<PAGE>
As filed with the Securities and Exchange Commission on September 30, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
CONCORD CAMERA CORP.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<CAPTION>
<S> <C> <C>
New Jersey 3861 13-3142196
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
35 Mileed Way
Avenel, New Jersey 07001
(732) 499-8280
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------
Ira B. Lampert, Chief Executive Officer and Chairman
Concord Camera Corp.
35 Mileed Way
Avenel, New Jersey 07001
(732) 499-8280
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
Copy to:
Ralph Sutcliffe, Esq.
Kronish Lieb Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036-7798
(212) 479-6000
--------------
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to
be offered in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an
offering pursuant to Rule 463(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]_____________________
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]_______________________________
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
Proposed
Proposed Maximum
Maximum Aggregate
Title of Securities Amount to be Offering Price per Offering Amount of
to be Registered Registered Unit Price Registration Fee
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11% Senior Notes Due 2005, Series B $15,000,000 $1,000 $15,000,000 $4,425
========================================================================================================================
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date or dates as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1998
PROSPECTUS
OFFER TO EXCHANGE
11% Senior Notes Due 2005, Series B
for Any and All Outstanding 11% Senior Notes Due 2005
of
Concord Camera Corp.
The Exchange Offer will expire at 5:00 P.M.,
New York City time, on , 1998, unless extended
Concord Camera Corp., a New Jersey corporation (the "Issuer"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together constitute
the "Exchange Offer"), to exchange $1,000 principal amount of 11% Senior Notes
Due 2005, Series B, of the Issuer (the "New Notes") for each $1,000 principal
amount of the issued and outstanding 11% Senior Notes Due 2005 of the Issuer
(the "Old Notes," and collectively with the New Notes, the "Notes"). As of the
date of this Prospectus, $15,000,000 principal amount of the Old Notes were
outstanding. The terms of the New Notes are substantially identical in all
material respects (including interest rate and maturity) to the Old Notes except
for certain transfer restrictions and registration rights relating to the Old
Notes.
The Exchange Offer is being made to satisfy certain obligations of the
Issuer under the Registration Rights Agreement, dated as of July 30, 1998,
between the Issuer and the other signatory thereto (the "Registration
Agreement"). Upon consummation of the Exchange Offer, holders of Old Notes that
were not prohibited from participating in the Exchange Offer and did not tender
their Old Notes will not have any registration rights under the Registration
Agreement covering such Old Notes not tendered and such Old Notes will continue
to be subject to the restrictions on transfer contained in the legend thereon.
If the Exchange Offer is not consummated, or a shelf registration statement is
not filed or is not declared effective or, after either this registration
statement or the shelf registration statement has been declared effective, such
registration statement thereafter ceases to be effective or usable (subject to
certain exceptions) in connection with resales of Old Notes or New Notes in
accordance with and during the periods specified in the Registration Agreement,
additional interest will accrue and be payable on the Notes until such
registration statement is declared effective or the Exchange Offer is
consummated. See "Exchange Offer" and "Description of the Notes -- Registration
Rights; Liquidated Damages."
Based on interpretations by the staff of the Securities and Exchange
Commission (the "SEC" or "Commission") with respect to similar transactions, the
Issuer believes that the New Notes issued pursuant to the Exchange Offer in
exchange for the Old Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any holder which is an "affiliate" of
the Issuer within the meaning of Rule 405 under the Securities Act of 1933, as
amended and the rules and regulations promulgated thereunder (the "Securities
Act")) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that the New Notes are acquired in
the ordinary course of the holder's business, the holder has no arrangement with
any person to participate in the distribution of the New Notes and neither the
holder nor any other person is engaging in or intends to engage in a
distribution of the New Notes. Each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of the New Notes received in exchange for the Old Notes where such
New Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Issuer has agreed that, for a period
expiring on the earlier of (i) 365 days after the date of this Prospectus and
(ii) the date upon which all Transfer Restricted Securities (as defined) have
been exchanged pursuant to the Exchange Offer, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
The New Notes will evidence the same debt as the Old Notes and will be
entitled to the benefits of the Indenture (as defined). For a more complete
description of the terms of the New Notes, see "Description of the Notes." There
will be no cash proceeds to the Issuer from the Exchange Offer. The New Notes
will be senior unsecured obligations of the Issuer ranking pari passu in right
of payment with all present and future senior unsecured obligations of the
Issuer and will rank senior in right of payment to all present and future
subordinated indebtedness of the Issuer. As of June 30, 1998, the total
indebtedness and other liabilities of the Issuer and its subsidiaries were $36.0
million, including approximately $34.3 million of indebtedness and other
liabilities of the Issuer's subsidiaries. The Issuer and its subsidiaries may
incur substantial additional indebtedness in the future. See "Capitalization"
and "Description of the Notes."
The Old Notes were originally issued and sold on July 30, 1998 in a
transaction exempt from registration under the Securities Act in reliance upon
the exemptions provided by Rule 144A and Section 4(2) of the Securities Act.
Accordingly, the Old Notes may not be reoffered, resold or otherwise pledged,
hypothecated or transferred in the United States unless so registered or unless
an exemption from the registration requirements of the Securities Act and
applicable state securities laws is available.
<PAGE>
The Issuer has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer and to
the best of the Issuer's information and belief, each person participating in
the Exchange Offer is acquiring the New Notes in its ordinary course of business
and has no arrangement or understanding with any person to participate in the
distribution of the New Notes to be received in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. The Exchange Offer will expire
at 5:00 p.m., New York City time, on , 1998, unless extended (the "Expiration
Date"). The date of acceptance for exchange of the Old Notes for the New Notes
(the "Exchange Date") will be the first business day following the Expiration
Date. The Old Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date; otherwise such tenders are irrevocable.
Prior to this Exchange Offer, there has been no public market for the Notes.
If a market for the New Notes should develop, the New Notes could trade at a
discount from their principal amount. The Issuer does not currently intend to
list the New Notes on any securities exchange or to seek approval for quotation
through any automated quotation system. There can be no assurance that an active
public market for the New Notes will develop.
See "Risk Factors" beginning on page 10 or a description of certain factors that
should be considered by participants in the Exchange Offer.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE>
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from
Concord Camera Corp., 35 Mileed Way, Avenel, New Jersey 07001 (telephone
732-499-8280), Attention: Investor Relations. In order to ensure timely delivery
of the documents, any request should be made by , 1998.
AVAILABLE INFORMATION
The Issuer is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Commission. Such
reports, proxy and other information can be inspected and copied without charge
at the Public Reference Room maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. In addition, upon request, such
reports, proxy statements and other information will be made available for
inspection and copying at the Commission's public reference facilities at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
be obtained at prescribed rates upon request from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a site on the World Wide Web (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants, like the Issuer, that file electronically with the
Commission. The Issuer's common stock is listed on the Nasdaq National Market
under the symbol "LENS." Reports, proxy statements and other information
concerning the Issuer may be inspected and copied at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
Statements contained in this Prospectus as to the contents of any contract
or other document are not necessarily complete, and reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, each such statement being
qualified in all respects by such reference.
In the event that the Issuer ceases to be subject to the informational
reporting requirements of the Exchange Act, the Issuer has agreed that, whether
or not it is required to do so by the rules and regulations of the Commission,
for so long as any of the securities offered hereby remain outstanding, it will
furnish to the holders of the securities and file with the Commission (unless
the Commission will not accept such a filing) (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Issuer were required to file such
forms, including a "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and, with respect to the annual information
only, a report thereon by the Issuer's certified independent public accountants
and (ii) all reports that would be required to be filed with the Commission on
Form 8-K if the Issuer were required to file such reports. In addition, for so
long as any of the securities offered hereby remain outstanding, the Issuer has
agreed to make available to any prospective purchaser of the securities or
beneficial owner of the securities in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or information have been filed by the Issuer with
the Commission and are incorporated herein by reference:
The Issuer's Annual Report on Form 10-K for the year ended June 30, 1998.
All documents subsequently filed by the Issuer with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering covered by this
Prospectus will be deemed incorporated by reference into this Prospectus and to
be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained therein modifies or supersedes such statement. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Issuer hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon the written or oral request of such person to Concord Camera
Corp., 35 Mileed Way, Avenel, New Jersey 07001 (telephone 732-499-8280),
Attention: Investor Relations, a copy of any or all of the documents referred to
above (other than exhibits to such documents) which have been incorporated by
reference in this Prospectus.
ii
<PAGE>
________________________________________________________________________________
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus and in the
Consolidated Financial Statements and the Notes thereto incorporated
herein by reference. References in this Prospectus to the "Company" or
"Concord" mean Concord Camera Corp. together with its subsidiaries,
except where the context otherwise requires. This Prospectus contains
certain "forward-looking statements" concerning the Company's
operations, economic performance and financial condition, which are
subject to inherent uncertainties and risks, including those identified
under "Risk Factors." Actual results could differ materially from those
anticipated in this Prospectus. When used in this Prospectus, the words
"estimate," "project," "anticipate," "expect," "intend," "believe" and
similar expressions are intended to identify forward-looking
statements.
The Company
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.
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).
________________________________________________________________________________
1
<PAGE>
________________________________________________________________________________
Concord was incorporated in the state of New Jersey on September
30, 1982. Its principal offices are located at 35 Mileed Way, Avenel,
New Jersey 07001 (telephone 732-499-8280).
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.
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.
________________________________________________________________________________
2
<PAGE>
________________________________________________________________________________
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 the
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 co-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.
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.
________________________________________________________________________________
3
<PAGE>
________________________________________________________________________________
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.
________________________________________________________________________________
4
<PAGE>
<TABLE>
<CAPTION>
______________________________________________________________________________________________________________________________
The Exchange Offer
<S> <C>
Securities Offered.............................. Up to $15,000,000 aggregate principal amount of 11% Senior
Notes Due 2005, Series B, of the Issuer. The terms of the New
Notes and the Old Notes will be substantially identical in all
material respects, except for certain transfer restrictions and
registration rights relating to the Old Notes which will not apply
to the New Notes. See "Description of the Notes."
The Exchange Offer............................ The Issuer is offering to exchange $1,000 principal amount of
New Notes for each $1,000 principal amount of Old Notes. See
"The Exchange Offer" for a description of the procedures for
tendering Old Notes. The Exchange Offer satisfies the registration
obligations of the Issuer under the Registration Agreement. Upon
consummation of the Exchange Offer, holders of Old Notes that
were not prohibited from participating in the Exchange Offer and
did not tender their Old Notes will not have any registration
rights under the Registration Agreement with respect to such non-
tendered Old Notes and, accordingly, such Old Notes will
continue to be subject to the restrictions on transfer contained in
the legend thereon.
Tenders, Expiration Date;
Withdrawal................................. The Exchange Offer will expire at 5:00 p.m., New York City
time, on , 1998, or such later date and time to which
it is extended, provided that the Exchange Offer shall not be
extended beyond 30 Business Days (a "Business Day" being 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 (as
defined), on which banks are authorized to close). Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn and
retendered at any time prior to the Expiration Date. Any Old
Notes not accepted for exchange for any reason will be returned
without expense to the tendering holder as promptly as practicable
after the expiration or termination of the Exchange Offer.
Federal Income Tax Considerations............. The Exchange Offer will not result in any income, gain or loss to
the holders of Notes or the Issuer for federal income tax
purposes. See "Certain Federal Income Tax Considerations."
Use of Proceeds............................... There will be no proceeds to the Issuer from the exchange of the
New Notes for the Old Notes pursuant to the Exchange Offer.
Exchange Agent................................ Bankers Trust Company, the trustee (the "Trustee") under the
Indenture is serving as exchange agent (the "Exchange Agent") in
connection with the Exchange Offer.
______________________________________________________________________________________________________________________________
</TABLE>
5
<PAGE>
________________________________________________________________________________
Consequences of Exchanging or Failing to Exchange Old Notes Pursuant to the
Exchange Offer
Generally, holders of Old Notes (other than any holder who is an "affiliate"
of the Issuer within the meaning of Rule 405 under the Securities Act) who
exchange their Old Notes for New Notes pursuant to the Exchange Offer may offer
their New Notes for resale, resell their New Notes, and otherwise transfer their
New Notes without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided such New Notes are acquired in the
ordinary course of the holders' business, such holders have no arrangement with
any person to participate in a distribution of such New Notes and neither the
holder nor any other person is engaging in or intends to engage in a
distribution of the New Notes. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of its New Notes. See "Plan of Distribution." To comply with the
securities laws of certain jurisdictions, it may be necessary to qualify for
sale or register the New Notes prior to offering or selling such New Notes. The
Issuer is required, under the Registration Agreement, to register the New Notes
in any jurisdiction reasonably requested by the holders, subject to certain
limitations. Upon consummation of the Exchange Offer, holders that were not
prohibited from participating in the Exchange Offer and did not tender their Old
Notes will not have any registration rights under the Registration Agreement
with respect to such non-tendered Old Notes and, accordingly, such Old Notes
will continue to be subject to the restrictions on transfer contained in the
legend thereon. In general, the Old Notes may not be offered or sold (except in
private transactions), unless registered under the Securities Act and applicable
state securities laws. See "The Exchange Offer -- Consequences of Failure to
Exchange."
