, as to all of
which such person has sole dispositive power.
(4) Includes 267,667 shares underlying stock options, as to all of which such
person has sole dispositive power. Excludes 5,250 shares underlying
options which will not become exercisable within 60 days of September 17,
1998.
(5) Represents 28,000 shares purchased in the open market and 54,750 shares
underlying stock options.
(6) Represents 10,500 shares purchased in the open market and 19,750 shares
underlying stock options.
(7) Represents shares underlying stock options.
(8) Includes 55,000 shares purchased in the open market, 22,000 warrants
pursuant to a consulting agreement and 19,750 shares underlying stock
options. Excludes 109,000 shares underlying warrants which will not become
exercisable within 60 days of September 17, 1998.
(9) Represents 446,000 shares purchased in the open market and 19,750 shares
underlying stock options.
39
<PAGE>
(10) Represents 108,250 shares purchased in the open market and 19,750 shares
underlying stock options.
(11) Includes 27,500 shares purchased pursuant to a purchase agreement with
the Company, 52,500 shares purchased in private transactions from former
employees of the Company pursuant to the Management Equity provision of
the Company's Stock Incentive Plan and 160,000 shares underlying stock
options, as to all of which such person has sole dispositive power.
Excludes 40,000 shares underlying options which will not become
exercisable within 60 days of September 17, 1998.
(12) Includes 20,000 shares purchased in the open market, 55,000 shares
purchased in private transactions from former employees of the Company
pursuant to the Management Equity provision of the Company's Stock
Incentive Plan and 115,500 shares underlying stock options, as to all of
which such person has sole dispositive power. Excludes 29,500 shares
underlying options which will not become exercisable within 60 days of
September 17, 1998.
(13) Includes 7,000 shares pursuant to a purchase agreement with the Company
and 37,000 shares underlying stock options, as to all of which such
person has sole dispositive power. Excludes 12,000 shares underlying
options which will not become exercisable within 60 days of September 17,
1998.
Item 13. Certain Relationships and Related Transactions
At June 30, 1998, the Company was indebted to Mr. Benun for certain loans made
by him to the Company in the principal amount of $100,000, which amount bears
interest at a rate per annum equal to 2% over CIT's prime lending rate. The
Company incurred approximately $11,000 in interest expense in Fiscal 1998 in
connection with the loans from Mr. Benun and suspended payment of the loans.
The Company believes that any amounts which may otherwise have been due Mr.
Benun will be offset by the amounts which Mr. Benun will be found to owe the
Company when all claims by the Company against Mr. Benun are finally
arbitrated or adjudicated. See "Item 3 - Legal Proceedings."
The Company and Mr. Benun entered into and executed a Pledge Agreement on each
of March 7, 1994 and April 6, 1994 to secure the prompt payment of any
liability to the Company that Mr. Benun may incur as a result of the matters
then under investigation. Mr. Benun was terminated as Chief Executive Officer
on July 14, 1994. The Company holds 30,770 shares of the Company's Common
Stock owned by Mr. Benun and pledged to the Company in connection with the
Pledge Agreement.
On August 1, 1994, ELA Enterprises, Inc., a Company owned by Eli Arenberg, was
granted an option under the Company's Incentive Plan to purchase 10,000 Common
Shares at an exercise price of $3.00 per share, 10,000 Common Shares at an
exercise price of $4.00 per share and 10,000 Common Shares at an exercise
price of $5.00 per share, in connection with consulting services provided by
Mr. Arenberg to the Company pursuant to the ELA Enterprises, Inc. Consulting
Agreement. All options previously granted to Mr. Arenberg were canceled. In
addition, ELA Enterprises, Inc. will be paid at an hourly rate for consulting
services provided to the Company. Selling expenses include $56,000 and $48,000
for such consulting services and related expenses during the fiscal years
ended June 30, 1998 and 1997, respectively.
During the fiscal year ended June 30, 1996 the Company paid consulting fees and
expenses of approximately $218,000 to a firm, the president of which was
appointed Chief Operating Officer and President of the Company in January 1996.
On August 23, 1995, the Compensation Committee of the Board approved stock
purchase awards under the Company's Incentive Plan pursuant to which 500,000
Common Shares were made available for purchase by senior management of the
Company at a price per share equal to $5.375 per share (the closing price of
the Common Stock on August 23, 1995) pursuant to binding commitments to be
made by such persons by August 31, 1995. The Company received commitments for
the purchase of 444,000 of such shares. Each purchaser was also granted the
right to receive a contingent restricted stock award covering a number of
shares equal to the number of shares purchased by such purchaser. The
contingent restricted stock was to be issued based upon attainment of
increases in shareholder value in accordance with the Incentive Plan as
follows:
40
<PAGE>
<TABLE>
<CAPTION>
Percentage of Restricted Stock Fair Market Value Latest Attainment Date
- - ------------------------------ ----------------- ----------------------
<S> <C> <C>
33 1/3% $10.00 August 31, 1997
66 2/3% $15.00 February 28, 1999
100% $20.00 August 31, 2000
</TABLE>
If issued, such contingent restricted shares were to vest over a three-year
period and were subject to forfeiture prior to vesting under certain
conditions.
Pursuant to purchase agreements (the "Purchase Agreements"), members of the
Company's senior management purchased shares of Common Stock (the "Purchased
Shares") pursuant to the terms of the Management Equity Provisions of the
Company's Incentive Plan. As payment for such shares, each purchaser executed
a full recourse note for the purchase price of such shares (each a "Note";
collectively, the "Notes") and pledged the Purchased Shares as security for
the payment of the Note. The Notes mature five years from the date of purchase
(May 7, 1996 in the case of the Note executed by Brian F. King and November 7,
1995 in the case of Notes executed by all other purchasers) and bear interest
at 6%.
Concurrently with the execution of their respective Purchase Agreements and
Notes, each purchaser entered into a Voting Agreement pursuant to which each
purchaser agreed to vote all of his Purchased Shares and contingent restricted
stock in accordance with the determination of the holders of a majority of all
of the Purchased Shares and contingent restricted stock held by the
purchasers. To effect the foregoing, each of the purchasers delivered to Mr.
Lampert an irrevocable proxy and agreed that prior to any transfer of
Purchased Shares and contingent restricted stock, such purchaser will cause
the transferee (A) to agree in writing with Mr. Lampert to be bound by the
provisions of the Voting Agreement and (B) to execute and deliver to Mr.
Lampert an irrevocable proxy.
Pursuant to Amendments to each of the Purchase Agreements dated February 28,
1997 (the "Amendments"), the Company was relieved of its obligation to issue
any contingent restricted stock. Instead, each member of the Company's senior
management received, as of December 22, 1996, options to purchase that number
of shares of Common Stock (the "Option Shares") equal to the number of
Purchased Shares purchased by such person. The options vested as to 20% of the
Option Shares covered thereby as of December 22, 1996 and the balance of the
shares covered thereby vest beginning December 31, 1996 in equal monthly
installments over a four-year period during the term of employment or
consultancy. The unvested portion will immediately become vested in the event
that the average closing price of the Common Stock for any consecutive 90
trading day period is at least $5.00. The unvested portion is cancelable upon
any termination of employment or consultancy (except for death, disability or
retirement).
Concurrently with the Amendments, the Voting Agreement and the irrevocable
proxies were amended and restated to include the Option Shares and to delete
the contingent restricted stock.
As of December 22, 1996, all outstanding options held by senior management and
directors of the Company that previously had an exercise price of up to $3.99
per share remained unchanged. All such options having an exercise price at
$4.00 a share or above (excluding those granted to ELA Enterprises, Inc.) were
revised as follows:
41
<PAGE>
(a) The number of shares of Common Stock covered by each
option was reduced by 25% (the reduction was applied on a pro rata
basis first against the unvested installments of each option).
(b) The exercise price for 50% of the shares covered by
the revised option were repriced to be $2.00 per share, 25% were
repriced to be $2.50 per share and 25% to be $3.00 per share.
(c) Vesting of the repriced options remained unchanged.
The following tables detail the above changes in options held by senior
management exclusive of the options granted in lieu of the contingent
restricted stock awards discussed above and exclusive of the options described
in Item 11 - Table II (Option Grants in Fiscal 1997), which were granted
subsequent to December 22, 1996:
<TABLE>
<CAPTION>
OPTIONS HELD PRIOR TO CHANGES OF 12/22/96(1) TERMS OF ORIGINAL GRANT
-------------------------------------------------------- --------------------------------
# OF END OF
UNDERLYING OPTION VESTED UNVESTED GRANT VESTING VESTING
SHARES PRICE ($) SHARES SHARES DATE PERIOD METHOD
---------- --------- ------ -------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Ira B. Lampert 260,000 4.0000 172,500 87,500 9/30/94 8/31/98 quarterly
340,000 4.0000 252,500 87,500 7/1/93 8/31/97 quarterly
- - ----------------------------------------------------------------------------------------------------------------------------
Steve Jackel 25,000 3.0000 25,000 0 5/1/95 12/31/95 100%
75,000 4.0000 75,000 0 5/1/95 4/30/96 100%
200,000 4.0000 95,000 105,000 2/15/95 12/31/98 weekly
- - ----------------------------------------------------------------------------------------------------------------------------
Eli Shoer 75,000 4.0000 50,000 25,000 10/1/94 9/30/97 annual
75,000 3.2500 75,000 0 10/4/94 10/4/94 annual
- - ----------------------------------------------------------------------------------------------------------------------------
Brian F. King (2) 60,000 4.0000 0 60,000 5/7/96 5/7/99 annual
- - ----------------------------------------------------------------------------------------------------------------------------
Lawrence Pesin (2) 60,000 4.0000 0 60,000 5/7/96 5/7/99 annual
- - ----------------------------------------------------------------------------------------------------------------------------
Arthur Zawodny 12,000 3.2500 12,000 0 10/21/94 10/21/94 annual
8,000 3.2500 4,000 4,000 10/21/94 5/31/98 annual
12,000 2.8125 6,000 6,000 5/15/96 5/15/97 annual
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For each person listed, excludes contingent restricted stock awards.
(2) Excludes a stock option for $10,000 Common Shares at $1.81 purchased in a
private transaction for a former employee of the Company pursuant to the
management equity provision of the Company's Stock Incentive Plan.
42
<PAGE>
<TABLE>
<CAPTION>
OPTIONS HELD AFTER 12/22/96 WITH
OPTIONS HELD AFTER 12/22/96 ORIGINAL EXERCISE PRICE
------------------------------------------------------ -----------------------------------------
# OF NUMBER
OPTIONS OF SHARES SHARES
CANCELED SHARES VESTED UNVESTED PRICE ($) VESTED UNVESTED
-------- ------ ------ -------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ira B. Lampert (65,000) 195,000 129,375 65,625 4.0000 0 0
(85,000) 255,000 189,375 65,625 4.0000 0 0
- - -----------------------------------------------------------------------------------------------------------------------------
Steve Jackel 0 25,000 25,000 0 3.0000 25,000 0
(18,750) 56,250 56,250 0 4.0000 0 0
(50,000) 150,000 71,250 78,750 4.0000 0 0
- - -----------------------------------------------------------------------------------------------------------------------------
Eli Shoer (18,750) 56,250 37,500 18,750 4.0000 0 0
0 75,000 75,000 0 3.2500 75,000 0
- - -----------------------------------------------------------------------------------------------------------------------------
Brian F. King (2) (15,000) 45,000 0 45,000 4.0000 0 0
- - -----------------------------------------------------------------------------------------------------------------------------
Lawrence Pesin (2) (15,000) 45,000 0 45,000 4.0000 0 0
- - -----------------------------------------------------------------------------------------------------------------------------
Arthur Zawodny 0 12,000 12,000 0 3.2500 12,000 0
0 8,000 4,000 4,000 3.2500 4,000 4,000
0 12,000 6,000 6,000 2.8125 6,000 6,000
- - -----------------------------------------------------------------------------------------------------------------------------
OPTIONS HELD AFTER 12/22/96 WITH NEW EXERCISE PRICE
------------------------------------------------------------------------------------------------------------
$2.00 PRICE $2.50 PRICE $3.00 PRICE TOTAL OUTSTANDING
----------- ----------- ----------- -----------------
VESTED UNVESTED VESTED UNVESTED VESTED UNVESTED VESTED UNVESTED
- - ---------------------------------------------------------------------------------------------------------------------------------
Ira B. Lampert 64,687 32,813 32,344 16,406 32,344 16,406 129,375 65,625
94,687 32,813 47,344 16,406 47,344 16,406 189,375 65,625
- - ---------------------------------------------------------------------------------------------------------------------------------
Steve Jackel 0 0 0 0 0 0 25,000 0
28,125 0 14,062 0 14,063 0 56,250 0
35,625 39,375 17,812 19,688 17,813 19,687 71,250 78,750
- - ---------------------------------------------------------------------------------------------------------------------------------
Eli Shoer 18,750 9,375 9,375 4,687 9,375 4,688 37,500 18,750
0 0 0 0 0 0 75,000 0
- - ---------------------------------------------------------------------------------------------------------------------------------
Brian F. King (2) 0 22,500 0 11,250 0 11,250 0 45,000
- - ---------------------------------------------------------------------------------------------------------------------------------
Lawrence Pesin (2) 0 22,500 0 11,250 0 11,250 0 45,000
- - ---------------------------------------------------------------------------------------------------------------------------------
Arthur Zawodny 0 0 0 0 0 0 12,000 0
0 0 0 0 0 0 4,000 4,000
0 0 0 0 0 0 6,000 6,000
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following executive officers of the Company are indebted to the Company
for amounts in excess of $60,000 as a result of purchases Pursuant to the
Purchase Agreements:
Ira B. Lampert....................................................$1,588,272.74
Brian F. King.......................................................$350,354.28
Steve Jackel........................................................$622,852.05
43
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(a) (1) and (2) Financial Statements and Financial Statement Schedule
The following consolidated financial statements of the Company and the notes
thereto, the related reports thereon of the certified public accountants and
financial statement schedule are filed under Item 8 of this Report:
(a) (1) Financial Statements
Page
Independent Auditors' Report..................................... F-1
Consolidated Balance Sheets at June 30, 1998 and 1997............ F-2
Consolidated Statements of Operations for the years ended
June 30, 1998, 1997 and 1996................................... F-3
Consolidated Statements of Cash Flows for the year ended
June 30, 1998, 1997 and 1996................................... F-4
Consolidated Statements of Stockholders' Equity for the years
ended June 30, 1998, 1997 and 1996............................. F-5
Notes to Consolidated Financial Statements....................... F-6
(2) Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts and Reserves......F-23
All other financial statement schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange Commission are
not required under the instructions to Item 8 or are inapplicable and
therefore have been omitted.
(3) Exhibits:
<TABLE>
<CAPTION>
Exh. No. Page
-------- ----
<S> <C> <C>
3.1 Certificate of Incorporation of the Company(1)........................................................
3.2 Amendments to Certificate of Incorporation of the Company(1)..........................................
3.3 Amendment No. 4 to Certificate of Incorporation of the Company(3).....................................
3.4 Amendment No. 5 to Certificate of Incorporation of the Company(18)....................................
3.5 Restated By-Laws of the Company(18)...................................................................
4.1 Form of Common Stock Certificate(1)...................................................................
4.2 Purchase Agreement dated July 30, 1998, between Dreyfus High Yield Strategies Fund and the Company....
4.3 Indenture, dated July 30, 1998, between Bankers Trust Company and the Company.........................
4.4 Registration Rights Agreement dated July 30, 1998, between Dreyfus High Yield Strategies Fund and
the Company...........................................................................................
9.1 Voting Agreement, dated as of November 7, 1995, as amended,
among Ira B. Lampert, Eli Shoer, Steve Jackel, George Erfurt
Arthur Zawodny, Brian F. King and Lawrence Pesin(16)..................................................
9.2 Agreement dated as of July 18, 1997, by and among Brian F. King,
Lawrence Pesin and Keith Lampert (17).................................................................
10.1 Settlement Agreement between the Company and the Commission
effective September 1, 1994(11).......................................................................
10.2 Employment Agreement between the Company and Ira B. Lampert,
dated as of July 15, 1993(6)..........................................................................
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Exh. No. Page
-------- ----
<S> <C> <C>
10.3 Employment Agreement between Concord France and Jean Louis Vinant
dated as of July 1, 1994(11)..........................................................................
10.4 Employment Agreement between the Company and Hans Dieter Kuehn
dated as of April 1, 1993(6)..........................................................................
10.5 Employment Agreement between the Company and Eli Shoer
dated as of July 1, 1993(6)...........................................................................
10.6 Pledge Agreement between the Company and Benun
dated as of March 7, 1994(10).........................................................................
10.7 Pledge Agreement between the Company and Benun
dated as of April 6, 1994(10).........................................................................
10.8 Compensation Trade Agreement between Concord HK and
Shenzhen Baoan Contat Camera Factory and translation
dated November 23, 1993(7)............................................................................
10.9 Processing Trade Agreement, dated October 28, 1986,
between Concord Camera Enterprises Company Ltd. and
Baoan County Foreign Trade Company and Concord Electronic
Factory Henggang, Baoan County and translations)(1)...................................................
10.10 Filing Certificate for Joint Venture, Cooperative Venture,
Compensation Trade and Foreign-Related Processing and
Assembly Agreements (Contracts) issued by the Foreign
Economic Relations Office People's Government of Baoan
County, Shenzhen November 1, 1986 and translations)(1)................................................
10.11 Processing and Assembly Contract, dated July 25, 1987,
between Concord Camera Enterprises Company Ltd. and
Baoan County Foreign Trade Company and Concord Electronic
Factory, Henggang, Baoan County and translations)(1)..................................................
10.12 Processing Trade Agreement, dated September 6, 1985, between
Dialbright Company Limited and Baoan County Foreign Trade
Company and Dialbright Electronic Factory, Henggang, Baoan County
and translations)(1)..................................................................................
10.13 Filing Certificate for Joint Venture, Cooperative Venture,
Compensation Trade and Foreign-Related Processing and
Assembly Agreements (Contracts) issued by the Foreign
Economic Relations Office, People's Government of Baoan
County, Shenzhen on September 12, 1985 and translations)(1)...........................................
10.14 Notice Concerning the Approval of Import Projects issued
by the Foreign Economic Relations Office, Baoan County,
Shenzhen on September 12, 1985 and translations)(1)...................................................
10.15 Supplementary Agreement, dated September 27, 1985,
between Dialbright Company Limited and Baoan County
Foreign Trade Company and Dialbright Electronic Factory,
Henggang, Baoan County and translations)(1)...........................................................
10.16 Notice Concerning the Approval of Supplementary Agreement
dated September 27, 1985 issued by the Foreign Economic Relations
Office, Baoan County on October 4, 1985 and translations)(1)..........................................
10.17 Processing and Assembly Contract, dated September 27, 1985,
between Dialbright Company Limited and Baoan County Foreign
Trade Company and Dialbright Electronic Factory, Henggang,
Baoan County and translations(1)......................................................................
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Exh. No. Page
-------- ----
<S> <C> <C>
10.18 Supplementary Agreement, dated October 30, 1985, between
Dialbright Company Limited and Baoan County Foreign Trade
Company and Dialbright Electronic Factory, Henggang,
Baoan County and translations(1)......................................................................
10.19 Processing and Assembly Contract, dated December 17, 1985,
between Dialbright Company Limited and Baoan County Foreign
Trade Company and Dialbright Electronic Factory, Henggang,
Baoan County and translations(1)......................................................................
10.20 Processing and Assembly Contract between Dialbright Company
Limited and Baoan County Foreign Trade Company and Dialbright
Electronic Factory, Henggang, Baoan County and translations(1)........................................
10.21 Supplementary Agreement, dated July 9, 1986, between Dialbright
Company Limited and Baoan County Foreign Trade Company and
Dialbright Electronic Factory, Henggang, Baoan County and translations(1).............................
10.22 Processing and Assembly Contract, dated July 11, 1986, between
Dialbright Company Limited and Baoan County Foreign Trade
Company and Dialbright Electronic Factory, Henggang, Baoan
County and translations(1)............................................................................
10.23 Processing and Assembly Contract, dated August 14, 1986, between
Dialbright Company Limited and Baoan County Foreign Trade Company
and Dialbright Electronic Factory, Henggang, Baoan County and translations(1).........................
10.24 Supplementary Agreement, dated August 26, 1986, between Dialbright
Company Limited and Baoan County Foreign Trade Company and
Dialbright Electronic Factory, Henggang, Baoan County and translations(1).............................
10.25 Agreement for the Provision of Land, Management Services and
Labor between Company and Wan Kong Economic Development
Corporation of Baoan County, dated July 10, 1988 (English Translation
with Chinese Original attached)(2)....................................................................
10.26 Agreement between Dialbright and Development Corporation,
Baoan County, dated September 23, 1988(2).............................................................
10.27 Agreement between Dialbright and Henggang Economic Development
Corporation, dated September 23, 1988 and translation(2)..............................................
10.28 Construction Works Contract between Concord Factory Henggang
and Henggang Economic Development Corporation dated
February 25, 1989 and translation(2)..................................................................
10.29 Agreement between Concord HK and Baoan Henggang Joint Stock
Investment Company, Ltd., dated February 15, 1993 and translation(4)..................................
10.30 Contract for the Utilization of Land in Factory Construction
between Concord HK and Henggang Investment Holdings Limited
dated June 20, 1994 and translation(11)...............................................................
10.31 Supplemental Agreement to the Contract for the Utilization
of Land in Factory Construction between Concord HK and
Henggang Investment Holdings Limited dated June 20, 1994 and translation(11)..........................
10.32 Loan and Security Agreement between the Company,
Concord-Keystone Sales Corp. and CIT dated March 30, 1994(9)..........................................
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Exh. No. Page
--------- ----
<S> <C> <C>
10.33 Loan Agreement between Concord HK and BOEA dated June 15, 1993(6)
10.34 Amendment to Loan Agreement between Concord HK and BOEA
dated January 11, 1994(8).............................................................................
10.35 Incentive Plan, effective November 29, 1993(13).......................................................
10.36 Amended and Restated 1988 Stock Option Plan(4)........................................................
10.27 Third Extension and Amendment of Lease dated April 18, 1994
by and between Howard H. Gelb and Eunice Gelb and the Company(11).....................................
10.38 Employment Agreement between the Company and Eli Shoer dated
as of October 1, 1994(12).............................................................................
10.39 Employment Agreement between the Company and Gary Kaess
dated as of November 1994(12).........................................................................
10.40 Amended and Restated Employment Agreement between
Concord Camera HK Limited and Arthur Zawodny dated
as of October 21, 1994(12)............................................................................
10.41 Consulting Agreement between the Company Arid Harjac Consulting, Inc.,
dated as of May 1, 1995(13)...........................................................................
10.42 First Amendment to Revolving Line of Credit and Security
Agreement between the Company and the Bank of East Asia Limited,
New York Branch (14)..................................................................................
10.43 Employment Agreement between the Company and Steve Jackel dated
as of January 1, 1996. (15)...........................................................................
10.44 Amended and Restated Employment Agreement between the Company
and Ira B. Lampert dated as of May 1, 1997(18)........................................................
21. List of Subsidiaries of Company(6)....................................................................
27. Financial Data Schedule...............................................................................
</TABLE>
The Financial Statement Schedules required to be filed pursuant to this Item
14(d) are listed above.
(1) This document has been previously filed with the Securities and Exchange
Commission as an Exhibit to Company's Registration Statement on Form S-18
(No. 33-21156), declared effective July 12, 1988 and is incorporated
herein by reference.
(2) This document has been previously filed with the Securities and Exchange
Commission as an Exhibit to Company's annual report on Form 10-K for the
fiscal year ended June 30, 1989 and is incorporated herein by reference.
(3) This document has been previously filed with the Securities and Exchange
Commission as an Exhibit to Company's interim report on Form 8-K dated May
29, 1992 and is incorporated herein by reference.
(4) This document has been previously filed with the Securities and Exchange
Commission as an Exhibit to the Company's Registration Statement on Form
S-1 (33-59398), filed with the Commission on March 11, 1993 and is
incorporated herein by reference.
(5) This document has been previously filed as Exhibit 10.46 to Amendment No.
2 to the Company's Registration Statement on Form S-1, filed June 1, 1993
and is incorporated herein by reference.
(6) This document has been previously filed with the Securities and Exchange
Commission as an Exhibit to the Company's annual report on Form 10-K for
the fiscal year ended June 30, 1993 and is incorporated herein by
reference.
(7) This document has been previously filed with the Securities and Exchange
Commission as an Exhibit to the Company's interim report on Form 8-K dated
November 23, 1993 and is incorporated herein by reference.
47
<PAGE>
(8) This document has been previously filed with the Securities and Exchange
Commission as an Exhibit to the Company's quarterly report on Form 10-Q
for the fiscal quarter ended December 31, 1993 and is incorporated herein
by reference.
(9) This document has been previously filed with the Securities and Exchange
Commission as an Exhibit to the Company's interim report on Form 8-K
dated March 30, 1994 and is incorporated herein by reference.
(10) This document has been previously filed with the Securities and Exchange
Commission as an Exhibit to the Company's quarterly report on Form 10-Q
for the fiscal quarter ended March 31, 1994 and is incorporated herein by
reference.
(11) This document has been previously filed with the Securities and Exchange
Commission as an Exhibit to the Company's annual report on Form 10-K for
the Fiscal Year ended June 30, 1994 and is incorporated herein by
reference.
(12) This document has been previously filed with the Securities and Exchange
Commission as an Exhibit to the Company's quarterly report on Form 10-Q
for the fiscal period ended March 3 1, 1995 and is incorporated herein by
reference.
(13) This document has been previously filed with the Securities and Exchange
Commission as an Exhibit to the Company's annual report on Form 10-K for
the Fiscal Year ended June 30, 1995 and is incorporated herein by
reference.
(14) This document has been previously filed with the Securities and Exchange
Commission as a Form 10-Q for the fiscal period ended September 30, 1995
and is incorporated herein by reference.
(15) This document has been previously filed with the Securities and Exchange
Commission as a Form 10-Q for the Fiscal period ended March 31, 1996 and
is incorporated herein by reference.
(16) This document has been previously filed with the Securities and Exchange
Commission as an exhibit to a Schedule 13D Amendment No. 1 filed on March
4, 1997.
(17) This document has been previously filed with the Securities and Exchange
Commission as an exhibit to a Schedule 13D Amendment No. 2 filed on July
14, 1997.
(18) This document has been previously filed with the Securities and Exchange
Commission as an exhibit to the Company's annual report on Form 10-K for
the Fiscal Year ended June 30, 1997 and is incorporated herein by
reference.
48
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders of
Concord Camera Corp.
Avenel, New Jersey
We have audited the accompanying consolidated balance sheets of
Concord Camera Corp. and subsidiaries as of June 30, 1998 and 1997 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended June 30, 1998. Our
audits also included the financial statement schedule listed in the Index in
Item 14(a)(2). These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Concord Camera Corp. and subsidiaries as of June 30, 1998 and 1997
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended June 30, 1998, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
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.
Ernst & Young LLP
MetroPark, New Jersey
August 24, 1998
F-1
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Concord Camera Corp. Consolidated Balance Sheets
<TABLE>
<CAPTION>
Proforma
June 30, June 30, June 30,
1998 1998 1997
---- ---- ----
(unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash $21,225,699 $ 7,119,699 $ 5,297,820
Accounts receivable, net 19,961,534 19,961,534 9,866,962
Inventories 21,458,595 21,458,595 15,752,402
Prepaid expenses and other current assets 3,238,129 3,238,129 3,091,669
----------- ----------- -----------
Total current assets 65,883,957 51,777,957 34,008,853
Plant and equipment, net 15,930,486 15,930,486 13,865,777
Goodwill, net 727,633 727,633 1,089,217
Other assets 4,389,703 3,645,703 4,124,396
----------- ----------- -----------
Total assets $86,931,779 $72,081,779 $53,088,243
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt $10,822,012 $10,822,012 $ 7,976,315
Current portion of long-term debt 35,676 35,676 33,349
Current obligations under capital leases 870,173 870,173 790,426
Accounts payable 14,213,757 14,213,757 8,665,622
Accrued expenses 4,418,604 4,418,604 2,232,289
Income taxes payable 379,662 379,662 2,831
Other current liabilities 224,781 224,781 313,965
----------- ----------- -----------
Total current liabilities 30,964,665 30,964,665 20,014,797
Deferred income taxes 689,169 689,169 572,492
Long-term debt 2,460,784 2,460,784 396,570
Senior Notes Payable, net of original issue discount 14,850,000 -- --
Obligations under capital leases 1,409,865 1,409,865 2,000,002
Other long-term liabilities 452,548 452,548 602,549
----------- ----------- -----------
Total liabilities 58,827,031 35,977,031 23,586,410
----------- ----------- -----------
COMMITMENT AND CONTINGENCIES
Stockholders' Equity:
Common stock, no par value, 40,000,000 authorized; 11,214,451 and 40,094,559 40,094,559 39,361,893
10,944,026, issued as of June 30, 1998 and 1997, respectively.
Paid in capital 850,786 850,786 850,786
Deficit (1,622,215) (1,622,215) (7,635,654)
Notes receivable arising from common stock purchase agreements (2,765,463) (2,765,463) (2,622,273)
----------- ----------- -----------
36,557,667 36,557,667 29,954,752
Less: treasury stock, at cost; 63,553 shares (452,919) (452,919) (452,919)
----------- ----------- -----------
Total stockholders' equity 36,104,748 36,104,748 29,501,833
----------- ----------- -----------
Total liabilities and stockholders' equity $86,931,779 $72,081,779 $53,088,243
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
Concord Camera Corp.
Consolidated Statement of Operations
<TABLE>
<CAPTION>
For the year ended June 30,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $102,663,451 $65,747,433 $66,781,851
Cost of products sold 74,771,683 48,722,416 49,292,625
------------ ----------- -----------
Gross profit 27,891,768 17,025,017 17,489,226
Selling expenses 9,233,781 6,949,600 7,570,658
General and administrative expenses 10,776,643 9,247,489 9,395,677
Financial expenses 1,668,233 1,465,169 1,488,672
Other (income), net (516,694) (122,513) (29,764)
Legal expenses and settlement costs 212,818 200,810 718,359
------------ ----------- -----------
Income (loss) before income taxes 6,516,987 (715,538) (1,654,376)
Provision for income taxes 503,548 117,124 79,820
------------ ----------- -----------
Net income (loss) $ 6,013,439 $ (832,662) $(1,734,196)
============ =========== ============
Weighted average common shares outstanding - 10,938,934 10,880,473 10,813,224
basic
Incremental shares using treasury stock method 615,048 0 0
------------ ----------- -----------
Weighted average common shares outstanding -
diluted 11,553,982 10,880,473 10,813,224
============ =========== ============
Basic earnings (loss) per share $0.55 $(0.08) $(0.16)
===== ======= =======
Diluted earnings (loss) per share $0.52 $(0.08) $(0.16)
===== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
Concord Camera Corp.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the year ended June 30,
--------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $6,013,439 ($832,662) ($1,734,196)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 3,316,328 3,151,144 3,023,209
Net (gain) loss on sale of property & equipment -- -- 19,881
Interest income on notes receivable arising from common stock purchase (143,190) (143,190) (92,583)
agreements
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (10,094,572) (2,316,554) 1,039,382
Decrease (increase) in inventories (5,706,193) 1,739,213 1,373,708
(Increase) in prepaid expenses and other current assets (146,460) (555,245) (111,474)
(Increase) in other assets (81,985) (610,414) (1,538,316)
Increase (decrease) in accounts payable 5,548,135 2,665,294 (993,529)
Increase (decrease) in accrued expenses 2,186,315 59,426 (729,419)
Increase (decrease) in income taxes payable 376,831 (76,219) (215,534)
Increase (decrease) in other current liabilities (89,184) (347,770) 356,660
Increase (decrease) in deferred income taxes 116,677 129,603 (41,953)
Increase (decrease) in other long-term liabilities (150,001) (64,242) 666,143
----------- ---------- ----------
Total adjustments (4,867,299) 3,631,046 2,756,075
----------- ---------- ----------
Net cash provided by operating activities 1,146,140 2,798,384 1,021,879
----------- ---------- ----------
Cash flows from investing activities:
Purchase of property, plant and equipment (4,458,775) (3,188,424) (2,531,327)
Proceeds from sale of long-term assets -- -- 2,004,150
Decrease in investment in and advances to joint ventures -- -- 91,984
----------- ---------- ----------
Net cash (used in) investing activities (4,458,775) (3,188,424) (435,193)
----------- ---------- ----------
Cash flows from financing activities:
Net borrowings under short-term debt agreements 2,845,697 1,607,343 626,909
Net borrowings (repayments) of long-term debt 2,066,541 (30,222) 170,873
Principal payments under capital lease obligations (510,390) (886,031) (961,133)
Net proceeds from exercise of common stock options 732,666 -- 40,219
----------- ---------- ----------
Net cash provided by (used in) financing activities 5,134,514 691,090 (123,132)
----------- ---------- ----------
Net increase in cash 1,821,879 301,050 463,554
Cash at beginning of period 5,297,820 4,996,770 4,533,216
----------- ---------- ----------
Cash at end of period $7,119,699 $5,297,820 $4,996,770
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
Concord Camera Corp.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common stock
------------
Notes
receivable
arising from
common
stock
purchase
Issued shares Stated Value Paid in capital (Deficit) agreements
------------- ------------ --------------- --------- ------------
<S> <C> <C> <C> <C> <C>
Balance as of June 30, 1995 10,490,526 $36,935,174 $850,786 ($5,068,796) --
Exercise of stock options 453,500 2,426,719 -- -- ($2,386,500)
Interest on notes receivable -- -- -- -- (92,583)
arising from Common Stock
purchase agreements
Net (loss) -- -- -- (1,734,196) --
---------- ------------ ---------- ----------- -----------
Balance as of June 30, 1996 10,944,026 39,361,893 $850,786 (6,802,992) (2,479,083)
Interest on notes receivable -- -- -- -- (143,190)
arising from Common Stock
purchase agreements
Net (loss) -- -- -- (832,662) --
---------- ------------ ---------- ----------- -----------
Balance as of June 30, 1997 10,944,026 39,361,893 850,786 (7,635,654) (2,622,273)
Exercise of stock options 270,425 732,666 -- -- --
Interest on notes receivable -- -- -- -- (143,190)
arising from Common Stock
purchase agreements
Net income -- -- -- 6,013,439 --
---------- ------------ ---------- ----------- -----------
Balance as of June 30, 1998 $11,214,451 $40,094,559 $850,786 ($1,622,215) ($2,765,463)
========== ============ ========== =========== ===========
Treasury stock
--------------
Shares Cost Total
------ ---- -----
Balance as of June 30, 1995 63,553 ($452,919) $32,264,245
Exercise of stock options -- -- 40,219
Interest on notes receivable -- -- (92,583)
arising from Common Stock
purchase agreements
Net (loss) -- -- (1,734,196)
------- --------- -----------
Balance as of June 30, 1996 63,553 (452,919) 30,477,685
Interest on notes receivable -- -- (143,190)
arising from Common Stock
purchase agreements
Net (loss) -- -- (832,662)
------- --------- -----------
Balance as of June 30, 1997 63,553 (452,919) 29,501,833
Exercise of stock options -- -- 732,666
Interest on notes receivable -- -- (143,190)
arising from Common Stock
purchase agreements
Net income -- -- 6,013,439
------- --------- -----------
Balance as of June 30, 1998 63,553 ($452,919) $36,104,748
======= ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
CONCORD CAMERA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Concord Camera Corp. ("Concord") and its wholly-owned subsidiaries, Concord
Camera HK Limited ("Concord HK") a Hong Kong corporation, Concord Camera GmbH
("Concord GmbH"), Concord Camera Europe Ltd. (formerly Concord Camera UK Ltd)
("Concord UK"), Concord-Keystone Sales Corporation ("Concord Keystone"),
Concord Holding Corp. ("Concord Holding"), Concord Camera Canada a division of
Concord Camera Illinois Corp. ("Concord Canada"), Concord Camera (Panama)
Corp. ("Concord Panama"), Concord Camera (Hungary) ("Concord Hungary") and
Concord Camera France SARL ("France") (collectively, the "Company"). All
material intercompany balances and transactions have been eliminated.