________________________________________________________________________________
6
<PAGE>
<TABLE>
<CAPTION>
______________________________________________________________________________________________________________________________
Summary Description of the New Notes
<S> <C>
Securities Offered.............................. Up to $15,000,000 aggregate principal amount of 11% Senior
Notes Due 2005, Series B, of the Issuer. The terms of the New
Notes and the Old Notes will be substantially identical in all
material respects, except for certain transfer restrictions and
registration rights relating to the Old Notes which will not apply
to the New Notes. See "Description of the Notes."
Maturity........................................ July 15, 2005.
Interest Payment Dates.......................... Each January 15, April 15, July 15 and October 15, commencing
on October 15, 1998.
Sinking Fund.................................... None.
Optional Redemption............................. On or after July 15, 2000, the New Notes will be redeemable at
the option of the Issuer, in whole or in part at any time, at the
redemption prices set forth herein, plus accrued and unpaid
interest, if any, thereon to the date of redemption. In addition, in
the event of the sale by the Issuer prior to July 15, 2000 of its
securities in one or more Secondary Public Offerings (as defined),
up to a maximum of 35% of the aggregate principal amount of the
Notes originally issued will, at the option of the Issuer, 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. See "Description
of the Notes -- Optional Redemption."
Change of Control............................... Upon the occurrence of a Change of Control (as defined), each
holder of Notes will have the right to require the Issuer to make an
offer to purchase all or a portion of such holder's Notes at a
purchase price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon to the date of
purchase. The Issuer may not have sufficient funds or the financial
resources necessary to satisfy its obligations to repurchase the New
Notes and other debt that may become repayable upon a Change
of Control. See "Description of the Notes -- Offer to Purchase
Upon Change of Control."
______________________________________________________________________________________________________________________________
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
______________________________________________________________________________________________________________________________
<S> <C>
Ranking......................................... The New Notes will be senior unsecured obligations of the Issuer,
ranking pari passu in right of payment with all present and future
senior unsecured obligations of the Issuer and will rank senior in
right of payment to all present and future subordinated
indebtedness of the Issuer. As of June 30, 1998, the total
indebtedness and other future liabilities of the Issuer and its
subsidiaries were $36.0 million, including approximately $34.3
million of indebtedness and other liabilities of the Issuer's
subsidiaries. The Issuer and its subsidiaries may incur substantial
additional indebtedness in the future. See "Capitalization" and
"Description of the Notes -- Ranking."
Certain Covenants............................... The Indenture governing Notes (the "Indenture") contains
covenants relating to, among other things, the following matters:
(i) incurrence of additional indebtedness; (ii) restricted payments;
(iii) maintenance of tangible net worth (iv) disposition of proceeds
of asset sales; (v) dividend and other payment restrictions affecting
subsidiaries; (vi) mergers, consolidation or sales of assets; and (vii)
limitations on transactions with affiliates. See "Description of the
Notes -- Certain Covenants."
For additional information concerning the New Notes and the definitions of certain capitalized terms used above, see
"Description of the Notes."
______________________________________________________________________________________________________________________________
</TABLE>
8
<PAGE>
Summary Financial Data
The following table sets forth selected historical consolidated financial
information and other data of the Company for the five years ended June 30, 1998
which have been derived from the consolidated financial statements of the
Company. The following financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the "Consolidated Financial Statements of the Company" and Notes
thereto, which are incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended June 30, 1998.
<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(1) 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
======= ======= ======= ======= =======
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(3) 4.26 (2) (2) 1.75 (2)
======= ======= ======= ======= =======
__________________
1 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.
2 Earnings are inadequate to cover fixed charges. In Fiscal 1997, 1996 and 1994 the amount of the coverage
deficiency was $716, $1,654 and $822, respectively.
3 For purposes of determining the ratio of earnings to fixed charges, (i) earnings consist of income before
income taxes plus fixed charges and (ii) fixed charges consist of interest expense, amortization of debt
issuance cost and the estimated interest portion of rental expense.
________________________________________________________________________________________________________________
</TABLE>
9
<PAGE>
RISK FACTORS
In addition to other information set forth elsewhere in this Prospectus,
before tendering the Old Notes for New Notes, holders should consider the
following risk factor, which (other than "Consequences of Failure to Exchange")
are generally applicable to the Old Notes as well as the New Notes, and the
information set forth in the Issuer's Annual Report on Form 10-K for the year
ended June 30, 1998 which is incorporated herein by reference.
Consequences of Failure to Exchange
Upon the consummation of the Exchange Offer, holders of Old Notes that were
not prohibited from participating in the Exchange Offer and did not tender their
Old Notes will not have any registration rights under the Registration Agreement
with respect to such non-tendered Old Notes and, accordingly, such Old Notes
will continue to be subject to the restrictions on transfer contained in the
legend thereon. In general, the Old Notes may not be offered or sold, unless
registered under the Securities Act and applicable state securities laws, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Issuer does not intend
to register the Old Notes under the Securities Act.
Based on interpretations by the staff of the SEC with respect to similar
transactions, the Issuer believes that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by holders (other than any holder which is an "affiliate" of the
Issuer within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the New Notes are acquired in the ordinary course
of the holder's business, the holder has no arrangement with any person to
participate in the distribution of the New Notes and neither the holder nor any
other person is engaging in or intends to engage in a distribution of the New
Notes. Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of the New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for the Old Notes acquired by the broker-dealer as a result
of market-making activities or other trading activities. The Issuer has agreed
that, starting on the date of this Prospectus and ending on the earlier of the
first anniversary of the date of this Prospectus or the date upon which all such
Transfer Restricted Securities have been sold pursuant to the Exchange Offer, it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution." The New Notes may not be
offered or sold unless they have been registered or qualified for sale under
applicable state securities laws or an exemption from registration or
qualification is available and is complied with. The Registration Agreement
requires the Issuer to register or qualify the New Notes for resale in any state
as may be reasonably requested by their holders, subject to certain limitations.
Lack of Public Market
Prior to this Exchange Offer, there has been no public market for the Old
Notes. If a market for the New Notes should develop, the New Notes may trade at
a discount from their principal amount, depending upon prevailing interest
rates, the market for similar securities and other factors including general
economic conditions and the financial condition of the Issuer. The Issuer does
not currently intend to apply for a listing or quotation of the New Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. No assurance can be given as to the liquidity of, and the
trading market for, the New Notes.
The liquidity of, and trading market for, the New Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Issuer.
10
<PAGE>
Effective Subordination of the Notes.
The Notes are not secured by any of the assets of the Issuer. Holders of
secured indebtedness of the Issuer will have claims that are prior to the claims
of the holders of the Notes to the extent of the assets securing such other
indebtedness. As of June 30, 1998 the Issuer and its subsidiaries had
approximately $15.6 million of secured indebtedness outstanding. The Indenture
also permits certain new indebtedness of the Issuer and/or its subsidiaries to
be secured. In addition, the Notes will be effectively subordinated to $34.3
million of indebtedness (including secured indebtedness) and other liabilities
and commitments (including trade payables) of the Issuer's subsidiaries.
Effect of Substantial Additional Indebtedness on the Issuer's Ability to
Repay the Notes.
The Indenture limits, but does not prohibit, the incurrence of additional
indebtedness by the Issuer and its subsidiaries. The Issuer may incur
substantial additional indebtedness, including up to $11 million of increases in
or refinancings of existing credit lines, to support its working capital needs
and finance its expected growth. See "Description of the Notes -- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Disqualified Stock".
Additional indebtedness of the Issuer will ordinarily rank pari passu with the
Notes and will effectively be senior to the Notes to the extent incurred by
subsidiaries of the Issuer. The debt service requirements on any additional
indebtedness could make it more difficult for the Issuer to make principal and
interest payments on the Notes. No guarantees have been issued with respect to
the Notes; thus the Issuer's subsidiaries are not directly obligated under the
Notes. Earnings generated by any of the Issuer's subsidiaries, as well as the
existing assets of such subsidiaries, will have to be used first by such
subsidiaries to fulfill their debt service requirements.
Effect of Indebtedness on Future Prospects.
The level of the Issuer's indebtedness could have important consequences to
its future prospects, including the following: (i) limiting the ability of the
Issuer to obtain any necessary financing in the future for working capital,
capital expenditures, debt service requirements or other purposes; (ii)
requiring that a substantial portion of the Issuer's cash flow from operations,
if any, be dedicated to the payment of principal of and interest on its
indebtedness and other obligations; (iii) limiting its flexibility in planning
for, or reacting to changes in, its business; and (iv) increasing its
vulnerability in the event of a downturn in its business.
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 (as defined). FERO (as defined) approval is
required on all of the PRC Agreements to ensure their enforceability. See
"Business--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 (as defined) 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. 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
11
<PAGE>
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.
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 of 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.
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
12
<PAGE>
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 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.
13
<PAGE>
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 of the United States 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 U.S. Government 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.
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
14
<PAGE>
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 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 (as defined), Concord
France (as defined), Concord Germany (as defined) 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.
Year 2000 Risk
15
<PAGE>
Concord has implemented a Year 2000 date conversion program to ensure that
its computer systems and applications will function properly beyond 1999.
Concord believes that it has allocated adequate resources for this purpose and
expects its Year 2000 date conversion program to be successfully completed on a
timely basis. There can, however, be no assurance that this will be the case.
Concord does not expect to incur significant expenditures to address this issue.
The ability of third parties with whom Concord transacts business to adequately
address their Year 2000 issues is outside of Concord's control. There can be no
assurance that the failure of Concord or such third parties to adequately
address their respective Year 2000 issues will not have a material adverse
effect on Concord's business, financial condition, cash flows and results of
operations.
Certain Tax Considerations.
For a discussion of certain material federal income tax considerations which
are relevant to the exchange of the Old Notes for the New Notes, see "Certain
Federal Income Tax Consequences."
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.
16
<PAGE>
THE EXCHANGE OFFER
Purpose of the Exchange Offer
The Old Notes were originally issued and sold on July 30, 1998 in reliance
upon the exemptions from registration under Rule 144A and Section 4(2) of the
Securities Act. Pursuant to the Registration Agreement, the Issuer agreed to
register with the Commission a series of notes with substantially identical
terms as the Old Notes, to be offered in exchange for the Old Notes. The purpose
of the Exchange Offer is to satisfy the Issuer's obligations under the
Registration Agreement. Upon consummation of the Exchange Offer, holders that
were not prohibited from participating in the Exchange Offer and did not tender
their Old Notes will not have any registration rights under the Registration
Agreement with respect to such non-tendered Old Notes and, accordingly, such Old
Notes will continue to be subject to the restrictions on transfer contained in
the legend thereon.
Terms of the Exchange
The Issuer is offering to exchange, subject to the conditions set forth in
this Prospectus and in the Letter of Transmittal accompanying this Prospectus,
the same principal amount of New Notes for the Old Notes tendered for exchange.
The terms of the New Notes are substantially identical to the Old Notes in all
material respects (including interest rate and maturity), except that (i) the
New Notes will not be subject to the restrictions on transfer (other than with
respect to holders who are affiliates) and (ii) the Registration Agreement
covenants regarding registration and the related Liquidated Damages (other than
those that have accrued and were not paid) with respect to Registration Defaults
(as defined) will have been deemed satisfied. The New Notes will evidence the
same debt as the Old Notes and will be entitled to the benefits of the
Indenture. See "Description of the Notes." The Exchange Offer is not conditioned
upon any minimum aggregate principal amount of Old Notes being tendered for
exchange.
The Issuer believes that New Notes received in exchange for Old Notes may be
offered for sale, sold and otherwise transferred by any holder (other than any
holder which is an "affiliate" of the Issuer within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that the New
Notes are acquired in the ordinary course of the holder's business, the holder
has no arrangement or understanding with any person to participate in the
distribution of the New Notes and neither the holder nor any other person is
engaging in or intends to engage in a distribution of the New Notes. Any holder
who tenders in the Exchange Offer for the purpose of participating in a public
distribution of the New Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with the distribution.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
Tendering holders of the Old Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the Exchange Offer.
Expiration Date; Extensions, Termination; Amendment
The Exchange Offer will expire on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1998 or such later date and
time, if any, to which it is extended by the Issuer, provided that the Exchange
Offer shall not be extended beyond 30 Business Days. In connection with the
Exchange Offer, the Issuer will comply with all applicable requirements of the
federal securities laws, including, but not limited to, Rule 14e-1 under the
Exchange Act.
The Exchange Date will be the first business day following the Expiration
Date. The Issuer expressly reserves the right to (i) terminate the Exchange
Offer and not accept for exchange any Old Notes if either of the events set
forth under "Conditions to the Exchange Offer" shall have occurred and shall not
have been waived by the Issuer
17
<PAGE>
and (ii) amend the terms of the Exchange Offer in any manner which, in its good
faith judgment, is advantageous to the holders of the Old Notes, whether before
or after any tender of the Old Notes. Unless the Issuer terminates the Exchange
Offer prior to 5:00 p.m., New York City time, on the Expiration Date, the Issuer
will exchange the New Notes for the Old Notes on the Exchange Date.
Procedures for Tendering Old Notes
The Exchange Offer is subject to the terms and conditions set forth in this
Prospectus and the Letter of Transmittal.
The Old Notes may be tendered by properly completing and signing the Letter
of Transmittal and delivering the Letter of Transmittal, to the Exchange Agent
at its address set forth in this Prospectus on or prior to the Expiration Date,
together with (i) the certificate or certificates, if any, representing the Old
Notes being tendered and any required signature guarantees, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of the Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility" or "Depository")
pursuant to the procedure for book-entry transfer described below or (iii) the
completion of the procedures for guaranteed delivery set forth below. See
"--Guaranteed Delivery Procedures."
If the New Notes are to be issued in the name of the registered holder and
the registered holder has signed the Letter of Transmittal, the holder's
signature need not be guaranteed. In any other case, the tendered Old Notes must
be endorsed or accompanied by written instruments of transfer in form
satisfactory to the Exchange Agent and duly executed by the registered holder,
and the signature on the endorsement or instrument of transfer must be
guaranteed by a commercial bank or trust company located or having an office or
correspondent in the United States or by a member firm of a national securities
exchange or of the National Association of Securities Dealers, Inc. (an
"Eligible Institution"). If the New Notes and/or Old Notes not exchanged are to
be delivered to an address other than that of the registered holder appearing on
the register for the Old Notes, the signature on the Letter of Transmittal must
be guaranteed by an Eligible Institution.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS
RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER
INSURANCE OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE
EXPIRATION DATE. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
ISSUER.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal, the
Old Notes or a Book-Entry Confirmation and all other required documents are
received by the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Issuer in its sole discretion, which determination will be
final and binding. The Issuer reserves the right to reject any or all tenders
not in proper form or the acceptance for exchange of which may, in the opinion
of the Issuer's counsel, be unlawful. The Issuer also reserves the right to
waive any of the conditions of the Exchange Offer or any defect, withdrawal,
rejection of tender or irregularity in the tender of any Old Notes. Neither the
Issuer, the Exchange Agent nor any other person will be under any duty to give
notification of any defects, withdrawals, rejections or irregularities or incur
any liability for failure to give any such notification.
18
<PAGE>
Terms and Conditions of the Letter of Transmittal
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The holder tendering Old Notes exchanges, assigns and transfers the Old
Notes to the Issuer and irrevocably constitutes and appoints the Exchange Agent
as the holder's agent and attorney-in-fact to cause the Old Notes to be
assigned, transferred and exchanged. The holder represents and warrants to the
Issuer and the Exchange Agent that (i) it has full power and authority to
tender, exchange, assign and transfer the Old Notes and to acquire New Notes in
exchange for the Old Notes, (ii) when the Old Notes are accepted for exchange,
the Issuer will acquire good and unencumbered title to the Old Notes, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim, (iii) it will, upon request, execute and deliver any
additional documents deemed by the Issuer to be necessary or desirable to
complete the exchange, assignment and transfer of tendered Old Notes and (iv)
acceptance of any tendered Old Notes by the Issuer and the issuance of New Notes
in exchange therefor will constitute performance in full by the Issuer of its
obligations under the Registration Agreement and that the Issuer will have no
further obligations or liabilities thereunder (except with respect to accrued
and unpaid Liquidated Damages, if any). All authority conferred by the holder
will survive the death or incapacity of the holder and every obligation of the
holder shall be binding upon the heirs, legal representatives, successors
assigns, executors and administrators of the holder.
Each holder will also certify that it (i) is not an "affiliate" of the
Issuer within the meaning of Rule 405 under the Securities Act or that, if it is
an "affiliate," it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (ii) is acquiring
the New Notes offered in the ordinary course of its business and (iii) has no
arrangement with any person to participate in the distribution of the New Notes.
Withdrawal Rights
The Old Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
To be effective, a written notice of withdrawal must be timely received by
the Exchange Agent at its address set forth in this Prospectus by mail, courier
or telegraphic, telex or facsimile transmission. Any notice of withdrawal must
specify the person named in the Letter of Transmittal as having tendered Old
Notes to be withdrawn, the certificate numbers of Old Notes to be withdrawn, the
principal amount of Old Notes to be withdrawn, a statement that the holder is
withdrawing its election to tender the Old Notes for exchange and the name of
the registered holder of the Old Notes, and such notice must be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to the Exchange Agent that the person withdrawing the tender has
succeeded to the beneficial ownership of the Old Notes being withdrawn. The
Exchange Agent will return the properly withdrawn Old Notes promptly following
receipt of notice of withdrawal. If the Old Notes have been tendered pursuant to
a book-entry transfer, any notice of withdrawal must specify the name and number
of the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Old Notes and otherwise comply with the procedures of the Book-Entry
Transfer Facility. All questions as to the validity of notices of withdrawals,
including time of receipt, will be determined by the Issuer, and such
determination will be final and binding on all parties. Any Old Notes which have
been tendered for exchange but which are not exchanged will be returned to the
holder thereof without cost to the holder (or, in the case of Old Notes tendered
by book-entry transfer by crediting an account maintained with the Book-Entry
Transfer Facility for the Old Notes) as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be re-tendered at any time on or prior to the Expiration Date. Any Old
Notes so withdrawn and not re-tendered will not be exchanged for New Notes under
the Exchange Offer.
19
<PAGE>
Acceptance of Old Notes for Exchange; Delivery of New Notes
Upon terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Old Notes validly tendered and not withdrawn and
issuance of the New Notes will be made on the Exchange Date. For the purposes of
the Exchange Offer, the Issuer shall be deemed to have accepted for exchange
validly tendered Old Notes when, as and if the Issuer has given oral or written
notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Old Notes
for the purpose of causing the Old Notes to be assigned, transferred and
exchanged for New Notes. Upon the terms and subject to the conditions of the
Exchange Offer, delivery of New Notes in exchange for Old Notes will be made by
the Exchange Agent promptly after acceptance of the tendered Old Notes by the
Issuer. Tendered Old Notes not accepted for exchange by the Issuer will be
returned without expense to the tendering holders (or, in the case of Old Notes
tendered by book-entry transfer crediting an account maintained with the
Depository) promptly following the Expiration Date or, if the Issuer terminates
the Exchange Offer prior to the Expiration Date, promptly after the Exchange
Offer is terminated.
Book-Entry Transfer
The Exchange Agent will establish an account at the Book-Entry Transfer
Facility for purposes of the Exchange Offer within two business days after the
date of this Prospectus, and any financial institution that is a participant in
the Book-Entry Transfer Facility's systems may make book-entry delivery of Old
Notes by causing the Book-Entry Transfer Facility to transfer the Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility in accordance
with the Book-Entry Transfer Facility's procedure for transfer. The Letter of
Transmittal with any required signature guarantees and any other required
documents must be received by the Exchange Agent on or prior to the Expiration
Date for any book-entry transfers.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and, (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date, must tender their Old Notes and follow the guaranteed
delivery procedures. Pursuant to such procedures: (i) such tender must be made
by or through an Eligible Institution; (ii) prior to the Expiration Date, the
Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery ("Notice of Guaranteed
Delivery") (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the holder of the Old Notes, the certificate number or
numbers of such Old Notes and the principal amount of Old Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within five
business days after the Expiration Date, the Letter of Transmittal (or facsimile
thereof) together with the certificate(s) representing the Old Notes (or a
confirmation of electronic delivery of book-entry delivery into the Exchange
Agent's account at the Depository) and any of the required documents will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) such
properly completed and executed Letter of Transmittal (or facsimile hereof), as
well as all other documents required by the Letter of Transmittal and the
certificate(s) representing all tendered Old Notes in proper form for transfer
(or a confirmation of electronic mail delivery or book-entry delivery into the
Exchange Agent's account at the Depository) must be received by the Exchange
Agent within five business days after Expiration Date. Any holder of Old Notes
who wishes to tender his Old Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery prior to 5:00 P.M., New York City time, on the
Expiration Date.
Conditions to the Exchange Offer
Notwithstanding any other provision of the Exchange Offer, the Issuer will
not be required to issue New Notes in exchange for any properly tendered Old
Notes not previously accepted and may terminate the Exchange Offer (by oral or
written notice to the holders and by timely public announcement communicated,
unless otherwise
20
<PAGE>
required by applicable law or regulation, by making a release to the Dow Jones
News Service), or, at its option, modify or otherwise amend the Exchange Offer,
if any of the following events occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission (i) seeking to
restrain or prohibit the making or consummation of the Exchange Offer
or any other transaction contemplated by the Exchange Offer, or
assessing or seeking any damages as a result thereof, or (ii) resulting
in a material delay in the ability of the Issuer to accept for exchange
or exchange some or all of the Old Notes pursuant to the Exchange
Offer, or any statute, rule, regulation, order or injunction shall be
sought, proposed, introduced, enacted, promulgated or deemed applicable
to the Exchange Offer or any of the transactions contemplated by the
Exchange Offer by any government or governmental authority, domestic or
foreign, or any action shall have been taken, proposed or threatened,
by any government, governmental authority, agency or court, domestic or
foreign, that in the sole judgment of the Issuer might directly or
indirectly result in any of the consequences referred to in clause (i)
or (ii) above or, in the sole judgment of the Issuer, might result in
the holders of New Notes having obligations with respect to resales and
transfers of New Notes which are greater than those described in the
interpretation of the Commission referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the
Exchange Offer; or
(b) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties,
assets, liabilities, financial condition, operations, results of
operations or prospects of the Issuer, taken as a whole, that, in the
sole judgment of the Issuer is or may be adverse to the Issuer, or the
Issuer shall have become aware of facts that, in the sole judgment of
the Issuer, have or may have adverse significance with respect to the
value of the Old Notes or the New Notes; which, in the sole judgment of
the Issuer in any case, and regardless of the circumstances (including
any action by the Issuer) giving rise to any such condition, makes it
unlawful to proceed with the Exchange Offer and/or with such acceptance
for exchange or with such exchange.
The Issuer expressly reserves the right to terminate the Exchange Offer and
not accept for exchange any Old Notes upon the occurrence of any of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Issuer of properly tendered Old Notes). In addition, the
Issuer may amend the Exchange Offer at any time prior to the Expiration Date if
any of the conditions set forth above occur. Moreover, regardless of whether any
of such conditions has occurred, the Issuer may amend the Exchange Offer in any
manner which, in its good faith judgment, is advantageous to holders of the Old
Notes.
These conditions are for the sole benefit of the Issuer and may be waived by
the Issuer, in whole or in part, in its sole discretion, provided, however, that
in the event that the Issuer waives any of such conditions that is material to
the Exchange Offer on a date (the "Waiver Date") that is fewer than five
business days prior to the Expiration Date, the Issuer will extend the Exchange
Offer to five business days from the Waiver Date. Any determination made by the
Issuer that any of these conditions has occurred will be final and binding on
all holders, absent manifest error.
In addition, the Issuer will not accept for exchange any Old Notes tendered,
and no New Notes will be issued in exchange for any such Old Notes, if at such
time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
Exchange Agent
Bankers Trust Company, the Trustee under the Indenture, has been appointed
as the Exchange Agent for the Exchange Offer. All executed Letters of
Transmittal, questions and requests for assistance and requests for
21
<PAGE>
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
If by Registered or Certified Mail
or Overnight Courier: BT Services Tennessee, Inc.
Reorganization Unit
648 Grassmere Park Road
Nashville, Tennessee 37211
If by Hand: Bankers Trust Company
Receipt and Delivery Window
123 Washington Street
First Floor
New York, NY 10006
If by Facsimile: (615) 835-3572
Confirm by Telephone: (615) 835-3701
1-800-735-7777 Customer Service
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID
DELIVERY.
Solicitation of Tenders; Expenses
The Issuer has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus and the Letter of Transmittal. If given or made, such
information or representations should not be relied upon as having been
authorized by the Issuer. Neither the delivery of this Prospectus nor any
exchange made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Issuer since the respective
dates as of which information is given herein. The Exchange Offer is not being
made to (nor will tenders be accepted from or on behalf of) holders of Old Notes
in any jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction. The
Issuer may, however, at the reasonable request of any holder, take such action
as it may deem necessary to make the Exchange Offer in any such jurisdiction and
extend the Exchange Offer to holders of Old Notes in such jurisdiction.