The Company terminated the operations of Concord Camera Canada Corp., Concord
Hungary and Concord Panama during June 1995, December 1995 and March 1997,
respectively, as part of its plan to consolidate its worldwide operations and
focus more closely on its core business. The Company will continue to service
customers throughout Canada, Hungary and Latin America through Concord Canada,
Concord UK and Concord Keystone, respectively.
Nature of Business
The Company is engaged in the design, manufacture, marketing and worldwide
distribution of cameras and related accessories. Substantially all of the
Company's products are assembled in the People's Republic of China ("PRC"). As
a result, the Company's operations could be adversely affected by political
instability in the PRC. Consolidated sales to the Company's three largest
customers in Fiscal 1998 amounted to approximately $56,592,000 (55.1%).
Consolidated sales to the Company's two largest customers in Fiscal 1997 and
1996 amounted to approximately $26,585,000 (40.4%), and $26,685,000 (40.0%).
The Company believes that the loss of such customers would have a material
effect on the Company and its subsidiaries taken as a whole. No other customer
accounted for 10% or more of consolidated sales during the years ended June
30, 1998, 1997 or 1996.
Reclassifications
Certain amounts have been reclassified to conform with current year
presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
F-6
<PAGE>
Cash and Cash Equivalents
The Company considers all highly-liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined on
the first-in, first-out basis. Inventories are reviewed quarterly for both
obsolescence and lower of cost or market issues at which time valuation
allowances, if required, are established. In determining lower of cost or
market, the Company reviews current sales prices, sales projections and market
conditions to ensure inventory is not stated above net realizable value.
Earnings Per Share
In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
No. 128, Earnings per Share ("Statement 128"). Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share are calculated on a basis similar to
fully diluted earnings per share. All applicable earnings per share amounts
have been presented to conform to the Statement 128 requirements. Options to
purchase shares of common stock were outstanding during Fiscal 1997 and 1996 but
were not included in the calculation of diluted earnings per share because the
effect would be antidilutive.
Impact of Recently Issued Accounting Standards
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income ("Statement 130"). Statement 130 established standards for the
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. Statement 130 requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. Statement 130 is
effective for fiscal years beginning after December 15, 1997. The Company does
not expect to be significantly impacted by the adoption of Statement 130.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, Disclosures about Segments of an Enterprise and Related Information
("Statement 131"). Statement 131 established standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
established standards for related disclosures about products and services,
geographic areas, and major customers. Statement 131 is effective for
financial statements for fiscal years beginning after December 15, 1997 and,
therefore, the Company will adopt the new requirements retroactively in Fiscal
1999. Management has not completed its review of Statement 131, but the
adoption of this Statement may increase the number of the Company's reported
segments.
Plant and Equipment
Plant and equipment is stated at cost. Depreciation and amortization are
computed based upon the estimated useful lives of the respective assets using
accelerated methods for income tax purposes and the straight-line method for
financial reporting purposes. These lives range from two to forty years. Small
F-7
<PAGE>
tools and accessories used in production in the PRC are charged to operations
when purchased. Amortization of assets recorded under capital leases is
included in depreciation and amortization expense.
Intangible Assets
Cost in excess of net assets acquired (goodwill) was being amortized on a
straight-line basis over its estimated life of fifteen years. During Fiscal
1997, the Company revised the estimated life of certain goodwill to three
remaining years and is amortizing the balance of this goodwill over this
period. Accumulated amortization at June 30, 1998 and 1997 for such intangible
asset is approximately $1,826,000 and $1,405,000, respectively.
Impairment of Long-Lived Assets
In accordance with the Financial Accounting Standards Board Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be disposed of" the Company records impairment losses when indications of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amounts. No
impairment indicators were noted for the periods ended June 30, 1998, 1997,
and 1996.
Other Assets
Other assets include trademarks, patents, licensing fees, deposits,
capitalized costs and non current receivables. Trademarks, patents, licensing
fees and capitalized costs are amortized on a straight line basis over their
estimated useful lives.
Advertising
Advertising costs are expensed as incurred and included in selling expenses.
Advertising allowances and other discounts totaled approximately $793,000,
$876,000, and $889,000 in Fiscal 1998, 1997 and 1996, respectively.
Foreign Currency Remeasurement
The Company operates on a worldwide basis and its results may be adversely or
positively affected by fluctuations of various foreign currencies against the
U.S. Dollar, specifically, the Canadian Dollar, German Mark, British Pound
Sterling, French Francs and Japanese Yen. Each of the Company's foreign
subsidiaries purchases its inventories in U.S. Dollars and sells them in local
currency, thereby creating an exposure to fluctuations in foreign currency
exchange rates. Certain components needed to manufacture cameras are priced in
Japanese Yen. The translation from the applicable currencies to U.S. Dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date and for revenue and expense accounts using a weighted
average exchange rate during the period. Cumulative translation adjustments are
not material. Gains or losses resulting from foreign currency transactions are
included in "Other (income) expense, net" in the Consolidated Statements of
Operations. For the fiscal years ended June 30, 1998, 1997 and 1996,
consolidated other (income) expense, net includes approximately ($22,000),
$192,000, and ($103,000), respectively, of net foreign currency (gains) losses
from remeasurement.
F-8
<PAGE>
Forward Exchange Contracts
During the Fiscal years ended June 30, 1998, 1997 and 1996, the Company's
hedging activities were immaterial and as of June 30, 1998 there were no
forward exchange contracts outstanding. The Company continues to analyze the
benefits and costs associated with hedging against foreign currency
fluctuations.
Income Taxes
Deferred tax assets and liabilities are determined based on the difference
between financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce preferred tax assets to the amount expected to be
realized.
Stock Based Compensation
As permitted by FASB Statement No. 123, "Accounting for Stock-Based
Compensation" (FASB 123), the Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25") and related interpretations in accounting for its employee stock
option plans. Under APB 25, compensation expense is calculated at the time of
option grant based upon the difference between the exercise price of the
option and the fair market value of the Company's common stock at the date of
grant recognized over the vesting period.
Revenue Recognition
Revenues are recorded when the product is shipped to a customer net of
appropriate reserves for returns.
NOTE 2 -- ACCOUNTS RECEIVABLE:
Accounts receivable consist of the following:
June 30
1998 1997
---- ----
Trade accounts receivable $20,524,657 $10,869,435
Less: Allowances for doubtful accounts,
discounts and allowances (563,123) (1,002,473)
----------- -----------
$19,961,534 $ 9,866,962
=========== ===========
NOTE 3 -- INVENTORIES:
Inventories are comprised of the following:
June 30
1998 1997
---- ----
Raw material and components $13,033,653 $10,517,322
Finished goods 8,424,942 5,235,080
----------- -----------
$21,458,595 $15,752,402
=========== ===========
F-9
<PAGE>
During the fourth quarter of Fiscal 1996, the Company recorded inventory
provisions totaling $3,035,000 on certain 35 millimeter camera products and
related inventory. The Company has suspended production of certain 35
millimeter conventional camera models that it produced in the past and
anticipate producing in the future. As a consequence, provisions for certain
components as well as certain inventory related items for those models were
recorded in order to reduce their carrying value to net realizable value.
NOTE 4 -- PLANT AND EQUIPMENT:
Plant and equipment consist of the following:
<TABLE>
<CAPTION>
June 30
1998 1997
---- ----
<S> <C> <C>
Building and building under capital lease $ 6,061,376 $ 5,288,671
Equipment and equipment under capital lease 18,979,857 15,907,081
Office furniture and equipment 4,471,283 3,990,970
Automobiles 237,467 310,588
Leasehold improvements 1,072,622 944,799
----------- -----------
30,822,605 26,442,309
Less: Accumulated depreciation and amortization (14,892,119) (12,576,532)
----------- -----------
$15,930,486 $13,865,777
=========== ===========
</TABLE>
NOTE 5 -- SHORT-TERM DEBT:
Short term debt is comprised of the following:
<TABLE>
<CAPTION>
June 30
1998 1997
---- ----
<S> <C> <C>
Non-notification factoring with recourse facility $ 7,396,000 --
U.S. bank facility -- $3,000,000
U.S. credit facility 687,000 1,143,000
Hong Kong credit facility 2,128,000 3,427,000
Canadian working capital facility 611,000 406,000
----------- ----------
$10,822,000 $7,976,000
=========== ==========
</TABLE>
Non-Notification Factoring with Recourse Facility
During the last quarter of Fiscal 1998, Concord HK consummated a $10,000,000
Non-Notification Factoring with Recourse Facility (the "Factoring Facility")
that is guaranteed by the Company, is secured by certain accounts receivables of
the Company's Hong Kong operations and bears interest at 1.5% above prime
lending rate. Availability under the Factoring Facility is subject to advance
formulas based on eligible accounts receivable with no minimum borrowings. The
Company utilized the Factoring Facility during the fourth quarter of Fiscal 1998
to replace its revolving credit facility with a U.S. bank.
F-10
<PAGE>
At June 30, 1998, approximately $7,396,000 was outstanding and classified as
short-term debt under the Factoring Facility.
U.S. Credit Facility
The Company has a $4,500,000 credit facility (the "U.S. Credit Facility") which
expires on May 31, 1999 that is secured by accounts receivable, inventory and
other related assets of the Company's United States operations and bears
interest at 1.5% above prime lending rate, which was 8.5% at June 30, 1998.
Availability is subject to advance formulas based on eligible inventory and
accounts receivable with interest calculated on borrowing of $1,500,000. At June
30, 1998, approximately $687,000 was outstanding and classified as short-term
debt under the U.S. Credit Facility.
Hong Kong Credit Facility
Concord HK has a credit facility (the "HK Facility") that provides Concord HK
with up to $6,900,000 of financing as follows: letters of credit and standby
letters of credit of up to $2,825,000, overdraft and packing loans of up to
$3,600,000 and an installment loan of $475,000. The installment loan was
utilized in part to repay the outstanding mortgage obligation on the Hong Kong
office property See "Note 6". As of June 30, 1998, approximately $3,480,000 was
utilized and approximately $2,945,000 was available under the HK Facility.
Approximately $2,128,000 of the total $3,480,000 utilized was in the form of
trade finance, including but not limited to import letters of credit. The HK
Facility, which is payable on demand, bears interest at 2% above prime lending
rate for letters of credit and 2.25% above prime lending rate for overdraft and
packing loans. At June 30, 1998, the prime lending rate was 10%. In connection
with the HK Facility, Concord HK has placed a $1,252,000 time deposit with the
lender which is included in prepaid and other current assets at June 30, 1998
and such deposit is pledged as collateral for the HK Facility. In addition, all
amounts outstanding under the HK Facility are guaranteed by Concord.
Canadian Working Capital Facility
On November 25, 1996, the Company obtained a $1,090,000 working capital facility
(the "Canadian Facility") with a Canadian bank which is secured by accounts
receivable, inventory and other related assets of the Company's Canadian
operations and bears interest at 1% above the Canadian prime lending rate, which
was 5.5% at June 30, 1998. Availability under the Canadian Facility is subject
to advance formulas based on eligible accounts receivable and seasonable
inventory eligibility with no minimum borrowings and is subject to monthly
covenant requirements. At June 30, 1998, approximately $611,000 was outstanding
and classified as short-term debt. Concord Canada did not meet the effective net
worth covenant at June 30, 1998 as required under the TDB Facility.
The weighted average interest rate on the Company's short-term borrowings was
approximately 11.2% and 10.4% at June 30, 1998 and 1997, respectively.
Due to the short-term nature of these debt instruments the Company believes
that the carrying amount approximates its fair value.
In the fourth quarter of Fiscal 1997, Hong Kong Finance Company, extended to
Concord HK a five-year equipment leasing facility in the amount of approximately
$1,100,000. At June 30, 1998, approximately $672,000 was outstanding and
classified as capital lease obligations.
F-11
<PAGE>
NOTE 6 -- LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30
1998 1997
---- ----
<S> <C> <C>
Mortgage payable through July 9, 1999, monthly payments of interest
only at 12.986%. Facility is secured by Company owned manufacturing
facilities in Boan County, Shenzhen Municipal, PRC. $2,100,000 --
Mortgage payable through October 2005, monthly principal and interest
(at 10.75% per annum) payments of $6,658. Outstanding balance is
guaranteed by Concord See "Note 5 - Short-Term Debt" 396,460 $429,919
---------- --------
2,496,460 429,919
Current portion of long-term debt (35,676) (33,349)
---------- --------
Long-term portion $2,460,784 $396,570
========== ========
</TABLE>
The carrying amount of the Company's long-term borrowings approximates its
fair value.
Future maturities of long-term debt, exclusive of capital lease obligations,
are as follows: Fiscal Year:
1999....................... $35,676
2000....................... 2,140,950
2001....................... 45,915
2002....................... 51,305
2003....................... 57,661
Thereafter ....................... 164,953
----------
$2,496,460
==========
Senior notes payable
On July 30, 1998, the Company consummated a private offering of $15 million of
its senior notes. The notes bear interest at 11%, and the maturity date is July
15, 2005. Interest payments are due quarterly. The agreement contains certain
restrictive covenants relating to, among other things, incurrence of additional
indebtedness and dividend and other payment restrictions affecting subsidiaries.
The unaudited Pro Forma Consolidated Balance Sheet at June 30, 1998 reflects
this transaction as if it had occurred on June 30, 1998.
NOTE 7 -- COMMON STOCK:
The Company's Incentive Plan permits the Compensation Committee of the
Company's Board of Directors to grant a variety of common stock awards and
provides for a formula plan for annual grants to non-employee directors. The
maximum number of shares of common stock available for awards under the
Incentive Plan is 2,000,000. Upon the adoption of the Incentive Plan, the
Company's 1988 Stock Option Plan was terminated except with respect to any
unexercised options outstanding thereunder.
F-12
<PAGE>
Stock option activity is as follows:
<TABLE>
<CAPTION>
Number of Shares Option price per share
---------------- ----------------------
<S> <C> <C>
Outstanding June 30, 1995 1,184,600 $1.69 - $9.00
Canceled (120,750) $2.19 - $8.31
Granted 960,500 $2.19 - $5.50
Exercised (456,000) $1.69 - $5.38
------------ -------------
Outstanding June 30, 1996 1,568,350 $2.13 - $9.00
Canceled (1,181,900) $1.81 - $8.31
Granted 986,000 $1.75 - $3.00
Exercised -- --
------------ -------------
Outstanding June 30, 1997 1,372,450 $1.75 - $9.00
Canceled (96,550) $2.69 - $9.00
Granted 220,513 $1.90 - $5.00
Exercised (247,925) $1.81 - $3.81
------------ -------------
Outstanding June 30, 1998 1,248,488 $1.75 - $9.00
============ =============
</TABLE>
At June 30, 1998, 69,187 shares are available for future grants.
For financial reporting purposes, 444,000 shares of Common Stock, which were
issued in exchange for notes of $2,386,500 pursuant to the Company's Senior
Management Common Stock Purchase Award Provisions forming a part of the
Company's Incentive Plan, have been treated as outstanding since August 23,
1995 the date upon which commitments for the purchase of such shares were made
by the purchasers. Definitive agreements and the related notes for such
purchases were executed on November 7, 1995, when the shares were issued. The
purchase price was paid by a loan from the Company to the participating senior
executives and evidenced by a full recourse promissory note secured by the
common stock purchased by the obligors. The notes mature five years from the
date of purchase and bear interest at 6%. Interest on this Note is payable in
cash, except that so long as Obligor remains an employee of the Company or any
subsidiary thereof or performs consulting activities for any thereof, Obligor
may (i) apply the shares of the Company's Common Stock pledged to the Company
as provided below in payment of interest by delivering to the Company a letter
in form and substance reasonably satisfactory to the Company instructing it to
apply the requisite number of such shares to the payment of such interest
(whereupon the number of shares required for such payment shall be canceled),
it being understood that for this purpose such shares shall be valued at the
Fair Market Value (as defined below) thereof on the date on which such letter
is so delivered to the Company, or (ii) deliver, as payment of interest, a
secured promissory note dated the date of payment of interest in the principal
amount of such interest payment and having substantially the same terms as
this Note. Interest on this note may also be payable in any combination of
cash, shares of the Company's Common Stock or a secured promissory note, all
on the terms described in the preceding paragraph. Each senior management
purchaser was granted a restricted stock award covering a number of shares
equal to the number of shares purchased by such purchase. The restricted stock
was to be issued based upon attainment of increase in shareholder value in
accordance with the Incentive Plan. Pursuant to Amendments to each of the
F-13
<PAGE>
Purchase Agreements, dated February 28, 1997 (the "Amendments"), the Company
was relieved of its obligation to issue any Restricted Shares. Instead, each
participant received, as of December 22, 1996, options to purchase that number
of shares of Common Stock (the "Option Shares") equal to the number of
Purchased Shares purchased by such participant. The options vested as to 20%
of the Option Shares covered thereby as of December 22, 1996 and the balance
of the shares covered thereby began vesting December 31, 1996 in equal monthly
installments over a four-year period during the term of employment or
consultancy. The unvested portion became vested on August 19, 1998 when the
average closing price of the Common Stock was at least $5.00 for 90
consecutive trading days.
In Fiscal 1997, certain executives' option agreements were canceled and
repriced as follows (the market price on the date of grant was either above or
equal to the option price on the date of grant):
Pursuant to his amended employment agreement, 225,000, 112,500 and 112,500
shares of the Company's common stock are subject to options which were granted
to Ira B. Lampert, Chairman and Chief Executive Officer, at an exercise price
of $2.00, $2.50 and $3.00 per share, respectively.
Pursuant to his employment agreement, 115,625, 57,813 and 57,812 shares of the
Company's common stock are subject to options which were granted to Steve
Jackel, Chief Operating Officer and President, at an exercise price of $2.00,
$2.50 and $3.00 per share, respectively.
Pursuant to terms of his employment agreement, 22,500, 11,250 and 11,250
shares of the Company's common stock are subject to options which were granted
to Lawrence Pesin, General Manager -- Americas, at an exercise price of $2.00,
$2.50 and $3.00 per share, respectively.
Pursuant to terms of his employment agreement, 22,500, 11,250 and 11,250
shares of the Company's common stock are subject to options which were granted
to Brian F. King, Vice President Corporate & Strategic Development, at an
exercise price of $2.00, $2.50 and $3.00 per share, respectively.
As of June 30, 1998, a total of 2,114,425 shares of Common Stock have been
reserved for issuance.
At the Board of Directors meeting of August 23, 1995, a Management Incentive
Compensation Program was approved for the 1995 Fiscal Year and for subsequent
periods. The Plan was enacted in order to foster increased efforts by senior
executives on behalf of the Company by giving them a direct financial interest
in the Company's performance and to encourage key employees to remain with the
Company as well as to provide an incentive in the recruitment of senior
management. The incentive pool is to be earned if the Company achieves certain
return on equity goals. The goals are reviewable each year by the Board and
may be amended. If the goals are achieved, an Inventive Fund is to be
established of up to 10% of earnings after taxes and any unawarded portion of
an Incentive Fund from previous years. Included in General and Administrative
expenses in Fiscal 1998 is an accrual of $703,526 allocated to the Incentive
Fund for Fiscal 1998 incentive compensation payments. No accrual was made in
Fiscal 1997 or 1996.
FASB 123 requires pro forma information regarding net income and earnings per
share as if the Company has accounted for its employee stock options and
warrants ("equity awards") under the fair value method of FAS 123. The fair
value of these equity awards was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for 1998, 1997 and 1996, respectively: risk-free interest rates of
between 4.6% and 4.9%; expected volatility of .747; expected option life of 5
to 7.5 years and an expected dividend yield of 0.0%. The weighted average
grant date fair value of the options granted during Fiscal 1998 and 1997 was
$3.65 and $1.39, respectively.
F-14
<PAGE>
For the purposes of pro forma disclosures, the estimated fair value of the
equity awards is amortized to expense over the options vesting period. The
Company's pro forma information is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Pro forma net income (loss) $5,599,495 ($1,220,971) ($2,001,871)
========== ============ ============
Pro forma net (loss) income per share of common stock $.49 ($.11) ($.18)
========== ============ ============
</TABLE>
NOTE 8 -- INCOME TAXES:
For financial reporting purposes, pre-tax income (loss) consists of the
following:
<TABLE>
<CAPTION>
June 30,
1998 1997 1996
---- ---- ----
(in 000's)
<S> <C> <C> <C>
United States $1,401 $ 532 $ 979
Foreign 5,116 (1,248) (2,633)
------ ------- ---------
$6,517 $ (716) ($ 1,654)
====== ======= =========
</TABLE>
The provision for income taxes, principally related to foreign operations, is
comprised of the following:
<TABLE>
<CAPTION>
June 30,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current $386,871 ($ 12,479) $ 121,773
Deferred 116,677 129,603 (41,953)
-------- --------- ---------
$503,548 $ 117,124 $ 79,820
======== ========= =========
</TABLE>
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes and (b) operating loss
carryforwards. The tax effects of significant items comprising the Company's
net deferred tax liability as of June 30, 1998 are as follows:
Deferred Tax Liabilities:
<TABLE>
<CAPTION>
Domestic Foreign Total
-------- ------- -----
<S> <C> <C> <C>
Difference between book and tax basis of property $ 0 $661,607 $661,607
Other deferred liabilities 0 27,562 27,562
-- -------- --------
Total deferred tax liabilities $ 0 $689,169 $689,169
=== ======== ========
Deferred Tax Assets:
Operating loss carryforwards $4,763,345 -- $4,763,345
Reserves not currently deductible 312,407 -- 312,407
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Difference between book and tax basis for foreign 345,436 -- 345,436
subsidiaries
Difference between book and tax basis of property 117,222 -- 117,222
Tax credits 45,369 -- 45,369
Contributions carryover 33,907 -- 33,907
Other deferred tax assets 129,067 -- 129,067
---------- ---------- -----------
Total deferred tax assets 5,746,754 -- 5,746,754
Valuation allowance (5,746,754) -- (5,746,754)
---------- ---------- -----------
Total deferred tax assets after valuation allowance $ -- $ -- $ --
========== ========== ===========
Net deferred tax liability $ -- $ 689,169 $ 689,169
========== ========== ===========
</TABLE>
The Tax effects of significant items comprising the Company's Net deferred tax
liability as of June 30, 1997 are as follows:
<TABLE>
<CAPTION>
Domestic Foreign Total
-------- ------- -----
<S> <C> <C> <C>
Deferred Tax Liabilities:
Difference between book and tax basis of property ($ 34,920) ($513,489) ($ 548,409)
Other deferred liabilities ( 24,083) ( 24,083)
----------- --------- ----------
Total deferred tax liabilities ($ 34,920) ($537,572) ($ 572,492)
=========== ========= ==========
Deferred Tax Assets:
Operating loss carryforward $5,566,523 -- $5,566,523
Reserves not currently deductible 84,905 -- 84,905
Difference between book and tax basis of foreign 328,366 -- 328,366
subsidiaries
Difference between book and tax basis of property 167,703 -- 167,703
Tax credits 40,837 -- 40,837
Contributions carryover 43,484 -- 43,484
Other deferred tax assets 92,659 -- 92,659
----------- --------- ----------
Total deferred tax assets 6,324,477 -- 6,324,477
Valuation allowance 6,324,477 -- 6,324,477
----------- --------- ----------
Total deferred tax assets after valuation allowance $ -- $ -- $ --
=========== ========= ==========
Net long-term deferred tax liability ($ 34,920) ($537,572) ($ 572,492)
=========== ========= ==========
</TABLE>
In May 1992, the Hong Kong Inland Revenue Department notified Concord HK that
its annual tax rate commencing July 1, 1992 will be 8.75%. The Company
currently does not pay taxes or import/export duties in the PRC, but there can
be no assurance that the Company will not be required to pay such taxes or
duties in the future.
F-16
<PAGE>
The Company has never paid any income or turnover tax to the PRC on account of
its business activities in the PRC. Existing PRC statutes can be construed as
providing for a minimum of 10% to 15% income tax and a 3% turnover tax on the
Company's business activities; however, the PRC has never attempted to enforce
those statutes. The Company has been advised that the PRC's State Tax Bureau
is reviewing the applicability of those statutes to processing activities of
the type engaged in by the Company, but it has not yet announced any final
decisions as to the taxability of those activities. After consultation with
its tax advisors, the Company does not believe that any tax exposure it may
have on account of its operations in the PRC will be material to its financial
condition.
The Company does not provide U.S. federal income taxes on undistributed
earnings of its foreign subsidiaries as it intends to permanently reinvest
such earnings. Undistributed earnings of its foreign subsidiaries approximated
$17.4 million as of June 30, 1998. It is not practicable to estimate the
amount of tax that might be payable on the eventual remittance of such
earnings. Upon eventual remittance, no withholding taxes will be payable. As
of June 30, 1998, Concord had net operating loss carryforwards for U.S. tax
purposes of approximately $11,951,000, which expire as follows: $5,700,000 in
2008, $2,770,000 in 2009 and $3,481,000 in 2010. Losses for state tax purposes
began to expire in 1997.
The realization of the deferred tax assets relate directly to the Company's
ability to generate taxable income for certain foreign and U.S. federal and
state tax purposes. Management is not able to conclude that realization of
these deferred tax assets is more likely than not as a result of the Company's
earnings history. Reductions to the valuation allowance will be recorded when,
in the opinion of management, the Company's ability to generate taxable income
in these jurisdictions is more certain.
A reconciliation of income tax expense computed at the statutory U.S. federal
rate to the actual provision for income taxes is as follows:
<TABLE>
<CAPTION>
June 30,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Computed tax (benefits) at statutory U.S. federal tax rates $2,215,776 ($243,283) ($562,483)
Utilization of operating loss carryforward (476,180) (217,592) (332,730)
Earnings of foreign subsidiaries subject to a different tax rate (1,754,284) (306,705) --
Refund of prior years' income taxes paid by foreign subsidiary (58,733) -- --
U.S. federal minimum tax 68,798 -- --
Losses producing no current tax benefit 554,473 834,171 950,733
Other (46,302) 50,532 24,300
---------- --------- ---------
$ 503,548 $117,123 $ 79,820
========== ========= =========
</TABLE>
NOTE 9 -- PRODUCT DEVELOPMENT:
The Company's products are created, designed and engineered principally by its
own engineers in Hong Kong. The Company expended approximately $3,963,000,
$3,130,000, and $1,722,000 during the fiscal years ended June 30, 1998, 1997
and 1996, respectively, for product design and development. The large increase
in these costs over these years was due to the significant development costs
incurred with respect to new Advanced Photo System single-use and traditional
cameras, as well as new 35 millimeter single-use cameras.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES:
United States Offices and Warehouses
F-17
<PAGE>
The Company's lease on its principal offices containing the Company's domestic
warehouse and administrative offices provides for a rent of approximately
$13,300 per month and expires on December 31, 1998.
The Company plans to move its principal offices and warehouse to Florida in
December 1998. The Company's leases on these facilities provide for a rent of
approximately $13,300 and $6,900 per month, respectively, with annual
increases of 4% and 3%, respectively, and expire in August 31, 2008, and 120
months from the completion of warehouse improvements (or approximately
November 30, 2008), respectively. In August 1998, the Company opened a
temporary design center in Chicago, Illinois. A permanent design center at the
principal offices in Florida is expected to open in December 1998.
Hong Kong
The Company owns one floor and leases three floors constituting approximately
23,000 square feet of warehouse and business space in Hong Kong at a cost of
approximately $15,800 per month including rent and maintenance.
Other Jurisdictions
The Company leases warehouse and/or office space in France, Canada, Germany
and the UK in connection with the activities of its subsidiaries in those
jurisdictions.
The Company also leases various fixed assets which have been classified as
capital leases. The initial terms of such capital leases range from three to
five years and expire at various times through 2003. Monthly payments on those
leases range from approximately $300 to $50,000.
The following is a summary of assets under capitalized leases:
<TABLE>
<CAPTION>
June 30,
1998 1997
---- ----
<S> <C> <C>
Assets under capitalized leases $7,137,845 $6,808,988
Less: accumulated amortization (4,150,077) (3,425,828)
---------- ----------
$2,987,768 $3,383,160
========== ==========
</TABLE>
Future minimum rental payments are as follows:
<TABLE>
<CAPTION>
Operating Leases Capital Leases
<S> <C> <C>
Fiscal Year:
1999 $1,037,173 $1,117,617
2000 827,264 1,021,033
2001 664,553 299,255
2002 545,999 260,011
2003 469,466 19,189
Thereafter 2,278,276 --
---------- ----------
2,717,105
Total minimum payments $5,822,730
==========
Less: amount representing interest (437,067)
----------
Present value of net minimum lease payments $2,280,038
==========
</TABLE>
F-18
<PAGE>
The effective interest rates on capital leases range from approximately 12% to
14%. Rental expense for operating leases of approximately $998,000, $986,000
and $1,121,000 was incurred for fiscal years ended June 30, 1998, 1997 and
1996, respectively.
The Company has an employment agreement with its Chief Executive Officer. The
agreement is for a period of four years and provides for the term of
employment to be automatically extended for one additional day for each day of
the term of employment that elapses. Under the terms of such employment
arrangements, the Company is committed to pay an annual salary of
approximately $574,000 for the fiscal years ending June 30, 1999, 2000 and
2001. The agreement also provides for other incentives which are based on the
operating performance of the Company.
The Company has License and Royalty Agreements which require the payment of
royalties based on the manufacture and/or sale of certain products which
expire at various dates through Fiscal 2008.
NOTE 11 -- LITIGATION AND SETTLEMENTS
Jack C. Benun. On November 18, 1994, the Company filed a demand for
arbitration in New Jersey for money damages in excess of $1.5 million against
Jack C. Benun ("Benun"), former chief executive officer who was discharged for
cause in Fiscal 1995. This action was taken due to Benun's failure to fully
compensate the Company for damages it sustained as a result of Benun's
breaching his employment obligations, his fiduciary obligations and
perpetrating frauds upon the Company including the misappropriation of funds
from the Company. Mr. Benun has submitted a counterclaim in which he alleges,
among other things, a wrongful termination by the Company. The Company is
vigorously pursuing its action as well as defending the counterclaim. The
matter is currently in discovery. The Company has reserved its rights under
any other claims it may have against Mr. Benun.
Fuji. On December 30, 1997, the Company commenced in the United States
District Court of the Southern District of New York (the "Court") an action
against Fuji Photo Film Co., Ltd. ("Fuji") seeking to enforce the terms of a
Settlement Agreement between the Company and Fuji (the "Settlement Agreement")
and to restrain Fuji from terminating the Settlement Agreement. Under the
terms of the Settlement Agreement, the Company has been granted a worldwide
(subject to certain geographic limitations), non-exclusive license to use
certain Fuji technology in connection with the manufacture and sale of
single-use cameras. On January 9, 1998, the Court granted the Company's
request for an order restraining Fuji from terminating the Settlement
Agreement. Pending a final judicial determination of the dispute, the
restraining order will continue in effect as long as the Company refrains from
making any further shipments pursuant to the purchase order which gave rise to
the dispute.
The Company is involved from time to time in routine legal matters incidental
to its business. In the opinion of the Company's management, the resolution of
such matters will not have a material effect on its financial position or
results of operations.
F-19
<PAGE>
NOTE 12 -- FOREIGN OPERATIONS:
Set forth below is a summary of significant financial information regarding
the Company's foreign operations (in 000's):
<TABLE>
<CAPTION>
June 30,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current assets $ 50,504 $36,315 $33,427
Non-current assets 17,160 15,869 13,885
--------- ------- -------
Total assets 67,664 52,184 47,312
Liabilities 48,617 37,331 30,922
--------- ------- -------
Equity $ 19,047 $14,852 $16,390
========= ======= =======
Net sales (including intercompany sales) $ 105,077 $67,064 $73,595
Costs and expenses 100,395 68,393 76,266
--------- ------- -------
Net income (loss) $ 4,682 ($1,329) ($2,671)
========= ======= =======
</TABLE>
Significant financial information regarding the Company's operations, which
includes the effect of the elimination of intercompany transactions, is as
follows (in 000's):
<TABLE>
<CAPTION>
Year Ended June 30,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Sales made to unaffiliated customers:
United States $ 4,923 $6,245 $8,954
Canada 3,957 4,746 4,270
Central America 575 639 1,849
Hong Kong/People's Republic of China 85,896 46,249 42,442
Federal Republic of Germany 948 1,915 3,161
United Kingdom 3,923 3,764 3,896
France 2,441 2,189 2,199
Hungary -- -- 11
-------- ------- -------
$102,663 $65,747 $66,782
======== ======= =======
</TABLE>
Sales to unaffiliated customers exclude intercompany sales (in 000's) of
approximately $11,548, $12,877, and $16,000 for Fiscal Years 1998, 1997 and
1996, respectively. The basis of accounting for intercompany sales is cost
plus a manufacturing profit.
<TABLE>
<CAPTION>
Year Ended June 30,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income (loss) before income taxes:
United States $2,005 $ 740 $ 1,330
Canada (540) (208) (351)
Central America (64) (403) (156)
Hong Kong/People's Republic of China 6,747 1,205 (1,153)
Federal Republic of Germany (777) (785) (509)
United Kingdom (817) (1,083) (748)
France (37) (182) (27)
Hungary -- -- (40)
------ ------- --------
$6,517 ($ 716) ($ 1,654)
====== ======= ========
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
June 30,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Identifiable assets:
United States $10,056 $ 6,209 $ 8,088
Canada 1,608 1,357 1,690
Central America 254 280 1,075
Hong Kong/People's Republic of China 54,810 39,210 32,445
Federal Republic of Germany 720 1,537 2,990
United Kingdom 3,373 3,245 2,265
France 1,261 1,250 1,297
-------- -------- --------
$72,082 $53,088 $49,850
======= ======= =======
</TABLE>
NOTE 13 -- RELATED PARTY TRANSACTIONS:
During the first quarter of Fiscal 1995, the Company entered into an agreement
with a member of the Board to provide sales and marketing consulting services.
Selling expenses include $56,000, $48,000 and $56,000 for such consulting
services and related expenses during the fiscal years ended June 30, 1998,
1997 and 1996, respectively.
During the fiscal year ended June 30, 1996, the Company paid consulting fees
and expenses of approximately $218,000 to a firm, the president of which was
appointed Chief Operating Officer and President of the Company in January 1996.
NOTE 14 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
June 30,
1998 1997 1996
---- ---- ----
Cash paid for interest $1,299,000 $1,067,000 $ 882,000
========== ========== =========
Cash paid for taxes $ 120,000 $ 146,000 $ 329,000
========== ========== =========
During the Fiscal years ended June 30, 1998, 1997 and 1996, capital lease
obligations of approximately $347,000, $1,157,000 and $2,569,000 were incurred
when the Company entered into leases for new equipment.
NOTE 15 -- OTHER (INCOME) EXPENSES -- NET:
<TABLE>
<CAPTION>
June 30,
-------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
(Gain) loss on sales of long-term assets -- -- $ 20,000
Other interest (income) ($433,000) ($403,000) (271,000)
Other expense, net 151,000 55,000 200,000
Directors' fees 136,000 133,000 128,000
Foreign exchange (gain) loss, net (371,000) 92,000 (107,000)
--------- --------- ---------
($517,000) ($123,000) ($ 30,000)
========= ========= =========
</TABLE>
F-21
<PAGE>
Schedule II
CONCORD CAMERA CORP.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to
beginning of costs and other Balance at end of
Description period expenses accounts Deductions period
----------- ------------ ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Reserve for doubtful accounts, discounts and allowances
Fiscal Year:
1996 1,041,771 584,497 -- 232,683 1,393,585
1997 1,393,585 118,072 -- 509,184 1,002,473
1998 1,002,473 59,178 -- 498,528 563,123
Inventory reserves and provisions
Fiscal Year:
1996 1,036,701 3,034,604 -- 839,200 3,232,105
1997 3,232,105 644,192 -- 2,103,522 1,772,775
1998 1,772,775 583,888 -- 701,688 1,654,975
</TABLE>
F-22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CONCORD CAMERA CORP.
By: /s/ Ira B. Lampert
--------------------------------------------------
Name: Ira B. Lampert
Title: Chairman, Chief Executive Officer and
Director
By: /s/ Harlan I. Press
--------------------------------------------------
Name: Harlan I. Press
Title: Corporate Controller and Assistant Secretary
By: /s/ Eli Arenberg
--------------------------------------------------
Name: Eli Arenberg
Title: Director
By: /s/ Joel L. Gold
--------------------------------------------------
Name: Joel L. Gold
Title: Director
By: /s/ Morris H. Gindi
--------------------------------------------------
Name: Morris H. Gindi
Title: Director
By: /s/ J. David Hakman
--------------------------------------------------
Name: J. David Hakman
Title: Director
By: /s/ Ira J. Hechler
--------------------------------------------------
Name: Ira J. Hechler
Title: Director
By: /s/ Kent M. Klineman
--------------------------------------------------
Name: Kent M. Klineman
Title: Director
<PAGE>
Exhibit 4.2
CONCORD CAMERA CORP.
$15,000,000 of
11% Senior Notes due 2005
Purchase Agreement
July 30, 1998
DREYFUS HIGH YIELD STRATEGIES FUND
<PAGE>
CONCORD CAMERA CORP.
$15,000,000 of
11% Senior Notes due 2005
PURCHASE AGREEMENT
July 30, 1998
New York, New York
DREYFUS HIGH YIELD STRATEGIES FUND
200 Park Avenue
New York, New York 10166
Ladies & Gentlemen:
Concord Camera Corp., a New Jersey corporation (the "Company"),
proposes to issue and sell to Dreyfus High Yield Strategies Fund (the
"Purchaser") $15,000,000 aggregate principal amount of its 11% Senior Notes due
2005 (the "Senior Notes"), subject to the terms and conditions set forth herein.
The Senior Notes will be issued pursuant to an indenture (the "Indenture"), to
be dated the Closing Date (as defined below), between the Company and Bankers
Trust Company, as trustee (the "Trustee"). The Senior Notes are more fully
described in the offering memorandum referred to below.
1. Issuance of Notes. The Company proposes to, upon the terms and
subject to the conditions set forth herein, issue and sell to the Purchaser the
Senior Notes. The Senior Notes and the Exchange Notes (as defined below)
issuable in exchange therefore are hereinafter referred to as the Notes.
Capitalized terms used but not otherwise defined herein shall have the meanings
given to such terms in the Indenture.
The proceeds to the Company from the sale to the Purchaser of the
Senior Notes will be used to fund capital expenditures, working capital
requirements, design and development costs incurred in connection with expanded
original equipment manufacturer sales, new camera and non-camera products and
general corporate purposes, which may include acquisitions.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933
(as amended, the "Act"), the Notes (and all securities issued in exchange
therefor or in substitution thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY
WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
<PAGE>
REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION
5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT
OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED, ONLY (1) TO THE COMPANY, (2)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (3) TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, (4) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (5) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D
UNDER THE SECURITIES ACT (AN "IAI") THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE OR TRANSFER AGENT) OR (6) PURSUANT
TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER THE SECURITIES ACT (AND BASED ON AN OPINION
OF COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT IN EACH OF THE
FOREGOING CASES TO APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY
OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
2. Offering. The Senior Notes will be offered and sold to the Purchaser
without such offer and sale being registered under the Act, pursuant to an
exemption from the registration requirements under the Act. In connection with
the sale of the Senior Notes, the
2
<PAGE>
Company has prepared an offering memorandum, dated July 30, 1998 (together with
the Exhibits thereto, the "Offering Memorandum"), relating to the Company and
the Senior Notes.
The Purchaser and its direct and indirect transferees will be
entitled to the benefits of the registration rights agreement relating thereto
(the "Registration Rights Agreement") in the form of Exhibit A hereto, to be
dated the Closing Date for so long as such Senior Notes constitute "Transfer
Restricted Securities" (as defined in such agreement). Pursuant to the
Registration Rights Agreement, the Company will agree to file with the
Securities and Exchange Commission (the "Commission"), under the circumstances
set forth therein, (i) a registration statement under the Act (the "Exchange
Offer Registration Statement") with respect to an offer to exchange (the
"Exchange Offer") the Senior Notes for 11% Series B Senior Notes due 2005 (the
"Exchange Notes") to be offered in exchange for the Senior Notes or (ii) a shelf
registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement") relating to the resale by certain holders of the Notes,
and to use its best efforts to cause such Registration Statements to be declared
effective and to consummate the Exchange Offer. This Agreement, the Notes, the
Indenture, and the Registration Rights Agreement are hereinafter sometimes
referred to collectively as the "Operative Documents."
3. Purchase, Sale and Delivery. (a) On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell to the
Purchaser, and the Purchaser agrees to purchase from the Company, the Senior
Notes. The purchase price for the Senior Notes shall be $14,850,000.
(b) Delivery of the Senior Notes shall be made against payment of the
purchase price, at the offices of Kronish, Lieb, Weiner & Hellman LLP, 1114
Avenue of the Americas, New York, New York 10036, or such other location as may
be mutually acceptable. Such delivery and payment shall be made at 9:00 A.M. New
York time, on July 30, 1998 or at such other time as shall be agreed upon by the
Purchaser and the Company. Payment for the Senior Notes shall be made to the
Company by wire transfers to an account previously designated to the Purchaser
by the Company, provided that the Company shall give at least two business days'
prior written notice to the Purchaser of the information required to effect such
wire transfers. The time and date of such delivery and payment are herein called
the "Closing Date."
(c) Senior Notes sold to the Purchaser will be represented by one or
more permanent global Senior Notes in definitive, fully registered form without
interest coupons (each a "Restricted Global Note", registered in the name of
Cede & Co., as nominee of the Depository Trust Company ("DTC"), having an
aggregate principal amount corresponding to the aggregate principal amount of
the Senior Notes. The Restricted Global Notes shall be made available to the
Purchaser for inspection not later than 9:30 a.m., New York City time, on the
business day immediately preceding the Closing Date.
4. Agreements of the Company. The Company covenants and agrees with the
Purchaser as follows:
3
<PAGE>
(a) To advise the Purchaser promptly and, if requested by the
Purchaser, confirm such advice in writing, (i) of the issuance by any
state securities commission of any stop order suspending the
qualification or exemption from qualification of any Notes for offering
or sale in any jurisdiction, or the initiation of any proceeding for
such purpose by any state securities commission or other regulatory
authority and (ii) of the happening of any event that, in the
reasonable opinion of counsel to the Company, makes any statement of a
material fact made in the Offering Memorandum untrue or that requires
the making of any additions to or changes in the Offering Memorandum in
order to make the statements therein, in the light of the circumstances
under which they are made, not misleading. The Company shall use its
best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Notes under any state
securities or Blue Sky laws and, if at any time any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption of any Notes under any state
securities or Blue Sky laws, the Company shall use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time.
(b) To furnish the Purchaser, without charge, as many copies
of the Offering Memorandum, and any amendments or supplements thereto
as the Purchaser may reasonably request by 5:00 P.M. (New York time) on
the business day next following the date of the execution of this
Agreement.
(c) Not to amend or supplement the Offering Memorandum prior
to the Closing Date unless the Purchaser shall previously have been
advised thereof and shall not have objected thereto within a reasonable
time after being furnished a copy thereof.
(d) If, after the date hereof and prior to the purchase of the
Notes by the Purchaser any event shall occur or condition shall exist
as a result of which, in the reasonable judgment of the Company or the
Purchaser or in the reasonable opinion of either counsel to the Company
or counsel to the Purchaser, it becomes necessary or advisable to amend
or supplement the Offering Memorandum in order to make the statements
therein, in the light of the circumstances when such Offering
Memorandum is delivered to the Purchaser, not misleading, or if in the
reasonable opinion of either counsel to the Company or counsel to the
Purchaser it is necessary or advisable to amend or supplement the
Offering Memorandum to comply with applicable law, (i) to notify the
Purchaser and (ii) forthwith to prepare an appropriate amendment or
supplement to such Offering Memorandum, at its own expense, so that the
statements therein as so amended or supplemented will not, in the light
of the circumstances when it is so delivered, be misleading or omit to
state a material fact, or so that such Offering Memorandum will comply
with applicable law.
(e) To cooperate with the Purchaser and counsel to the
Purchaser in connection with the qualification or registration of the
Notes under the securities or Blue Sky laws of such jurisdictions as
the Purchaser may reasonably request; provided, however that the
Company shall not be required in connection therewith to register or
4
<PAGE>
qualify as a foreign corporation where it is not now so qualified or to
take any action that would subject it to service of process in suits or
taxation, in each case, other than as to matters and transactions
relating to the Offering Memorandum, in any jurisdiction where it is
not now so subject.
(f) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is
terminated, to pay all costs, expenses, fees and taxes incident to the
performance of the obligations of the Company hereunder, including in
connection with: (i) the preparation, printing, filing and distribution
of the Offering Memorandum (including, without limitation, financial
statements) and all amendments and supplements thereto required
pursuant hereto, (ii) the preparation (including, without limitation,
duplication costs) and delivery of all preliminary and final Blue Sky
memoranda prepared and delivered in connection herewith, (iii) the
issuance, transfer and delivery by the Company of the Notes to the
Purchaser, (iv) the qualification or registration of the Notes for
offer and sale under the securities or Blue Sky laws of the several
states, including filing fees and the fees and disbursements of counsel
to the Purchaser relating to the memorandum described in (ii) above,
(v) the preparation of certificates for the Notes (including, without
limitation, printing and engraving thereof), (vi) the fees,
disbursements and expenses of the Company's counsel and accountants,
(vii) all expenses and listing fees in connection with the application
for quotation of the Notes in the National Association of Securities
Dealers, Inc. ("NASD") Automated Quotation System - PORTAL ("PORTAL"),
(viii) all fees and expenses (including fees and expenses of counsel to
the Company) of the Company in connection with the approval of the
Notes by DTC for "book-entry" transfer, (ix) rating the Notes by rating
agencies, (x) the reasonable fees and expenses of the Trustee and its
counsel in connection with the Indenture and the Notes, (xi) the costs
and expenses relating to investor presentations or any "road show"
undertaken in connection with the marketing of the Notes, including,
without limitation, expenses associated with slides, graphics, travel
and lodging expenses and (xii) the performance by the Company of its
other obligations under this Agreement and the other Operative
Documents, provided, however, that the expenses incurred pursuant to
clauses (ii) and (iv) above shall not exceed $1,000 without the consent
of the Company.
(g) To use the proceeds from the sale of the Notes in the
manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(h) Not to voluntarily claim, and to resist actively any
attempts to claim, the benefit of any usury laws against the holders of
any Notes.
(i) To do and perform all things required to be done and
performed under this Agreement by it prior to or after the Closing Date
and to satisfy all conditions precedent on its part to the delivery of
the Notes.
5
<PAGE>
(j) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
that could be integrated with the sale of the Notes in a manner that
would require the registration under the Act of the sale of the Senior
Notes to the Purchaser.
(k) For so long as any of the Notes remain outstanding and
during any period in which the Company is not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to make available to any beneficial owner of Notes in connection
with any sale thereof and any prospective purchaser of such Notes from
such beneficial owner, the information required by Rule 144A(d)(4)
under the Act.
(l) To cause the Exchange Offer to be made in the appropriate
form to permit registered Exchange Notes to be offered in exchange for
the Senior Notes and to comply with all applicable federal and state
securities laws in connection with the Exchange Offer.
(m) To comply with all of its agreements set forth in the
Registration Rights Agreement and all agreements set forth in the
representation letters of the Company to DTC relating to the approval
of the Notes by DTC for "book-entry" transfer.
(n) To use its best efforts to effect the inclusion of the
Notes in PORTAL and to obtain approval of the Notes by DTC for
"book-entry" transfer.
(o) During a period of one year following the Closing Date, to
deliver without charge to the Purchaser, promptly upon their becoming
available, copies of (i) all reports or other publicly available
information that the Company shall mail or otherwise make available to
its stockholders and (ii) all reports, financial statements and proxy
or information statements filed by the Company with the Commission or
any national securities exchange and such other publicly available
information concerning the Company, including without limitation, press
releases.
(p) Prior to the Closing Date, to furnish to the Purchaser, as
soon as they have been prepared in the ordinary course by the Company,
copies of any consolidated financial statements or any unaudited
interim financial statements of the Company for any period subsequent
to the periods covered by the financial statements appearing in the
Offering Memorandum.
(q) The Company will not take, directly or indirectly, any
action designed to, or that might reasonably be expected to, cause or
result in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Notes. Except as
permitted by the Act, the Company will not distribute any Offering
Memorandum or other offering material in connection with the offering
and sale of the Notes.
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(r) Not to solicit any offer to buy or offer to sell the
Senior Notes by means of any form of general solicitation or general
advertising (as such terms are used in Regulation D under the Act) or
in any manner involving a public offering within the meaning of Section
4(2) of the Act.
(s) While any of the Notes remain outstanding, the Company
shall make available, upon request, to any seller of such Notes the
information specified in Rule 144A(d)(4) under the Act, unless the
Company is then subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended.
(t) To comply with the agreements in the Indenture, the
Registration Rights Agreement, and any other Operative Document.
5. Representations and Warranties. (a) The Company represents and
warrants to the Purchaser that:
(i) The Offering Memorandum has been prepared in connection
with the sale by the Company to the Purchaser of the Senior Notes. The
Offering Memorandum does not, and any supplement or amendment to the
Offering Memorandum will not, contain 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, except that the representations
and warranties contained in this paragraph shall not apply to
statements in or omissions from the Offering Memorandum (or any
supplement or amendment thereto) made in reliance upon and in
conformity with information relating to the Purchaser furnished to the
Company in writing by the Purchaser expressly for use therein. Any
projections and other forward- looking information contained in the
Offering Memorandum have been prepared in good faith and are based upon
assumptions which, in light of the circumstances under which they were
made, are reasonable. No stop order preventing the use of the Offering
Memorandum, or any amendment or supplement thereto, or any order
asserting that any of the transactions contemplated by this Agreement
are subject to the registration requirements of the Act, has been
issued.
(ii) When the Notes are issued and delivered pursuant to this
Agreement, no Note will be of the same class (within the meaning of
Rule 144A under the Act) as securities of the Company that are listed
on a national securities exchange registered under Section 6 of the
Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
(iii) Each of the Company and its subsidiaries (A) has been
duly organized, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, (B) has all
requisite corporate power and authority to carry on its business as it
is currently being conducted and as described in the Offering
Memorandum and to own, lease and operate its properties, and (C) is
duly qualified and in good standing as
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a foreign corporation authorized to do business in each jurisdiction in
which the nature of its business or its ownership or leasing of
property requires such qualification, except where the failure to be so
qualified or in good standing could not reasonably be expected to
result in a material adverse effect on the business of the Company and
its subsidiaries taken as a whole (each, a "Material Adverse Effect").
(iv) All of the outstanding shares of capital stock of the
Company have been duly authorized, validly issued, and are fully paid
and nonassessable and were not issued in violation of any preemptive or
similar rights. At June 30, 1998 after giving effect to the issuance
and sale of the Senior Notes pursuant hereto, the Company had an
authorized and outstanding consolidated capitalization as set forth in
the Offering Memorandum under the caption "Capitalization."
(v) All the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights.
(vi) Each subsidiary, direct or indirect, of the Company is
set forth on Schedule A hereto. All of the outstanding shares of
capital stock of each of the Company's subsidiaries has been duly
authorized and validly issued, fully paid and non-assessable, and are
owned by the Company, directly or indirectly through one or more
subsidiaries, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature.
(vii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement, the Indenture, the Registration Rights Agreement and the
other Operative Documents and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the
corporate power and authority to issue, sell and deliver the Notes as
provided herein and therein and the power to effect the Use of Proceeds
as described in the Offering Memorandum.
(viii) This Agreement has been duly and validly authorized,
executed and delivered by the Company and is the legal, valid and
binding agreement of the Company, enforceable against it in accordance
with its terms, except insofar as indemnification and contribution
provisions may be limited by applicable law or equitable principles and
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.
(ix) The Indenture has been duly and validly authorized by the
Company and, when duly executed and delivered by the Company, will be
the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to
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<PAGE>
general principles of equity. The Offering Memorandum contains a fair
summary of the terms of the Indenture. On the Closing Date, the
Indenture will conform in all material respects to the requirements of
the Trust Indenture Act of 1939, as amended (the "TIA"), and the rules
and regulations of the Commission applicable to an indenture which is
qualified thereunder.
(x) The Senior Notes have been duly and validly authorized by
the Company, and have been duly and validly authorized for issuance and
sale to the Purchaser by the Company pursuant to this Agreement and,
when issued and authenticated in accordance with the terms of the
Indenture and delivered against payment therefor in accordance with the
terms hereof and thereof, will be the legal, valid and binding
obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the
Indenture, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity. The
Offering Memorandum contains a fair summary of the terms of the Senior
Notes.
(xi) The Exchange Notes have been duly and validly authorized
for issuance by the Company and, when issued and authenticated in
accordance with the terms of the Exchange Offer and the Indenture, will
be the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms and entitled to the
benefits of the Indenture, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws
affecting the rights of creditors generally and subject to general
principles of equity. The Offering Memorandum contains a fair summary
of the terms of the Exchange Notes.
(xii) The Registration Rights Agreement has been duly and
validly authorized by the Company and, when duly executed and delivered
by the Company, will be the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity. The Offering
Memorandum contains a fair summary of the terms of the Registration
Rights Agreement.
(xiii) The Company and its subsidiaries are not, and, after
giving effect to the Offering, will not be (A) in violation of their
respective charters or bylaws, (B) in default in the performance of any
bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument for borrowed money to which any of them is a
party or by which any of them is bound or to which any of their
properties is subject, or (C) in violation of any local, state or
Federal law, statute, ordinance, rule, regulation, requirement,
judgment or court decree (including, without limitation, environmental
laws, statutes, ordinances, rules, regulations, judgments or court
decrees) applicable to the Company, its subsidiaries or any of their
assets or properties (whether owned or leased) other than, in the case
of clauses (B) and (C), any default or violation that (1)
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<PAGE>
could not reasonably be expected to result in a Material Adverse Effect
or (2) which is disclosed in the Offering Memorandum.
(xiv) None of (A) the execution, delivery or performance by
the Company of this Agreement and the other Operative Documents and (B)
the issuance and sale of the Notes violate, conflict with or constitute
a breach of any of the terms or provisions of, or a default under (or
an event that with notice or the lapse of time, or both, would
constitute a default), or require consent under, or result in the
imposition of a lien or encumbrance on any properties of the Company
and its subsidiaries, or an acceleration of any indebtedness of the
Company and its subsidiaries pursuant to, (i) the charters or bylaws of
the Company and its subsidiaries, (ii) any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument for
borrowed money to which the Company or any of its subsidiaries is a
party or by which the Company, its subsidiaries or their property is or
may be bound, (iii) any statute, rule or regulation applicable to the
Company, its subsidiaries or any of their assets or properties or (iv)
any judgment, order or decree of any court or governmental agency or
authority having jurisdiction over the Company, its subsidiaries or any
of their assets or properties, except in the case of clauses (ii),
(iii) and (iv) for such violations conflicts, breaches, defaults,
consents, impositions of liens or accelerations that (x) could not
reasonably be expected to result in a Material Adverse Effect or (y)
which are disclosed in the Offering Memorandum. Other than as described
in the Offering Memorandum, no consent, approval, authorization or
order of, or filing, registration, qualification, license or permit of
or with, (A) any court or governmental agency, body or administrative
agency or (B) any other person is required for (1) the execution,
delivery and performance by the Company of this Agreement and the other
Operative Documents, (2) the issuance and sale of the Notes and the
transactions contemplated hereby and thereby, except (x) such as have
been obtained and made (or, in the case of the Registration Rights
Agreement, will be obtained and made) under the Act, the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act") and state
securities or Blue Sky laws and regulations or such as may be required
by the NASD or (y) where the failure to obtain any such consent,
approval, authorization or order of, or filing registration,
qualification, license or permit could not reasonably be expected to
result in a Material Adverse Effect.
(xv) There is (i) no action, suit or proceeding before or by
any court, arbitrator or governmental agency, body or official,
domestic or foreign, now pending or, to the best knowledge of the
Company, threatened or contemplated to which the Company or any of its
subsidiaries is a party or to which the business or property of the
Company or any of its subsidiaries is subject, (ii) no statute, rule,
regulation or order that has been enacted, adopted or issued by any
governmental agency or that has been proposed by any governmental body
or (iii) no injunction, restraining order or order of any nature by a
federal or state court or foreign court of competent jurisdiction to
which the Company or any of its subsidiaries is or may be subject or to
which the business, assets, or property of the Company and its
subsidiaries is or may be subject, other than those
10
<PAGE>
accurately disclosed in the Offering Memorandum or which would not have
a Material Adverse Effect.
(xvi) No action has been taken and no statute, rule,
regulation or order has been enacted, adopted or issued by any
governmental agency that prevents the issuance of the Notes or prevents
or suspends the use of the Offering Memorandum; no injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction has been issued that prevents the issuance of
the Notes, prevents or suspends the sale of the Notes in any
jurisdiction referred to in Section 4(e) hereof or that could adversely
affect the consummation of the transactions contemplated by this
Agreement, the Operative Documents or the Offering Memorandum; and
every request of any securities authority or agency of any jurisdiction
for additional information has been complied with in all material
respects.
(xvii) There is (i) no significant unfair labor practice
complaint pending against the Company or any of its subsidiaries nor,
to the best knowledge of the Company, threatened against the Company or
any of its subsidiaries, before the National Labor Relations Board, any
state or local labor relations board or any foreign labor relations
board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement
is so pending against the Company or any of its subsidiaries or, to the
best knowledge of the Company, threatened against the Company or any of
its subsidiaries, (ii) no significant strike, labor dispute, slowdown
or stoppage pending against the Company or any of its subsidiaries nor,
to the best knowledge of the Company, threatened against the Company or
any of its subsidiaries and (iii) to the best knowledge of the Company,
no union representation question existing with respect to the employees
of the Company or any of its subsidiaries that could reasonably be
expected to result in a Material Adverse Effect. To the best knowledge
of the Company, no collective bargaining organizing activities are
taking place with respect to the Company or any of its subsidiaries.
The Company and its subsidiaries have not violated (A) any federal,
state or local law or foreign law relating to discrimination in hiring,
promotion or pay of employees (except as set forth in the Offering
Memorandum), (B) any applicable wage or hour laws or (C) any provision
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules and regulations thereunder, which in the case
of clause (A), (B) or (C) above could reasonably be expected to result
in a Material Adverse Effect.
(xviii) The Company and its subsidiaries are in compliance
with and have not violated any environmental, safety or similar law or
regulation applicable to them or their business or property relating to
the protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), do not lack any permit, license or other
approval required of them under applicable Environmental Laws and are
not violating any term or condition of such permit, license or approval
which could reasonably be expected to, either individually or in the
aggregate, result in a Material Adverse Effect. No facilities owned
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<PAGE>
or leased by the Company or its subsidiaries, or to the knowledge of
the Company, any facilities of any predecessor in interest of the
Company or its subsidiaries, is listed or, to the knowledge of the
Company, formally proposed for listing on the National Priorities List
or the Comprehensive Environmental Response, Compensation, and
Liability Information System, both as promulgated under the
Comprehensive Environmental Response, Compensation and Liability Act.
("CERCLA"), or on any comparable state list, or listed or, to the
knowledge of the Company, formally proposed for listing, on any
comparable local list, and the Company and its subsidiaries have not
received any written notification of potential or actual liability, or
any written request for information, pursuant to CERCLA or any
comparable state, local or foreign environmental law.
(xix) The Company and its subsidiaries have (i) good and
marketable title to all of the properties and assets described in the
Offering Memorandum as owned by them, free and clear of all liens,
charges, encumbrances and restrictions, except such as are described in
the Offering Memorandum or as could not reasonably be expected to
result in a Material Adverse Effect, (ii) peaceful and undisturbed
possession under all material leases to which they are a party as
lessee, (iii) all licenses, certificates, permits, authorizations,
approvals, franchises and other rights from, and have made all
declarations and filings with, all federal, state and local
authorities, all self-regulatory authorities and all courts and other
tribunals (each an "Authorization") necessary to engage in the business
conducted by the Company and its subsidiaries in the manner described
in the Offering Memorandum, except as described in the Offering
Memorandum or as could not reasonably be expected to result in a
Materially Adverse Effect, and no such Authorization contains a
materially burdensome restriction that is not disclosed in the Offering
Memorandum and (iv) no reason to believe that any governmental body or
agency is considering limiting, suspending or revoking any such
Authorization. Except where the failure to be in full force and effect
could not reasonably be expected to result in a Material Adverse
Effect, all such Authorizations are valid and in full force and effect
and the Company and its subsidiaries are in compliance in all material
respects with the terms and conditions of all such Authorizations and
with the rules and regulations of the regulatory authorities having
jurisdiction with respect thereto.
(xx) The Company and its subsidiaries own, possess or have the
right to employ all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, software,
systems or procedures), trademarks, service marks and trade names,
inventions, computer programs, technical data and information
(collectively, the "Intellectual Property") presently employed by them
in connection with the businesses now operated by them or which are
proposed to be operated by them free and clear of and without violating
any right, claimed right, charge, encumbrance, pledge, security
interest, restriction or lien of any kind of any other person and the
Company and its subsidiaries have not received any notice of
infringement of or conflict with asserted
12
<PAGE>
rights of others with respect to any of the foregoing except as
disclosed in the Offering Memorandum or as could not reasonably be
expected to result in a Material Adverse Effect. The use of the
Intellectual Property in connection with the business and operations of
the Company and its subsidiaries does not infringe on the rights of any
person, except as could not reasonably be expected to result in a
Material Adverse Effect.
(xxi) Neither the Company and its subsidiaries, nor, to the
best knowledge of the Company, any of their officers, directors,
partners, employees, agents or affiliates or any other person acting on
behalf of the Company or any of its subsidiaries has directly or
indirectly, given or agreed to give any money, gift or similar benefit
(other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer
or supplier, official or employee of any governmental agency (domestic
or foreign), instrumentality of any government (domestic or foreign) or
any political party or candidate for office (domestic or foreign) or
other person who was, is or may be in a position to help or hinder the
business of the Company and its subsidiaries (or assist the Company and
its subsidiaries in connection with any actual or proposed transaction)
which (i) might subject the Company and its subsidiaries, or any other
individual or entity to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign), (ii) if
not given in the past, might have had a material adverse effect on the
assets, business or operations of the Company and its subsidiaries or
(iii) if not continued in the future, could reasonably be expected to
result in a Material Adverse Effect.
(xxii) All material tax returns required to be filed by the
Company and its subsidiaries in all jurisdictions have been so filed.
All taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due from such
entities or that are due and payable have been paid, other than those
being contested in good faith and for which adequate reserves have been
provided or those currently payable without penalty or interest. To the
knowledge of the Company, there are no material proposed additional tax
assessments against the Company and its subsidiaries, or the assets or
property of the Company and its subsidiaries.
(xxiii) None of the Company and its subsidiaries is (i) an
"investment company" or company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended
(the "Investment Company Act"), or (ii) a "holding company" or "a
subsidiary company" or an "affiliate" of a holding company within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(xxiv) Except as disclosed in the Offering Memorandum, there
are no holders of securities of the Company who, by reason of the
execution by the Company of this Agreement or any other Operative
Document to which it is a party or the consummation by the Company of
the transactions contemplated hereby or thereby, have the right to
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request or demand that the Company register under the Act or analogous
foreign laws and regulations securities held by them.
(xxv) The Company and its subsidiaries maintain a system of
internal accounting controls sufficient to provide 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 in conformity
with generally accepted accounting principles and to maintain
accountability for assets; (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 thereto.
(xxvi) The Company and its subsidiaries maintain insurance
covering its properties, operations, personnel and businesses. Such
insurance insures against such losses and risks as are adequate in
accordance with customary industry practice to protect the Company and
its business and the Company's subsidiaries and their business. The
Company and its subsidiaries have not received notice from any insurer
or agent of such insurer that substantial capital improvements or other
expenditures will have to be made in order to continue such insurance.
All such insurance is outstanding and duly in force on the date hereof,
subject only to changes made in the ordinary course of business,
consistent with past practice, which do not, singly or in the
aggregate, materially alter the coverage thereunder or the risks
covered thereby.
(xxvii) The Company has not (i) taken, directly or indirectly,
any action designed to, or that might reasonably be expected to, cause
or result in stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Notes or (ii),
except as described in the Offering Memorandum, since the date of the
Offering Memorandum (A) sold, bid for, purchased or paid any person any
compensation for soliciting purchases of, the Notes or (B) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
(xxviii) No registration under the Act of the Notes is
required for the sale of the Senior Notes to the Purchaser as
contemplated hereby assuming (i) that the Purchaser is a "qualified
institutional buyer," as defined in Rule 144A under the Act ("QIB"). No
securities of the same class as the Notes have been issued and sold by
the Company within the six-month period immediately prior to the date
hereof.
(xxix) No employee pension benefit plan (within the meaning of
Section 3(2) of ERISA, but excluding any "multiemployer plan" within
the meaning of Section 3(37) of ERISA) established or maintained by the
Company or any of its subsidiaries or to which the Company or any of
its subsidiaries has made contributions, which is subject to Part 3 or
Subtitle B of Title I of ERISA, or Section 412 of the Internal Revenue
Code of 1986 (the "Code"), had an accumulated funding deficiency (as
such term is defined in Section
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302 of ERISA or Section 412 of the Code), whether or not waived, as of
the last day of the most recent plan year of such plan heretofore ended
for which an excise tax is due (or would be due if such deficiency were
not waived). Each of the Company and its subsidiaries has made all
contributions required to be made by it to any "multiemployer pension
plan" (within the meaning of Section 3(37) of ERISA). Neither the
Company nor any Related Person (as such term is defined below) has
incurred, or is expecting to incur, any withdrawal liability
(determined under Section 4201 of ERISA) with respect to any plan
covered by Title IV of ERISA and in respect of which the Company or a
Related Person is an "employer" as defined in Section 3(5) of ERISA,
and to the best of the Company's knowledge, there has not been any
"reportable event" (within the meaning of Section 4043 of ERISA and
regulations thereunder, other than an event for which the 30-day notice
requirement has been waived), or any other event or condition which
presents a material risk of the termination of any such plan,
including, but not limited to, a termination by action of the Pension
Benefit Guaranty Corporation, which termination would create a material
liability of the Company or a Related Person to the Pension Benefit
Guaranty Corporation. "Related Person" shall mean any trade or business
(whether or not incorporated) which is under common control (as defined
in Section 414(b) and (c) of the Code) with the Company within the
meaning of Section 4001(b) of ERISA. As of the last day of the most
recent plan year heretofore ended of each employee benefit plan
described in the preceding sentence (other than a "multiemployer
plan"), the present value of all accrued benefits under each such
employee benefit plan (calculated on the basis of the actuarial
assumptions specified in the most recent actuarial valuation for each
such plan) did not exceed the fair market value of the assets of such
plan allocable to such benefit by more than $1,000,000. Neither any
employee pension benefit plan (excluding any "multiemployer plan"
within the meaning of Section 3(37) of ERISA) established or maintained
by the Company or any of its subsidiaries or to which the Company or
any of its subsidiaries has made contributions, nor any trust created
thereunder, nor any trustee or administrator thereof (including the
Company and its subsidiaries), has engaged in any non-exempt prohibited
transaction (as described in Section 406 of ERISA or in Section 4975 of
the Code) that could subject the Company or any of its subsidiaries
either directly or indirectly through an obligation to indemnify to any
material tax or material penalty on prohibited transactions imposed
under said Section 4975 of the Code or under ERISA. The execution and
delivery of this Agreement, the other Operative Documents and the sale
of the Senior Notes to the Purchaser will not involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975
of the Code. Each employee benefit plan described in the preceding
sentence is in compliance in all material respects with all applicable
provisions of ERISA and the Code, except for plan amendments required
or permitted by such statutes as to which applicable grace periods for
making such amendments have not expired, and the Company and its
subsidiaries have made, accrued or provided for all contributions
heretofore required to be made by the Company and its subsidiaries and
the Company and its subsidiaries have complied in all material respects
with the continuation coverage requirements of Title X of the
Consolidated Omnibus Budget Act of 1985, as amended. The Company and
its subsidiaries have no
15
<PAGE>
material "expected post-retirement benefit obligation" (within the
meaning of Financial Accounting Standards Board Statement No. 106). The
consummation of the transactions contemplated by this Agreement
(including, without limitation, the Use of Proceeds) will not result in
any material payment (including, without limitation, severance, golden
parachute or otherwise) becoming due from the Company or any of its
subsidiaries to any employee of the Company or any of its subsidiaries
as a consequence of such transaction.