Transfer Taxes
Holders who tender their Old Notes in exchange for New Notes will not be
obligated to pay any transfer taxes in connection therewith, except that holders
who instruct the Issuer to register New Notes in the name of, or request that
Old Notes not tendered or not accepted in the Exchange Offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
Consequences of Failure to Exchange
Upon consummation of the Exchange Offer, holders of Old Notes that were not
prohibited from participating in the Exchange Offer and did not tender their Old
Notes will not have any registration rights under the Registration Agreement
with respect to such non-tendered Old Notes and, accordingly such Old Notes will
continue to be subject
22
<PAGE>
to the restrictions on transfer contained in the legend thereon. In general, the
Old Notes may not be offered or sold, unless registered under the Securities Act
and the applicable state securities laws, except pursuant to an exemption from,
or in a transaction not subject to, the Securities Act and applicable state
securities laws. The Issuer does not intend to register the Old Notes under the
Securities Act. Based on interpretations by the staff of the Commission, New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold or otherwise transferred by holders (other than any
holder which is an "affiliate" of the Issuer within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery requirements of Securities Act provided that the New Notes
are acquired in the ordinary course of the holder's business, the holder has no
arrangement with any person to participate in the distribution of the New Notes
and neither the holder nor any other person is engaging in or intends to engage
in a distribution of the New Notes. If any holder has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, the holder (i) could not rely on the applicable
interpretations of the staff of the SEC and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of the New Notes. See "Plan of Distribution." In
addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Issuer has
agreed under the Registration Agreement to register or qualify the New Notes for
resale in any jurisdictions reasonably requested by any holder, subject to
certain limitations.
Other
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
Upon consummation of the Exchange Offer, holders of Old Notes that were not
prohibited from participating in the Exchange Offer and did not tender their Old
Notes will not have any registration rights under the Registration Agreement
with respect to such non-tendered Old Notes and, accordingly, such Old Notes
will continue to be subject to the restrictions on transfer contained in the
legend thereon.
The Issuer has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer and to
the best of the Issuer's information and belief, each person participating in
the Exchange Offer is acquiring the New Notes in its ordinary course of business
and has no arrangement or understanding with any person to participate in the
distribution of the New Notes to be received in the Exchange Offer. In this
regard, the Issuer will make each person participating in the Exchange Offer
aware (through this Prospectus or otherwise) that any holder using the Exchange
Offer to participate in a distribution of New Notes to be acquired in the
registered Exchange Offer (i) may not rely on the staff position enunciated in
Morgan Stanley and Co. Inc. (avail. June 5, 1991) and Exxon Capital Holding
Corp. (avail. May 13, 1988) or similar letters and (ii) must comply with
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.
Accounting Treatment
The New Notes will be recorded at the same aggregate value as the Old Notes,
as reflected in the Issuer's accounting records on the Exchange Date.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Issuer. The expenses of the Exchange Offer will be amortized over the term of
the New Notes.
23
<PAGE>
USE OF PROCEEDS
There will be no proceeds to the Issuer from the Exchange Offer.
The net proceeds of the sale of the Old Notes, after payment of financial
advisory fees to Barington Capital Group which acted as a financial advisor to
the Issuer in connection with the sale of the Old Notes, were approximately
$14.1 million. Such net proceeds will be used to fund capital expenditures,
working capital requirements, design and development costs incurred in
connection with expanded OEM sales, new camera and non-camera products and
general corporate purposes of the Issuer, which may include acquisitions.
Pending the application of the net proceeds of the sale of the Old Notes as
described above, such funds have been invested in short-term investment grade
securities.
CAPITALIZATION
The following table sets forth, on an unaudited basis, the capitalization of
the Company as of June 30, 1998 and as adjusted to reflect the issuance of the
Old Notes and the application of the net proceeds therefrom. See "Use of
Proceeds." This table should be read in connection with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
"Consolidated Financial Statements of the Company" and the Notes thereto,
appearing in the Company's Annual Report on Form 10-K for the year ended June
30, 1998.
<TABLE>
<CAPTION>
June 30, 1998
(Unaudited)
-------------
Actual As Adjusted
------ -----------
<S> <C> <C>
Cash .................................................... $ 7,119,699 $21,225,699
----------- -----------
Total: $ 7,119,699 $21,225,699
=========== ===========
Debt:
Current Debt
Short-term debt .................................... $10,822,012 $10,822,012
Current portion of long-term debt .................. 35,676 35,676
Current portion of obligations under
capital leases .................................. 870,173 870,173
----------- -----------
Subtotal .................................. $11,727,861 $11,727,861
=========== ===========
Long-term debt
Obligations under capital leases.................... 1,409,865 1,409,865
Notes offered, net of original issue discount....... -- 14,850,000
Long-term debt...................................... 2,460,784 2,460,784
----------- -----------
Subtotal................................... 3,870,649 18,720,649
----------- -----------
Total Stockholders' equity 36,104,748 36,104,748
----------- -----------
Total capitalization.............. $51,703,258 $66,553,258
=========== ===========
</TABLE>
24
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
information and other data of the Company for the five years ended June 30, 1998
which have been derived from the consolidated financial statements of the
Company. The following financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the "Consolidated Financial Statements of the Company" and Notes
thereto, which are incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended June 30, 1998.
<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 17,4892(1) 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
========= ========= ========= ========= =========
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(3) 4.26 (2) (2) 1.75 (2)
========= ========= ========= ========= =========
- -------------------
1 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.
2 Earnings are inadequate to cover fixed charges. In Fiscal 1997, 1996 and 1994 the amount of the coverage deficiency was
$716, $1,654 and $822, respectively.
3 For purposes of determining the ratio of earning to fixed charges, (i) earnings consist of income before income taxes plus
fixed charges and (ii) fixed charges consist of interest expense, amortization of debt issuance cost and the estimated
interest portion of rental expense.
</TABLE>
25
<PAGE>
BUSINESS
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 OEMs such as Concord,
which conducts its manufacturing activities in the 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 Kodak, Polaroid, Agfa,
Imation and 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 and 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.
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
26
<PAGE>
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.
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 the 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.
27
<PAGE>
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 co-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.
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.
28
<PAGE>
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.
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, in the U.K., France
and Germany, and in Hong Kong, China and Japan. 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.
29
<PAGE>
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"), 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.
30
<PAGE>
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
subdivisions 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.
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)
- --------------
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."
31
<PAGE>
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 camera(2) marketed by Kodak and a contract to co-develop and, in 1999,
begin providing Polaroid(3) 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.
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
- ----------------
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.
32
<PAGE>
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.
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.
33
<PAGE>
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.
34
<PAGE>
DESCRIPTION OF THE NOTES
General
The Old Notes were and the New Notes will be issued pursuant to an Indenture
(the "Indenture") between the Issuer and Bankers Trust Company, as trustee (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 (the "Trust Indenture Act"). The Notes are subject to all such
terms, and holders of Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture and the Registration Agreement does not purport to
be complete and is qualified in its entirety by reference to such agreements,
including the definitions therein of certain terms used below. Copies of the
Indenture and Registration Agreement have been filed as exhibits hereto. The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions." Under certain circumstances, the Issuer will be
able to designate existing and future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture.
Ranking
The Old Notes rank, and the New Notes will rank, senior in right of payment
to all subordinated Indebtedness of the Issuer. The Old Notes rank, and the New
Notes will rank, pari passu in right of payment with all existing and future
unsecured senior borrowings of the Issuer. Holders of secured Indebtedness of
the Issuer will, however, have claims that are prior to the claims of the
holders of the Notes with respect to the assets securing such Indebtedness.
Most of the Issuer's operations are conducted through its Subsidiaries and,
therefore, the Issuer is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Notes. The Notes will
be effectively subordinated to all indebtedness and other liabilities and
commitments (including trade payables and lease obligations) of the Issuer's
Subsidiaries. Any right of the Issuer to receive assets of any of its
Subsidiaries upon the latter's liquidation or reorganization (and the consequent
right of the holders of the Notes to participate in those assets) will be
effectively subordinated to the claims of that Subsidiary's creditors, except to
the extent that the Issuer is itself recognized as a creditor of such
Subsidiary, in which case the claims of the Issuer would still be subordinate to
any security in the assets of such Subsidiary and any indebtedness of such
Subsidiary senior to that held by the Issuer. As of June 30, 1998, the total
amount of outstanding liabilities of the Issuer and its Subsidiaries, including
trade payables, was approximately $36.0 million, of which approximately $34.3
million were liabilities of the Subsidiaries.
Principal, Maturity and Interest
The Notes are limited in aggregate principal amount to $15.0 million and
will mature on July 15, 2005. Interest on the Notes will accrue at 11% per annum
and will be payable quarterly in arrears on January 15, April 15, July 15 and
October 15 of each year, commencing on October 15, 1998, to holders of record on
the immediately preceding January 1, April 1, July 1 and October 1,
respectively. 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. The Old Notes were, and the New Notes will be, issued in
registered form, without coupons, and in denominations of $1,000 and integral
multiples thereof.
Optional Redemption
The Notes will not be redeemable at the Issuer's option prior to July 15,
2000. Thereafter, the Notes will be subject to redemption at the option of the
Issuer, in whole or in part, upon not less than 30 nor more than 60 days'
35
<PAGE>
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages (as
described below under "--Registration Rights; 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...................................... 105.00%.
2001...................................... 103.00%.
2002...................................... 101.00%.
Thereafter................................ 100.00%
Notwithstanding the foregoing, in the event of the sale by the Issuer prior
to July 15, 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 Issuer, 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.
Mandatory Redemption
The Issuer will not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
Offer to Purchase Upon Change of Control
Upon the occurrence of a Change of Control, the Issuer will be required to
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 repurchase (the "Change of Control Payment"). The Change
of Control Offer must be commenced within 30 days following a Change of Control,
must remain open for at least 30 and not more than 40 days (unless required by
applicable law) and must comply with the requirements of Rule 14e-1 under the
Securities Exchange Act, and any other applicable securities laws and
regulations.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the holders of the Notes to require that
the Issuer repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
Due to the leveraged structure of the Issuer and the effective subordination
of the Notes to secured Indebtedness of the Issuer and the outstanding
Indebtedness and future Indebtedness of the Issuer's Subsidiaries, the Issuer
may not have sufficient funds available to purchase the Notes tendered in
response to a Change of Control Offer. In addition, the agreements relating to
future Indebtedness of the Issuer's Subsidiaries may contain prohibitions or
restrictions on the Issuer's ability to effect a Change of Control Payment.
Offer to Purchase with Excess Asset Sale Proceeds
When the cumulative amount of Excess Proceeds (as defined below under
"--Certain Covenants -- Asset Sales") exceeds $2.0 million, the Issuer will make
an offer to all holders of Notes (an "Excess Proceeds Offer"), to repurchase the
maximum principal amount of Notes that may be purchased out of such Excess
Proceeds, at an offer
36
<PAGE>
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 specified in the Indenture.
If the aggregate principal amount of Notes surrendered by holders thereof
exceeds the amount of Excess Proceeds, the Trustee will select the Notes to be
purchased on a pro rata basis. To the extent that the aggregate amount of Notes
tendered pursuant to an Excess Proceeds Offer is less than the amount of Excess
Proceeds, the Issuer may use such deficiency for general purposes. Upon
completion of an Excess Proceeds Offer, the amount of Excess Proceeds will be
reset at zero.
Selection of Notes for Redemption or Offers to Purchase
If less than all of the Notes are to be redeemed or to be repurchased
pursuant to any purchase offer required under the Indenture at any time,
selection of Notes for redemption or repurchase will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed, or, if the Notes are not so listed, on a
pro rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate, 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 will be issued in the name of the holder
thereof upon cancellation of the original note. On and after the redemption or
purchase date, interest will cease to accrue on the Notes or portions of them
called for redemption or purchase.
Notice of Redemption
Notice of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at its registered address. 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.
Certain Covenants
Restricted Payments
The Indenture provides that the Issuer and its Restricted Subsidiaries may
not, directly or indirectly:
(i) declare or pay any dividend or make any distribution on account of any
Equity Interests of the Issuer 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 Issuer or any of its Restricted Subsidiaries or other Affiliate of
the Issuer in each case to the extent made in cash or other tangible
property;
(iii)Retire any Indebtedness of the Issuer 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) and (iii) above and this (iv) being
collectively referred to as "Restricted Payments"),
37
<PAGE>
unless, at the time of such Restricted Payment:
(1) no Default or Event of Default (as described below under "--Events of
Defaults and Remedies") 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 Issuer could incur
at least $1.00 of additional Indebtedness pursuant to the Consolidated
Indebtedness to Consolidated Capitalization Ratio test set forth under
the covenant described below under the caption "--Incurrence of
Indebtedness and Issuance of Disqualified Stock";
(3) immediately after giving effect to such Restricted Payment, the Issuer
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 financial information of the Issuer 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 Issuer either (x) as capital contributions to
the Issuer after the Issue Date or (y) from the issue and sale (other
than to a Subsidiary of the Issuer) 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 Issuer or any Subsidiary of
the Issuer 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 the next following sentence), 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 Issuer or any Subsidiary of the Issuer incurred
after the Issue Date which has been converted into or exchanged for
qualified Equity Interests of the Issuer (minus the amount of any cash
or property distributed by the Issuer or any Subsidiary of the Issuer
upon such conversion or exchange).