(xxx) The Offering Memorandum, as of its date, and each
amendment or supplement thereto, as of its date, contains the
information specified in, and meets the requirements of, Rule
144A(d)(4) under the Act applicable to the Company.
(xxxi) Subsequent to the respective dates as of which
information is given in the Offering Memorandum and up to the Closing
Date, except as set forth in the Offering Memorandum, (i) the Company
and its subsidiaries have neither incurred any liabilities or
obligations, direct or contingent, which are material, individually or
in the aggregate, to the Company and its subsidiaries taken as a whole,
nor entered into any transaction not in the ordinary course of
business, (ii) there has not been, singly or in the aggregate, any
change or development which could reasonably be expected to result in a
Material Adverse Effect and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company or any
of its subsidiaries on any class of their capital stock.
(xxxii) None of the execution, delivery and performance of
this Agreement, the issuance and sale of the Notes, the application of
the proceeds from the issuance and sale of the Notes and the
consummation of the transactions contemplated thereby as set forth in
the Offering Memorandum, will violate Regulations G, T, U or X
promulgated by the Board of Governors of the Federal Reserve System or
analogous foreign laws and regulations.
(xxxiii) To the best knowledge of the Company, the accountants
who have certified or will certify the financial statements included or
to be included as part of the Offering Memorandum are independent
accountants. The historical financial statements of the Company and its
subsidiaries comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under
the Act and present fairly in all material respects the financial
position and results of operations of the Company and its subsidiaries
at the respective dates and for the respective periods indicated. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout
the periods presented. The pro forma financial statements included in
the Offering Memorandum have been prepared on a basis consistent with
such historical statements, except for the pro forma adjustments
specified therein, and give effect to assumptions made on a reasonable
basis and present fairly in all material respects the historical and
proposed transactions contemplated by this Agreement, the other
Operative Documents; and such pro forma financial statements comply as
to form in all material respects with the
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requirements applicable to pro forma financial statements included in
registration statements on Form S-1 under the Act. The other financial
and statistical information and data included in the Offering
Memorandum, historical and pro forma, are accurately presented in all
material respects and prepared on a basis consistent with the financial
statements, historical and pro forma, included in the Offering
Memorandum and the books and records of the Company and its
subsidiaries, as applicable.
(xxxiv) Except pursuant to this Agreement and except for any
arrangements between the Purchaser and Barrington Capital Group, its
financial advisor (the "Financial Advisor"), there are no contracts,
agreements or understandings between the Company and any other person
that would give rise to a valid claim against the Company or the
Purchaser for a brokerage commission, finder's fee or like payment in
connection with the issuance, purchase and sale of the Notes.
(xxxv) Each certificate signed by any officer of the Company
and delivered to the Purchaser or counsel for the Purchaser shall be
deemed to be a representation and warranty by the Company to the
Purchaser as to the matters covered thereby.
(xxxvi) When the Notes are issued and delivered pursuant to
this Agreement, the Notes will not be of the same class (within the
meaning of Rule 144A of the Act) as any security of the Company that is
listed on a national securities exchange registered under Section 6 of
the Exchange Act or that is quoted in a United States automated
inter-dealer quotation system.
(xxxvii) No form of general solicitation or general
advertising (as defined under Regulation D under the Act) was used by
the Company or any of its representatives in connection with the offer
and sale of the Notes contemplated hereby, including, without
limitation, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by
any general solicitation or general advertising. No securities of the
same class as the Notes have been issued and sold by the Company within
the six-month period immediately prior to the date hereof.
(xxxviii) Prior to the effectiveness of any Registration
Statement, the Indenture is not required to be qualified under the TIA.
(xxxix) Except as disclosed in the Offering Memorandum, no
relationship, direct or indirect, exists between or among the Company
or any of its subsidiaries on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Company or any of
its subsidiaries on the other hand, which would be required by Item 404
of Regulation S-K under the Act to be described in the Offering
Memorandum if the Offering Memorandum were a prospectus included in a
registration statement filed by the Company on Form S-1 with the
Commission.
17
<PAGE>
The Company acknowledges that the Purchaser and, for purposes
of the opinions to be delivered pursuant to Section 6 hereof, counsel to the
Company, will rely upon the accuracy and truth of the foregoing representations
and hereby consents to such reliance.
(b) The Purchaser represents, warrants and covenants to the Company and
agrees that:
(i) The Purchaser is a QIB, with such knowledge and experience
in financial and business matters as are necessary in order to evaluate
the merits and risks of an investment in the Notes.
(ii) The Purchaser is aware that the sale to it is being made
in reliance on Rule 144A, and is acquiring such Notes for its own
account or for the account of another qualified institutional buyer.
The Purchaser is not acquiring the Notes with a view to any
distribution thereof that would violate the Act or the securities laws
of any state of the United States or any other applicable jurisdiction.
(iii) The Purchaser acknowledges and agrees that the Notes are
being offered in a transaction not involving any public offering in the
United States within the meaning of the Act, that the Notes have not
been registered under the Act and that (A) the Notes may be resold,
pledged or otherwise transferred only (I) to the Company, (II) pursuant
to a registration statement which has been declared effective under the
Act, (III) to a person it reasonably believes is a QIB in a transaction
meeting the requirements of Rule 144A under the Act, (IV) pursuant to
offers and sales to non-U.S. persons that occur outside the United
States in a transaction meeting the requirements of Rule 904 of
Regulation S under the Act, (V) to an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation
D under the Act that, prior to such transfer, furnishes to the trustee
a signed letter containing certain representations and agreements
relating to the transfer of the Notes (the form of which letter can be
obtained from the Trustee) or (VI) pursuant to any other available
exemption from the registration requirements of the Act (and based on
an opinion of counsel if the Company so requests) subject in each of
the foregoing cases to the applicable state securities laws of any
State of the United States or any other applicable jurisdiction and (B)
the Purchaser will, and each subsequent holder is required to, notify
any subsequent purchaser from it of the resale restrictions set forth
in (A) above.
(iv) The Purchaser acknowledges that neither the Company nor
any person representing the Company has made any representation to it
with respect to the Company or the offering or sale of the Notes, other
than the information contained in the Offering Memorandum, which has
been delivered to it and upon which it is relying in making its
investment decision with respect to the Notes. The Purchaser has access
to such financial and other information concerning the Company and the
Notes as it has deemed necessary in connection with its decision to
purchase the Notes, including an opportunity to ask questions of and
request information from the Company.
18
<PAGE>
(v) Except pursuant to this Agreement and except for any
arrangements between the Purchaser and the Financial Advisor, there are
no contracts, agreements or understandings between the Purchaser and
any other person that would give rise to a valid claim against the
Company or the Purchaser for a brokerage commission, finder's fee or
like payment in connection with the issuance, purchase and sale of the
Notes. All commissions, fees or other payments to the Financial Advisor
shall be paid by the Company.
(vi) The Purchaser understands that the Company and, for
purposes of the opinions to be delivered pursuant to Section 6 hereof,
counsel to the Company will rely upon the accuracy and truth of the
foregoing representations and hereby consents to such reliance. The
Purchaser agrees that, if any of the foregoing acknowledgements,
representations or agreements deemed to have been made by it are no
longer accurate, it shall promptly notify the Company. If the Purchaser
is acquiring the Notes as a fiduciary or agent for one or more investor
accounts, the Purchaser represents that it has sole investment
discretion with respect to each such account and that it has full power
to make the foregoing acknowledgements, representations and agreements
on behalf of each such account.
6. Conditions of Obligations of Purchaser and Company. (a) The
obligation of the Purchaser to purchase and pay for the Notes as provided
herein, shall be subject to the satisfaction of the following conditions:
(i) All of the representations and warranties of the Company contained
in this Agreement shall be true and correct on the date hereof and on the
Closing Date with the same force and effect as if made on and as of the date
hereof and the Closing Date, respectively. The Company shall have performed or
complied with all of the agreements herein contained and required to be
performed or complied with by it at or prior to the Closing Date.
(ii) The Offering Memorandum shall have been printed and copies
distributed to the Purchaser not later than 10:00 a.m., New York City time, on
the day following the date of this Agreement or at such later date and time as
to which the Purchaser may agree, and no stop order suspending the qualification
or exemption from qualification of the Notes in any jurisdiction referred to in
Section 4(e) shall have been issued and no proceeding for that purpose shall
have been commenced or shall be pending or threatened.
(iii) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance of the Notes; no
action, suit or proceeding shall have been commenced and be pending against or
affecting or, to the best knowledge of the Company, threatened against, the
Company or its subsidiaries before any court or arbitrator or any governmental
body, agency or official that (1) could reasonably be expected to result in a
Material Adverse Effect or (2) has not been disclosed in the Offering
Memorandum; and no stop order shall have been issued preventing the use of the
Offering Memorandum, or any
19
<PAGE>
amendment or supplement thereto, or which could reasonably be expected to result
in a Material Adverse Effect.
(iv) Since the dates as of which information is given in the Offering
Memorandum, (1) there shall not have been any material adverse change, or any
development that is reasonably likely to result in a material adverse change, in
the condition, financial or otherwise, or the earnings, business, management or
operations, of the Company from that set forth in the Offering Memorandum, (2)
no dividend or distribution of any kind shall have been declared, paid or made
by the Company on any class of its capital stock, (3) the Company and its
subsidiaries shall not have incurred any liabilities or obligations, direct or
contingent, that are material, individually or in the aggregate, to the Company
and its subsidiaries, taken as a whole, and that are required to be disclosed on
a balance sheet or notes thereto in accordance with generally accepted
accounting principles and are not disclosed on the latest balance sheet or notes
thereto included in the Offering Memorandum. Since the date hereof and since the
dates as of which information is given in the Offering Memorandum, there shall
not have occurred any Material Adverse Effect.
(v) The Purchaser shall have received a certificate, dated the Closing
Date, signed on behalf of the Company by Ira B. Lampert, Chairman and Chief
Executive Officer in form and substance reasonably satisfactory to the
Purchaser, confirming, as of the Closing Date, the matters set forth in
paragraphs (i), (ii), (iii) and (iv) of this Section 6(a) and that, as of the
Closing Date, the obligations of the Company to be performed hereunder on or
prior thereto have been duly performed in all material respects.
(vi) The Purchaser shall have received on the Closing Date an opinion,
dated the Closing Date, in form and substance satisfactory to the Purchaser and
counsel to the Purchaser, of Kronish, Lieb, Weiner & Hellman LLP, counsel for
the Company, to the effect set forth in Exhibit B hereto.
(vii) Prior to the Closing Date, the Company shall have furnished to
the Purchaser such further information, certificates and documents as the
Purchaser may reasonably request.
(viii) The Company and the Trustee shall have entered into the
Indenture and the Purchaser shall have received counterparts, conformed as
executed, thereof.
(ix) The Company shall have entered into the Registration Rights
Agreement and the Purchaser shall have received counterparts, conformed as
executed, thereof.
(x) The Notes shall have been approved by the NASD for trading and duly
listed in PORTAL.
(xi) The Company shall furnish such other documents and certificates as
are reasonably requested by Purchaser and its counsel.
20
<PAGE>
All opinions, certificates, letters and other documents required by
this Section 6(a) to be delivered by the Company will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to the Purchaser. The Company will furnish the Purchaser with such conformed
copies of such opinions, certificates, letters and other documents as it shall
reasonably request.
(b) The obligation of the Company to sell the Notes as provided herein,
shall be subject to the satisfaction of the following conditions:
(i) All of the representations and warranties of the Purchaser
contained in this Agreement shall be true and correct on the date hereof and on
the Closing Date with the same force and effect as if made on and as of the date
hereof and the Closing Date, respectively. The Purchaser shall have performed or
complied with all of the agreements herein contained and required to be
performed or complied with by it at or prior to the Closing Date.
(ii) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance of the Notes.
7. Survival of Representations and Agreements. All representations and
warranties, covenants and agreements of the Purchaser and the Company contained
in this Agreement, including the agreement contained in Section 4(f), shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of the Purchaser any controlling person thereof or by or on
behalf of the Company or any controlling person thereof, and shall survive
delivery of and payment for the Notes to and by the Purchaser. The
representations contained in Section 5 and the agreement contained in Section
4(f) shall survive the termination of this Agreement.
8. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon execution and delivery
of a counterpart hereof by each of the parties hereto.
(b) The Purchaser shall have the right to terminate this Agreement at
any time prior to the Closing Date by notice to the Company from the Purchaser,
without liability on the Purchaser's part to the Company if, on or prior to such
date, any of the following has occurred: (i) the Company shall have failed,
refused or been unable to perform in any material respect any agreement on its
part to be performed hereunder or (ii) any other condition to the obligations of
the Purchaser hereunder as provided in Section 6 is not fulfilled when and as
required in any material respect.
(c) The Company shall have the right to terminate this Agreement at any
time prior to the Closing Date by notice to the Purchaser from the Company,
without liability on the Company's part to the Purchaser if, on or prior to such
date, (i) the Purchaser shall have failed,
21
<PAGE>
refused or been unable to perform in any material respect any agreement on its
part to be performed hereunder or (ii) any other condition to the obligations of
the Company hereunder as provided in Section 6 is not fulfilled when and as
required in any material respect.
(d) Any notice of termination pursuant to this Section 8 shall be by
telephone, telex, telephonic facsimile, or telegraph, confirmed in writing by
letter.
9. Notice. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the Purchaser
shall be mailed, delivered, or telexed, telegraphed or telecopied and confirmed
in writing to Dreyfus High Yield Strategies Fund, 200 Park Avenue, New York, New
York 10166, Attention: [Corporate Finance Department], telecopy number: (212) [
]; and if sent to the Company, shall be mailed, delivered or telexed,
telegraphed or telecopied and confirmed in writing to Concord Camera Corp., 35
Mileed Way, Avenal, N.J. 07001, Attention: Controller, telecopy number: (732)
382-9081, with a copy to Kronish, Lieb, Weiner & Hellman LLP, 1114 Avenue of the
Americas, New York, New York 10036, Attention: Ralph J. Sutcliffe, telecopy
number: (212) 479-6275.
10. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Purchaser and the Company, and their respective
successors and assigns, and no other person shall have or be construed to have
any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement or any provision herein contained. The term "successors
and assigns" shall not include a purchaser, in its capacity as such, of Notes
from the Purchaser.
11. Construction. This Agreement shall be construed in accordance with
the internal laws of the State of New York. TIME IS OF THE ESSENCE IN THIS
AGREEMENT.
12. Captions. The captions included in this Agreement are included
solely for convenience of reference and are not to be considered a part of this
Agreement.
13. Counterparts. This Agreement may be executed in various
counterparts which together shall constitute one and the same instrument.
[Signature page to follow]
22
<PAGE>
If the foregoing correctly sets forth the understanding among
the Purchaser and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
CONCORD CAMERA CORP.
By:_______________________________
Name:
Title:
Accepted and agreed to as of the date first above written:
DREYFUS HIGH YIELD STRATEGIES FUND
By:_________________________________
Name:
Title:
23
<PAGE>
Schedule A
List of Subsidiaries of the Company
-----------------------------------
Concord Camera Corp.
Concord Holding Corp.
Concord-Keystone Sales Corp.
Concord Camera Illinois Corp.
Starprint Corporation
Concord Camera Europe Ltd.
Concord Camera France SARL
Concord Camera GmbH
Concord Camera (Magyarorszag) Kereskedelmi KFT
Concord Camera (Panama) Inc.
Concord Camera HK Limited
<PAGE>
Exhibit A
Form of Registration Rights Agreement
-------------------------------------
<PAGE>
Exhibit B
Form of Opinion of Kronish, Lieb, Weiner & Hellman LLP
1. The Company is duly organized and validly existing as a
corporation in good standing under the laws of the State of New Jersey, and has
all requisite corporate power and authority to carry on its business as it is
currently being conducted and as described in the Offering Memorandum and to
own, lease and operate its properties.
2. The Company is duly qualified and is in good standing as a
foreign corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires such
qualification or license, except where failure to be so qualified or licensed
would not have a Material Adverse Effect.
3. All the issued and outstanding shares of capital stock of
each of the Company's direct and indirect subsidiaries are owned of record, and,
to our knowledge, beneficially, as set forth on Schedule A hereto.
4. When the Senior Notes are issued and delivered pursuant to
the Agreement, no Senior Note will be of the same class (within the meaning of
Rule 144A under the Act) as securities of the Company that are listed on a
national securities exchange registered under Section 6 of the Exchange Act or
that are quoted in a United States automated inter-dealer quotation system.
5. The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Agreement, the
Indenture, the Registration Rights Agreement and the other Operative Documents,
as applicable, and to consummate the transactions contemplated thereby,
including, without limitation, the corporate power and authority to issue, sell
and deliver the Senior Notes.
6. The Agreement has been duly and validly authorized,
executed and delivered by the Company and, assuming due execution by the other
parties thereto, is the legally valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity.
7. Each of the Indenture and the Registration Rights
Agreement, has been duly and validly authorized, executed and delivered by the
Company and assuming due execution by the other parties thereto, is the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that such counsel need express no opinion as
to the validity or enforceability of rights of indemnity or contribution, or
26
<PAGE>
both and except as such enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity.
8. The Senior Notes have been duly and validly authorized for
issuance and sale to the Purchaser by the Company pursuant to the Agreement and,
when issued and authenticated in accordance with the terms of the Indenture and
delivered against payment therefor in accordance with the terms of the Agreement
and the Indenture, will be the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms and
entitled to the benefits of the Indenture, except that such counsel need express
no opinion as to the validity or enforceability of rights of indemnity or
contribution, or both, and except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws
affecting the rights of creditors generally and subject to general principles of
equity.
9. The Exchange Notes have been duly and validly authorized
for issuance by the Company and, when issued and authenticated in accordance
with the terms of the Exchange Offer and the Indenture and delivered in
accordance with the terms of the Exchange Offer and the Indenture, will be the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms and entitled to the benefits of the
Indenture, except that such counsel need express no opinion as to the validity
or enforceability of rights of indemnity or contribution, or both, and except as
such enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.
10. The statements in the Offering Memorandum, insofar as such
constitute a summary of the legal matters, documents or proceedings referred to
therein, fairly present in all material respects such legal matters, documents
and proceedings.
11. The Indenture complies as to form in all material respects
with the requirements of the TIA, and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder. Prior to
the effectiveness of the Exchange Offer Registration Statement or the Shelf
Registration Statement, it is not necessary to qualify the Indenture under the
TIA.
12. The Offering Memorandum contains a fair summary of the
terms of the Senior Notes, the Indenture and the Registration Rights Agreement
required to be described in the Offering Memorandum.
13. No registration under the Act of the Senior Notes is
required for the sale of the Senior Notes to the Purchaser as contemplated by
the Agreement assuming (i) that the Purchaser is a Qualified Institutional
Buyer, as defined in Rule 144A under the Act, and (ii) the accuracy of the
Company's representations in Sections 5(a)(ii), (xxvii), (xxviii) (other than
with respect to the first sentence) and (xxx) of the Agreement.
27
<PAGE>
14. The Offering Memorandum, as of its date (except for the
financial statements, including the notes thereto, and supporting schedules and
other financial, statistical and accounting data included therein or omitted
therefrom, as to which no opinion is expressed), contains all the information
specified in, and meets the requirements of, Rule 144A(d)(4) under the Act
applicable to the Company.
15. None of (A) the execution, delivery or performance by the
Company of the Agreement and the other Operative Documents or (B) the issuance
and sale of the Senior Notes violates, conflicts with or constitutes a breach of
any of the terms or provisions of, or a default under (or an event that with
notice or the lapse of time, or both, would constitute a default), or require
consent under, or result in the imposition of a lien or encumbrance on any
properties of the Company and its subsidiaries, or an acceleration of any
indebtedness of the Company and its subsidiaries pursuant to, (i) the respective
charters or bylaws of the Company and its subsidiaries, (ii) any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument for borrowed money known to such counsel to which the Company or any
of its subsidiaries is a party or by which any of them or their respective
properties are or may be bound, (iii) any local, state, federal or
administrative statute, rule or regulation applicable to the Company, its
subsidiaries or any of their respective assets or properties, or (iv) any
judgment, order or decree of any court or governmental agency or authority
having jurisdiction over the Company, its subsidiaries or any of their
respective assets or properties known to such counsel, except in the case of
clauses (ii), (iii) and (iv) for such violations, conflicts, breaches, defaults,
consents, impositions of liens or accelerations that (x) could not, singly or in
the aggregate, reasonably be expected to result in a Material Adverse Effect or
(y) are disclosed in the Offering Memorandum. Assuming compliance with
applicable state securities and Blue Sky laws, as to which such counsel
expresses no opinion, and except for the filing of a registration statement
under the Act and qualification of the Indenture under the Trust Indenture Act
of 1939, as amended, in connection with the Registration Rights Agreement, or as
may be required by the NASD or as described in the Offering Memorandum, no
consent, approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, any court or governmental agency,
body or administrative agency is required for the execution, delivery and
performance by the Company of the Agreement, the Operative Documents or the
issuance and sale of the Senior Notes, except (i) such as have been obtained and
made or have been disclosed in the Offering Memorandum and (ii) where the
failure to obtain such consents or approvals, authorizations or orders of, or
make such filings, registrations, qualifications, licenses or permits of or
with, any court or governmental agency, body or administrative agency could not
reasonably be expected to result in a Material Adverse Effect. To such counsel's
knowledge, after reasonable inquiry, except as described in the Offering
Memorandum, no consents or approvals, authorizations or orders of, or filings,
registrations, qualifications, licenses or permits of or with, any court or
governmental agency, body or administrative agency or from any other person are
required for the execution, delivery and performance by the Company of the
Agreement, the Operative Documents or the issuance and sale of the Senior Notes,
other than such consents, approvals, authorizations, orders, filings,
registrations, qualifications, licenses and permits as have been obtained.
28
<PAGE>
16. None of the Company and its subsidiaries is (i) an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or (ii) a
"holding company" or a "subsidiary company" or an "affiliate" of a holding
company within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
17. Except as disclosed in the Offering Memorandum or as set
forth in the Agreement or the Registration Rights Agreement, to such counsel's
knowledge, there are no holders of securities of the Company who, by reason of
the execution by the Company of the Agreement or any other Operative Document to
which it is a party or the consummation by the Company of the transactions
contemplated thereby, have the right to request or demand that the Company
register under the Act securities held by them.
18. None of the execution, delivery and performance of the
Agreement, the issuance and sale of the Senior Notes, the application of the
proceeds from the issuance and sale of the Senior Notes and the consummation of
the transactions contemplated thereby as set forth in the Offering Memorandum,
will violate Regulations G, T, U or X promulgated by the Board of Governors of
the Federal Reserve System.
19. To such counsel's knowledge, no search of court records
having been made, there is (i) no action, suit, or proceeding (other than
proceedings with respect to pending license applications) before or by any
court, arbitrator or governmental agency, body or official, domestic or foreign,
now pending, or threatened or contemplated to which the Company or any of its
subsidiaries is a party or to which the business or property of the Company or
any of its subsidiaries is subject or (ii) no injunction, restraining order or
order of any nature by a federal or state court of competent jurisdiction to
which the Company or any of its subsidiaries is or may be subject or to which
the business, assets or property of the Company or any of its subsidiaries is or
may be subject has been issued, except those which (a) could not reasonably be
expected to result in a Material Adverse Effect upon the Company and its
subsidiaries or (b) which are disclosed in the Offering Memorandum.
20. To such counsel's knowledge, there is no statute, rule,
regulation or order that has been enacted, adopted or issued by any governmental
agency or that has been proposed by any governmental body to which the Company
and its subsidiaries is or may be subject or to which the business, assets or
property of the Company and its subsidiaries are or may be subject, except those
which (a) could not reasonably be expected to result in a Material Adverse
Effect upon the Company and its subsidiaries or (b) which are disclosed in the
Offering Memorandum.
21. The statements contained in the Offering Memorandum under
the caption "Certain Federal Income Tax Consequences" are a fair and accurate
summary of the matters discussed therein.
29
<PAGE>
Such counsel has participated in conferences with officers and
other representatives of the Company at which the contents of the Offering
Memorandum and related matters were discussed and, although such counsel has not
undertaken to investigate or verify independently, and do not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum (except as indicated above), on the basis
of the foregoing, no facts have come to such counsel's attention which led such
counsel to believe that the Offering Memorandum, as of its date or the Closing
Date, contained an untrue statement of a material fact or omitted to state any
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading
(except as to financial statements and related notes, the financial statement
schedules and other financial and statistical data included therein).
Such counsel are members of the Bar of the State of New York,
and such counsel does not herein express an opinion as to any matters governed
by any laws other than the laws of the State of New York, the laws of the State
of New Jersey governing corporations and the federal laws of the United States
of America.
30
<PAGE>
Exhibit 4.3
================================================================================
Concord Camera Corp.
$15,000,000
11% Senior Notes due 2005
----------------------------------------
-----------------
INDENTURE
Dated as of July 30, 1998
-----------------
-----------------
Bankers 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)(1) .............................................. 7.06
(b)(2) .............................................. 7.06
(c) ................................................. 7.06; 10.02
(d).................................................. 7.06
314 (a) ................................................. 4.03; 10.05
(b).................................................. 4.14
(c)(1) .............................................. 10.04
(c)(2) .............................................. 10.04
(c)(3) .............................................. N.A.
(d).................................................. 4.13
(e) ................................................ 10.05
(f).................................................. N.A.
315 (a).................................................. N.A.
(b).................................................. 7.05
(c) ................................................ 7.01
(d).................................................. N.A.
(e).................................................. N.A.
316 (a)(last sentence) .................................. N.A.
(a)(1)(A)............................................ N.A.
(a)(2) .............................................. N.A.
(b) ................................................. 6.07
(c) ................................................. 2.13
317 (a)(1) .............................................. 6.08
(a)(2)............................................... 6.09
(b) ................................................. 2.04
318 (a).................................................. N.A.
(b).................................................. N.A.
(c).................................................. 10.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
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TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
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Section 1.01. Definitions......................................................................1
Section 1.02. Other Definitions...............................................................12
Section 1.03. Incorporation by Reference of Trust Indenture Act...............................12
Section 1.04. Rules of Construction...........................................................13
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.................................................................13
Section 2.02. Execution and Authentication....................................................14
Section 2.03. Registrar and Paying Agent......................................................14
Section 2.04. Paying Agent to Hold Money in Trust.............................................15
Section 2.05. Holder Lists....................................................................15
Section 2.06. Transfer and Exchange...........................................................15
Section 2.07. Replacement Notes...............................................................26
Section 2.08. Outstanding Notes...............................................................26
Section 2.09. Treasury Notes..................................................................27
Section 2.10. Temporary Notes.................................................................27
Section 2.11. Cancellation....................................................................27
Section 2.12. Defaulted Interest..............................................................27
Section 2.13. Record Date.....................................................................28
Section 2.14. CUSIP Number....................................................................28
ARTICLE 3
REDEMPTION AND CERTAIN REPURCHASES
Section 3.01. Notices to Trustee..............................................................28
Section 3.02. Selection of Notes to Be Redeemed...............................................28
Section 3.03. Notice of Redemption............................................................29
Section 3.04. Effect of Notice of Redemption..................................................30
Section 3.05. Deposit of Redemption Price.....................................................30
Section 3.06. Notes Redeemed in Part..........................................................30
Section 3.07. Optional Redemption.............................................................30
Section 3.08. Mandatory Redemption............................................................31
Section 3.09. Offer to Purchase With Excess Asset Sale Proceeds...............................31
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ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes................................................................33
Section 4.02. Maintenance of Office or Agency.................................................34
Section 4.03. Reports.........................................................................34
Section 4.04. Compliance Certificate..........................................................35
Section 4.05. Taxes...........................................................................35
Section 4.06. Stay, Extension and Usury Laws..................................................36
Section 4.07. Restricted Payments.............................................................36
Section 4.08. Incurrence of Indebtedness and Issuance of Disqualified Stock...................39
Section 4.09. Asset Sales.....................................................................40
Section 4.10. Transactions with Affiliates....................................................40
Section 4.11. Corporate Existence.............................................................41
Section 4.12. Offer to Purchase Upon Change of Control........................................41
Section 4.13. Insurance.......................................................................42
Section 4.14. Payments for Consent............................................................42
Section 4.15. Use of Proceeds.................................................................42
Section 4.16. Tangible Net Worth..............................................................43
Section 4.17. Dividend and Other Payment Restrictions Affecting Subsidiaries..................43
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation or Sale of Assets.........................................43
Section 5.02. Successor Corporation Substituted...............................................44
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default...............................................................44
Section 6.02. Acceleration....................................................................46
Section 6.03. Other Remedies..................................................................47
Section 6.04. Waiver of Past Defaults.........................................................47
Section 6.05. Control by Majority.............................................................47
Section 6.06. Limitation on Suits.............................................................47
Section 6.07. Rights of Holders of Notes to Receive Payment...................................48
Section 6.08. Collection Suit by Trustee......................................................48
Section 6.09. Trustee May File Proofs of Claim................................................48
Section 6.10. Priorities......................................................................49
Section 6.11. Undertaking for Costs...........................................................49
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ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee...............................................................50
Section 7.02. Rights of Trustee...............................................................51
Section 7.03. Individual Rights of Trustee....................................................52
Section 7.04. Trustee's Disclaimer............................................................52
Section 7.05. Notice of Defaults..............................................................52
Section 7.06. Reports by Trustee to Holders of the Notes......................................52
Section 7.07. Compensation and Indemnity......................................................52
Section 7.08. Replacement of Trustee..........................................................53
Section 7.09. Successor Trustee by Merger, etc................................................54
Section 7.10. Eligibility; Disqualification...................................................54
Section 7.11. Preferential Collection of Claims Against Company...............................55
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance........................55
Section 8.02. Legal Defeasance and Discharge..................................................55
Section 8.03. Covenant Defeasance.............................................................55
Section 8.04. Conditions to Legal or Covenant Defeasance......................................56
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions........................................................57
Section 8.06. Repayment to Company............................................................58
Section 8.07. Reinstatement...................................................................58
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.............................................58
Section 9.02. With Consent of Holders of Notes................................................59
Section 9.03. Compliance with Trust Indenture Act.............................................60
Section 9.04. Revocation and Effect of Consents...............................................60
Section 9.05. Notation on or Exchange of Notes................................................61
Section 9.06. Trustee to Sign Amendments, etc.................................................61
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls....................................................61
Section 10.02. Notices.........................................................................61
Section 10.03. Communication by Holders of Notes with Other Holders of Notes...................62
Section 10.04. Certificate and Opinion as to Conditions Precedent..............................62
Section 10.05. Statements Required in Certificate or Opinion...................................63
Section 10.06. Rules by Trustee and Agents.....................................................63
Section 10.07. No Personal Liability of Directors, Officers, Employees and
Stockholders....................................................................63
Section 10.08. Governing Law...................................................................63
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Section 10.09. No Adverse Interpretation of Other Agreements...................................64
Section 10.10. Successors......................................................................64
Section 10.11. Severability....................................................................64
Section 10.12. Counterpart Originals...........................................................64
Section 10.13. Table of Contents, Headings, etc................................................64
EXHIBITS
Exhibit A FORM OF NOTE...................................................................A-1
Exhibit B FORM OF CERTIFICATE OF TRANSFER................................................B-1
Exhibit C FORM OF CERTIFICATE OF EXCHANGE................................................C-1
Exhibit D FORM OF CERTIFICATE OF ACQUIRING
INSTITUTIONAL ACCREDITED INVESTOR..........................................D-1
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INDENTURE dated as of July 30, 1998 between Concord Camera Corp. (the
"Company"), and Bankers Trust Company, a New York Banking Corporation, as
trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit
of each other and for the equal and ratable benefit of the holders of the 11%
Senior Notes due 2005 (the "Senior Notes") and the Exchange Notes (as defined
below) (collectively, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Security" means the global security in the form
of Exhibit A hereto bearing the Global Security Legend and the Private Placement
Legend and registered in the name of the Depositary or its nominee that will be
issued in a denomination equal to the outstanding principal amount of the Notes
sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"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, however, that beneficial ownership of 25% or more of the voting
securities of a Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary that apply to such transfer or exchange.
"Beneficial Owner" means a beneficial owner as defined in
Rules 13d-3 and 13d-5 under the Exchange Act (or any successor rules), including
the provision of such Rules that a Person shall be deemed to have beneficial
ownership of all securities that such Person has a right to acquire within 60
days; provided that a Person will not be deemed a beneficial owner of, or to own
beneficially, any securities if such beneficial ownership (1) arises solely as a
result of a revocable proxy delivered in response to a proxy or consent
solicitation made pursuant to, and in accordance with, the Exchange Act and (2)
is not also then reportable on Schedule 13D or Schedule 13G (or any successor
schedule) under the Exchange Act.
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"Board of Directors" means, unless otherwise specified, the
Board of Directors 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 so required to be capitalized on the
balance sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock and (iii) in the case of a partnership,
partnership 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, such partnership.
"Certificated Security" means a certificated Note registered
in the name of the holder thereof and issued in accordance with Section 2.06
hereof, substantially in the form of Exhibit A hereto, except that such Note
shall not bear the Global Security Legend and shall not have the "Schedule of
Exchanges of Interests in the Global Security" attached thereto.
"Change of Control" means the occurrence of any of the
following: (i) any Person or group (other than Permitted Holders) is or becomes
the Beneficial Owner, directly or indirectly, of more than 50% of the total
Voting Stock or Total Common Equity of the Company (or the successor to the
Company) including by way of merger, consolidation, sale of assets or otherwise
and (ii) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
"Closing Price" on any Trading Day with respect to the per
share price of any shares of Capital Stock means the last reported sale price
regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either case
on the New York Stock Exchange or, if such shares of Capital Stock are not
listed or admitted to trading on such exchange, on the principal national
securities exchange on which such shares are listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange, on the
Nasdaq National Market or, if such shares are not listed or admitted to trading
on any national securities exchange or quoted on Nasdaq National Market but the
issuer is a Foreign Issuer (as defined in Rule 3b-4(b) under the Exchange Act)
and the principal securities exchange on which such shares are listed or
admitted to trading is a Designated Offshore Securities Market (as defined in
Rule 902(a) under the Securities Act), the average of the reported closing bid
and asked prices regular way on such principal exchange, or, if such shares are
not listed or admitted to trading on an national securities exchange or quoted
on Nasdaq National Market and the issuer and principal securities exchange do
not meet such requirements, the average of the closing bid and asked prices in
the over-the counter market as furnished by any New York Stock Exchange member
firm that is selected from time to time by the Company for that purpose and is
reasonably acceptable to the Trustee.
"Common Stock" of any Person means Capital Stock of such
Person that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary
2
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or involuntary liquidation, dissolution or winding up of such Person, to shares
of Capital Stock of any other class of such Person.
"Consolidated Capitalization" means the sum of (i)
Consolidated Indebtedness and (ii) Consolidated Net Worth.
"Consolidated Indebtedness" means, with respect to any Person,
as of any date of determination, the aggregate amount of Indebtedness of such
Person and its Subsidiaries, or, in the case of the Company, its Restricted
Subsidiaries as of such date calculated on a consolidated basis in accordance
with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries or, in the case of the Company, the Company and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(i) the Net Income of any Person that is not a Subsidiary or,
in the case of the Company, a Restricted Subsidiary or that is
accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash
to the referent Person or a Subsidiary or, in the case of the Company,
a Restricted Subsidiary thereof,
(ii) the Net Income of any Subsidiary or, in the case of the
Company, any Restricted Subsidiary shall be excluded to the extent that
the declaration or payment of dividends or other distributions by that
Subsidiary, or Restricted Subsidiary, as the case may be, of that Net
Income is not at the date of determination permitted without any prior
governmental approval (which 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 Restricted Subsidiary, as
the case may be, 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,
(iv) the cumulative effect of a change in accounting
principles shall be excluded, and
(v) the Net Income of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the Company or one of its
Restricted Subsidiaries.
"Consolidated Net Worth" means the total amount shown on the
balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company for which internal financial
statements are then available, prior to the taking of any action for the purpose
of which the determination is being made, as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid-in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (a) any accumulated deficit and (b) any amounts attributable
to Disqualified Stock.
3
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"Contingent Investment" means, with respect to any Person, any
guarantee by such Person of the performance of another Person or any commitment
by such Person to invest in another Person. Any Investment that consists of a
Contingent Investment shall be deemed made at the time that the guarantee of
performance or the commitment to invest is given, and the amount of such
Investment shall be the maximum monetary obligation under such guarantee of
performance or commitment to invest. To the extent that a Contingent Investment
is released or lapses without payment under the guarantee of performance or the
commitment to invest, such Investment shall be deemed not made to the extent of
such release or lapse. With respect to any Contingent Investment, the payment of
the guarantee of performance or the payment under the commitment to invest shall
not be deemed to be an additional Investment.
"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 Issue Date or (ii) was nominated for election or
elected to such Board of Directors with the affirmative vote of a majority of
the Continuing Directors who were members of such Board at the time of such
nomination or election and would be continuing in office after such election.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 10.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"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.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, until a successor shall have
been appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Disqualified Stock" means any Capital Stock to the extent
that, and only to the extent 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, it matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof, in whole or in part, on or prior to the date on which the Notes
mature, provided, however, that any Capital Stock which would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require the Company to repurchase or redeem such Capital Stock upon the
occurrence of a Change of Control occurring prior to the final maturity of the
Notes shall not constitute Disqualified Stock if the change in control
provisions applicable to such Capital Stock are no more favorable to the holders
of such Capital Stock than the provisions applicable to the Notes contained in
Section 4.12 hereof and such Capital Stock specifically provides that the
Company will not repurchase or redeem any such stock pursuant to such provisions
prior to the Company's repurchase of such Notes as are required to be
repurchased pursuant to Section 4.12 hereof.
"Eligible Institution" means a commercial banking institution
that has combined capital and surplus of not less than $500 million or its
equivalent in foreign currency, whose debt is rated "A" (or higher) according to
S&P or Moody's at the time as of which any investment or rollover therein is
made.
4
<PAGE>
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock or that are measured by the
value of Capital Stock (but excluding any debt security that is convertible into
or exchangeable for Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended (or any successor act), and the rules and regulations thereunder.
"Exchange Notes" means the Company's 11% Series B Senior Notes
due 2005 to be issued under this Indenture.
"Exchange Offer" means the exchange offer to be filed with the
SEC pursuant to the Registration Rights Agreement.
"Existing Indebtedness" means all Indebtedness of the Company
and its Restricted Subsidiaries in existence on the Issue Date and all
Indebtedness that may be subsequently incurred under the credit agreements and
arrangements (including increases thereon), to the extent described in Appendix
I to this Indenture.
"Fair Market Value" means with respect to any asset or
property, the sale value that would be obtained in an arm's length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy.
"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 may be approved by a significant segment of
the accounting profession of the United States, which are in effect on the Issue
Date.
"Global Security" means, individually and collectively, each
of the Restricted Global Securities and the Unrestricted Global Security,
substantially in the form of Exhibit A.
"Global Security Legend" means the legend set forth in Section
2.06(g)(ii) to be placed on all Global Securities issued under this Indenture.
"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.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person pursuant to any swap or cap agreement, exchange
agreement, collar agreement, option, futures or forward hedging contract,
derivative instrument or other similar agreement or arrangement designed to
protect such Person against fluctuations in interest rates or foreign
5
<PAGE>
exchange rates or the price of raw materials and other products used or produced
in such Person's business, as the case may be.
"Holder" and "holder" shall mean, when used with reference to
a Note, a Person in whose name a Note is registered.
"IAI Global Security" means the Global Security in the form of
Exhibit A hereto bearing the Global Security Legend and the Private Placement
Legend and deposited with and registered in the name of the Depositary or its
nominee that will be issued in a denomination equal to the outstanding principal
amount of the Notes sold to Institutional Accredited Investors.
"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 equipment (including
pursuant to capital leases) 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 (other than Hedging Obligations or letters of
credit) would appear as a liability upon a balance sheet of such Person prepared
in accordance with GAAP, all indebtedness of others secured by a Lien on any
asset of such Person (whether or not such Indebtedness is assumed by such
Person), all obligations to purchase, redeem, retire, defease or otherwise
acquire for value any Disqualified Stock or any warrants, rights or options to
acquire such Disqualified Stock valued, in the case of Disqualified Stock, at
the greatest amount payable in respect thereof on a liquidation (whether
voluntary or involuntary) plus accrued and unpaid dividends, the liquidation
value of any Preferred Stock issued by Subsidiaries of such Person or by
Restricted Subsidiaries of the Company, as the case may be, plus accrued and
unpaid dividends, and also includes, to the extent not otherwise included, the
Guarantee of items that would be included within this definition and any
amendment, supplement, modification, deferral, renewal, extension or refunding
of any of the above; notwithstanding the foregoing, in no event will performance
bonds or similar security for performance be deemed Indebtedness so long as such
performance bonds or similar security for performance would not appear as a
liability on a balance sheet of such Person prepared in accordance with GAAP;
and provided, that the amount of any Indebtedness in respect of any Guarantee
shall be the maximum principal amount of the Indebtedness so guaranteed.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Security through a Participant.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of loans, Guarantees, Contingent Investments, 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 of any other
Person and all other
6
<PAGE>
items that are or would be classified as investments on a balance sheet prepared
in accordance with GAAP; provided, however, that any investment to the extent
made with Capital Stock of the Company (other than Disqualified Stock) shall not
be deemed an "Investment" for purposes of this Indenture.
"Issue Date" means July 30, 1998.
"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 with respect to such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all holders of the Notes for use by such
holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Marketable Securities" means:
(i) Government Securities;
(ii) any certificate of deposit maturing not more than 270
days after the date of acquisition issued by, or time deposit of, an
Eligible Institution;
(iii) commercial paper maturing not more than 270 days after
the date of acquisition issued by a corporation (other than an
Affiliate of the Company) with a rating, at the time as of which any
investment therein is made, of "A-1" (or higher) according to S&P or
"P-1" (or higher) according to Moody's;
(iv) any banker's acceptances or money market deposit accounts
issued or offered by an Eligible Institution; and
(v) any fund investing exclusively in investments of the types
described in clauses (i) through (iv) above.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
7
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"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, in the case of the Company, the Company or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Subsidiaries or, in the case of the Company, the Company or any of its
Restricted Subsidiaries and (ii) any extraordinary gain (but not loss), together
with any related provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of 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 secured by a Lien on the asset or
assets that are the subject of such Asset Sale and any reserve for adjustment in
respect of the sale price of such asset or assets. Net Proceeds shall exclude
any non-cash proceeds received from any Asset Sale, but shall include such
proceeds when and as converted by the Company or any Restricted Subsidiary of
the Company to cash.
"Note Custodian" means the Trustee, as custodian with respect
to the Notes in global form, or any successor entity thereto.
"Offering" means the offering of the Notes pursuant to the
Offering Memorandum.
"Offering Memorandum" means the offering memorandum of the
Company, dated July 30, 1998, relating to the Offering.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
Controller, Secretary, Assistant Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed by two
Officers of the Company, one of whom must be the principal executive officer,
principal financial officer, treasurer or principal accounting officer of the
Company, delivered to the Trustee that meets the requirements of Section 10.05
hereof.
"Opinion of Counsel" means an opinion from legal counsel, who
may be an employee of or counsel to the Company, any Subsidiary of the Company
or the Trustee, delivered to the Trustee.
"Participant" means, with respect to the Depositary, a Person
who has an account with the Depositary.
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"Permitted Business" means the existing businesses of the
Company and/or its Subsidiaries, businesses reasonably related thereto as
determined in good faith by the Board of Directors, and other manufacturing
and/or distribution businesses in which the Company and/or its Restricted
Subsidiaries hereafter are engaged.
"Permitted Holders" means any member of the existing
management group of the Company as determined by the Continuing Directors of the
Company (including their respective lineal descendants, spouses and trusts for
the benefit of any member of their respective immediate families) and any person
subsequently designated by the Continuing Directors of the Company as a member
of the Company's management group.
"Permitted Investment" means (a) any Investments in the
Company or any Restricted Subsidiary of the Company; (b) any Investments in
Marketable Securities; (c) Investments by the Company and/or any Restricted
Subsidiary of the Company in a Permitted Business (including direct or indirect
Investments in assets (tangible or intangible) used or to be used in a Permitted
Business); (d) Investments of the Company and/or a Restricted Subsidiary, in
effect on the Issue Date or on the date a Subsidiary becomes a Restricted
Subsidiary (provided that any agreement for such Investment was not entered into
in contemplation of such Subsidiary becoming a Restricted Subsidiary) or on the
date any Person other than a Subsidiary was merged with or became a Restricted
Subsidiary (provided that any agreement for such Investment was not entered into
in contemplation of such Person being merged with or becoming a Restricted
Subsidiary); (e) Investments in prepaid expenses, negotiable instruments held
for collection and lease, utility and workers' compensation, performance and
other similar deposits; (f) Hedging Obligations permitted to be incurred
pursuant to Section 4.08(b) hereof; and (g) bonds, notes, debentures or other
securities received as a result of Asset Sales permitted under Section 4.09
hereof.
"Permitted Refinancing" means the incurrence by the Company
and/or any of its Restricted Subsidiaries of Indebtedness issued in exchange
for, or the proceeds of which are used to refinance, replace, refund or defease
or increase to the extent contemplated by Appendix I hereto ("Refinance" and
correlatively, "Refinanced" and "Refinancing") Existing Indebtedness and any
subsequent Refinancing thereof not expressly prohibited under this Indenture,
provided that the terms of any Refinancing are generally as favorable to the
Company and/or the Restricted Subsidiaries as the terms of the Indebtedness
being refinanced.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any
Person, means Capital Stock of such Person of any class or classes (however
designated) that ranks prior, as to payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Purchaser" means The Dreyfus High Yield Strategies Fund, as
purchaser in the Offering.
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"Qualified Equity Interests" means any Equity Interest (i)
which is not mandatorily redeemable or redeemable at the option of the holder
thereof or (ii) which, by its terms, or upon the happening of any event, matures
or is mandatorily redeemable, or redeemable, at the option of the holder
thereof, in whole or in part, or exchangeable into Indebtedness after the
maturity date of the Notes.
"QIB" means a qualified institutional buyer as defined in Rule
144A of the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, between the Company and the Purchaser
relating to the Notes.
"Responsible Officer" when used with respect to the Trustee,
means any officer within the Corporate Trust and Agency Group of the Trustee (or
any successor group of the Trustee), including any vice president, assistant
vice president, assistant secretary or any other officer or assistant officer of
the Trustee customarily performing functions similar to those performed by such
persons at the time, and also any person to whom any corporate trust matter is
referred at the Trustee's corporate trust office because of his knowledge of and
familiarity with the particular subject.
"Restricted Certificated Security" means a Certificated
Security bearing the Private Placement Legend.
"Restricted Global Security" means any 144A Global Security or
IAI Global Security that bears the Private Placement Legend.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Subsidiary" means any subsidiary of the Company
that is not designated by the Board of Directors as an Unrestricted Subsidiary.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard and Poor's Rating Services and its
successors.
"SEC" means the Securities and Exchange Commission.
"Sale and Leaseback Transaction" means, with respect to any
Person, any direct or indirect arrangement pursuant to which any property (other
than Capital Stock) is sold by such Person or a Subsidiary, or, in the case of
the Company, the Company or a Restricted Subsidiary, of such Person and is
thereafter leased back from the purchaser or transferee thereof by such Person
or one of its Subsidiaries or, in the case of the Company, the Company or one of
its Restricted Subsidiaries.
"Secondary Public Offering" means an underwritten offering of
Capital Stock (other than Disqualified Stock) of the Company registered under
the Securities Act.
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"Securities Act" means the Securities Act of 1933, as amended
(or any successor act), and the rules and regulations thereunder.
"Senior Indebtedness" means any Indebtedness permitted to be
incurred by the Company under the terms of this Indenture, unless the instrument
under which such Indebtedness is incurred expressly provides that it is
subordinated in right of payment to the Notes. Notwithstanding anything to the
contrary in the foregoing, Senior Indebtedness will not include (i) any
liability for federal, state, local or other taxes owed or owing by the Company,
(ii) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates, (iii) any trade payables or (iv) any Indebtedness that is incurred
in violation of this Indenture.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation
is in effect on the date hereof and (ii) any Subsidiary which holds any permit
or license which is material to the operations of the Company and its Restricted
Subsidiaries taken as a whole.
"Subsidiary" of any Person means (i) any corporation,
association or 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 such 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 one or more Subsidiaries of such
Person or any combination thereof.
"Tangible Net Worth" means Consolidated Net Worth less all
intangible assets of the Company and its consolidated Restricted Subsidiaries,
including, but not limited to, goodwill, patents, trademarks, tradenames,
copyrights and franchises, and all capitalized transaction fees and expenses,
all as determined in accordance with GAAP and determined as of at the end of the
fiscal quarter for which the Consolidated Net Worth was determined.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.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.
"Total Common Equity" of any Person means, as of any date of
determination, the product of (i) the aggregate number of outstanding primary
shares of Common Stock of such Person on such day (which shall not include any
options or warrants on, or securities convertible or exchangeable into, shares
of Common Stock of such Person) and (ii) the average Closing Price of such
Common Stock over the 20 consecutive Trading Days immediately preceding such
day. If no such Closing Price exists with respect to shares of any such class,
the value of such shares for purposes of clause (ii) of the preceding sentence
shall be determined by the Board of Directors
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of the Company in good faith and evidenced by a resolution of the Board of
Directors filed with the Trustee.
"Trading Day," with respect to a securities exchange or
automated quotation system, means a day on which such exchange or system is open
for a full day of trading.
"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.
"Unrestricted Certificated Security" means one or more
Certificated Securities that do not and are not required to bear the Private
Placement Legend.
"Unrestricted Global Security" means a permanent global
security in the form of Exhibit A attached hereto that bears the Global Security
Legend and the "Schedule of Exchanges of Interests in the Global Security"
attached thereto, and that is registered in the name of the Depositary,
representing Notes that do not bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
resolution of the Board of Directors filed with the Trustee.
"Vendor Indebtedness" means any Indebtedness of the Company or
any Restricted Subsidiary the proceeds of which are used for the direct or
indirect acquisition or construction of assets, rights or properties (tangible
or intangible) used in connection with the Company's business.
"Voting Stock" of any Person means Capital Stock of such
Person which ordinarily has voting power for the election of directors (or
Persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (x) 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 (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment; provided, that with respect to Capital
Lease Obligations, that maturity shall be calculated after giving effect to all
renewal options by the lessee.
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Section 1.02. Other Definitions.
Defined in
Term Section
"Affiliate Transaction"........................................ 4.10
"Asset Sale"................................................... 4.09
"Bankruptcy Law"............................................... 4.01
"Change of Control Offer"...................................... 4.12
"Change of Control Payment".................................... 4.12
"Change of Control Payment Date"............................... 4.12
"Covenant Defeasance".......................................... 8.03
"Custodian".................................................... 6.01
"Event of Default"............................................. 6.01
"Excess Proceeds".............................................. 4.09
"Excess Proceeds Offer"........................................ 3.09
"incur"........................................................ 4.08
"Legal Defeasance" ............................................ 8.02
"Offer Amount"................................................. 3.09
"Offer Period"................................................. 3.09
"Paying Agent"................................................. 2.03
"Payment Default".............................................. 6.01
"Purchase Date"................................................ 3.09
"Registrar".................................................... 2.03
"Restricted Payments".......................................... 4.07
"Retire"....................................................... 4.07
"SEC Reports".................................................. 4.03
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 Notes;
"indenture security holder" means a holder of a Note or a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
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Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a capitalized term has the meaning assigned to it under this
Article 1;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation; and
(5) words in the singular include the plural, and in the plural include
the singular.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of this Indenture. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. Each Note
shall be dated the date of its authentication. The Notes shall be in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Note conflicts with the express provisions of this Indenture,
the provisions of this Indenture shall govern and be controlling.
Notes issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the Global Security Legend and the
"Schedule of Exchanges in the Global Security" attached thereto). Notes issued
in definitive form shall be substantially in the form of Exhibit A attached
hereto (but without the Global Security Legend and without the "Schedule of
Exchanges of Interests in the Global Security" attached thereto). Each Global
Security shall represent such of the outstanding Notes as shall be specified
therein and each shall provide that it shall represent the aggregate principal
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate principal amount of outstanding Notes represented thereby may from
time to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Security to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Notes
represented thereby shall be made by the Trustee or the Note Custodian, at the
direction of the Trustee, in accordance with instructions given by the holder
thereof as required by Section 2.06 hereof.
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Section 2.02. Execution and Authentication.
One Officer of the Company shall sign the Notes for the Company by
manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid. In
addition, if a Person is not an Officer at the time a Note is authenticated, but
becomes an Officer on or prior to the delivery of the Note, the Note shall
nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
an authorized signatory of the Trustee. The signature of the Trustee shall be
conclusive evidence that the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an
Officer of the Company, authenticate Notes for original issue up to the
aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any holder. The Company shall notify
the Trustee and the Trustee shall notify the holders of the Notes in writing of
the name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such. The Company or any of its Subsidiaries may act as
Paying Agent or Registrar. The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which shall incorporate
the provisions of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company shall notify the Trustee of the
name and address of any such Agent. If the Company fails to maintain a Registrar
or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such, and shall be entitled to appropriate compensation in accordance with
Section 7.07 hereof.
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The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Securities.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Securities.
Except as otherwise specifically provided herein, (i) all references in this
Indenture to the Trustee shall be deemed to refer to the Trustee in its capacity
as Trustee and in its capacities as Registrar and Paying Agent and (ii) every
provision of this Indenture relating to the conduct of or affecting the
liability of or offering protection, immunity or indemnity to the Trustee shall
be deemed to apply with the same force and effect to the Trustee acting in its
capacities as Paying Agent and Registrar.
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 shall hold in trust for the benefit of
holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent and Registrar for the Notes.
Section 2.05. Holder Lists.
If it is the Registrar, 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 ss. 312(a). If
the Trustee is not the Registrar, the Company shall furnish to the Trustee at
least five 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 the Notes and the Company shall otherwise comply with TIA ss. 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Securities. A Global Security may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. All Global
Securities will be exchanged by the Company for Certificated Securities if (i)
the Company delivers to the Trustee notice from the Depositary that it is
unwilling or unable to continue to act as Depositary or that it is no longer a
clearing agency registered under the Exchange Act and, in
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either case, a successor Depositary is not appointed by the Company within 120
days after the date of such notice from the Depositary or (ii) the Company in
its sole discretion determines that the Global Securities (in whole but not in
part) should be exchanged for Certificated Securities and delivers a written
notice to such effect to the Trustee. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Certificated Securities shall be issued
in such names as the Depositary shall instruct the Trustee. Global Securities
also may be exchanged or replaced, in whole or in part, as provided in Sections
2.07 and 2.11 hereof. Every Note authenticated and delivered in exchange for, or
in lieu of, a Global Security or any portion thereof, pursuant to Section 2.07
or 2.11 hereof, shall be authenticated and delivered in the form of, and shall
be, a Global Security. A Global Security may not be exchanged for another Note
other than as provided in this Section 2.06(a); however beneficial interests in
a Global Security may be transferred and exchanged as provided in Section
2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Securities. The transfer and exchange of beneficial interests in the Global
Securities shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the procedures of the Depositary therefor.
Beneficial interests in the Restricted Global Securities shall be subject to
restrictions on transfer comparable to those set forth herein to the extent
required by the Securities Act. The Trustee shall have no obligation to
ascertain the Depositary's compliance with any such restrictions on transfer.
Transfers of beneficial interests in the Global Securities also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs as applicable:
(i) Transfer of Beneficial Interests in the Same Global Security.
Beneficial interests in any Restricted Global Security may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in the
same Restricted Global Security in accordance with the transfer restrictions
set forth in the Private Placement Legend. Beneficial interests in any
Unrestricted Global Security may be transferred only to Persons who take
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Security. No written orders or instructions shall be required to be
delivered to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global
Securities. In connection with all transfers and exchanges of beneficial
interests (other than transfers of beneficial interests in a Global Security
to Persons who take delivery thereof in the form of a beneficial interest in
the same Global Security), the transferor of such beneficial interest must
deliver to the Registrar either (A) (1) a written order from a Participant or
an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in the specified Global Security in an amount
equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures containing
information regarding the Participant account to be credited with such
increase or (B) (1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to cause to be issued a Certificated
Security in an amount equal to the beneficial interest to be transferred or
exchanged and (2) instructions given by the Depositary to the Registrar
containing information regarding the Person in whose name such Certificated
Security shall be registered to effect the transfer or exchange referred to in
(1) above. Upon an Exchange Offer by the Company in accordance with Section
2.06(f) hereof, the requirements
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of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon
receipt by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the holder of such beneficial interests in the
Restricted Global Securities. Upon satisfaction of all of the requirements for
transfer or exchange of beneficial interests in Global Securities contained in
this Indenture, the Notes and otherwise applicable under the Securities Act,
the Trustee shall adjust the principal amount of the relevant Global Security
pursuant to Section 2.06(h) hereof.
(iii)Transfer of Beneficial Interests to Another Restricted Global
Security. Beneficial interests in any Restricted Global Security may be
transferred to Persons who take delivery thereof in the form of a beneficial
interest in another Restricted Global Security if the Registrar receives the
following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Security, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including
the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Security, then the transferor must
deliver (x) a certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof, (y) an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is
in compliance with the Securities Act and such beneficial interest is
being transferred in compliance with any applicable blue sky securities
laws of any State of the United States and (z) if the transfer is being
made to an Institutional Accredited Investor and effected pursuant to an
exemption from the registration requirements of the Securities Act other
than Rule 144A under the Securities Act or Rule 144 under the Securities
Act, a certificate from the transferee in the form of Exhibit D hereto.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Security for Beneficial Interests in the Unrestricted Global Security.
Beneficial interests in any Restricted Global Security may be exchanged by any
holder thereof for a beneficial interest in the Unrestricted Global Security
or transferred to Persons who take delivery thereof in the form of a
beneficial interest in the Unrestricted Global Security if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the related letter of transmittal that it is not
(1) a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement; or
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(C) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Security proposes to exchange such beneficial interest for a
beneficial interest in the Unrestricted Global Security, a certificate
from such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof;
(2) if the holder of such beneficial interest in a Restricted
Global Security proposes to transfer such beneficial interest to a
Person who shall take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Security, a certificate from such
holder in the form of Exhibit B hereto, including the certifications in
item (3) thereof;
(3) in each such case set forth in this subparagraph (C), an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer contained herein and
in the Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such beneficial interest is
being exchanged or transferred in compliance with any applicable blue
sky securities laws of any State of the United States.
If any such transfer is effected pursuant to subparagraph (B) or
(C) above at a time when an Unrestricted Global Security has not yet been
issued, the Company shall issue and, upon receipt of an authentication order
in accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Securities in an aggregate principal amount equal to
the principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (C) above.
Beneficial interests in an Unrestricted Global Security cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in any Restricted Global Security.
(c) Transfer or Exchange of Beneficial Interests for Certificated
Securities.
(i) If any holder of a beneficial interest in a Restricted Global
Security proposes to exchange such beneficial interest for a Certificated
Security or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Certificated Security, then, upon receipt by
the Registrar of the following documentation (all of which may be submitted by
facsimile):
(A) if the holder of such beneficial interest in a Restricted
Global Security proposes to exchange such beneficial interest for a
Restricted Certificated Security, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (1) thereof;
(C) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities
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Act other than Rule 144A, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2)(c) thereof, a
certificate from the transferee to the effect set forth in Exhibit D
hereof and an Opinion of Counsel from the transferee or the transferor
reasonably acceptable to the Company to the effect that such transfer is
in compliance with the Securities Act and such beneficial interest is
being transferred in compliance with any applicable blue sky securities
laws of any State of the United States;
(D) if such beneficial interest is being transferred to the Company
or any of its Subsidiaries, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2)(a) thereof;
or
(E) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (2)(b) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Security to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and deliver
to the Person designated in the instructions a Certificated Security in the
appropriate principal amount. Certificated Securities issued in exchange for
beneficial interests in a Restricted Global Security pursuant to this Section
2.06(c) shall be registered in such names and in such authorized denominations
as the holder shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Certificated Securities to the Persons in whose names such Notes
are so registered. Certificated Securities issued in exchange for a beneficial
interest in a Restricted Global Security pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Notwithstanding 2.06(c)(i), a holder of a beneficial interest in a
Restricted Global Security may exchange such beneficial interest for an
Unrestricted Certificated Security or may transfer such beneficial interest to
a Person who takes delivery thereof in the form of an Unrestricted
Certificated Security only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the related letter of transmittal that it is not
(1) a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement; or
(C) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Security proposes to exchange such beneficial interest for a
Certificated Security that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit C hereto, including
the certifications in item (1)(b) thereof;
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(2) if the holder of such beneficial interest in a Restricted
Global Security proposes to transfer such beneficial interest to a
Person who shall take delivery thereof in the form of a Certificated
Security that does not bear the Private Placement Legend, a certificate
from such holder in the form of Exhibit B hereto, including the
certifications in item (3) thereof; and
(3) in each such case set forth in this subparagraph (C), an
Opinion of Counsel in form reasonably acceptable to the Company, to the
effect that such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer contained herein and
in the Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such beneficial interest in a
Restricted Global Security is being exchanged or transferred in
compliance with any applicable blue sky securities laws of any State of
the United States.
(iii)If any holder of a beneficial interest in an Unrestricted Global
Security proposes to exchange such beneficial interest for a Certificated
Security or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Certificated Security, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii), the Trustee
shall cause the aggregate principal amount of the applicable Global Security
to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company
shall execute and the Trustee shall authenticate and deliver to the Person
designated in the instructions a Certificated Security in the appropriate
principal amount. Certificated Securities issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered in such
names and in such authorized denominations as the holder shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Certificated Securities
to the Persons in whose names such Notes are so registered. Certificated
Securities issued in exchange for a beneficial interest pursuant to this
section 2.06(c)(iii) shall not bear the Private Placement Legend. Beneficial
interests in an Unrestricted Global Security cannot be exchanged for a
Certificated Security bearing the Private Placement Legend or transferred to a
Person who takes delivery thereof in the form of a Certificated Security
bearing the Private Placement Legend.
(d) Transfer or Exchange of Certificated Securities for Beneficial
Interests.
(i) If any holder of Restricted Certificated Securities proposes to
exchange such Notes for a beneficial interest in a Restricted Global Security
or to transfer such Certificated Securities to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Security,
then, upon receipt by the Registrar of the following documentation (all of
which may be submitted by facsimile):
(A) if the holder of such Restricted Certificated Securities
proposes to exchange such Notes for a beneficial interest in a
Restricted Global Security, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item (2)(b)
thereof;
(B) if such Certificated Securities are being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
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(C) if such Certificated Securities are being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than Rule 144A, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (2)(c) thereof, a certificate from the transferee
to the effect set forth in Exhibit D hereof and an Opinion of Counsel
from the transferee or the transferor reasonably acceptable to the
Company to the effect that such transfer is in compliance with the
Securities Act and such Certificated Securities are being transferred in
compliance with any applicable blue sky securities laws of any State of
the United States;
(D) if such Certificated Securities are being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)(a)
thereof; or
(E) if such Certificated Securities are being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (2)(b) thereof,
the Trustee shall cancel the Certificated Securities, increase or cause to be
increased the aggregate principal amount of, in the case of clause (A) above,
the appropriate Restricted Global Security, in the case of clause (B) above,
the 144A Global Security, and in all other cases, the IAI Global Security.
(ii) A holder of Restricted Certificated Securities may exchange such
Notes for a beneficial interest in the Unrestricted Global Security or
transfer such Restricted Certificated Securities to a Person who takes
delivery thereof in the form of a beneficial interest in the Unrestricted
Global Security only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the related letter of transmittal that it is not
(1) a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement; or
(C) the Registrar receives the following:
(1) if the holder of such Certificated Securities proposes to
exchange such Notes for a beneficial interest in the Unrestricted Global
Security, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof;
(2) if the holder of such Certificated Securities proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Security, a
certificate from such holder in the form of Exhibit B hereto, including
the certifications in item (3) thereof; and
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(3) in each such case set forth in this subparagraph (C), an
Opinion of Counsel in form reasonably acceptable to the Company to the
effect that such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer contained herein and
in the Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Certificated Securities are
being exchanged or transferred in compliance with any applicable blue
sky securities laws of any State of the United States.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Certificated Securities and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Security.
(iii)A holder of Unrestricted Certificated Securities may exchange such
Notes for a beneficial interest in the Unrestricted Global Security or
transfer such Certificated Securities to a Person who takes delivery thereof
in the form of a beneficial interest in the Unrestricted Global Security. Upon
receipt of a request for such an exchange or transfer, the Trustee shall
cancel the Unrestricted Certificated Securities and increase or cause to be
increased the aggregate principal amount of the Unrestricted Global Security.
If any such exchange or transfer from a Certificated Security to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(C) or
(iii) above at a time when an Unrestricted Global Security has not yet been
issued, the Company shall issue and, upon receipt of an authentication order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Securities in an aggregate principal amount to the principal
amount of beneficial interests transferred pursuant to subparagraphs (ii)(B),
(ii)(C) or (iii) above.
(e) Transfer and Exchange of Certificated Securities. Upon request by a
holder of Certificated Securities and such holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Certificated Securities. Prior to such registration of transfer or
exchange, the requesting holder shall present or surrender to the Registrar the
Certificated Securities duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such holder or
by his attorney, duly authorized in writing. In addition, the requesting holder
shall provide any additional certifications, documents and information, as
applicable, pursuant to the provisions of this Section 2.06(e).
(i) Restricted Certificated Securities may be transferred to and
registered in the name of Persons who take delivery thereof if the Registrar
receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 904, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certification in item (2)(C) hereof; and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver (x) a certificate in the form of Exhibit B
hereto, including the certifications in item (3) thereof, (y) an Opinion
of
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Counsel in form reasonably acceptable to the Company to the effect that
such transfer is in compliance with the Securities Act and such
beneficial interest is being transferred in compliance with any
applicable blue sky securities laws of any State of the United States
and (z) if the transfer is being made to an Institutional Accredited
Investor and effected pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A under the
Securities Act, Rule 144 under the Securities Act or Rule 904 under
Securities Act, a certificate from the transferee in the form of Exhibit
D hereto.
(ii) Restricted Certificated Securities may be exchanged by any holder
thereof for an Unrestricted Certificated Security or transferred to Persons
who take delivery thereof in the form of an Unrestricted Certificated Security
if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the related letter of transmittal that it is not
(1) a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement; or
(C) the Registrar receives the following:
(1) if the holder of such Restricted Certificated Securities
proposes to exchange such Notes for an Unrestricted Certificated
Security, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof;
(2) if the holder of such Restricted Certificated Securities
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Certificated Security, a
certificate from such holder in the form of Exhibit B hereto, including
the certifications in item (3) thereof; and
(3) in each such case set forth in this subparagraph (C), an
Opinion of Counsel in form reasonably acceptable to the Company to the
effect that such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer contained herein and
in the Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Restricted Certificated
Security is being exchanged or transferred in compliance with any
applicable blue sky securities laws of any State of the United States.