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 the Indenture;
(ii) the Retirement of (A) any Equity Interests of the Issuer or any
Restricted Subsidiary of the Issuer, (B) Indebtedness of the Issuer
that is subordinate to the Notes or (C) Indebtedness of a Restricted
Subsidiary of the Issuer, in exchange for, or out of the proceeds of
the substantially concurrent sale (other than to a Restricted
Subsidiary of the Issuer) of, Equity Interests of the Issuer (other
than Disqualified Stock);
(iii) the Retirement of any Indebtedness of the Issuer 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 Issuer
(other than Indebtedness to a Restricted Subsidiary of the Issuer),
but only to the extent that such new Indebtedness is (A) permitted
under the covenant described below under the caption, "--Incurrence of
Indebtedness and Issuance of Disqualified Stock" 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;
38
<PAGE>
(iv) the Retirement of any Indebtedness of a Restricted Subsidiary of the
Issuer in exchange for, or out of the proceeds of, the substantially
concurrent incurrence of Indebtedness of the Issuer or any Restricted
Subsidiary but only to the extent that such incurrence is (A)
permitted under the covenant described below under the caption
"--Incurrence of Indebtedness and Issuance of Disqualified Stock" and
only to the extent that such Indebtedness (1) is not secured by any
assets of the Issuer 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 Issuer, is pari passu or subordinated 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 Issuer or any Restricted
Subsidiary of the Issuer held by any member of the Issuer'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 $4.0 million during the seven year period following
the issue date of the Notes plus in each case the aggregate cash
proceeds received by the Issuer during such twelve-month or seven year
period from any issuance of Equity Interests by the Issuer to members
of management of the Issuer and/or its Subsidiaries; and
(vi) the payment of cash in lieu of fractional shares (a) payable as
dividends on Equity Interests of the Issuer or (b) issuable upon
conversion of or in exchange for securities convertible into or
exchangeable for Equity Interests of the Issuer 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 the 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.
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. For purposes of making such determination, all outstanding
Investments by the Issuer and its Restricted Subsidiaries (except to the extent
repaid in cash) in such Restricted Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will reduce the amount
available for Restricted Payments under the first paragraph of this covenant.
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.
The Board of Directors of the Issuer 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 Issuer of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant entitled "--Incurrence of Indebtedness and
Issuance of Disqualified Stock," and (ii) no Default or Event of Default would
be in existence following such designation.
Not later than the date of making any Restricted Payment, the Issuer shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant concerning Restricted Payments were computed, which
calculations may be based upon the Issuer's latest available financial
statements. The Trustee shall have no duty or obligation to confirm or verify
the calculations set forth in such officers' certificate.
39
<PAGE>
Incurrence of Indebtedness and Issuance of Disqualified Stock
The Indenture provides that the Issuer 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 Issuer and/or
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.
The foregoing limitation will not apply to (with each exception to be given
independent effect):
(a) the incurrence in the ordinary course of business by the Issuer and/or
any of its Restricted Subsidiaries of Indebtedness evidenced by letters
of credit;
(b) the incurrence by the Issuer and/or any of its Restricted Subsidiaries
of Vendor Indebtedness;
(c) the incurrence by the Issuer and/or any of its Restricted Subsidiaries
of the Existing Indebtedness and all borrowings after the Issue Date
under the Existing Indebtedness;
(d) the incurrence by the Issuer and/or any of its Restricted Subsidiaries
of Indebtedness in an aggregate amount not to exceed $10.0 million at
any one time outstanding;
(e) the incurrence by the Issuer and/or any of its Restricted Subsidiaries
of Indebtedness in connection with customs' duties and the guarantees
thereof;
(f) Permitted Refinancings;
(g) the incurrence by the Issuer or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Issuer and any of its
Restricted Subsidiaries; and
(h) the incurrence by the Issuer 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 covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
described in clauses (a) through (h) above or is entitled to be incurred
pursuant to the first paragraph of this covenant, the Issuer shall, in its sole
discretion, classify such item in any manner that complies with this covenant
and such item will be treated as having been incurred pursuant to only one of
such clauses or pursuant to the first paragraph hereof. Accrual of interest or
dividends, the accretion of accreted value or liquidation preference and the
payment of interest or dividends in the form or additional Indebtedness, Common
Stock or Preferred Stock will not be deemed to be an incurrence of Indebtedness
for purposes of this covenant.
Asset Sales
The Indenture provides that the Issuer and its Restricted Subsidiaries may
not, 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,
40
<PAGE>
(B) of inventory, including close-out sales, in the ordinary course of business,
(C) to the Issuer by any Restricted Subsidiary of the Issuer or from the Issuer
to any Restricted Subsidiary of the Issuer, (D) that constitute a Restricted
Payment or dividend or distribution permitted under the covenant described above
under the caption "--Restricted Payments" or (E) that constitute the disposition
of all or substantially all of the assets of the Issuer pursuant to the covenant
described above under the caption "--Merger, Consolidation or Sale of Assets"
(each of the foregoing other than those categories described in clauses (B),
(C), (D) and (E), an "Asset Sale").
The foregoing provisions does not apply to a sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Issuer, which
will be governed by the provisions of the Indenture described below under
"--Merger, Consolidation or Sale of Assets."
The Indenture also provides that within 365 days after the receipt of net
proceeds of any Asset Sale, the Issuer (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 Issuer 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 will constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $2.0 million,
the Issuer will be required to make an Excess Proceeds Offer in accordance with
the terms set forth under "--Offer to Purchase with Excess Asset Sale Proceeds."
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Issuer and its Restricted Subsidiaries may
not, 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 Issuer 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 Issuer or any of its Restricted
Subsidiaries;
(ii) make loans or advances to the Issuer or any of its Restricted
Subsidiaries; or
(iii) transfer any of its properties or assets to the Issuer 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 clauses (b), (c), (d) and (f) of the second
paragraph under the caption "--Incurrence of Indebtedness and Issuance
of Disqualified Stock"; or
(e) the Indenture and the Notes.
41
<PAGE>
Use of Proceeds
The Indenture provides that the Issuer may 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 Issuer which may include acquisitions.
The Issuer 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 covenant.
Tangible Net Worth
The Indenture provides that the Issuer shall at all times maintain a
Tangible Net Worth of not less than $25.0 million.
Merger, Consolidation or Sale of Assets
The Indenture provides that the Issuer may not consolidate or merge with or
into (whether or not the Issuer 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 Issuer) 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 Issuer
under the Notes and the 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 Issuer, the Issuer 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 with respect to such
transaction) could incur at least $1.00 of additional Indebtedness
pursuant to the Consolidated Debt to Consolidated Capitalization Ratio
test described under "--Incurrence of Indebtedness and Issuance of
Disqualified Stock"; and
(iv) the Issuer 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.
Transactions with Affiliates
The Indenture provides that the Issuer and its Restricted Subsidiaries may
not 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 Issuer or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Issuer or such
Restricted Subsidiary with an unrelated Person;
42
<PAGE>
(ii) such Affiliate Transaction is approved by a majority of the
disinterested directors on the Board of Directors of the Issuer; and
(iii) the Issuer 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 Issuer 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 by the Issuer 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 Issuer;
(b) transactions between or among the Issuer and its Restricted
Subsidiaries;
(c) transactions permitted by the provisions of the Indenture described
above under the covenant "--Restricted Payments";
(d) loans and advances to employees and officers of the Issuer 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 Issuer or any
Restricted Subsidiary financing the purchase of Capital Stock of the
Issuer by such employees or officers; and
(f) transactions (including loans and advances) pursuant to existing
contracts to which the Issuer is a party in accordance with the terms
of such contracts as they exist on the Issue Date
shall not be deemed Affiliate Transactions.
Reports
The Indenture provides that the Issuer will file with the Trustee within 15
days after it files them with the Securities and Exchange Commission (the
"Commission") copies of the annual and quarterly reports and the information,
documents and other reports that the Issuer is required to file with the
Commission pursuant to Section 13(a) or 15(d) of the Exchange Act ("SEC
Reports"). In the event the Issuer is not required or shall cease to be required
to file SEC Reports, pursuant to the Exchange Act, the Issuer will nevertheless
continue to file such report with the Commission (unless the Commission will not
accept such a filing) and with the Trustee. Whether or not required by the
Exchange Act to file SEC Reports with the Commission, so long as any Notes are
outstanding, the Issuer will furnish copies of the SEC Reports to the holders of
Notes at the time the Issuer is required to file the same with the Trustee and
make such information available to investors who request it in writing. In
addition, the Issuer has agreed that, for so long as any Notes remain
outstanding, it will 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.
Payments for Consent
The Indenture provides that neither the Issuer nor any of its Affiliates
shall, 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 the 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
43
<PAGE>
or agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default:
(i) default for 30 days in payment when due of interest on or Liquidated
Damages, if any, with respect to the Notes;
(ii) default in payment when due of principal or premium, if any, on the
Notes at maturity, upon redemption or otherwise;
(iii) failure by the Issuer to perform or comply with the provisions of the
covenants described above under "--Offer to Purchase Upon Change of
Control," "--Certain Covenants--Asset Sales," "--Certain
Covenants--Restricted Payments," "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock" or "--Certain
Covenants--Merger, Consolidation or Sale of Assets;"
(iv) failure by the Issuer for 30 days after notice to the Issuer from the
Trustee or to the Issuer 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 the Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Issuer or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Issuer 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 Issuer 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;
(vi) failure by the Issuer or any of its Significant Subsidiaries to pay
final judgments (other than any judgment as to which a reputable
insurance Issuer 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; and
(vii) certain events of bankruptcy or insolvency with respect to the Issuer
or any of its Significant Subsidiaries.
If any Event of Default occurs and is continuing under the Indenture, the
Trustee, by notice to the Issuer, or the holders of at least 25% in principal
amount of the then outstanding Notes, by notice to the Issuer 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 from certain events of bankruptcy or insolvency with respect to the
Issuer 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 Issuer or any of its
Restricted Subsidiaries intended to avoid restrictions on or premiums related to
redemptions of the
44
<PAGE>
Notes contained in the Indenture or the Notes, the amount declared due and
payable will include the premium that would have been applicable on a voluntary
prepayment of the Notes or, if voluntary prepayment is not then permitted, the
premium set forth in the Indenture. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payments of
principal or interest) if it determines that withholding notice is in such
holders' interest.
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.
The Issuer is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuer is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Issuer,
as such, shall have any liability for any obligations of the Issuer under the
Notes or the Indenture or for any claim based on, in respect of, or by reason of
such obligations or their creation. Each holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws, and it is the view of the
Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Issuer may, at its option and at any time, elect to have its obligations
discharged with respect to the outstanding Notes ("Legal Defeasance"). Such
Legal Defeasance means that the Issuer shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Notes, except
for:
(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 Issuer'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 Issuer's obligations in connection therewith; and
(d) the Legal Defeasance provisions of the Indenture.
In addition, the Issuer may, at its option and at any time, elect to have
the obligations of the Issuer released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including nonpayment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "--Events of Default and
Remedies" will no longer constitute an Event of Default with respect to the
Notes.
45
<PAGE>
In order to exercise either Legal Defeasance or Covenant Defeasance:
(i) the Issuer must irrevocably deposit with the Trustee, in trust, for
the benefit of the holders of the Notes, cash in U.S. dollars,
non-callable U.S. government obligations, or 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
Issuer, to pay the principal of, premium, if any, and interest on and
Liquidated Damages with respect to 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;
(ii) in the case of Legal Defeasance, the Issuer must deliver to the
Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Issuer has received
from, or there has been published by, the Internal Revenue Service a
ruling or (B) 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;
(iii) in the case of Covenant Defeasance, the Issuer must deliver 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;
(iv) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit)
or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after
the date of deposit;
(v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the
Issuer or any of its Restricted Subsidiaries is a party or by which
the Issuer or any of its Restricted Subsidiaries is bound;
(vi) the Issuer must 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;
(vii) the Issuer must deliver to the Trustee an officers' certificate
stating that the deposit was not made by the Issuer with the intent
of preferring the holders of Notes over the other creditors of the
Issuer with the intent of defeating, hindering, delaying or
defrauding creditors of the Issuer or others; and
(viii) the Issuer must deliver to the Trustee an officers' certificate and
an opinion of counsel, each stating that all conditions precedent
provided for in the Indenture relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
Transfer and Exchange
A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuer
46
<PAGE>
may require a holder to pay any taxes and fees required by law or permitted by
the Indenture. The Issuer is not required to transfer or exchange any Note
selected for redemption. Also, the Issuer is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
Amendment, Supplement and Waiver
Except as provided in the next succeeding paragraph, 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 each holder affected, however, an amendment or waiver
may not (with respect to any Note held by a non-consenting holder):
(i) reduce the principal amount of Notes whose holders must consent to an
amendment, supplement or waiver;
(ii) reduce the principal or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes
(other than provisions relating to the covenants described under the
caption "--Offer to Purchase upon Change of Control" and "--Offer to
Purchase with Excess Asset Sale Proceeds");
(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 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;
(vii) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the
captions "--Offer to Purchase upon Change of Control" and "--Offer to
Purchase with Excess Asset Sale Proceeds");
(viii) make any change in the foregoing amendment and waiver provisions; or
(ix) modify the ranking of priority of the Notes in any manner adverse to
the holders thereof.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Issuer and the Trustee may amend or supplement the Indenture or the Notes:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
47
<PAGE>
(c) to provide for the assumption of the Issuer'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 the Indenture of any such holder; or
(e) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture
Act.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should the Trustee become a creditor of the Issuer, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions with the Issuer; however, if the Trustee acquires any
conflicting interest, it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue as Trustee or resign.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur and be continuing, the Trustee will be required, in the exercise of
its powers, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
holder of Notes, unless such holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense. No
holder of any Note will have any right to institute any proceeding with respect
to the Indenture or for any remedy thereunder, unless (i) such holder gives to
the Trustee written notice of a continuing Event of Default, (ii) holders of at
least 25% in principal amount of the then outstanding Notes make a written
request to pursue the remedy, (iii) such holders of the Notes provide to the
Trustee satisfactory indemnity and (iv) the Trustee does not comply within 60
days. Otherwise, no holder of any Note will have any right to institute any
proceeding with respect to the Indenture or thereunder for any remedy, except:
(i) a holder of a Note may institute suit for enforcement of payment of the
principal of and premium, if any, or interest on or Liquidated Damages with
respect to such Note on or after the respective due dates expressed in such Note
(including upon acceleration thereof) or (ii) the institution of any proceeding
with respect to the Indenture 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 notice thereof.
Registration Rights; Liquidated Damages
In connection with the sale of the Old Notes, the Issuer and the purchasers
of the Old Notes entered into the Registration Agreement. Pursuant to the
Registration Agreement, the Issuer agreed to file with the Commission a
registration statement relating to the Exchange Offer (the "Exchange Offer
Registration Statement"), of which this Prospectus forms a part, on the
appropriate form under the Securities Act. Upon the effectiveness of the
Exchange Offer Registration Statement, the Issuer will offer to the holders of
Transfer Restricted Securities pursuant to the Exchange Offer who are able to
make certain representations the opportunity to exchange their Transfer
Restricted Securities for a new issue of senior notes of the Issuer, the New
Notes, to be registered under the Securities Act, with terms substantially
identical to those of the Old Notes. If (i) the Issuer is not required to file
the Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any holder of Transfer Restricted Securities notifies
the Issuer within the specified time period that (A) it is prohibited by law or
Commission policy from participating in the Exchange Offer or (B) that it may
not resell the New 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
48
<PAGE>
appropriate or available for such resales, the Issuer will file with the
Commission a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement") to cover resales of the Old
Notes by the holders thereof who satisfy certain conditions relating to the
provision of information in connection with the Shelf Registration Statement.
The Issuer will use its best efforts to cause the applicable registration
statement to be declared effective as promptly as possible by the Commission.
For purposes of the foregoing, "Transfer Restricted Securities" means each Old
Note until (i) the date on which such has been exchanged by a Person for an New
Note in the Exchange Offer, (ii) the date on which such Old Note has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iii) the date on which such Old Note
is distributed to the public pursuant to Rule 144 under the Securities Act.
The Registration Agreement will provide that (i) the Issuer will file an
Exchange Offer Registration Statement with the Commission as soon as practicable
after the Closing Date, but in no event later than 90 days after the Closing
Date, (ii) the Issuer will use its best efforts to have the Exchange Offer
Registration Statement declared effective by the Commission on or prior to 150
days after the Closing Date, (iii) unless the Exchange Offer would not be
permitted by applicable law or Commission policy, the Issuer will commence the
Exchange Offer and use its best efforts to issue, on or prior to 30 business
days after the date on which the Exchange Offer Registration Statement was
declared effective by the Commission, New Notes in exchange for all Old Notes
tendered prior thereto in the Exchange Offer and (iv) if obligated to file the
Shelf Registration Statement, the Issuer will use its best efforts to file the
Shelf Registration Statement with the Commission on or prior to 30 days after
such filing obligation arises (and in any event within 150 days after the
Closing Date) and to cause the Shelf Registration to be declared effective by
the Commission on or prior to 90 days after such obligation arises (and in any
event within 180 days after the Closing Date). If (a) the Issuer fails to file
any of the Registration Statements required by the Registration Agreement on or
before the day specified for such filing, (b) 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"), (c) the
Issuer fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) 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 the Registration Agreement, (each such event
referred to in clauses (a) through (d) above a "Registration Default"), then the
Issuer will pay Liquidated Damages to each holder of Transfer Restricted
Securities, with respect to the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to $.05 per week per
$1,000 principal amount of Old Notes constituting Transfer Restricted Securities
held by such holder. The amount of the Liquidated Damages will increase by an
additional $.05 per week per $1,000 principal amount of Old Notes constituting
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.50 per week per $1,000 principal amount of Old Notes
constituting Transfer Restricted Securities. All accrued Liquidated Damages will
be paid by the Issuer on each Interest Payment Date. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Old Notes will be required to make certain representations to the
Issuer (as described in the Registration Agreement) in order to participate in
the Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Agreement in order to have their Old Notes included in the Shelf
Registration Statement and benefit from the provisions regarding Liquidated
Damages set forth above.
Book-Entry, Delivery and Form
Except as set forth below, New Notes will be issued in registered, global
form (the "Global Notes") in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof. The Global Notes will be deposited upon
issuance with the Trustee as custodian for The Depository Trust Company ("DTC"),
in New York, New York, and registered in the name of DTC or its nominee, in each
case for credit to an account of a direct or indirect participant in DTC as
described below.
49
<PAGE>
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for New
Notes in certificated form except in the limited circumstances described below.
See " --Exchange of Book-Entry Notes for Certificated Notes." Except in the
limited circumstances described below, owners of beneficial interests in the
Global Notes will not be entitled to receive physical delivery of Certificated
Notes (as defined below). Transfers of beneficial interests in the Global Notes
will be subject to the applicable rules and procedures of DTC and its direct or
indirect participants, which may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The New Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
Depository Procedures
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of its settlement system and are subject to changes by
DTC from time to time. The Issuer takes no responsibility for these operations
and procedures and urges investors to contact DTC or their participants directly
to discuss these matters.
DTC has advised the Issuer that DTC is a limited-purpose trust Issuer
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interests
in, and transfers of ownership interests in, each security held by or on behalf
of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised the Issuer that, pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the initial purchaser with portions of the principal
amount of the Global Notes and (ii) ownership of such interests in the Global
Notes will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Notes). Investors in the Global Notes may hold
their interests therein directly through DTC, if they are Participants in such
system, or indirectly through organizations which are Participants in such
system.
All interests in a Global Note may be subject to the procedures and
requirements of DTC. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own. Consequently,
the ability to transfer beneficial interests in a Global Note to such persons
will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global Note to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interest in the Global Notes will not
have New Notes registered in their names, will not receive physical delivery of
New Notes in certificated form and will not be considered the registered owners
or "Holders" thereof under the Indenture for any purpose.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Issuer and the
Trustee will treat the persons in
50
<PAGE>
whose names the New Notes, including the Global Notes, are registered as the
owners thereof for the purpose of receiving such payments and for any and all
other purposes whatsoever. Consequently, neither the Issuer, the Trustee nor any
agent of the Issuer or the Trustee has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Notes, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect Participant's
records relating to the beneficial ownership interests in the Global Notes or
(ii) any other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Issuer that its
current practice, upon receipt of any payment in respect of securities such as
the New Notes (including principal and interest), is to credit the accounts of
the relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in the principal amount of beneficial
interest in the relevant security as shown on the records of DTC unless DTC has
reason to believe it will not receive payment on such payment date. Payments by
the Participants and the Indirect Participants to the beneficial owners of New
Notes will be governed by standing instructions and customary practices and will
be the responsibility of the Participants or the Indirect Participants and will
not be the responsibility of DTC, the Trustee or the Issuer. Neither the Issuer
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the New Notes, and the Issuer and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Interest in the Global Notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its Participants. See " -- Same Day
Settlement and Payment." Transfers between Participants in DTC will be effected
in accordance with DTC's procedures, and will be settled in same day funds in
accordance with its rules and operating procedures.
DTC has advised the Issuer that it will take any action permitted to be
taken by a Holder of New Notes only at the direction of one or more Participants
to whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the New Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the New Notes, DTC reserves the
right to exchange the Global Notes for New Notes in certificated form, and to
distribute such New Notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among Participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Issuer nor the Trustee
nor any of their respective agents will have any responsibility for the
performance by DTC or its participants or indirect participants of its
obligations under the rules and procedures governing its operations.
Exchange of Book-Entry Notes for Certificated Notes
A Global Note is exchangeable for definitive New Notes in registered
certificated form ("Certificated Notes") if (i) DTC (x) notifies the Issuer that
it is unwilling or unable to continue as depositary for the Global Notes and the
Issuer thereupon fails to appoint a successor depositary or (y) has ceased to be
a clearing agency registered under the Exchange Act or (ii) the Issuer, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
the Certificated Notes. In addition, beneficial interests in a Global Note may
be exchanged for Certificated Notes upon request but only upon prior written
notice given to the Trustee by or on behalf of DTC in accordance with the
Indenture. In all cases, Certificated Notes delivered in exchange for any Global
Note or beneficial interests therein will be registered in the names, and issued
in any approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures).
51
<PAGE>
Same Day Settlement and Payment
The Indenture requires that payments in respect of the New Notes represented
by the Global Notes (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Global Note Holder. With respect to New
Notes in certificated form, the Issuer will make all payments of principal,
premium, if any, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. The New Notes represented by the Global Notes are expected
to be eligible to trade in the PORTAL market and to trade in the Depositary's
Same-Day Funds Settlement System, and any permitted secondary market trading
activity in such New Notes will, therefore, be required by the Depositary to be
settled in immediately available funds. The Issuer expects that secondary
trading in any certificated New Notes will also be settled in immediately
available funds.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of 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.
"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.
"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, participation, 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.
52
<PAGE>
"Change of Control" means the occurrence of either 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 Issuer (or the successor to the Issuer) including by
way of merger, consolidation, sale of assets or otherwise (ii) the first day on
which a majority of the members of the Board of Directors of the Issuer are not
Continuing Directors.
"Closing Date" means July 30, 1998.
"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 Issuer 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 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 Issuer, the Issuer and 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 Issuer, the Issuer 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 Issuer, 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 Issuer, a Restricted
Subsidiary thereof,
(ii) the Net Income of any Subsidiary or, in the case of the Issuer, 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,
53
<PAGE>
(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 Issuer or one of its Restricted
Subsidiaries.
"Consolidated Net Worth" means the total amount shown on the balance sheet
of the Issuer 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 Issuer 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 Issuer 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.
"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 Issuer 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.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock 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 Issuer 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
the covenant described under "--Offer to Purchase Upon a Change of Control" and
such Capital Stock specifically provides that the Issuer will not repurchase or
redeem any such stock pursuant to such provisions prior to the Issuer's
repurchase of such Notes as are required to be repurchased pursuant to the
covenant described under "--Offer to Purchase Upon Change of Control."
"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.
54
<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).
"Existing Indebtedness" means all Indebtedness of the Issuer 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 the
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.
"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 exchange rates or the price of raw
materials and other products used or produced in such Person's business, as the
case may be.
"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 Issuer, 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.
55
<PAGE>
"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 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 Issuer (other than Disqualified
Stock) shall not be deemed an "Investment" for purposes of the Indenture.
"Issue Date" means July 30, 1998.
"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).
"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
Issuer) 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.
"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 Issuer, the Issuer 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 Issuer, the Issuer 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 Issuer 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,
56
<PAGE>
but shall include such proceeds when and as converted by the Issuer or any
Restricted Subsidiary of the Issuer to cash.