(iii)A holder of Unrestricted Certificated Securities may transfer such
Notes to a Person who takes delivery thereof in the form of an Unrestricted
Certificated Security. Upon receipt of a request for such a transfer, the
Registrar shall register the Unrestricted Certificated Securities pursuant to
the instructions from the holder thereof. Unrestricted Certificated Securities
cannot be exchanged for or transferred to Persons who take delivery thereof in
the form of a Restricted Certificated Security.
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(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an authentication order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Securities in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Securities tendered for acceptance by Persons
that have certified in the related letter of transmittal that they are not (x)
broker-dealers, (y) Persons participating in the distribution of the Exchange
Notes or (z) Persons who are affiliates (as defined in Rule 144) of the Company
and accepted for exchange in the exchange Offer and (ii) Certificated Securities
in an aggregate principal amount equal to the principal amount of the Restricted
Certificated Securities accepted for exchange in the Exchange Offer. Concurrent
with the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Securities to be reduced accordingly,
and the Company shall execute and the Trustee shall authenticate and deliver to
the Persons designated by the holders of Certificated Securities so accepted
Restricted Certificated Securities in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Securities and Certificated Securities issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (b) below, each Global
Security and each Certificated Security (and all Notes issued in
exchange therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER
OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF
THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) TO THE COMPANY, (2) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (3) TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (4) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (5) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR
(7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI") THAT, PRIOR
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TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE OR TRANSFER AGENT) OR (6) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE
SECURITIES ACT (AND BASED ON AN OPINION OF COUNSEL IF THE COMPANY
SO REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH
IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Security or
Certificated Security issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section
2.06 (and all Notes issued in exchange therefor or substitution thereof)
shall not bear the Private Placement Legend.
(ii) Global Security Legend. Each Global Security shall bear a legend in
substantially the following form:
"THIS GLOBAL SECURITY IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT
OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON
UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH
NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE
INDENTURE, (II) THIS GLOBAL SECURITY MAY BE EXCHANGED IN WHOLE BUT NOT
IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL
SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL SECURITY MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY."
(h) Cancellation and/or Adjustment of Global Securities. At such time as
all beneficial interests in a particular Global Security have been exchanged for
Certificated Securities or a particular Global Security has been redeemed,
repurchased or cancelled in whole and not in part, each such Global Security
shall be returned to or retained and cancelled by the Trustee in accordance with
Section 2.11 hereof. At any time prior to such cancellation, if any beneficial
interest in a Global Security is exchanged for or transferred to a Person who
will take delivery thereof in the form of a beneficial interest in another
Global Security or Certificated Securities, the principal amount of Notes
represented by such Global Security shall be reduced accordingly and an
endorsement shall be made on such Global Security, by the Trustee or by the
Depositary at the direction of the Trustee, to reflect such reduction; and if
the beneficial interest is being exchanged for or transferred to a Person who
will take delivery thereof in the form of a beneficial interest in another
Global Security, such other Global Security shall be increased accordingly and
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an endorsement shall be made on such Global Security, by the Trustee or by the
Depositary at the direction of the Trustee, to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Securities and
Certificated Securities upon the Company's order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Security or to a holder of a Certificated Security for
any registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to Sections
2.10, 3.06, 4.09, 4.12 and 9.05 hereof).
(iii)The Registrar shall not be required to register the transfer of or
exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(iv) All Global Securities and Certificated Securities issued upon any
registration of transfer or exchange of Global Securities or Certificated
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Global
Securities or Certificated Securities surrendered upon such registration of
transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange Notes during a period beginning at the opening of
business 15 days before the day of any selection of Notes for redemption under
Section 3.02 hereof and ending at the close of business on the day of
selection, (B) to register the transfer of or to exchange any Note so selected
for redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part or (C) to register the transfer of or to exchange a
Note between a record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and
for all other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Securities and Certificated
Securities in accordance with the provisions of Section 2.02 hereof.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Company and
the Trustee receives evidence to their satisfaction of the destruction, loss or
theft of any Note, the Company
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shall issue and the Trustee, upon the written order of the Company signed by two
Officers of the Company, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for cancellation
and those described in this Section 2.08 as not outstanding. Except as set forth
in Section 2.09 hereof, a Note does not cease to be outstanding because the
Company or an Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) segregates and holds in trust, in accordance with this
Indenture, on a redemption date or maturity date, money sufficient to pay all
principal and interest, if any, payable on that date with respect to the Notes
(or the portion thereof to be redeemed or maturing, as the case may be), then on
and after that date such Notes (or portions thereof) shall be deemed to be no
longer outstanding and shall cease to accrue interest.
Section 2.09. Treasury Notes.
In determining whether the holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or an 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
Notes that a Responsible Officer of the Trustee knows are so owned shall be so
disregarded.
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Section 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes and deliver them in exchange
for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act), unless the Company directs cancelled Notes to be returned to it.
Certification of the destruction of all cancelled Notes shall be delivered to
the Company for all certificates so destroyed. The Company may not issue new
Notes to replace Notes that it has redeemed, paid or delivered to the Trustee
for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are holders on a
subsequent special record date, which date shall be at the earliest practicable
date but in all events at least five Business Days prior to the payment date, in
each case at the rate provided in the Notes. The Company shall fix or cause to
be fixed each such special record date and payment date, provided that the
Company shall fix or cause to be fixed each such special record date as early as
practicable prior to the payment date, and the Company shall mail or cause to be
mailed as early as practicable to each holder a notice that states the special
record date, the related payment date and the amount of defaulted interest to be
paid.
Section 2.13. Record Date.
The record date for purposes of determining the identity of holders of
the 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 Section 316(c).
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Section 2.14. CUSIP Number.
The Company in issuing the 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 Notes and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company will
promptly notify the Trustee of any change in the CUSIP number.
ARTICLE 3
REDEMPTION AND CERTAIN REPURCHASES
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days (unless a shorter period is acceptable to the Trustee) but not
more than 60 days before a redemption date, an Officers' Certificate setting
forth (i) the clause of this Indenture pursuant to which the redemption shall
occur, (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or to be repurchased at
any time, except as provided in Section 3.09, the Trustee shall select the Notes
to be redeemed or purchased in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed, or, if the
Notes are not so listed, on a pro rata basis, by lot or in accordance with any
other method the Trustee considers fair and appropriate (and in such manner as
complies with applicable legal and stock exchange requirements, if any),
provided that no Notes with a principal amount of $1,000 or less shall be
redeemed or purchased in part. A new Note in principal amount equal to the
unredeemed or unpurchased portion shall be issued in the name of the holder
thereof upon cancellation of the original Note. On and after the redemption or
purchase date, interest shall cease to accrue on the Notes or portions of them
called for redemption or purchase. In the event of partial redemption by lot,
the particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
them selected shall be in amounts of $1,000 or whole multiples of $1,000; except
that if all of the Notes of a holder are to be redeemed, the entire outstanding
amount of Notes held by such holder, even if not a multiple of $1,000, shall be
redeemed. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption.
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Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each holder whose
Notes are to be redeemed at its registered address (provided that in the event
of a redemption pursuant to Section 3.07(b) hereof arising out of a sale of the
Company's Capital Stock (other than Disqualified Stock) in an Secondary Public
Offering, such notice shall not be mailed prior to the consummation of such
Secondary Public Offering).
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price, plus accrued interest, if any, and Liquidated
Damages, if any;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes (or portions thereof) called for redemption ceases to accrue
on and after the redemption date;
(g) the paragraph of the Notes and/or section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days (unless a shorter
period is acceptable to the Trustee) 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, Notes called for redemption become due and payable on the redemption
date at the redemption price stated in such notice. A notice of redemption may
not be conditional.
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Section 3.05. Deposit of Redemption Price.
On or prior to the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent (or, if the Company or a Subsidiary is the
Paying Agent, shall segregate and hold in trust) immediately available funds
sufficient to pay the redemption price of and accrued interest, if any, on all
Notes to be redeemed on that date. The Trustee or the Paying Agent shall
promptly return to the Company any funds 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, if any, on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest and Liquidated Damages, if any, shall be
paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption shall not be so
paid upon surrender for redemption because of the failure of the Company to
comply with the preceding paragraph, interest shall be paid on the unpaid
redemption price, from the redemption date until such redemption price is paid,
and to the extent lawful on any interest and Liquidated Damages, if any, not
paid on such unpaid principal, in each case at the rate provided in the Notes.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the holder of the Notes at the
expense of the Company a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in Section 3.07(b) below, the Notes will not be
redeemable at the Company's option prior to July 16, 2000. Commencing on July
16, 2000, the Notes will be subject to redemption at the option of the Company,
in whole or in part, upon not less than 30 nor more than 60 days' notice to the
holders, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on July 16 of the years indicated below:
Year Percentage
---- ----------
2000................................. 105.000%
2001................................. 103.000%
2002................................. 101.000%
2003 and thereafter.................. 100.000%
(b) Notwithstanding the foregoing, in the event of the sale by the
Company prior to July 16, 2000 of its securities in one or more Secondary Public
Offerings, up to a maximum of
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35% of the aggregate principal amount of the Notes originally issued will, at
the option of the Company, be redeemable from the net cash proceeds of such
secondary Public Offerings (but only to the extent the proceeds of such
Secondary Public Offerings consist of cash or readily marketable cash
equivalents) at a redemption price equal to 107% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
redemption date, provided that such redemption occurs within 60 days of the date
of the closing of such Secondary 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 3.09 and 4.12 hereof, the Company
shall not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
Section 3.09. Offer to Purchase With Excess Asset Sale Proceeds.
If at any time the cumulative amount of Excess Proceeds that have not
been applied in accordance with Section 4.09(b) exceeds $2.0 million, the
Company shall, within 30 days thereafter, make an offer to all holders of Notes
(an "Excess Proceeds Offer"), to purchase the maximum principal amount of Notes
that may be purchased out of such Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the outstanding principal amount of the Notes to the
date fixed for the closing of such offer, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date fixed for the closing of such
offer, in accordance with the procedures specified below.
The Excess Proceeds 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 maximum principal amount of Notes that
may be purchased with such Excess Proceeds (or such pro rata portion based upon
the principal amount of Notes if the principal amount of Notes tendered is in
excess of the Excess Proceeds) (which maximum principal amount of Notes shall be
the "Offer Amount") or, if less than the Offer Amount has been tendered, all
Notes tendered in response to the Excess Proceeds Offer, subject to the
provisions of Section 4.09 hereof.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued interest on the Notes
shall be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
holders who tender Notes pursuant to the Excess Proceeds Offer on the portion of
the tendered Notes purchased pursuant to the Excess Proceeds Offer.
Upon the commencement of any Excess Proceeds Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the holders of
the Notes, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such holders
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to tender Notes pursuant to the Excess Proceeds Offer. The Excess Proceeds Offer
shall be made to all holders. The notice, which shall govern the terms of the
Excess Proceeds Offer, shall state:
(a) that the Excess Proceeds Offer is being made pursuant to
Sections 3.09 and 4.09 hereof and the length of time the Excess Proceeds Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note or portion thereof not tendered or accepted for
payment shall continue to accrue interest;
(d) that any Note or portion thereof accepted for payment pursuant
to the Excess Proceeds Offer shall cease to accrue interest after the Purchase
Date;
(e) that holders electing to have a Note or portion thereof
purchased pursuant to any Excess Proceeds Offer shall be required to surrender
the Note, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three Business Days before the Purchase Date;
(f) that holders shall be entitled to withdraw their election if
the Company, depositary or Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder, the principal
amount of the Note or portion thereof the holder delivered for purchase and a
statement that such holder is withdrawing his election to have the Note or
portion thereof purchased;
(g) that, if the aggregate principal amount of Notes tendered by
holders of such notes exceeds the Offer Amount, the Trustee shall select the
Notes to be purchased on a pro rata basis as described above (with such
adjustments as may be deemed appropriate by the Trustee so that only Notes in
denominations of $1,000, or integral multiples thereof, shall be purchased);
and
(h) that holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis (as described above) to the extent
necessary, the Offer Amount of Notes or portions thereof tendered pursuant to
the Excess Proceeds Offer, or if less than the Offer Amount has been tendered,
all Notes or portions thereof tendered, and deliver to the Trustee an Officers'
Certificate stating that such Notes or portions thereof were accepted for
payment by the Company in accordance with the terms of this Section 3.09. The
Company or 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 Note or portion thereof
tendered by such holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Note, and the Trustee shall authenticate and
mail or deliver such new Note to such holder equal in principal amount to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the holder thereof. The Company
shall publicly announce the results of the Excess Proceeds
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Offer on the Purchase Date. In the event that the aggregate amount of Excess
Proceeds exceeds the aggregate principal amount of Notes or portion thereof
surrendered by holders of such notes pursuant to an Excess Proceeds Offer, the
Company may use the remaining Excess Proceeds for general purposes. Upon
completion of an Excess Proceeds Offer, the amount of Excess Proceeds shall be
deemed to be reset at zero.
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 Notes under this Section 3.9
shall be deemed to be a redemption of Notes.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest, on the Notes on the dates and in the manner provided in the
Notes and this Indenture. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company,
holds as of the due date money deposited by, or on behalf of, the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
the then applicable interest rate on the Notes to the extent lawful until such
overdue principal is paid; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace period) at the same rate to the
extent lawful until such overdue installments of interest are paid.
The term "Bankruptcy Law" means title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain an office or agency (which may be an office
of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where
Notes may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
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The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency 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
hereof.
Section 4.03. Reports.
(a) So long as any of the Notes remain outstanding, the Company shall
cause copies of all quarterly and annual financial reports and of the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which the
Company is required to file with the SEC pursuant to Section 13(a) or 15(d) of
the Exchange Act ("SEC Reports") to be filed with the Trustee within 15 days of
filing with the SEC. If the Company is not subject to the requirements of
Section 13(a) or 15(d) of the Exchange Act or shall cease to be required by the
SEC to file SEC Reports pursuant to the Exchange Act, the Company shall
nevertheless continue to cause SEC Reports, comparable to those which it would
be required to file pursuant to Section 13(a) or 15(d) of the Exchange Act if it
were subject to the requirements of either such section, to be so filed with the
SEC (unless the SEC will not accept such a filing) and with the Trustee within
the same time periods as would have applied (including under the preceding
sentence) had the Company been subject to the requirements of Section 13(a) or
15(d) of the Exchange Act. Whether or not required by the Exchange Act to file
SEC Reports with the SEC, so long as any Notes are outstanding, the Company
shall furnish copies of the SEC Reports to the holders of Notes at the time the
Company is required to file the same with the Trustee and make such information
available to investors who request it in writing. In addition, the Company
shall, for so long as any Notes remain outstanding, furnish to the holders and
to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act. The Company shall also comply with the provisions of TIA ss.
314(a).
(b) The Company shall provide the Trustee with a sufficient number of
copies of all SEC Reports that the Trustee may be required to deliver to the
holders of the 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 of the Company, an Officers' Certificate stating that
(i) a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervi sion of the signing
Officers with a view to determining whether the Company has (x) kept, observed,
performed and fulfilled, and (y) caused each of its Subsidiaries to keep,
observe, perform and fulfill, its obligations under this Indenture, (ii) as to
each such Officer signing such certificate, that to the best of his or her
knowledge (A) the Company has kept, observed,
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performed and fulfilled, and has caused each of its Restricted Subsidiaries to
keep, observe, perform and fulfill, 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 to be performed or observed
by it (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 each is taking or proposes to take with respect thereto) and (B) no
event has occurred and remains in existence by reason of which payments on
account of the principal of or interest, if any, on the Notes is prohibited or
if such event has occurred, a description of the event and what action each is
taking or proposes to take with respect thereto, and (iii) the Company's
Tangible Net Worth for the preceding fiscal year.
(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 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 which would lead them to believe that the Company has violated
any provisions of Article 4 or 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. In the event that such written statement of the Company's independent
public accountants can not be obtained, in whole or in part, the Company shall
deliver an Officers' Certificate certifying that it has used its best efforts to
obtain such statement but was unable to do so.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
(d) The Company shall deliver to the Trustee an Officers' Certificate as
required by, and in accordance with, Section 4.07(e) hereof.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Restricted
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies, except as contested in good faith and by appropriate
proceedings or where the failure to effect such payment is not adverse in any
material respect to the holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and
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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.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on account
of any Equity Interests of the Company or any of its Restricted
Subsidiaries in each case to the extent made in cash or other tangible
property;
(ii) purchase, redeem, defease, retire or otherwise acquire for
value ("Retire" and correlatively, a "Retirement") any Equity Interests
of the Company or any of its Restricted Subsidiaries or other Affiliate
of the Company in each case to the extent made in cash or other tangible
property;
(iii) Retire any Indebtedness of the Company and/or any
Restricted Subsidiary that is subordinate in right of payment to the
Notes, except at final maturity or in accordance with mandatory
redemption or repayment provisions set forth in the documentation
governing such Indebtedness; or
(iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i), (ii), (iii) and (iv) above being
collectively referred to as "Restricted Payments"),
unless, at the time of such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(2) immediately after giving effect to such Restricted Payment on a
pro forma basis as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, the Company could incur
at least $1.00 of additional Indebtedness pursuant to the Consolidated
Indebtedness to Consolidated Capitalization Ratio test set forth in
Section 4.08(a) hereof;
(3) immediately after giving effect to such Restricted Payment, the
Company would have a Tangible Net Worth of not less than $25.0 million;
and
(4) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made on or after
the Issue Date shall not exceed an amount equal to the sum of (1) 50% of
cumulative Consolidated Net Income determined for the period (taken as
one period) from the beginning of the first fiscal quarter commencing
after the Issue Date and ending on the last day of the most recent
fiscal quarter immediately preceding the date of such Restricted Payment
for which consolidated
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financial information of the Company is available (or if such cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss), plus
(2) 100% of the aggregate net cash proceeds received by the Company
either (x) as capital contributions to the Company after the Issue Date
or (y) from the issue and sale (other than to a Subsidiary of the
Company) of its Qualified Equity Interests after the Issue Date
(excluding the net proceeds from any issuance and sale of Qualified
Equity Interests (A) financed, directly or indirectly, using funds
borrowed from the Company or any Subsidiary of the Company until and to
the extent such borrowing is repaid or (B) used to retire Equity
Interests or Indebtedness pursuant to clauses (ii) or (v) of Section
4.07(b)), plus (3) the fair market value of Qualified Equity Interests
(other than Disqualified Stock) issued in connection with acquisitions,
plus (4) the principal amount (or accreted amount (determined in
accordance with GAAP), if less) of any Indebtedness of the Company or
any Subsidiary of the Company incurred after the Issue Date which has
been converted into or exchanged for qualified Equity Interests of the
Company (minus the amount of any cash or property distributed by the
Company or any Subsidiary of the Company upon such conversion or
exchange).
(b) The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would
have complied with the provisions of this Indenture;
(ii) the Retirement of (A) any Equity Interests of the Company or
any Restricted Subsidiary of the Company, (B) Indebtedness of the
Company that is subordinate to the Notes or (C) Indebtedness of a
Restricted Subsidiary of the Company, in exchange for, or out of the
proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of, Equity Interests of the
Company (other than Disqualified Stock);
(iii) the Retirement of any Indebtedness of the Company
subordinated in right of payment to the Notes in exchange for, or out of
the proceeds of, the substantially concurrent incurrence of Indebtedness
of the Company (other than Indebtedness to a Restricted Subsidiary of
the Company), but only to the extent that such new Indebtedness is (A)
permitted under Section 4.08 hereof and (1) is subordinated in right of
payment to the Notes at least to the same extent as, (2) has a Weighted
Average Life to Maturity at least as long as, and (3) has no scheduled
principal payments due in any amount earlier than, any equivalent amount
of principal under the Indebtedness so Retired or (B) a Permitted
Refinancing;
(iv) the Retirement of any Indebtedness of a Restricted Subsidiary
of the Company in exchange for, or out of the proceeds of, the
substantially concurrent incurrence of Indebtedness of the Company or
any Restricted Subsidiary but only to the extent that such incurrence is
(A) permitted under Section 4.08 hereof and only to the extent that such
Indebtedness (1) is not secured by any assets of the Company or any
Restricted Subsidiary to a greater extent than the Indebtedness so
Retired was so secured, (2) has a Weighted Average Life to Maturity at
least as long as the Indebtedness so Retired and (3) if the Indebtedness
so Retired was an obligation of the Company, is pari passu or
subordinated
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in right of payment to the Notes at least to the same extent as the
Indebtedness so Retired or (B) a Permitted Refinancing;
(v) the Retirement of any Equity Interests of the Company or any
Restricted Subsidiary of the Company held by any member of the Company's
(or any of its Subsidiaries') management pursuant to any management
equity subscription agreement or stock option agreement; provided that
the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $1.0 million in any
twelve-month period or $4 million during the seven year period following
the issue date of the Notes plus in each case the aggregate cash
proceeds received by the Company during such twelve-month or seven year
period from any issuance of Equity Interests by the Company to members
of management of the Company and its Subsidiaries; and
(vi) the payment of cash in lieu of fractional shares (a) payable
as dividends on Equity Interests of the Company or (b) issuable upon
conversion of or in exchange for securities convertible into or
exchangeable for Equity Interests of the Company or (c) issuable as a
result of a corporate reorganization, provided that, in the case of (a)
and (b), the issuance of such Equity Interests or securities and, in the
case of (c), such corporate reorganization, was permitted under the
terms of this Indenture;
provided, however, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (i), (ii), (iii), (iv), (v) and (vi),
no Default or Event of Default shall have occurred and be continuing.
(c) The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default or an
Event of Default pursuant to Article 6 hereof. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in such Restricted Subsidiary
so designated shall be deemed to be Restricted Payments at the time of such
designation and shall reduce the amount available for Restricted Payments under
paragraph (a) of this Section 4.07. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the greatest of (x) the
net book value of such Investments at the time of such designation, (y) the fair
market value of such Investments at the time of such designation and (z) the
original fair market value of such Investments at the time they were made. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time.
(d) The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under Section 4.08 hereof and (ii) no Default or Event of Default
pursuant to Article 6 hereof would be in existence following such designation.
(e) 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, which calculations may
be based upon the Company's latest available financial statements. The Trustee
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shall have no duty or obligation to confirm or verify the calculations set forth
in such Officers' Certificate.
Section 4.08. Incurrence of Indebtedness and Issuance of Disqualified Stock.
(a) The Company shall not, and shall not cause or permit any of its Restricted
Subsidiaries, directly or indirectly, to create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable for the payment of
(collectively, "incur" and, correlatively, "incurred" and "incurrence") any
Indebtedness (including, without limitation, Acquired Debt) or issue any
Disqualified Stock; provided, however, that the Company and any Restricted
Subsidiary may incur Indebtedness or issue Disqualified Stock if, at the time of
and immediately after giving pro forma effect to such incurrence of Indebtedness
or such issuance of Disqualified Stock and the application of the proceeds
therefrom, the ratio of Consolidated Indebtedness to Consolidated Capitalization
does not exceed 3 to 5.
(b) The foregoing limitation in Section 4.08(a) shall not apply to (with each
exception to be given independent effect):
(i) the incurrence in the ordinary course of business by the Company
and/or any of its Restricted Subsidiaries of Indebtedness evidenced by letters
of credit;
(ii) the incurrence by the Company and/or any of its Restricted
Subsidiaries of Vendor Indebtedness;
(iii) the incurrence by the Company and/or any of its Restricted
Subsidiaries of the Existing Indebtedness and all borrowings after the Issue
Date under the Existing Indebtedness;
(iv) the incurrence by the Company and/or any of its Restricted
Subsidiaries of Indebtedness in an aggregate amount not to exceed $10.0
million at any one time outstanding;
(v) the incurrence by the Company and/or any of its Restricted
Subsidiaries of Indebtedness in connection with customs' duties and the
guarantees thereof;
(vi) Permitted Refinancings;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and any
of its Restricted Subsidiaries; and
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate or foreign currency risk with respect to any
floating rate Indebtedness that is permitted by the terms of the Indenture to
be outstanding.
For purposes of determining compliance with this Section 4.08, in the
event that an item of Indebtedness Stock meets the criteria of more than one of
the categories described in clauses (i) through (viii) above or is entitled to
be incurred pursuant to Section 4.08(a), the Company
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shall, in its sole discretion, classify such item in any manner that complies
with this Section and such item shall be treated as having been incurred
pursuant to only one of such clauses or pursuant to Section 4.08(a). Accrual of
interest or dividends, the accretion of accreted value or liquidation preference
and the payment of interest or dividends in the form of additional Indebtedness,
Common Stock or Preferred Stock shall not be deemed to be an incurrence of
Indebtedness for purposes of this Section.
Section 4.09. Asset Sales.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, whether in a single transaction or a series of related
transactions occurring within any twelve-month period, sell, lease, convey,
dispose or otherwise transfer any assets including by way of a Sale and
Leaseback Transaction other than sales, leases, conveyances, dispositions or
other transfers (A) at a price equal to or greater than the fair market value
thereof, (B) of inventory, including close-out sales, in the ordinary course of
business, (C) to the Company by any Restricted Subsidiary of the Company or from
the Company to any Restricted Subsidiary of the Company, (D) that constitute a
Restricted Payment or dividend or distribution permitted under Section 4.07
hereof or (E) that constitute the disposition of all or substantially all of the
assets of the Company pursuant to Section 5.01 hereof (each of the foregoing
other than those categories described in clauses (B), (C), (D) and (E), an
"Asset Sale").
(b) Within 365 days after the receipt of net proceeds of any Asset Sale,
the Company (or such Restricted Subsidiary, as the case may be) may apply the
Net Proceeds from such Asset Sale to (i) permanently reduce the amounts
permitted to be borrowed by the Company under the terms of any of its Senior
Indebtedness or (ii) the direct or indirect acquisition of assets (tangible or
intangible) to be used in any Permitted Business. Any Net Proceeds from any
Asset Sales that are not so applied or invested as provided in the preceding
sentence, shall constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $2.0 million, the Company shall be required to make an
Excess Proceeds Offer in accordance with the terms of Section 3.09 hereof.
Section 4.10. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, 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 any 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 Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; (ii) such Affiliate Transaction
is approved by a majority of the disinterested directors on the Board of
Directors of the Company; and (iii) the Company delivers to the Trustee, with
respect to any Affiliate Transaction involving aggregate payments in excess of
$0.5 million, a resolution of a committee of independent directors of the
Company set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clauses (i) and (ii) above provided that (a)
transactions pursuant to any employment, stock option or stock purchase
agreement entered into
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by the Company or any of its Restricted Subsidiaries, or any grant of stock, in
the ordinary course of business that are approved by the Board of Directors of
the Company, (b) transactions between or among the Company and its Restricted
Subsidiaries, (c) transactions permitted by Section 4.07 hereof, (d) loans and
advances to employees and officers of the Company or any of its Restricted
Subsidiaries in the ordinary course of business in an aggregate principal amount
not to exceed $2.0 million at any one time outstanding, (e) loans and advances
to employees and officers of the Company or any Restricted Subsidiary financing
the purchase of Capital Stock of the Company by such employees or officers and
(f) transactions (including loans and advances) pursuant to existing contracts
to which the Company is a party in accordance with the terms of such contracts
as they exist on the Issue Date, shall not be deemed Affiliate Transactions.
Section 4.11. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
existence as a corporation, and the corporate, partnership or other existence of
any Restricted Subsidiary, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses
and franchises of the Company and its Restricted Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right,
license or franchise, or the corporate, partnership or other existence of any of
its Restricted Subsidiaries if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Restricted Subsidiaries, taken as a whole,
and that the loss thereof is not adverse in any material respect to the holders
of the Notes.
Section 4.12. Offer to Purchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall make
an offer (the "Change of Control Offer") to each holder of Notes to repurchase
all or any part (equal to $1,000 or an integral multiple thereof) of such
holder's Notes at a purchase price equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase (the "Change of Control Payment"), provided that
if the date of purchase is on or after an interest record date and on or before
the related interest payment date, any accrued interest shall be paid to the
Person in whose name a Note is registered at the close of business on such
record date, and no additional interest shall be paid or payable to holders who
tender Notes pursuant to the Change of Control Offer. Within thirty (30) days
following any Change of Control, the Company shall mail a notice to the Trustee
and each holder stating: (1) that the Change of Control Offer is being made
pursuant to this Section 4.12 and that all Notes or portions thereof tendered
will be accepted for payment; (2) the purchase price and the purchase date,
which shall be no earlier than 30 days nor later than 40 days (unless required
by applicable law) from the date such notice is mailed (the "Change of Control
Payment Date"); (3) that any Note or portion thereof not tendered will continue
to accrue interest in accordance with its terms; (4) that, unless the Company
defaults in the payment of the Change of Control Payment, all Notes or portions
thereof 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 Notes or portions thereof purchased pursuant to a Change of
Control Offer
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will be required to surrender the Notes, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying
Agent at the address specified in the notice prior to the close of business on
the third Business Day preceding the Change of Control Payment Date; (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 Notes or portions thereof delivered for purchase, and a statement that
such holder is withdrawing his election to have such Notes or portions thereof
purchased; and (7) that holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof. The Company shall comply with
the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations to the extent such laws and regulations are applicable in
connection with the repurchase of the Notes or portions thereof in connection
with a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
Notes or portions thereof tendered to the Company. The Paying Agent shall
promptly mail to each holder of Notes so accepted payment in an amount equal to
the purchase price for such Notes or portions thereof, and the Trustee shall
promptly authenticate and mail to each holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided,
that each such new Note shall 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.
Section 4.13. Insurance.
The Company shall and shall cause each of its Restricted Subsidiaries to
at all times keep all of their respective properties which are of an insurable
nature insured against loss or damage of the kinds customarily insured by
corporations similarly situated and owning like properties, with insurers
believed by the Company in good faith to be financially sound and responsible.
Section 4.14. Payments for Consent.
The Company shall not, and shall not permit any of its Affiliates to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
or agreed to be paid to all holders of the Notes that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
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Section 4.15. Use of Proceeds.
The Company shall use the net proceeds from the sale of the Notes only to fund
capital expenditures, working capital requirements, design and development costs
incurred in connection with expanded original equipment manufacturer sales, new
camera and non-camera products and general corporate purposes of the Company,
which may include acquisitions.
The Company will deliver to the Trustee an Officer's Certificate with each
annual compliance certificate certifying that the proceeds of the Notes were
applied in accordance with this Section 4.15.
Section 4.16. Tangible Net Worth.
The Company shall at all times maintain a Tangible Net Worth of not less than
$25.0 million.
Section 4.17. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause to become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(i) pay dividends or make any other distributions to the Company or
any of its Restricted Subsidiaries on its Capital Stock or with respect
to any other interest or participation in, or measured by, its profits,
or pay any Indebtedness owed to the Company or any of its Restricted
Subsidiaries;
(ii) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(iii)transfer any of its properties or assets to the Company or any
of its Restricted Subsidiaries;
except for such encumbrances or restrictions existing as of the Issue Date or
under or by reason of:
(a) applicable law;
(b) any instrument governing Acquired Debt as in effect at the time
of acquisition (except to the extent such Indebtedness was incurred in
connection with, or in contemplation of, such acquisition);
(c) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices;
(d) Indebtedness incurred under Section 4.08(b)(ii), (iii), (iv)
and (vi) hereof; or
(e) this Indenture and the Notes.
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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 entity), 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 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 has been made assumes all the obligations of the
Company under the Notes and this Indenture pursuant to a supplemental
indenture in form reasonably satisfactory to the Trustee;
(ii) immediately after such transaction no Default or Event of
Default exists;
(iii)except in connection with a Merger with or into a wholly-owned
Subsidiary of the Company, the Company, or any entity or Person formed
by or surviving any such consolidation or merger, or to which such sale,
assignment, transfer, lease, conveyance or other disposition has been
made, at the time of such transaction after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the
applicable fiscal quarter (including any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), could incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated Debt to
Consolidated Capitalized Ratio test described under Section 4.08 hereof;
and
(iv) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each to the effect that, with
respect to the transaction, items (i) through (iii) as stated above have
been satisfied.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, 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,
lease, conveyance or other disposition is made shall succeed to, and be
substituted for (so that from and after the date of such consolidation, merger,
sale, lease, conveyance or other disposition, the provisions of this Indenture
referring to the Company shall refer instead to the successor corporation and
not to the Company), and may exercise every right and power of the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company, herein; provided, however, that the predecessor Company shall
not be relieved from the obligations to pay the principal of, premium, if any,
and interest on the Notes, except in the case of a sale of all of the Company's
assets that meets the requirements of Section 5.01 hereof.
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ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
Each of the following constitutes an "Event of Default":
(a) default for 30 days in payment when due of interest on, or
Liquidated Damages, if any, with respect to the Notes;
(b) default in payment when due of principal or premium, if any, on the
Notes at maturity, upon redemption or otherwise;
(c) failure by the Company to perform or comply with the provisions of
Sections 4.07, 4.08, 4.09, 4.12 or 5.01 hereof;
(d) failure by the Company for 30 days after notice to the Company from
the Trustee or to the Company and the Trustee by the holders of at
least 25% in principal amount of the Notes then outstanding to
observe or perform any other covenant, representation, warranty or
other agreement in this Indenture or the Notes;
(e) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries), whether such
Indebtedness or Guarantee now exists, or is created after the Issue
Date, which default (x) is caused by a failure to pay when due
principal, premium, if any, or interest on such Indebtedness within
the grace period provided in such Indebtedness (a "Payment
Default"), and the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness
of the Company or any Significant Subsidiary under which there has
been a Payment Default or the maturity of which has been
accelerated as provided in clause (y), aggregates $2.0 million or
more or (y) results in the acceleration (which acceleration has not
been rescinded) of such Indebtedness prior to its express maturity
and 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 $2.0 million or more;
(f) failure by the Company or any of its Significant Subsidiaries to
pay final judgments (other than any judgment as to which a
reputable insurance company has accepted full liability in writing)
aggregating in excess of $2.0 million, which judgments are not
paid, discharged or stayed within 45 days after their entry;
(g) the Company or any of its Significant Subsidiaries pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
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(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 (other than debts which
are the subject of a bona fide dispute) as they become due; and
(h) 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 in an involuntary case;
(B) appoints a Custodian of the Company or any of its
Significant Subsidiaries or for all or substantially all of the
property of the Company or any of its Significant Subsidiaries; or
(C) orders the liquidation of the Company or any of its
Significant Subsidiaries;
and the order or decree remains unstayed and in effect for 60
consecutive days; provided, however; that if the entry of such
order or decree is appealed and dismissed on appeal or otherwise
has ceased to be in effect, then the Event of Default hereunder by
reason of the entry of such order or decree shall be deemed to have
been cured and the related acceleration, provided that no other
Event of Default has occurred and is continuing, shall be deemed
rescinded.