"Permitted Business" means the existing businesses of the Issuer 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 Issuer and/or its Restricted Subsidiaries hereafter are
engaged.
"Permitted Holders" means any member of the existing management group of the
Issuer as determined by the Continuing Directors of the Issuer (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 Issuer as a member of the Issuer's management
group.
"Permitted Investment" means (a) any Investments in the Issuer or any
Restricted Subsidiary of the Issuer; (b) any Investments in Marketable
Securities; (c) Investments by the Issuer and/or any Restricted Subsidiary of
the Issuer 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 Issuer 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 by the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock"; and (g)
bonds, notes, debentures or other securities received as a result of Asset Sales
permitted under the covenant entitled "Asset Sales."
"Permitted Refinancing" means the incurrence by the Issuer 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 to the Indenture ("Refinance" and
correlatively, "Refinanced" and "Refinancing") Existing Indebtedness and any
subsequent Refinancing thereof not expressly prohibited under the Indenture,
provided that the terms of any Refinancing are generally as favorable to the
Issuer 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.
"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.
"Registration Agreement " means the Registration Rights Agreement between
the Issuer and the purchaser of the Old Notes.
"Restricted Investment" means an Investment other than a Permitted
Investment.
57
<PAGE>
"Restricted Subsidiary" means any subsidiary of the Issuer that is not
designated by the Board of Directors as an Unrestricted Subsidiary.
"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
Issuer, the Issuer 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 Issuer, the Issuer or one of its
Restricted Subsidiaries.
"Secondary Public Offering" means an underwritten offering of Capital Stock
(other than Disqualified Stock) of the Issuer registered under the Securities
Act.
"Senior Indebtedness" means any Indebtedness permitted to be incurred by the
Issuer under the terms of the 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 Issuer, (ii) any Indebtedness of the Issuer
to any of its Subsidiaries or other Affiliates, (iii) any trade payables or (iv)
any Indebtedness that is incurred in violation of the Indenture.
"Significant Subsidiary" means (i) 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 Issuer 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 Issuer 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.
"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 of the Issuer 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.
"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.
58
<PAGE>
"Vendor Indebtedness" means any Indebtedness of the Issuer 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 Issuer'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.
59
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain United States federal income tax
considerations generally applicable to holders acquiring the New Notes pursuant
to the Exchange Offer but does not purport to be a complete analysis of all
potential consequences. The discussion is based upon the Code, Treasury
regulations, Internal Revenue Service ("IRS") rulings and judicial decisions now
in effect, all of which are subject to change at any time by legislative,
judicial or administrative action. Any such changes may be applied retroactively
in a manner that could adversely affect a holder of the New Notes. The
discussion assumes that the holders of the New Notes will hold them as "capital
assets" within the meaning of Section 1221 of the Code.
The tax treatment of a holder of the New Notes may vary depending on such
holder's particular situation or status. Certain holders (including S
corporations, insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, taxpayers subject to alternative minimum tax and
persons holding the New Notes as part of a straddle, hedging or conversion
transaction) may be subject to special rules not discussed below. The following
discussion does not consider all aspects of United States federal income tax
that may be relevant to the purchase, ownership and disposition of the New Notes
by a holder in light of such holder's personal circumstances. In addition, the
discussion does not consider the effect of any applicable foreign, state or
local tax laws or estate or gift tax considerations. PERSONS CONSIDERING THE
EXCHANGE OF THE OLD NOTES FOR NEW NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO
THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE
LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
For purposes of this discussion, a "U.S. Holder" means a citizen or resident
of the United States, a corporation, partnership or other entity created or
organized in the United States or under the laws of the United States or of any
political subdivision thereof, an estate whose income is includible in gross
income for United States federal income tax purposes regardless of its source or
a trust, if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust. A "Non-U.S. Holder" means a
holder who is not a U.S. Holder.
Introduction
The exchange of Old Notes for New Notes will not constitute a recognition
event for federal income tax purposes. Consequently, no gain or loss will be
recognized by a holder upon receipt of the New Notes. The New Notes will have
the same issue date and issue price as the Old Notes. A holder's adjusted tax
basis in the New Notes will be the same as the holder's adjusted tax basis in
the Old Notes exchanged therefor. A holder will be considered to have held the
New Notes from the time the holder originally acquired the Old Notes.
Tax Consequences to U.S. Holders
Interest on the New Notes
Interest paid on the New Notes will generally be taxable to a U.S. Holder as
ordinary interest income at the time it is accrued or is received in accordance
with the U.S. Holder's method of accounting for federal income tax purposes.
Sale or Other Taxable Disposition of the New Notes
Upon the sale or other taxable disposition of a New Note, the difference
between the sum of the amount of cash and the fair market value of other
property received (other than amounts attributable to accrued unpaid interest)
and the holder's adjusted tax basis in the New Note will generally be capital
gain or loss. Any capital gain or loss will
60
<PAGE>
be long-term capital gain or loss if the holder's holding period for the New
Note exceeds on year. In the case of a holder who acquired an Old Note at a
"market discount" (as defined in the Code), a portion of any gain recognized on
the disposition of the New Note received in exchange for such Old Note will be
treated as ordinary income.
Tax Consequences to Non-U.S. Holders
Interest on the New Notes
Interest paid by the Company to a Non-U.S. Holder will not be subject to
United States federal income or withholding tax if such interest is not
effectively connected with the conduct of a trade or business within the United
States by such Non-U.S. Holder and such Non-U.S. Holder (i) does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote; (ii) is not a controlled foreign
corporation with respect to which the Company is a "related person" within the
meaning of the Code; and (iii) certifies, under penalties of perjury, that such
holder is not a United States person and provides such holder's name and address
(the "Portfolio Interest Exemption").
Interest paid to a Non-U.S. Holder of the New Notes that is effectively
connected with a United States trade or business conducted by such Non-U.S.
Holder will be taxed at the graduated rates applicable to United States
citizens, resident aliens and domestic corporations (the "Regular Federal Income
Tax") and will not be subject to withholding tax if the Non-U.S. Holder gives an
appropriate statement to the Company or its paying agent in advance of the
interest payment. In addition to the Regular Federal Income Tax, effectively
connected interest received by a Non-U.S. Holder that is a corporation may also
be subject to a branch profits tax at a rate of 30% (or such lower rate as may
be specified by an applicable income tax treaty).
Sale or Other Taxable Disposition of the New Notes
A Non-U.S. Holder will generally not be subject to United States federal
income tax on gain recognized on a sale or other disposition of a New Note
unless (i) the gain is effectively connected with the conduct of a trade or
business within the United States by the Non-U.S. Holder or (ii) in the case of
a Non-U.S. Holder who is a nonresident alien individual and holds the New Note
as a capital asset, such holder is present in the United States for 183 or more
days in the taxable year and certain other requirements are met.
If a Non-U.S. Holder falls within clause (i) in the preceding paragraph,
the holder will be taxed on the net gain derived from the sale under the Regular
Federal Income Tax and may be subject to withholding under certain circumstances
(and, with respect to corporate Non-U.S. Holders, may also be subject to the
branch profits tax described above). If an individual Non-U.S. Holder falls
under clause (ii) in the preceding paragraph, the holder generally will be
subject to United States federal income tax at a rate of 30% on the gain derived
from the sale.
New Withholding Regulations
The Treasury Department recently promulgated final regulations regarding the
withholding and information reporting rules applicable to Non-U.S. Holders (the
"New Withholding Regulations"). In general, the New Withholding Regulations do
not significantly alter the substantive withholding and information reporting
requirements but rather unify current certification procedures and forms and
clarify reliance standards. The New Withholding Regulations are generally
effective for payments made after December 31, 1999, subject to certain
transition rules. Non-U.S. Holders should consult their own tax advisors with
respect to the impact, if any, of the New Withholding Regulations.
61
<PAGE>
Federal Estate Taxes
If interest received by a Non-U.S. Holder on a New Note is exempt from
withholding of United States federal income tax under the Portfolio Interest
Exemption, the New Note will not be included in the estate of the Non-U.S.
Holder for United States federal estate tax purposes.
Information Reporting and Backup Withholding
Generally, interest on, and the proceeds from the sale or other disposition
of, New Notes will be reported to the IRS with respect to U.S. Holders. Interest
on New Notes will be reported to the IRS with respect to Non-U.S.
Holders.
A U.S. Holder of New Notes may be subject to backup withholding at the rate
of 31% with respect to interest paid on, or the proceeds from the sale or other
disposition of, New Notes unless such holder (a) is a corporation or comes
within certain other exempt categories and, when required, demonstrates its
exemption or (b) provides a correct taxpayer identification number, certifies as
to no loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. A U.S. Holder of New
Notes who does not provide the Company with the holder's correct taxpayer
identification number may be subject to penalties imposed by the IRS. A Non-U.S.
Holder of New Notes may also be subject to certain information reporting or
backup withholding if certain requisite certification is not received or other
exemptions do not apply. Any amount paid as backup withholding would be
creditable against the holder's federal income tax liability, provided the
required information is furnished to the IRS.
62
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Old Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of the Old Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Old Notes received in exchange for Old Notes acquired
as a result of market-making activities or other trading activities. The Company
has agreed that for a period expiring on the earlier of (i) the date that all
holders of Transfer Restricted Securities have registered such securities
pursuant to the Exchange Offer and (ii) 365 days after the date of this
Prospectus, it will make this Prospectus, as amended or supplemented, available
to any broker-dealer for use in connection with any such resale. In addition,
until , 1998, all dealers effecting transactions in the New Notes may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Old Notes by
broker-dealers. Old Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options of the Old Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any Old Notes. Any broker-dealer that
resells Old Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker-dealer that participates in a distribution of Old
Notes may be deemed to be an "underwriter" within the meaning of the Securities
Act and any profit on any resale of Old Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
During the Registration Period, the Company will promptly send additional
copies of this Prospectus and any amendment or supplement to this Prospectus to
any broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed to pay all expenses of the Exchange Offer (including the
expenses of one counsel for the holders of the Old Notes) other than commissions
or concessions of any brokers or dealers and will indemnify the holders of the
Old Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
The Company has not entered into any arrangement or understanding with any
person to distribute the Old Notes to be received in the Exchange Offer and to
the best of the Company's information and belief, each person participating in
the Exchange Offer is acquiring the Old Notes in its ordinary course of business
and has no arrangement or understanding with any person to participate in the
distribution of the Old Notes to be received in the Exchange Offer.
63
<PAGE>
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Issuer by Kronish Lieb Weiner & Hellman LLP, 1114 Avenue of the Americas, New
York, New York 10036-7798. Ralph J. Sutcliffe, a partner of Kronish Lieb Weiner
& Hellman LLP, beneficially owns 90,000 shares of the Issuer's common stock.
EXPERTS
The consolidated financial statements of Concord Camera Corp. appearing in
Concord Camera Corp.'s Annual Report (Form 10-K) for the year ended June 30,
1998, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
64
<PAGE>
================================================================================
No dealer, sales representative or any other person has been authorized to
give any information or make any representations in connection with this offer
other than those contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been
authorized by the Issuer. This Prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy any security other than the New Notes
offered hereby, nor does it constitute an offer to sell, or the solicitation of
an offer to buy, to any person in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Issuer since the date hereof
or that the information contained herein is correct as of any time subsequent to
the date hereof.
-------------
TABLE OF CONTENTS
Page
Available Information...............................ii
Incorporation of Certain Documents by Reference.....ii
Prospectus Summary...................................1
Risk Factors........................................10
The Exchange Offer..................................17
Use of Proceeds.....................................24
Capitalization......................................24
Selected Financial Data.............................25
Business ...........................................26
Description of the Notes............................35
Certain Federal Income Tax Consequences.............60
Plan of Distribution................................63
Legal Matters.......................................64
Experts.............................................64
================================================================================
================================================================================
$15,000,000
Concord Camera Corp.
11% Senior Notes
due 2005
----------------------------
PROSPECTUS
----------------------------
____________, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The New Jersey Business Corporation Act ("NJBCA") permits a corporation to
indemnify its directors and officers against reasonable expenses (including
attorney's fees), judgments, fines and amounts paid in settlement incurred by
them in connection with any action or proceeding brought by third parties, if
such directors or officers acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal proceeding, had no reasonable cause to believe
their conduct was unlawful. In a derivative action (i.e., one by or in the right
of the corporation), indemnification may be made only for reasonable expenses
(including attorneys' fees) incurred by directors and officers in connection
with the defense or settlement of such action if they acted in good faith and in
a manner they reasonably believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification shall be made if
such person shall have been adjudged liable to the corporation unless and only
to the extent that the Superior Court or such other court deems proper. The
NJBCA further provides that, to the extent any director or officer has been
successful on the merits or otherwise in defense of any action or proceeding
referred to in this paragraph or in defense of any claim, issue or matter
therein, such person shall be indemnified against reasonable expenses (including
attorneys' fees) incurred by him in connection therewith.