The term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
Section 6.02. Acceleration.
If any Event of Default occurs and is continuing under this Indenture,
the Trustee, by notice to the Company, or the holders of at least 25% in
principal amount of the then outstanding Notes, by notice to the Company and the
Trustee, may declare all the Notes to be due and payable immediately. Upon such
declaration, the principal of, premium, if any, and accrued and unpaid interest
and Liquidated Damages, if any, on the Notes shall be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising under Sections 6.01(g) or (h) hereof with respect to the Company or any
of its Significant Subsidiaries, the foregoing amount shall ipso facto become
due and payable without further action or notice. No premium is payable upon
acceleration of the Notes except that in the case of an Event of Default that is
the result of an action or inaction by the Company or any of its Restricted
Subsidiaries intended to avoid restrictions on or premiums related to
redemptions of the Notes contained in this Indenture or the Notes, the amount
declared due and payable shall include the premium that would have been
applicable on a voluntary prepayment of the Notes or, if voluntary prepayment is
not then
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permitted, the premium set forth in this Indenture. Holders of the Notes may not
enforce this Indenture or the Notes except as provided herein.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to Section
3.07 hereof, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law, anything in this Indenture or the Notes
notwithstanding. If an Event of Default occurs prior to July 16, 2000 by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding the prohibition on redemption of the
Notes prior to such date pursuant to Section 3.07 hereof, then the premium
payable for purposes of this paragraph shall be 107% of the amount that would
otherwise be due but for the provisions of this paragraph, plus accrued
interest, if any, to the date of payment.
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 of, premium,
if any, interest and Liquidated Damages, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default.
All remedies are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal
amount of the Notes then outstanding, by notice to the Trustee, may on behalf of
the holders of all of the Notes, waive any existing Default or Event of Default
and its consequences, except a continuing Default or Event of Default in the
payment of interest or Liquidated Damages or premium on, or the principal of,
the 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 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
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follow any direction that conflicts with the law or this Indenture that the
Trustee, in its sole discretion, determines may be unduly prejudicial to the
rights of other holders of Notes or that may involve the Trustee in personal
liability. The Trustee may take any other action which it deems proper which is
not inconsistent with any such direction. Notwithstanding any provision to the
contrary in this Indenture, the Trustee shall not be obligated to take any
action with respect to the provisions of the last paragraph of Section 6.02
hereof unless directed to do so pursuant to this Section 6.05.
Section 6.06. Limitation on Suits.
No holder of any Note shall have any right to institute any
proceeding with respect to this Indenture or the Notes or for any remedy
thereunder, unless:
(i) the holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(ii) the holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue
the remedy;
(iii) such holder of a Note or holders of the Notes offer and,
if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense; and
(iv) 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.
Otherwise, no holder of any Note shall have any right to
institute any proceeding with respect to this Indenture or the Notes or for any
remedy thereunder, except:
(x) a holder of a Note may institute suit for enforcement of
payment of the principal of and premium, if any, or interest on such Note on or
after the respective due dates expressed in such Note (including upon
acceleration thereof) or
(y) the institution of any proceeding with respect to this
Indenture or the Notes or any remedy thereunder, including without limitation
acceleration, by the holders of a majority in principal amount of the
outstanding Notes; provided that, upon institution of any proceeding or exercise
of any remedy such holders provide the Trustee with prompt written notice
thereof.
A holder of a Note may not use this Indenture to prejudice the
rights of another holder of a Note or to obtain a preference or priority over
another holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the respective
due dates expressed in the Note, or to bring suit for the
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enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the holder of the Note.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b)
hereof occurs and is continuing, the Trustee is authorized to recover judgment
in its own name and as trustee of an express trust against the Company for the
whole amount of principal of, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Notes and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due to the Trustee under Section 7.07 hereof.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel) and
the holders of the Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Notes), the Company's creditors or the
Company's 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 of a Note 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 of
the Notes, 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 which the holders of the Notes may be entitled
to receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing contained herein shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any holder of a Note any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any holder of a
Note thereof, or to authorize the Trustee to vote in respect of the claim of any
holder of a Note in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
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First: to the Trustee, its agents and attorneys for all
amounts due the Trustee under Section 7.07 hereof, including payment of all
compensation, expenses and liabilities incurred, and all advances made, by the
Trustee and the costs and expenses of collection;
Second: (i) first to holders of Notes, for amounts due and
unpaid on such Notes for interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Notes for interest,
and (ii) second, to the extent any other monies are available, to holders of
Notes for amounts due and unpaid on such Notes for principal and premium and
Liquidated Damages, if any, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal and premium
and Liquidated Damages, if any; 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
such payment to holders of Notes.
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 6.11 does not apply to a suit by the Trustee, a suit by a
holder of a Note pursuant to Section 6.07 hereof, or a suit by holders of more
than 10% in principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
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 shall use the same degree of care and skill in their exercise as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee, and
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(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.
(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 7.01;
(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 Inden ture that in any way relates to the Trustee is subject
to paragraphs (a), (b), and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any holders of Notes, including, without limitation,
the provisions of Section 6.05 hereof, unless such holders shall have provided
to the Trustee security and indemnity satisfactory to the Trustee 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.
(g) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture or other paper or documents, but the Trustee, in its discretion may
make such further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.
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(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
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. A permissive right granted to the Trustee
hereunder shall not be deemed an obligation to act.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the holders unless such holders shall have provided to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(g) The Trustee shall not be charged with knowledge of any
Default or Event of Default unless either (i) a Responsible Officer of the
Trustee shall have actual knowledge of such Default or Event of Default or (ii)
written notice of such Default or Event of Default shall have been given to the
Trustee by the Company or any Holder.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest, it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as Trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other
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document in connection with the sale of the Notes or pursuant to this Indenture
other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and
if it is known to a Responsible Officer of the Trustee, the Trustee shall mail
to holders of Notes a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default in payment
of principal of, premium, if any, or interest on any Note, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of the
holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15th beginning with the May 15th
following the date of this Indenture, the Trustee shall mail to the holders of
the Notes a brief report dated as of such reporting date that complies with TIA
ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred within the
twelve months preceding the reporting date, no report need be transmitted). The
Trustee also shall comply with TIA ss. 313(b). The Trustee shall also transmit
by mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the
holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed. The Company shall promptly notify
the Trustee when the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee or its agent from time to
time compensation for its acceptance of this Indenture and services hereunder in
accordance with the Fee Schedule dated July 15, 1998, as such schedule may be
amended from time to time (the "Fee Schedule"). 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 or its agent promptly upon request for all
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services (as described in the Fee Schedule). Such expenses
shall include the compensation, disbursements and expenses of the Trustee's
agents and counsel (as described in the Fee Schedule).
The Company shall indemnify and hold harmless the Trustee
against any and all losses, liabilities or expenses (including counsel fees and
expenses) incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, except any such loss,
liability or expense as may be attributable to the negligence or bad faith of
the Trustee. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Trustee, in its
sole discretion, may elect to have counsel selected by it and the Company shall
pay the fees and expenses of such counsel (as described in the Fee
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Schedule). The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company' payment obligations in this Section
7.07, the Company and the holders of the Notes agree that the Trustee shall have
a Lien prior to the Notes on all money or property held or collected by the
Trustee. Such Lien shall survive the resignation or removal of the Trustee and
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(g) or (h) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
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 in writing at any time 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 Notes may
remove the Trustee by so notifying the Trustee and the Company in writing. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the holders of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
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If the Trustee after written request by any holder of a Note
who has been a holder of a Note for at least six months fails to comply with
Section 7.10 hereof, such holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appoint ment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be
a corporation organized and doing business under the laws of the United States
of America or of any state thereof authorized under such laws to exercise
corporate trustee power, shall be subject to supervision or examination by
federal or state authority and shall have a combined capital and surplus of at
least $25.0 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA ss. 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
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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 and at any time,
with respect to the Notes, elect to have either Section 8.02 or 8.03 hereof be
applied to all outstanding Notes upon compliance with the conditions set forth
below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth in Section 8.04 are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all of its
other obligations under such Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of holders of
outstanding Notes to receive from the trust described below payments in respect
of the principal of, premium, if any, and interest on and Liquidated Damages
with respect to such Notes when such payments are due, or on the redemption
date, as the case may be; (b) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust; (c) the rights, powers,
trust, duties and immunities of the Trustee, and the Company's obligations in
connection therewith; and (d) the Legal Defeasance provisions of this Indenture.
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 be released from its
obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.07,
4.08, 4.09, 4.10, 4.12, and 4.16 hereof and Article 5 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 8.04
are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision
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herein or in any other document and such omission to comply shall not constitute
a Default or an Event of Default under Section 6.01 hereof but, except as
specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby. In addition, upon the Company's exercise under Section 8.01
hereof of the option applicable to this Section 8.03, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(c) through 6.01(f) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or Section 8.03 hereof to the outstanding Notes:
(a) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 hereof who shall agree to comply with the
provisions of this Article 8 applicable to it), in trust, for purpose
of making the following payments, specifically pledged as security for,
and dedicated solely to, the benefit of the holders of the Notes, (i)
cash in U.S. dollars, (ii) non-callable Government Securities, or (iii)
a combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public
accountants selected by the Company, to pay the principal of, premium
and Liquidated Damages, if any, and interest on the outstanding Notes,
on the stated maturity or on the applicable optional redemption date,
as the case may be, of such principal or installment of principal of,
premium, if any, or interest on or Liquidated Damages with respect to
the outstanding Notes;
(b) 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 (i) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the Issue Date, there has been a change
in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the
holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(c) 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 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 borrowing of funds to be applied to such
deposit) or insofar as Events of Default from
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bankruptcy or insolvency events are 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 Restricted Subsidiaries is a party or by
which the Company or any of its Restricted Subsidiaries is bound;
(f) The Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that after the 91st day (or such other
applicable date) 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 of Notes over the
other creditors of the Company with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others; 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 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 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 Notes shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as Paying Agent) as the Trustee may
determine, to the holders of such Notes of all sums due and to become due
thereon in respect of principal, premium, if any, and interest, but such money
and Government Securities (including any proceeds thereof) 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 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 Notes.
Anything in this Article 8 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 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
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in excess of the amount thereof which would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, or
interest on any Note and remaining unclaimed for two years after such principal,
interest, premium, if any, or Liquidated Damages, if any, has become due and
payable shall be paid to the Company on its written request or (if then held by
the Company) shall be discharged from such trust; and the holder of such Note
shall thereafter, as a creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
Dollars or Government Securities in accordance with Section 8.02 or 8.03 hereof,
as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 hereof, the Company and the Trustee may
amend or supplement this Indenture or the Notes without the consent of any
holder of Notes:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
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(c) to provide for the assumption of the Company's obligations to
holders of the Notes in the case of a merger or consolidation;
(d) to make any change that would provide any additional rights or
benefits to the holders of the Notes or that does not adversely
affect the legal rights under this Indenture of any such holder; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the Trust
Indenture Act.
Upon the request of the Company accompanied by a resolution of the Board
of Directors of the Company authorizing the execution of any such amended or
supplemental Indenture, 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 any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations which may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture which affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
The Company and the Trustee may amend or supplement this Indenture or
the Notes or any amended or supplemental Indenture with the written consent of
the holders of at least a majority in aggregate principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange offer for the Notes), and any existing Default and its consequences
or compliance with any provision of this Indenture or the Notes may be waived
with the consent of the holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for the Notes).
Upon the request of the Company accompanied by a resolution of the Board
of Directors of the Company authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 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 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 of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or
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supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
holders of a majority in aggregate principal amount of the Notes then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Notes. However, without the consent of
each holder affected, an amendment or waiver may not (with respect to any Note
held by a non-consenting holder of Notes):
(i) reduce the principal amount of Notes whose holders must consent
to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the
Notes (other than Sections 3.09 and 4.12 hereof);
(iii) reduce the rate of or change the time for payment of interest on
any Notes;
(iv) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the holders of at
least a majority in aggregate principal amount of the Notes and
a waiver of the payment default that resulted from such
acceleration);
(v) make any Note payable in money other than that stated in the
Notes;
(vi) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of holders of Notes to
receive payments of principal of, premium, if any, or interest
on the Notes;
(vii) waive a redemption payment with respect to any Note (other than
a payment required by Sections 3.09 or 4.12 hereof);
(viii) make any change in the foregoing amendment and waiver
provisions;
(ix) modify the ranking of priority of the Notes in any manner
adverse to the holders thereof.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a holder of a Note is a continuing consent by the holder of a Note and
every subsequent holder of a Note or portion of a Note that evidences the same
debt as the consenting holder's Note, even if notation of the consent is not
made on any Note. However, any such holder of a Note or subsequent holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An
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amendment, supplement or waiver becomes effective in accordance with its terms
and thereafter binds every holder of a Note.
The Company may fix a record date for determining which holders of the
Notes must consent to such amendment, supplement 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 of Notes furnished to the Trustee prior to such solicitation pursuant to
Section 2.05 hereof or (ii) such other date as the Company shall designate.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In signing or refusing to sign any amendment or supplemental
indenture, the Trustee shall be entitled to receive and shall be fully protected
in relying upon, in addition to documents required by Section 10.04 hereof, an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that such
amendment or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company in accordance with its terms and that all conditions
precedent to such amendment or supplemental indenture have been satisfied.
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.
Section 10.02. Notices.
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in Person or mailed by first class
mail (registered or certified, return
64
<PAGE>
receipt requested), telex, telecopier or overnight air courier guaranteeing next
day delivery, to the other's address:
If to the Company:
Concord Camera Corp.
35 Mileed Way
Avenel, New Jersey 07001
Telephone No.:
Telecopier No.: (732) 815-0258
Attention: Controller
If to the Trustee:
Bankers Trust Company
Corporate Trust & Agency Group
Four Albany Street
New York, N.Y. 10006
Telephone No.: (800) 735-7777
Telecopier No.: (212) 250-6961
Attention: Corporate Market Services
The Company or the Trustee, by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to holders of
Notes) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a holder of a Note shall be mailed by
first class mail to its address shown on the register kept by the Registrar. Any
notice or communication shall also be so mailed to any Person described in TIA
Section 313(c), to the extent required by the TIA. Failure to mail a notice or
communication to a holder of a Note or any defect in it shall not affect its
sufficiency with respect to other holders of Notes.
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 of Notes, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 10.03. Communication by Holders of Notes with Other Holders of Notes.
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<PAGE>
Holders of the Notes may communicate pursuant to TIA Section 312(b) with
other holders of Notes with respect to their rights under this Indenture or the
Notes. The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
Section 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements set
forth in Section 10.05 hereof) stating that, in the opinion of the signers,
all conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
Section 10.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall 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 has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 10.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
holders of Notes. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
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<PAGE>
Section 10.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes or this Indenture or for any claim based on, in respect of, or
by reason of such obligations or their creation. Each holder of the Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the SEC that such a waiver is against public policy.
Section 10.08. Governing Law.
The internal law of the State of New York shall govern and be used to
construe this Indenture and the Notes.
Section 10.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
Section 10.10. Successors.
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successor.
Section 10.11. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 10.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 10.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
articles and sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
67
<PAGE>
SIGNATURES
Dated as of July 30, 1998 Concord Camera Corp.
(SEAL)
By: ____________________________
Name:
Title:
Attest:
________________________________
Name:
Title:
Dated as of July 30, 1998 Bankers trust company
Trustee
(SEAL)
By: ____________________________
Name:
Title:
Attest:
________________________________
Name:
Title:
<PAGE>
EXHIBIT A
(Face of Note)
11% Senior Note due 2005
No. $15,000,000
CUSIP No.
CONCORD CAMERA CORP.
promises to pay to Cede & Co.
or its registered assigns,
the principal sum of $15,000,000
on July 15, 2005.
Interest Payment Dates: January 15, April 15, July 15 and October 15, commencing
October 15, 1998.
Record Dates: January 1, April 1, July 1 and October 1 (whether or not a
Business Day). Dated: ____________, ____
CONCORD CAMERA CORP.
By: _________________________________
Title:
(SEAL)
Trustee's Certification of Authentication
This is one of the Notes
referred to in the within-
mentioned Indenture:
Bankers trust company,
as Trustee
By: _______________________________________
(Authorized Signatory)
Additional provisions of this Note are set forth on the other side of this Note.
A-1
<PAGE>
(Back of Note)
11% Senior Note due 2005
THIS GLOBAL SECURITY IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL SECURITY
MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
SECURITY MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.1
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (3) TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (4)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (5) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT (AN "IAI") THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS
SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE OR
TRANSFER AGENT) OR (6) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT (AND BASED ON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT IN EACH OF THE
FOREGOING CASES TO APPLICABLE SECURITIES LAWS OF
- - --------
1 Legend to be included only on Global Securities.
A-2
<PAGE>
ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."2
Capitalized terms used herein have the meanings assigned to them in the
Indenture (as defined below) unless otherwise indicated.
1. Interest. Concord Camera Corp., a New Jersey corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate and in the manner specified below. Interest will accrue at the rate of 11%
per annum and will be payable quarterly, in arrears, on January 15, April 15,
July 15 and October 15 of each year (each an "Interest Payment Date"),
commencing on October 15, or if any such day is not a Business Day on the next
succeeding Business Day to holders of record of the Notes at the close of
business on the immediately preceding January 1, April 1, July 1 and October 1,
whether or not a Business Day. Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the Issue Date. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. To the extent lawful, the Company shall pay
interest on overdue principal at the then applicable interest rate on the Notes;
it shall pay interest on overdue installments of interest (without regard to any
applicable grace periods) at the same rate to the extent lawful.
2. Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered holders of Notes at the
close of business on the record date next preceding the Interest Payment Date,
even if such Notes are cancelled after such record date and on or before such
Interest Payment Date. Principal, premium, Liquidated Damages, if any, and
interest on the Notes will be payable by wire transfer of immediately available
funds to the account(s) specified by the holder thereof, or, if no such
account(s) are specified, by mailing a check to each such holder's registered
address.
3. Paying Agent and Registrar. Initially, the Trustee will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice to any holder of a Note. The Company may act
in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture, dated as
of July 30, 1998 (the "Indenture"), between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code ss.ss. 77aaa-77bbbb), as in effect on the date of the Indenture. The
Notes are subject to all such terms, and holders of Notes 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 Notes. The Notes
are senior unsecured obligations of the Company limited to the sum of
$15,000,000 in aggregate principal amount of Notes.
5. Optional Redemption. The Notes will not be redeemable at the
Company's option prior to July 15, 2000. Commencing on July 16, 2000, the Notes
will be subject to redemption at the option of the Company, in whole or in part,
upon not less than 30 nor more than 60 days' notice
- - --------
2 Legend to be included only on Restricted Global Securities and
Restricted Certificated Securities.
A-3
<PAGE>
to the holders thereof, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on July 16 of the years
indicated below:
Year Percentage
2000................................... 105.000%
2001................................... 103.000%
2002 .................................. 101.000%
2003 and thereafter.................... 100.000%
Notwithstanding the provisions of Section 3.07(a) of the Indenture, in
the event of the sale by the Company prior to July 16, 2000 of its securities in
one or more Secondary Public Offerings, up to a maximum of 35% of the aggregate
principal amount of the Notes originally issued will, at the option of the
Company, be redeemable from the net cash proceeds of such secondary Public
Offerings (but only to the extent the proceeds of such Secondary Public
Offerings consist of cash or readily marketable cash equivalents) at a
redemption price equal to 107% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the redemption date,
provided that such redemption occurs within 90 days of the date of the closing
of such Secondary Public Offering.
6. Mandatory Redemption. Except as set forth in Sections 3.09 and 4.12
of the Indenture, the Company will not be required to make mandatory redemption
or sinking fund payments with respect to the Notes.
7. Repurchase at Option of holder. (a) Upon the occurrence of a Change
of Control, the Company shall be required to make an offer to repurchase on the
Change of Control Payment Date all or any part (equal to $1,000 or an integral
multiple thereof) of the outstanding Notes at a purchase price equal to 101% of
the aggregate principal amount thereof plus accrued and unpaid interest, and
Liquidated Damages, if any thereon to the Change of Control Payment Date.
Holders of Notes that are subject to an offer to purchase will receive a Change
of Control Offer from the Company prior to any related Change of Control Payment
Date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
(b) The Company shall be required when the cumulative amount of Excess
Proceeds from Asset Sales exceeds $2.0 million to offer to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the outstanding principal
amount of the Notes, plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date fixed for the closing of such offer in accordance
with the procedures set forth in Section 3.09 of the Indenture. If the aggregate
principal amount of Notes surrendered by holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis based upon their principal amount or accreted value, as applicable
(with such adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000, or integral multiples thereof shall be
purchased). Holders of Notes that are the subject of an offer to purchase will
receive an Excess Proceeds Offer from the Company prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
A-4
<PAGE>
8. Notice of Redemption. Notice of redemption shall be mailed by first
class mail at least 30 days but not more than 60 days before the redemption date
to each holder of Notes to be redeemed at its registered address. Notes may be
redeemed in part but only in whole multiples of $1,000, unless all of the Notes
held by a holder of Notes are to be redeemed. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount to be redeemed. On and after the redemption
date, interest ceases to accrue on Notes or portions of them called for
redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a holder of a Note,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a holder of a Note to pay any taxes and fees
required by law or permitted by the Indenture. Neither the Company nor the
Registrar need exchange or register the transfer of any Note or portion of a
Note selected for redemption. Also, neither the Company nor the Registrar need
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed.
10. Persons Deemed Owners. Prior to due presentment to the Trustee for
registration of the transfer of this Note, the Trustee, any Agent and the
Company shall deem and treat the Person in whose name this Note is registered as
its absolute owner for the purpose of receiving payment of principal of,
premium, Liquidated Damages, if any, and interest on this Note and for all other
purposes whatsoever, whether or not this Note is overdue, and neither the
Trustee, any Agent nor the Company shall be affected by notice to the contrary.
The registered holder of a Note shall be treated as its owner for all purposes.
11. Amendments, Supplement and Waivers. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the holders of at least a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for Notes), and any existing default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes). Without the consent of any holder of a Note, the Indenture or the
Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency; to provide for uncertificated Notes in addition to or in place of
certificated Notes; to provide for the assumption of the Company's obligations
to holders of the Notes in case of a merger or consolidation; to make any change
that would provide any additional rights or benefits to the holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such holder; 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.
However, without the consent of each holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting holder of Notes) reduce
the principal amount of Notes whose holders must consent to an amendment,
supplement or waiver; reduce the principal of or change the fixed maturity of
any Note or alter the provisions with respect to the redemption of the Notes
(other than a payment required by Section 3.09 or Section 4.12 of the
Indenture); reduce the rate of or change the time for payment of interest on any
Notes; waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the holders of at least a majority in aggregate principal amount
of the Notes and a waiver of the payment default that resulted from such
acceleration); make any Note payable in money other than that stated in the
Notes; make any change in the provisions of
A-5
<PAGE>
the Indenture relating to waivers of past Defaults or the rights of holders of
Notes to receive payments of principal of, premium, if any, or interest on the
Notes; waive a redemption payment with respect to any Note (other than a payment
required by Section 3.09 or Section 4.12 of the Indenture); make any change in
the foregoing amendment and waiver provisions; or modify the ranking of priority
of the Notes in any manner adverse to the holders thereof, in each case in any
manner that adversely affects the rights of any Holder or the Trustee.
12. Defaults and Remedies. Events of Default include: default for 30
days in payment when due of interest on or Liquidated Damages, if any, with
respect to the Notes; default in payment when due of principal or premium, if
any, on the Notes at maturity, upon redemption or otherwise; failure by the
Company to perform or comply with the provisions described under Sections 4.07,
4.08, 4.09, 4.12 or 5.01 of the Indenture; failure by the Company for 30 days
after notice from the Trustee or the holders of at least 25% in principal amount
of the Notes then outstanding to comply with its other agreements in the
Indenture or the Notes; default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or
is created after the Issue Date, which default (x) is caused by a Payment
Default, and the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness of the Company or any
Significant Subsidiary under which there has been a Payment Default or the
maturity of which has been accelerated as provided in clause (y), aggregates
$2.0 million or more or (y) results in the acceleration (which acceleration has
not been rescinded) of such Indebtedness prior to its express maturity and 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 $2.0 million or more;
failure by the Company or any of its Significant Subsidiaries to pay final
judgments (other than any judgment as to which a reputable insurance company has
accepted full liability in writing) aggregating in excess of $2.0 million which
judgments are not paid, discharged or stayed within 45 days after their entry;
certain events of bankruptcy or insolvency with respect to the Company or any of
its Significant Subsidiaries; and if any provision of the Indenture shall cease
to be in full force and effect or shall cease to give the secured parties the
liens, rights, powers and privileges to be created thereby. If any Event of
Default occurs and is continuing, the Trustee or the holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately. Upon such declaration, the principal of, premium,
if any, and accrued and unpaid interest and Liquidated Damages, if any, on the
Notes shall be due and payable immediately. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries,
the foregoing amount shall ipso facto become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. The holders of a majority in
aggregate principal amount of the Notes then outstanding, by notice to the
Trustee, may on behalf of the holders of all of the Notes, waive any existing
Default or Event of Default and its consequences under the Indenture, except a
continuing Default or Event of Default in the payment of interest or Liquidated
Damages or premium on, or the principal of, the Notes.
13. Trustee Dealings with Company. The Trustee under the Indenture, 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
A-6
<PAGE>
not Trustee; however, if 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.
14. No Personal Liabilities of Directors, Officers, Employees and
Stockholders. No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of the Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
15. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
holder of a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. Additional Rights of Holders of Transfer Restricted Securities. In
addition to the rights provided to holders of Notes under the Indenture, holders
of Transfer Restricted Securities shall have all the rights set forth in the
Registration Rights Agreement.
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to holders of Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
The Company will furnish to any holder of a Note upon written request
and without charge a copy of the Indenture. Request may be made to:
Concord Camera Corp.
35 Mileed Way
Avenel, New Jersey 07001
Attention: Controller
A-7
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date: ______________
Your Signature: _______________________________
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by
the Company pursuant to Section 3.09 or Section 4.12 of the Indenture check the
appropriate box:
[ ] Section 3.09 [ ] Section 4.12
If you want to have only part of the Note purchased by the Company
pursuant to Section 3.09 or Section 4.12 of the Indenture, state the amount you
elect to have purchased:
$ _______________
Date:____________
Your Signature: _______________________________
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee.
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY
The following exchanges of a part of this Global Security have
been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Security authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Note
Date of Exchange this Global Security this Global Security (or increase) Custodian
---------------- -------------------- -------------------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Concord Camera Corp.
35 Mileed Way.
Avenel, New Jersey 07001
Attention: Controller
Bankers Trust Company
Corporate Trust & Agency Group
Four Albany Street
New York, N.Y. 10006
Attention: Corporate Market Services
Re: 11% Senior Notes due 2005
-------------------------
Reference is hereby made to the Indenture, dated as of July 30, 1998
(the "Indenture"), between Concord Camera Corp., as issuer (the "Company"), and
Bankers Trust Company, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ (the "Transfer"), to __________ (the
"Transferee"), as further specified in Annex A hereto. In connection with the
Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] Check if Transferee will take delivery of Book-Entry Interests in the
Global Security or Certificated Securities Pursuant to Rule 144A. The Transfer
is being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the Book-Entry
Interests or Certificated Securities are being transferred to a Person that the
Transferor reasonably believes is purchasing the Book-Entry Interests or
Certificated Securities for its own account, or for one or more accounts with
respect to which such Person exercises sole investment discretion, and such
Person and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and
such Transfer is in compliance with any applicable blue sky securities laws of
any state of the United States. Upon consummation of the proposed Transfer in
accordance with the terms of the Indenture, the transferred Book-Entry Interest
or Certificated Security will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Global Security and/or
the Certificated Security and in the Indenture and the Securities Act.
2. [ ] Check and complete if Transferee will take delivery of Book-Entry
Interests in the Global Security or Certificated Securities pursuant to any
provision of the Securities Act other than Rule 144A. The Transfer is being
effected in compliance with the transfer restrictions applicable to Book-Entry
Interests in the Restricted Global Security and Restricted Certificated
Securities and pursuant to and in accordance with the Securities Act and any
applicable blue sky securities laws of any State of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected to the Company or a subsidiary thereof,
B-1
<PAGE>
or
(b) [ ] such Transfer is being effected pursuant to an effective registration
statement under the Securities Act;
or
(c) [ ] such Transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A, and the
Transferor hereby further certifies that the Transfer complies with the transfer
restrictions applicable to Book-Entry Interests in a Restricted Global Security
or Restricted Certificated Securities and the requirements of the exemption
claimed, which certification is supported by (1) if the transfer is being made
to an Institutional Accredited Investor and effected pursuant to an exemption
from the registration requirements of the Securities Act other than Rule 144A
under the Securities Act, Rule 144 under the Securities Act or Rule 904 under
the Securities Act, a certificate executed by the Transferee in the form of
Exhibit D to the Indenture and (2) an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that (1) such Transfer is in compliance with
the Securities Act and (2) such Transfer complies with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the transferred
Book-Entry Interest or Certificated Security will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the Restricted
Global Security and/or the Restricted Certificated Securities and in the
Indenture and the Securities Act.
3. [ ] Check if Transferee will take delivery of Book-Entry Interests in the
Unrestricted Global Security or in Certificated Securities that do not bear the
Private Placement Legend. (i) The Transfer is being effected pursuant to and in
compliance with an exemption from the registration requirements of the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred Book-Entry Interests or
Certificated Securities will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Security or Restricted Certificated Securities bearing the Private Placement
Legend and in the Indenture.
This certificate and the statements contained herein are made for your benefit.
______________________________________
[NAME OF TRANSFEROR]
By: __________________________________
Name:
Title:
Dated: __________________, _____
B-2
<PAGE>
Corporate Notary
State of _____________________)
) SS.
County of ____________________)
On this ________day of ___________________, ______, before me
personally came ____________________, to me known, who being by me duly sworn,
she/he (name)
did depose and say that is the _____________________ of ____________________,
(title) (name of entity)
and the ______________described in, which executed the above Certificate of
(entity)
Transfer, and that she/he signed her/his name thereto by the authority of
the _____________________________________________________.
(e.g.. board of directors of the Corporation)
____________________________________
Notary Public
Non-corporate Notary:
State of _____________________)
) SS.
County of ____________________)
On this ________day of ___________________, ______, before me
personally came ____________________, to me known to be the individual described
in, and who executed the above (name) Certificate of Transfer and acknowledged
that she/he executed the same.
____________________________________
Notary Public
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] Book-Entry Interests in the Global Security:
(i) [ ] 144A Global Security (CUSIP ), or
(ii) [ ] IAI Global Security (CUSIP ); or
(b) [ ] Restricted Certificated Securities.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] Book-Entry Interests in the:
(i) [ ] 144A Global Security (CUSIP ), or
(ii) [ ] IAI Global Security (CUSIP ); or
(iii) [ ] Unrestricted Global Security (CUSIP ); or
(b) [ ] Restricted Certificated Securities; or
(c) [ ] Certificated Securities that do not bear the Private Placement Legend,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Concord Camera Corp.
35 Mileed Way
Avenel, New Jersey 07001
Attention: Controller
Bankers Trust Company
Corporate Trust & Agency Group
Four Albany Street
New York, N.Y. 10006
Attention: Corporate Market Services
Re: 11% Senior Notes due 2005
-------------------------
(CUSIP ______________________)
Reference is hereby made to the Indenture, dated as of July 30, 1998
(the "Indenture"), between Concord Camera Corp., as issuer (the "Company") and
Bankers Trust Company, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
_________________________ , (the "Holder") owns and proposes to
exchange the Note[s] or interest in such Note[s] specified herein, in the
principal amount of $____________ (the "Exchange"). In connection with the
Exchange, the Holder hereby certifies that:
1. Exchange of Restricted Certificated Securities or Restricted Book-Entry
Interests for Certificated Securities that do not bear the Private Placement
Legend or Unrestricted Book- Entry Interests
(a) [ ] Check if Exchange is from Restricted Book-Entry Interest to
Unrestricted Book-Entry Interest. In connection with the Exchange of the
Holder's Restricted Book-Entry Interest for Unrestricted Book-Entry Interests in
an equal principal amount, the Holder hereby certifies (i) the Unrestricted
Book-Entry Interests are being acquired for the Holder's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Global Security and pursuant to and in accordance
with the United States Securities Act of 1933, as amended (the "Securities
Act"), (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Unrestricted Book-Entry Interests are being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(b) [ ] Check if Exchange is from Restricted Book-Entry Interest to
Certificated Securities that do not bear the Private Placement Legend. In
connection with the Exchange of the Holder's Restricted Book-Entry Interests for
Certificated Securities that do not bear the Private Placement Legend, the
Holder hereby certifies (i) the Certificated Securities are being acquired for
the Holder's own account without transfer, (ii) such Exchange has been effected
in compliance with the transfer restrictions applicable to the Restricted Global
Security
C-1
<PAGE>
and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Certificated Securities are being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(c) [ ] Check if Exchange is from Restricted Certificated Securities to
Unrestricted Book-Entry Interests. In connection with the Holder's Exchange of
Restricted Certificated Securities for Unrestricted Book-Entry Interests, (i)
the Unrestricted Book-Entry Interests are being acquired for the Holder's own
account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Certificated Securities
and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Unrestricted Book-Entry Interests are being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
(d) [ ] Check if Exchange is from Restricted Certificated Securities to
Certificated Securities that do not bear the Private Placement Legend. In
connection with the Holder's Exchange of a Restricted Certificated Security for
Certificated Securities that do not bear the Private Placement Legend, the
Holder hereby certifies (i) the Certificated Securities that do not bear the
Private Placement Legend are being acquired for the Holder's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to Restricted Certificated Securities and pursuant to
and in accordance with the Securities Act , (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the Certificated
Securities are being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
2. Exchange of Restricted Certificated Securities or Restricted Book-Entry
Interests for Restricted Certificated Securities or Restricted Book-Entry
Interests
(a) [ ] Check if Exchange is from Restricted Book-Entry Interests to
Restricted Certificated Security. In connection with the Exchange of the
Holder's Restricted Book-Entry Interest for Restricted Certificated Securities
with an equal principal amount, (i) the Restricted Certificated Securities are
being acquired for the Holder's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Security and pursuant to and in accordance
with the Securities Act, and in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Exchange in accordance with the terms of the Indenture, the Restricted
Certificated Securities issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted
Certificated Securities and in the Indenture and the Securities Act.
(b) [ ] Check if Exchange is from Restricted Certificated Securities to
Restricted Book-Entry Interests. In connection with the Exchange of the Holder's
Restricted Certificated Security for Restricted Book-Entry Interests in the
[CHECK ONE] o 144A Global Security, o IAI Global Security with an equal
principal amount, (i) the Restricted Book-Entry Interests are being acquired for
the Holder's own account without transfer and (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the
Restricted Certificated Security and pursuant to and in accordance with the
Securities Act, and in compliance with any applicable blue sky securities laws
of any state of the United States. Upon
C-2
<PAGE>
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the Book- Entry Interests issued will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Security and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made
for your benefit.
_________________________
[Insert Name of Holder]
By: ____________________
Name:
Title:
Dated: ______________________,
C-3
<PAGE>
Corporate Notary
State of _____________________)
) SS.
County of ____________________)
On this ________day of ___________________, ______, before me
personally came ____________________, to me known, who being by me duly sworn,
she/he (name)
did depose and say that is the _____________________ of ____________________,
(title) (name of entity)
and the ______________described in, which executed the above Certificate of
(entity)
Transfer, and that she/he signed her/his name thereto by the authority of
the _____________________________________________________.
(e.g.. board of directors of the Corporation)
____________________________________
Notary Public
Non-corporate Notary:
State of _____________________)
) SS.
County of ____________________)
On this ________day of ___________________, ______, before me
personally came ____________________, to me known to be the individual described
in, and who executed the above (name) Certificate of Transfer and acknowledged
that she/he executed the same.
____________________________________
Notary Public
C-4
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Concord Camera Corp.
35 Mileed Way
Avenel, New Jersey 07001
Attention: Controller
Bankers Trust Company
Corporate Trust & Agency Group
Four Albany Street
New York, N.Y. 10006
Attention: Corporate Market Services
Re: 11% Senior Notes due 2005
-------------------------
Reference is hereby made to the Indenture, dated as of July
30, 1998 (the "Indenture"), between Concord Camera Corp., as issuer (the
"Company") and Bankers Trust Company, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes or
any interest therein is subject to certain restrictions and conditions set forth
in the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A)(1) to a person who we reasonably
believe is a qualified institutional buyer (as defined in Rule 144A under the
Securities Act) in a transaction meeting the requirements of Rule 144A, (2) in a
transaction meeting the requirements of Rule 144 under the Securities Act, (3)
outside the United States to a person that is not a U.S. person (as defined in
Rule 902 under the Securities Act) in a transaction meeting the requirements of
Rule 904 under the Securities Act, (4) to an institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) that, prior to such transfer, furnishes to you a signed letter
containing certain representations and agreements relating to the Notes, or (5)
in accordance with another exemption from the registration requirements of the
Securities Act (in the case of 2, 3, 4 or 5, based upon an opinion of counsel if
the Company or the Trustee so requests), (B) to the Company or (C) pursuant to
an effective registration statement and, in each case, in accordance with any
applicable securities laws of any state of the United States or any other
applicable jurisdiction, and we further agree to provide to any person
D-1
<PAGE>
purchasing the Certificated Securities or interests therein from us in a
transaction meeting the requirements of clauses (A) through (C) of this
paragraph a notice advising such purchaser that resales thereof are restricted
as stated herein.
3. We understand that, on any proposed resale of the Notes or
any interests therein, we will be required to furnish to you and the Company
such certifications, legal opinions and other information as you and the Company
may reasonably require to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect. We further understand that any
subsequent transfer by us of the Notes or interests therein acquired by us must
be effected through one of the Purchaser.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes or interests therein for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
_________________________________
[Insert Name of Accredited
Investor]
By: _____________________________
Name:
Title:
Dated: _________________________,
D-2
<PAGE>
Corporate Notary
State of _____________________)
) SS.
County of ____________________)
On this ________day of ___________________, ______, before me
personally came ____________________, to me known, who being by me duly sworn,
she/he (name)
did depose and say that is the _____________________ of ____________________,
(title) (name of entity)
and the ______________described in, which executed the above Certificate of
(entity)
Transfer, and that she/he signed her/his name thereto by the authority of
the _____________________________________________________.
(e.g.. board of directors of the Corporation)
____________________________________
Notary Public
Non-corporate Notary:
State of _____________________)
) SS.
County of ____________________)
On this ________day of ___________________, ______, before me
personally came ____________________, to me known to be the individual described
in, and who executed the above (name) Certificate of Transfer and acknowledged
that she/he executed the same.
____________________________________
Notary Public
D-3
<PAGE>
Exhibit 4.4
================================================================================
REGISTRATION RIGHTS AGREEMENT
$15,000,000
11% Senior Notes due 2005
Dated as of July 30, 1998
by and among
CONCORD CAMERA CORP.
and
DREYFUS HIGH YIELD STRATEGIES FUND
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made
and entered into as of July 30, 1998 by and among Concord Camera Corp., a New
Jersey corporation (the "Company"), and Dreyfus High Yield Strategies Fund (the
"Purchaser"), who has agreed to purchase the Company's 11% Senior Notes due 2005
(the "Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement,
dated July 30, 1998 (the "Purchase Agreement"), by and between the Company and
the Purchaser. In order to induce the Purchaser to purchase the Notes, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Purchaser set forth in Section 8 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Business Day: Any day except a Saturday, Sunday or other day
in the City of New York, or in the city of the corporate trust office of the
Trustee, on which banks are authorized to close.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (b) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Notes tendered by Holders
thereof pursuant to the Exchange Offer.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Notes: The Company's 11% Series B Senior Notes due
2005 to be issued pursuant to the Indenture.
Exchange Offer: The registration by the Company under the Act
of the Exchange Notes pursuant to the Exchange Offer Registration Statement
pursuant to which the Company shall offer the Holders of all outstanding
Transfer Restricted Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities for Exchange Notes in an aggregate principal
amount equal to the aggregate principal amount of the Transfer Restricted
Securities tendered in such exchange offer by such Holders.
<PAGE>
Exchange Offer Registration Statement: The Registration
Statement relating to the Exchange Offer, including the related Prospectus.
Holders: As defined in Section 2 hereof.
Indenture: The Indenture, dated the Closing Date, between the
Company and Bankers Trust Company, as trustee (the "Trustee"), pursuant to which
the Senior Notes are to be issued, as such Indenture is amended or supplemented
from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the
Senior Notes.
NASD: National Association of Securities Dealers, Inc.
Offering Memorandum: The offering memorandum, dated July 30,
1998, relating to the Company and the Notes.
Person: An individual, partnership, corporation, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration
Statement at the time such Registration Statement is declared effective, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the
Company relating to (a) an offering of Exchange Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) which is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Senior Notes: The Notes and the Exchange Notes.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note until the earliest
to occur of (i) the date on which such Note is exchanged by a person for an
Exchange Note in the Exchange Offer, (ii) the date on which such Note is
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iii) the date on which such Note is
distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
2
<PAGE>
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted
Securities (each, a "Holder") whenever such Person owns Transfer Restricted
Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
a) Unless the Exchange Offer shall not be permitted by
applicable federal law (after the procedures set forth in Section 6(a)(i) below
have been complied with), the Company shall (i) cause to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 90 days after the Closing Date, the Exchange Offer Registration Statement,
(ii) use its best efforts to cause such Exchange Offer Registration Statement to
become effective at the earliest possible time, but in no event later than 150
days after the Closing Date, (iii) in connection with the foregoing, (A) file
all pre-effective amendments to such Exchange Offer Registration Statement as
may be necessary in order to cause such Exchange Offer Registration Statement to
become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings, if any, in connection with the registration and
qualification of the Exchange Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting registration of the Exchange Notes to be offered in
exchange for the Notes that are Transfer Restricted Securities.
b) The Company shall cause the Exchange Offer Registration
Statement to be effective continuously, and shall keep the Exchange Offer open,
for a period of not less than the minimum period required under applicable
federal and state securities laws to Consummate the Exchange Offer; provided,
however, that in no event shall such period be less than 20 Business Days. The
Company shall cause the Exchange Offer to comply with all applicable federal and
state securities laws. No securities other than the Senior Notes shall be
included in the Exchange Offer Registration Statement. The Company shall use its
best efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 Business Days thereafter. If after such
Exchange Offer Registration Statement is initially declared effective by the
Commission, the Exchange Offer or the issuance of the Exchange Notes is
interfered by any stop order, injunction or other order or requirement of the
Commission or any other governmental agency or court, such Exchange Offer
Registration Statement shall be deemed not to have become effective for purposes
of this Agreement until such time as any such stop order, injunction or other
order or requirement of the Commission or any other governmental agency or court
is removed.
c) The Company shall use its best efforts to keep the Exchange
Offer Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below, for a period expiring on the
earlier of (i) the date that all Holders of Transfer Restricted Securities have
exchanged such securities pursuant to the Exchange Offer and (ii) 365 days from
the date on which the Exchange Offer Registration Statement is declared
effective.
3
<PAGE>
SECTION 4. SHELF REGISTRATION
a) Shelf Registration. If (i) the Company is not required to
file the Exchange Offer Registration Statement with respect to the Senior Notes
or permitted to Consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy (after the procedures set forth
in Section 6(a)(i) below have been complied with) or (ii) any Holder of Transfer
Restricted Securities notifies the Company within 20 Business Days following the
Consummation of the Exchange Offer that (A) such Holder is prohibited by law or
Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder, then the Company shall:
(x) cause to be filed on or prior to (1) in the case
of a Registration Statement filed pursuant to clause (a)(i) above, 30
days after the date on which the Company determines that it is not
required to file the Exchange Offer Registration Statement and in any
event, within 150 days after the Closing Date and (2) in the case of a
Registration Statement filed pursuant to clause (a)(ii) above, 30 days
after the date on which the Company receives the notice specified in
clause (a)(ii) above, a shelf registration statement pursuant to Rule
415 under the Act, (which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration
Statement")), relating to all Transfer Restricted Securities, the
Holders of which shall have provided the information required pursuant
to Section 4(b) hereof, and
(y) use its best efforts to cause such Shelf
Registration Statement to become effective on or prior to (1) in the
case of a Registration Statement filed pursuant to clause (a)(i) above,
90 days after the date on which the Company becomes obligated to file
such Shelf Registration Statement (and in any event, within 180 days
after the Closing Date), and (2) in the case of a Registration
Statement filed pursuant to clause (a)(ii) above, 90 days after the
date on which the Company receives the notice specified in clause (a)
(ii) above.
If, after the Company has filed an Exchange Offer Registration Statement which
satisfies the requirements of Section 3(a) above, the Company is required to
file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law, then the filing of
the Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above. Such an event shall have no effect on the
requirements of this clause (y), or on the Effectiveness Target Date as defined
in Section 5 below.
The Company shall use its best efforts to keep the Shelf Registration
Statement referred to in this Section 4(a) continuously effective, supplemented
and amended as required by the provisions of Sections 6(b) and (c) hereof for a
period expiring on the earlier of (i) the date that all Holders of Transfer
Restricted Securities have sold such securities and (ii) 365 days from the date
on which the Shelf Registration Statement is declared effective, provided
however, the Company shall have the option of suspending the effectiveness of
the shelf registration statement for periods of up to an aggregate of 90 days in
any calendar year if the Board of Directors of the Company determines that
compliance with the disclosure obligations necessary to maintain the
effectiveness of the shelf registration statement at such time could reasonably
be expected to have a material adverse effect on the Company or a pending
corporate transaction of the Company.
(b) Provision by Holders of Certain Information in Connection
with the Shelf Registration Statement. No Holder of Transfer Restricted
Securities may include any of its Transfer
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Restricted Securities in any Shelf Registration Statement pursuant to this
Agreement unless and until such Holder furnishes to the Company in writing,
within 20 Business Days after receipt of a request therefor, such information
specified in item 507 of Regulation S-K under the Act for use in connection with
any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. No Holder of Transfer Restricted Securities shall be entitled
to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder
shall have provided all such information required to be provided by such Holder
for inclusion therein. Each Holder as to which any Shelf Registration Statement
is being effected agrees to furnish promptly to the Company, for so long as the
Registration Statement is effective, all information required to be disclosed in
order to make the information previously furnished to the Company by such Holder
not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
The Company understands that holders of Transfer Restricted
Securities will suffer damages if the Company fails to fulfill its obligations
under Sections 3 or 4 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, if (i) the Company fails to
file any of the Registration Statements required by this Agreement on or before
the date specified herein for such filing in this Agreement, (ii) any of such
Registration Statements is not declared effective by the Commission on or prior
to the date specified for such effectiveness (the "Effectiveness Target Date"),
(iii) the Company fails to Consummate the Exchange Offer within 30 Business Days
after the Exchange Offer Registration Statement is declared effective by the
Commission or (iv) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in this Agreement without being succeeded
immediately by a post effective amendment to such Registration Statement that
cures such failure and that is itself declared effective within a five Business
Day period after filing such post effective amendment (each such event referred
to in clauses (i) through (iv) above, a "Registration Default"), then commencing
on the day following the date on which such Registration Default occurs, the
Company agrees to pay to each Holder of Transfer Restricted Securities, for the
first 90-day period immediately following the occurrence of such Registration
Default, liquidated damages in an amount equal to $.05 per week per $1,000
principal amount of Notes constituting Transfer Restricted Securities held by
such Holder for each week or pro rata for a portion of each week thereof that
the Registration Default continues. The amount of liquidated damages payable to
each Holder shall increase by an additional $.05 per week per $1,000 principal
amount of Notes constituting Transfer Restricted Securities held by such Holder
for each subsequent 90-day period until all Registration Defaults have been
cured, up to a maximum of $.50 per week per $1,000 principal amount of Notes
constituting Transfer Restricted Securities held by such Holder.
All accrued liquidated damages with respect to Transfer
Restricted Securities registered to Cede & Co., as nominee of the Depository
Trust Company ("DTC") shall be paid to Cede & Co., as nominee of DTC by wire
transfer of immediately available funds or by federal funds check on each
Interest Payment Date. All accrued liquidated damages with respect to Transfer
Restricted Securities registered to Holders other than Cede & Co. as nominee of
DTC shall be paid by the Company on each Interest Payment Date to each such
Holder by wire transfer of immediately available funds or by mailing checks to
such Holder's registered address on the books of the Company. All obligations of
the Company set forth in the preceding paragraph that are outstanding with
respect to any Transfer Restricted Security at the time such security ceases to
be a Transfer Restricted Security shall survive until such time as all such
obligations with respect to such security shall have been satisfied in full.
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SECTION 6. REGISTRATION PROCEDURES
a) Exchange Offer Registration Statement. In connection with
the Exchange Offer, the Company shall comply with all applicable provisions of
Section 6(c) below, shall use its best efforts to effect such exchange and shall
comply with all of the following provisions:
(i) If, following the date hereof there has been
published a change in Commission policy with respect to exchange offers
such as the Exchange Offer, such that in the reasonable opinion of
counsel to the Company there is a substantial question as to whether
the Exchange Offer is permitted by applicable federal law, the Company
hereby agrees to seek a no-action letter or other favorable decision
from the Commission allowing the Company to Consummate an Exchange
Offer for such Transfer Restricted Securities. The Company hereby
agrees to pursue the issuance of such a decision to the Commission
staff level. In connection with the foregoing, the Company hereby
agrees to take such other actions as are requested by the Commission or
otherwise required in connection with the issuance of such decision,
including without limitation (A) participating in telephonic
conferences with the Commission, (B) delivering to the Commission staff
an analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that such an
Exchange Offer should be permitted and (C) diligently pursuing a
resolution by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange
Offer pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement)
to the effect that (A) it is not an affiliate of the Company, (B) it is
not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes to be issued in the Exchange Offer
and (C) it is acquiring the Exchange Notes in its ordinary course of
business. Each Holder hereby acknowledges and agrees that any Holder
using the Exchange Offer to participate in a distribution of the
securities to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on
the position of the Commission enunciated in Morgan Stanley and Co.,
Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including, if applicable, any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a
secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507
of Regulation S-K if the resales are of Exchange Notes obtained by such
Holder in exchange for Notes acquired by such Holder directly from the
Company.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a supplemental letter
to the Commission (A) stating that the Company is registering the
Exchange Offer in reliance on the position of the Commission enunciated
in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley and Co., Inc. (available June 5, 1991) and, if applicable, any
no-action letter obtained pursuant to clause (i) above, (B) including a
representation that the Company has not entered into any arrangement or
understanding with any Person to distribute the Exchange Notes to be
received in the Exchange
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Offer and that, to the best of the Company's information and belief,
each Holder participating in the Exchange Offer is acquiring the
Exchange Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Exchange Notes received in the Exchange Offer and
(C) any other undertaking or representation required by the Commission
as set forth in any no-action letter obtained pursuant to clause (i)
above.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof.
(c) General Provisions. In connection with any Registration
Statement and any related Prospectus required by this Agreement to permit the
sale or resale of Transfer Restricted Securities, the Company shall:
(i) use its best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not
to be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company shall file
promptly an appropriate amendment to such Registration Statement, (1)
in the case of clause (A), correcting any such misstatement or
omission, and (2) in the case of either clause (A) or (B), use its best
efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such
amendments and post-effective amendments to the Registration Statement
as may be necessary to keep the Registration Statement effective for
the applicable period set forth in Section 3 or 4 hereof, or such
shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold; cause
the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with Rules 424 and 430A, as
applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus;
(iii) advise the underwriters, if any, and selling
Holders promptly and, if requested by such Persons, confirm such advice
in writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of
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any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement in order
to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Company shall use its best
efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(v) make available to each selling Holder named in any
Registration Statement or Prospectus and each of the underwriters in
connection with such sale, if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein
or any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), substantially in the
form proposed to be filed, which documents will be subject to the
review and comment of such Holders and underwriters in connection with
such sale, if any, for a period of at least five Business Days, and the
Company will not file any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which the selling Holders of the Transfer Restricted Securities covered
by such Registration Statement or the underwriters in connection with
such sale, if any, shall reasonably object within five Business Days
after the receipt thereof. A selling Holder or underwriter, if any,
shall be deemed to have reasonably objected to such filing if such
Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement
or omission or fails to comply with the applicable requirements of the
Act;
(vi) promptly upon the filing of any document that is to
be incorporated by reference into a Registration Statement or
Prospectus, make available copies of such document to the selling
Holders and to the underwriter(s) in connection with such sale, if any,
make the Company's representatives available for discussion of such
document and other customary due
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<PAGE>
diligence matters, and include such information in such document prior
to the filing thereof as such selling Holders or underwriter(s), if
any, reasonably may request;
(vii) make available at reasonable times for inspection
by the selling Holders, any underwriter participating in any
disposition pursuant to such Registration Statement and any attorney or
accountant retained by such selling Holders or any of such
underwriters, all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney or accountant in
connection with such Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior to its
effectiveness; provided that any person to whom information is provided
under this clause (vi) agrees in writing to maintain the
confidentiality of such information to the extent such information is
not in the public domain;
(viii) if requested by any selling Holders or the
underwriters in connection with such sale, if any, promptly include in
any Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such selling
Holders and underwriter(s), if any, may reasonably request to have
included therein, including, without limitation, information with
respect to the principal amount of Transfer Restricted Securities being
sold to such underwriters, the purchase price being paid therefor and
any other terms of the offering of the Transfer Restricted Securities
to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as
practicable after the Company is notified of the matters to be included
in such Prospectus supplement or post-effective amendment;
(ix) use best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be rated with the
appropriate rating agencies if so requested by the Holders of a
majority in aggregate principal amount of Senior Notes covered thereby
or the underwriters, if any;
(x) furnish to each selling Holder and each of the
underwriters in connection with such sale, if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, and make available all
documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(xi) deliver to each selling Holder and each of the
underwriters, if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company hereby
consents to the use of the Prospectus and any amendment or supplement
thereto by each of the selling Holders and each of the underwriters, if
any, in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(xii) enter into such agreements (including, unless not
required pursuant to Section 10 hereof, an underwriting agreement) and
make such representations and warranties and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this
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Agreement as may be reasonably requested by any Holder of Transfer
Restricted Securities or underwriter in connection with any sale or
resale pursuant to any Registration Statement contemplated by this
Agreement, and in such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an
Underwritten Registration, the Company shall:
(A) furnish to each selling Holder and each
underwriter, if any, upon the effectiveness of the Shelf
Registration Statement or upon the Consummation of the
Exchange Offer, as the case may be:
(1) a certificate, dated such date signed by (x) the
President or any Vice President and (y) a principal
financial or accounting officer of the Company,
confirming with respect to the Prospectus or any
purchase or underwriting agreement and the Transfer
Restricted Securities, as of the date thereof, the
matters set forth in paragraphs (i), (ii), (iii) and
(iv) of Section 6(a) of the Purchase Agreement and
such other matters as the Holders and/or
underwriter(s) may reasonably request;
(2) an opinion, dated such date, covering (i) due
authorization and enforceability of the Notes and the
Exchange Notes, (ii) a statement to the effect that
such counsel has participated in conferences with
officers and other representatives of the Company and
representatives of the independent public accountants
for the Company and has considered the matters
required to be stated therein and the statements
contained therein, although such counsel has not
independently verified the accuracy, completeness or
fairness of such statements; and that such counsel
advises that, on the basis of the foregoing (relying
as to materiality to a large extent upon facts
provided to such counsel by officers and other
representatives of the Company and without
independent check or verification), no facts came to
such counsel's attention that caused such counsel to
believe that the Registration Statement, at the time
such Registration Statement or any post-effective
amendment thereto became effective contained an
untrue statement of a material fact or omitted to
state a material fact required to be stated therein
or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date contained an
untrue statement of a material fact or omitted to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances
under which they were made, not misleading and (iii)
such other matters of the type customarily covered in
opinions of counsel for an issuer in connection with
similar securities offerings, as may reasonably be
requested by such parties. Without limiting the
foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or
fairness of the financial statements, notes and
schedules and other financial, statistical and
accounting data included in any Registration
Statement contemplated by this Agreement or the
related Prospectus; and
(3) if the registration is a registration in which
securities of the Company are sold to an underwriter
for reoffering to the public, obtain a customary
comfort letter, dated as of the date of effectiveness
of the Registration Statement,
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addressed to the Board of Directors of the Company or
any underwriter from the Company's independent
accountants, in the customary form and covering
matters of the type customarily covered in comfort
letters to boards of directors in underwritten
offerings;
(B) set forth in full or incorporate by
reference in the underwriting agreement, if any, in connection
with any sale or resale pursuant to any Shelf Registration
Statement the indemnification provisions and procedures of
Section 8 hereof with respect to all parties to be indemnified
pursuant to said Section; and
(C) deliver such other documents and
certificates as may be reasonably requested by such parties to
evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting agreement
or other agreement entered into by the Company pursuant to
this clause (xii), if any.
The above shall be done at each closing under such
underwriting or similar agreement, as and to the extent required thereunder, and
if at any time the representations and warranties of the Company contemplated in
(A)(1) above cease to be true and correct, the Company shall so advise the
underwriters, if any, and selling Holders promptly and if requested by such
Persons, shall confirm such advice in writing;
(xiii) prior to any public offering of Transfer
Restricted Securities, cooperate with the selling Holders, the
underwriters, if any, and their respective counsel in connection with
the registration and qualification of the Transfer Restricted
Securities under the securities or Blue Sky laws of such Jurisdictions
as the selling Holders or underwriters, if any, may request and do any
and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the applicable Registration Statement; provided, however,
that the Company shall not be required to register or qualify as a
foreign corporation where it is not now so qualified or to take any
action that would subject it to the service of process in suits or to
taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xiv) issue, upon the request of any Holder of Notes
covered by any Shelf Registration Statement contemplated by this
Agreement, Exchange Notes having an aggregate principal amount equal to
the aggregate principal amount of Notes surrendered to the Company by
such Holder in exchange therefor or being sold by such Holder; such
Exchange Notes to be registered in the name of such Holder or in the
name of the purchasers of such Exchange Notes; in return, the Notes
held by such Holder shall be surrendered to the Company for
cancellation;
(xv) in connection with any sale of Transfer
Restricted Securities that will result in such securities no longer
being Transfer Restricted Securities, cooperate with the selling
Holders and the underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the Holders or the underwriters, if
any, may request at least two Business Days prior to such sale of
Transfer Restricted Securities;
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(xvi) use its best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof
or the underwriters, if any, to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso contained in
clause (xiii) above;
(xvii) if any fact or event contemplated by Section
6(c)(iii)(D) above shall exist or have occurred, prepare a supplement
or post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(xviii) provide a CUSIP number for all Transfer
Restricted Securities not later than the effective date of a
Registration Statement covering such Transfer Restricted Securities and
provide the Trustee under the Indenture with printed certificates for
the Transfer Restricted Securities which are in a form eligible for
deposit with DTC;
(xix) cooperate and assist in any filings required to
be made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the
rules and regulations of the NASD, and use its best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xx) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act);
(xxi) cause the Indenture to be qualified under the
TIA not later than the effective date of the first Registration
Statement required by this Agreement, and, in connection therewith,
cooperate with the Trustee and the Holders to effect such changes to
the Indenture as may be required for such Indenture to be so qualified
in accordance with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to be
so qualified in a timely manner;
(xxii) cause all Transfer Restricted Securities covered
by the Registration Statement to be listed on each securities exchange
on which similar securities issued by the Company are then listed if
requested by the Holders of a majority in aggregate principal amount of
Notes or the managing underwriters, if any; and
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(xxiii) provide promptly to each Holder upon written
request each document filed with the Commission pursuant to the
requirements of Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition
of a Transfer Restricted Security that, upon receipt of any notice from the
Company of the existence of any fact of the kind described in Section
6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(xvii) hereof, or until it is advised in
writing (the "Advice") by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated by reference in the Prospectus. If so directed by the Company,
each Holder will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Transfer Restricted Securities that was current at the
time of receipt of such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including
the date when each selling Holder covered by such Registration Statement shall
have received the copies of the supplemented or amended Prospectus contemplated
by Section 6(c)(xvii) hereof or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made with the NASD (including, if applicable, the fees and expenses of any
"qualified independent underwriter" and its counsel, as may be required by the
rules and regulations of the NASD)); (ii) all fees and expenses of compliance
with federal securities and state Blue Sky or securities laws; (iii) all
expenses of printing (including printing certificates for the Exchange Notes and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company and, in accordance with
Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all
application and filing fees in connection with listing the Senior Notes on a
national exchange or automated quotation system if required hereunder; (vi) all
fees for obtaining any ratings of the Notes by rating agencies; and (vii) all
fees and disbursements of independent certified public accountants of the
Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
(b) In connection with any Registration Statement required by
this Agreement, the Company will reimburse the Holders of Transfer Restricted
Securities being tendered in the Exchange Offer and/or resold pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees
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and disbursements of not more than one counsel chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each
Holder, (ii) each person, if any, who controls a Holder within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person to the fullest extent lawful, from and
against any and all losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
investigation or litigation, commenced or threatened, or any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement, preliminary Prospectus or Prospectus, or in any
supplement thereto or amendment thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company will not be liable in any such case to the extent, but only to
the extent, that (i) any such loss, liability, claim, damage or expense arises
out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
expressly for use therein and (ii) the foregoing indemnity with respect to any
untrue statement contained in or omitted from a Registration Statement or the
Prospectus shall not inure to the benefit of any Holder (or any person
controlling such Holder), from whom the person asserting any such loss,
liability, claim, damage or expense purchased any of the Senior Notes which are
the subject thereof if it is finally judicially determined that such loss,
liability, claim, damage or expense resulted solely from the fact that the
Holder sold Senior Notes to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the Registration
Statement or the Prospectus, as amended or supplemented, and (x) the Company
shall have previously and timely furnished sufficient copies of the Registration
Statement or Prospectus, as so amended or supplemented, to such Holder in
accordance with this Agreement and (y) the Registration Statement or Prospectus,
as so amended or supplemented, would have corrected such untrue statement or
omission of a material fact. This indemnity agreement will be in addition to any
liability which the Company may otherwise have, including, under this Agreement.
(b) Each Holder, severally and not jointly, agrees to
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any losses, liabilities, claims, damages and expenses
whatsoever (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending against
any investigation or litigation, commenced or threatened, or any claim
whatsoever and any and all amounts paid in settlement of any claim or
litigation), several, to which they or any of them may become subject under the
Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims,
damages or expenses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
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stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Holder expressly for use therein. This indemnity will be in addition to any
liability which a Holder may otherwise have, including under this Agreement. In
no event shall any indemnified Holder be liable or responsible for any amount in
excess of the amount by which the total amount received by such indemnified
Holder with respect to its sale of Transfer Restricted Securities pursuant to a
Registration Statement exceeds (i) the amount paid by such indemnified Holder
for such Transfer Restricted Securities and (ii) the amount of any damages that
such indemnified Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may otherwise have). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action, (ii) the indemnifying parties
shall not have employed counsel to take charge of the defense of such action
within a reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to one or all of the indemnifying parties (in which case the
indemnifying party or parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses of counsel shall be borne by the indemnifying
parties; provided, however, that the indemnifying party under subsection (a) or
(b) above, shall only be liable for the legal expenses of one counsel (in
addition to any local counsel) for all indemnified parties in each jurisdiction
in which any claim or action is brought. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its prior written consent,
provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for contribution in circumstances in
which the indemnification provided for in this Section 8 is for any reason held
to be unavailable from the Company or is insufficient to hold harmless a party
indemnified thereunder, the Company and each Holder shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company, any contribution received by the Company from persons,
other than the Holders, who may also be liable
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for contribution, including persons who control the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act) to which the
Company and any Holder may be subject, in such proportion as is appropriate to
reflect the relative benefits received by the Company from the offering of
Senior Notes and any such Holder from its sale of Senior Notes or, if such
allocation is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party not having received notice as
provided in this Section 8, in such proportion as is appropriate to reflect not
only the relative benefits referred to above but also the relative fault of the
Company and the Holders in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and any Holder shall be deemed to be in the same proportion as (x)
the total proceeds from the offering of the Senior Notes (net of discounts but
before deducting expenses) received by the Company and (y) the total proceeds
received by such Holder upon its sale of Senior Notes which would otherwise give
rise to the indemnification obligation, respectively. The relative fault of the
Company and of the Holders shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to above. Notwithstanding the
provisions of this Section 8, (i) no Holder shall be required to contribute, in
the aggregate, any amount in excess of the amount by which the total received by
such Holder with respect to the sale of its Senior Notes exceeds the sum of (A)
the amount paid by such Holder for such Transfer Restricted Securities plus (B)
the amount of any damages which such Holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission and (ii) 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. For purposes of
this Section 8, (A) each person, if any, who controls a Holder within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (B)
the respective officers, directors, partners, employees, representatives and
agents of a Holder or any controlling person shall have the same rights to
contribution as such Holder, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
shall have the same rights to contribution as the Company, subject in each case
to clauses (i) and (ii) of this Section 8(d). Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 8, notify such party
or parties from whom contribution may be sought, but the failure to so notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 8 or otherwise. No party shall be liable for contribution with respect
to any action or claim settled without its prior written consent; provided,
however, that such written consent was not unreasonably withheld. The Holders'
obligations to contribute pursuant to this Section 8(d) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each of the Holders and not joint.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available, upon
request of any Holder of Transfer Restricted
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Securities, to any Holder or beneficial owner of Transfer Restricted Securities
in connection with any sale thereof and any prospective purchaser of such
Transfer Restricted Securities designated by such Holder or beneficial owner,
the information, if any, required by Rule 144A(d)(4) under the Act in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
In the event a Shelf Registration Statement is required to be
filed by the Company, the Holders of Transfer Restricted Securities included or
required to be included in such Shelf Registration Statement may elect to sell
their Transfer Restricted Securities pursuant to an Underwritten Registration No
Holder may participate in an Underwritten Registration hereunder unless such
Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the
basis provided in customary underwriting arrangements entered into in connection
therewith and (b) completes and executes all reasonable questionnaires, powers
of attorney, indemnities, underwriting agreements, lock-up letters and other
documents required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
In an Underwritten Offering, the investment banker or
investment bankers and manager or managers that will administer the offering
will be selected by the Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities included in such offering; provided, that
such investment bankers and managers must be reasonably satisfactory to the
Company. Such investment bankers and managers are referred to herein as the
"underwriters."
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to
exercise all rights provided herein, in the Indenture, the Purchase Agreement or
granted by law, including recovery of liquidated or other damages, will be
entitled to specific performance of its rights under this Agreement. The Company
acknowledges and agrees that any failure by the Company to comply with its
obligations under Section 3 and 4 hereof may result in material irreparable
injury to the Purchaser or the Holders for which there is no adequate remedy at
law, that it will not be possible to measure damages for such injuries precisely
and that, in the event of any such failure, the Purchaser or any Holder may
obtain such relief as may be required to specifically enforce the Company's
obligations under Section 3 and 4 hereof. The Company further agrees to waive
the defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Company will not on or
after the date of this Agreement enter into any agreement with respect to its
securities that conflicts with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof, except where a waiver with
respect thereto has been obtained.
(c) Adjustments Affecting the Senior Notes. The Company will
not take any action, or permit any change to occur, with respect to the Senior
Notes that would materially adversely affect the Consummation of any Exchange
Offer.
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(d) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company has
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities (excluding those held by the
Company or any Affiliates thereof), and such consent of the Holders of a
majority of the outstanding principal amount of Transfer Restricted Securities
shall be binding on every Holder of Transfer Restricted Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does not
affect directly or indirectly the rights of other Holders whose securities are
not being tendered pursuant to such Exchange Offer may be given by the Holders
of a majority of the outstanding principal amount of Transfer Restricted
Securities that are subject to such Exchange Offer.
(e) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Purchaser, on the other hand, and shall have the right to enforce
such agreements directly to the extent they may deem such enforcement necessary
or advisable to protect its rights or the rights of the Holders hereunder.
(f) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex, telecopier, or
air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the Registrar under the Indenture, with a copy to the
Registrar under the Indenture; and
(ii) if to the Company:
Concord Camera Corp.
35 Mileed Way
Avenel, New Jersey 07001
Telecopier: (732) 815-0258
Attention: Controller
With a copy to:
Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036
Telecopier: (212) 479-6275
Attention: Ralph J. Sutcliffe
All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five Business Days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when receipt acknowledged, if telecopied; and on the next
business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
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(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities directly from such Holder.
(h) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.
(k) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(l) Entire Agreement. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CONCORD CAMERA CORP.
By: _______________________________________
Name:
Title:
DREYFUS HIGH YIELD STRATEGIES FUND
By: _____________________________
Name:
Title:
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