Pursuant to Article SEVENTH of the Issuer's Certificate of Incorporation, as
amended, the Issuer will indemnify its corporate agents (as defined in the
NJBCA) to the fullest extent permitted by Section 14A:3-5 of the NJBCA and
pursuant to Article EIGHTH of the Issuer's Certificate of Incorporation, as
amended, the personal liability of the directors is limited to the fullest
extent permitted by Section 14A:2-7(3) of the NJBCA.
The Issuer has entered into a certain indemnification agreement with Ira J.
Hechler in order to induce Mr. Hechler to serve on the board of directors (the
"Board"). Pursuant to such agreement, Mr. Hechler will be indemnified and held
harmless by the registrant to the fullest extent permitted by the NJBCA against
all expenses reasonably incurred or suffered in any action, suit or proceeding
involving Mr. Hechler by reason of the fact that he is or was a director of the
Issuer or served in another capacity at the request of the Issuer.
Pursuant to a certain Purchase Agreement, dated May 29, 1992, between Mr.
Hechler and the Issuer, the Issuer has also agreed to enter into indemnification
agreements (in the same form as the indemnification agreement with Mr. Hechler)
with the two directors that may be nominated by Mr. Hechler and elected to the
Board.
The Issuer has entered into employment agreements with Jack C. Benun, the
former Chairman and Chief Executive Officer, Ira B. Lampert, the current
Chairman and Chief Executive Officer, and Steve Jackel, the former President
and Chief Operating Officer (each, individually, an "Officer"), which include
certain indemnification provisions. Pursuant to such provisions, each Officer
will be indemnified and held harmless by the Issuer to the fullest extent
permitted or authorized by the Issuer's Certificate of Incorporation or By-laws,
or the NJBCA against all expenses reasonably incurred or suffered in any action,
suit or proceeding involving any Officer by reason of the fact that such Officer
is or was a director, officer, or employee of the Issuer or served in another
capacity at the request of the Issuer.
The issuer has indemnification insurance under which directors and officers
are insured against certain liability that may occur in their capacity as such.
Item 21. Exhibits.
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Certificate of Incorporation of the Company (l)
i
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.2 Amendments to Certificate of Incorporation of the Company (l)
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 Purchase Agreement, dated July 30, 1998, between Dreyfus High
Yield Strategies Fund and the Company (19)
4.2 Indenture, dated July 30, 1998, between Bankers Trust Company
and the Company (19)
4.3 Registration Rights Agreement, dated July 30, 1998, between
Dreyfus High Yield Strategies Fund and the Company (19)
5 Opinion of Kronish Lieb Weiner & Hellman LLP
8 Opinion of Kronish Lieb Weiner & Hellman LLP re: tax matters
(contained in their opinion filed as Exhibit 4 to this
Registration Statement)
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)
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)
ii
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
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 translation (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
translation (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 translation (1)
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 translation (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 translation (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 translation (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
translation (1)
iii
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
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 translation (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 translation (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 translation (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 translations (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
translations (11)
10.32 Loan and Security Agreement between the Company,
Concord-Keystone Sales Corp. and CIT, dated March 30, 1994 (9)
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)
iv
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
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)
11 Statement re: computation of per share earnings
12 Statement re: computation of ratio of earnings to fixed charges
21 List of Subsidiaries of Company (6)
23.1 Consent of Ernst & Young LLP
23.2 Consent of Kronish Lieb Weiner & Hellman LLP (contained in
their opinion filed as Exhibit 5 to this Registration
Statement)
24 Power of Attorney as set forth on the signature page of this
Registration Statement
25 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 on Form T-1
99 Form of Letter of Transmittal
(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.
v
<PAGE>
(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.
(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 31, 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 and is incorporated herein by reference.
(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 and is incorporated herein by reference.
(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.
(19) 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, 1998 and is incorporated
herein by reference.
(b) Financial statements and financial statement schedules
All necessary financial statements and financial statement schedules
have been previously filed with the Commission and are incorporated herein by
reference.
Item 22. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Exchange Offer Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of this Exchange Offer Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
this Exchange Offer Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Exchange Offer Registration
Statement or any material change to such information in this Exchange Offer
Registration Statement;
vi
<PAGE>
provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Issuer pursuant to
Section 13 or Section 15(d) of the Exchange Act, that are incorporated by
reference in this Exchange Offer Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) To respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Item 4, 10(b), 11 or 13 of
this Exchange Offer Registration Statement, within one business day of
receipt of such request, and to send the incorporated documents by
first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective
date of this Exchange Offer Registration Statement through the date of
responding to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in this Exchange
Offer Registration Statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Issuer
pursuant to the foregoing provisions, or otherwise, the Issuer has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Issuer of expenses incurred or paid by a director, officer or
controlling person of the Issuer in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Issuer will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
vii
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Issuer has duly
caused this Exchange Offer Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Avenel, State of New
Jersey, on this 29th day of September, 1998.
Concord Camera Corp.
By: /s/ Ira B. Lampert
-------------------------
Ira B. Lampert
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Exchange Offer
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
under the heading "Signature" constitutes and appoints Ira B. Lampert and Harlan
I. Press or either of them, as true and lawfully attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities to sign any or all amendments
to this Exchange Offer Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, granting unto
said attorneys-in-fact and agents, each acting alone, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully for all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Principal Executive Officer:
/s/ Ira B. Lampert Chief Executive Officer September 29, 1998
---------------------------------
Ira B. Lampert
Principal Financial and Accounting Officer:
/s/ Harlan I. Press Controller September 29, 1998
--------------------------------- and Assistant Secretary
Harlan I. Press
Directors:
/s/ Ira B. Lampert Chairman of the Board September 29, 1998
--------------------------------
Ira B. Lampert
/s/ Eli Arenberg Director September 29, 1998
--------------------------------
Eli Arenberg
/s/ Joel L. Gold Director September 29, 1998
--------------------------------
Joel L. Gold
</TABLE>
viii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Directors:
/s/ Morris H. Gindi Director September 29, 1998
-------------------------------
Morris H. Gindi
/s/ J. David Hakman Director September 29, 1998
-------------------------------
J. David Hakman
/s/ Ira J. Hechler Director September 29, 1998
-------------------------------
Ira J. Hechler
/s/ Kent M. Klineman Director September 29, 1998
-------------------------------
Kent M. Klineman
</TABLE>
ix
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Certificate of Incorporation of the Company (l)
3.2 Amendments to Certificate of Incorporation of the Company (l)
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 Purchase Agreement, dated July 30, 1998, between Dreyfus High
Yield Strategies Fund and the Company (19)
4.2 Indenture, dated July 30, 1998, between Bankers Trust Company
and the Company (19)
4.3 Registration Rights Agreement, dated July 30, 1998, between
Dreyfus High Yield Strategies Fund and the Company (19)
5 Opinion of Kronish Lieb Weiner & Hellman LLP
8 Opinion of Kronish Lieb Weiner & Hellman LLP re: tax matters
(contained in their opinion filed as Exhibit 4 to this
Registration Statement)
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)
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)
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
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
translation (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 translation (1)
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 translation (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 translation (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 translation (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
translation (1)
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
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 translation (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 translation (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 translation (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 translations (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
translations (11)
10.32 Loan and Security Agreement between the Company,
Concord-Keystone Sales Corp. and CIT, dated March 30, 1994 (9)
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)
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
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)
11 Statement re: computation of per share earnings
12 Statement re: computation of ratio of earnings to fixed charges
21 List of Subsidiaries of Company (6)
23.1 Consent of Ernst & Young LLP
23.2 Consent of Kronish Lieb Weiner & Hellman LLP (contained in
their opinion filed as Exhibit 5 to this Registration
Statement)
24 Power of Attorney as set forth on the signature page of this
Registration Statement
25 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 on Form T-1
99 Form of Letter of Transmittal
(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.
<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 31, 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 and is incorporated herein by reference.
(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 and is incorporated herein by reference.
(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.
(19) 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, 1998 and is incorporated
herein by reference.
<PAGE>
Concord Camera Corp.
September 29, 1998
Page 1
September 29, 1998
Concord Camera Corp.
35 Mileed Way
Avenel, New Jersey 07001
Ladies and Gentlemen:
We have acted as counsel to Concord Camera Corp., a New Jersey
corporation (the "Company"), in connection with its Registration Statement on
Form S-4 (the "Registration Statement"), filed pursuant to the Securities Act of
1933, as amended (the "Securities Act"), relating to the Company's proposed
offer to exchange (the "Exchange Offer") 11% Senior Notes due 2005, Series B of
the Company (the "New Notes") for any and all outstanding 11% Senior Notes due
2005 of the Company (the "Old Notes"). The Old Notes were issued and sold on
July 30, 1998 pursuant to an indenture (the "Indenture") between the Company and
Bankers Trust Company, as trustee, in a transaction exempt from registration
under the Securities Act in reliance upon Rule 144A and Section 4(2) of the
Securities Act. The New Notes will also be issued pursuant to the Indenture.
In that connection, we have reviewed the Indenture, the Registration
Statement and such other documents and instruments as we have deemed
appropriate. In such review, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted as originals and the conformity to
the original documents of all documents submitted to us as copies.
On the basis of such review, and having regard to such legal
consideration as we have deemed relevant, it is our opinion that:
1. The New Notes have been duly and validly authorized for issuance by
the Company and, when issued 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 we 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.
<PAGE>
Concord Camera Corp.
September 29, 1998
Page 2
2. The statements under the caption "Certain Federal Income Tax
Considerations" in the prospectus relating to the New Notes included in the
Registration Statement, insofar as such statements constitute summaries of
federal income tax law, fairly summarize the matters referred to therein.
We are members of the Bar of the State of New York and do not purport
to be experts or give any opinion except as to matters involving the laws of
such state, the general corporation laws of the State of Delaware and the
federal laws of the United States.
We hereby consent to the use of our name under the caption "Legal
Matters" in the prospectus included in the Registration Statement and to the use
of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Kronish Lieb Weiner and Hellman LLP
<PAGE>
Exhibit 11 - Statement re: Computation of per share Earnings
<TABLE>
<CAPTION>
Year Ended June 30,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income (loss) $6,013,439 ($832,662) ($1,734,196) $1,209,020 ($944,751)
========== ========== =========== ========== =========
Weighted average common shares
outstanding - basic 10,938,934 10,880,473 10,813,224 10,426,973 10,044,049
Incremental shares using treasury
stock method 615,048 0 0 0 0
---------- ---------- ---------- ---------- ----------
Weighted average common shares
outstanding - diluted 11,553,982 10,880,473 10,813,224 10,426,973 10,044,049
========== ========== ========== ========== ==========
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)
========== ========== ========== ========== ==========
</TABLE>
<PAGE>
Exhibit 12 - Statement re: Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Year Ended June 30,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Consolidated pretax income (loss)
from continuing operations 6,517 $ (716) $(1,654) $1,316 $ (822)
Interest 1,668 1,465 1,437 1,412 1,709
Net amortization of debt discount
and premium and issuance expense 0 0 52 0 180
Interest portion of rental expense 333 329 374 344 335
------ ------ ------ ------ ------
Earnings $8,518 $1,078 $ 209 $3,072 $1,402
====== ====== ====== ====== ======
Interest $1,688 $1,465 $1,437 $1,412 $1,709
Net amortization of debt discount
and premium and issuance expense 0 0 52 0 180
Interest portion of rental expense 333 329 374 344 335
------ ------ ------ ------ ------
Fixed Charges $2,001 $1,794 $1,863 $1,756 $2,224
====== ====== ====== ====== ======
Ratio of Earnings to
Fixed Charges 4.26 * * 1.75 *
====== ====== ====== ====== ======
___________
*Earnings are inadequate to cover fixed charges.
</TABLE>
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 333-00000) and related Prospectus of Concord
Camera Corp. for the registration of $15,000,000 of 11% Senior Notes, and to the
incorporation by reference therein of our report dated August 24, 1998, with
respect to the consolidated financial statements and schedule of Concord Camera
Corp. included in its Annual Report (Form 10-K) for the year ended June 30,
1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
-------------------------------
MetroPark, New Jersey
September 28, 1998
<PAGE>
Exhibit 25
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT
TO SECTION 305(b)(2) ___________
------------------------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
Bankers Trust Company
Legal Department
130 Liberty Street, 31st Floor
New York, New York 10006
(212) 250-2201
(Name, address and telephone number
of agent for service)
---------------------------------
CONCORD CAMERA CORP.
(Exact name of Registrant as specified in its charter)
New Jersey 13-3142196
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
35 Mileed Way
Avenel, New Jersey 07001
(732) 499-8280
(Address, including zip code of principal executive offices)
11% Senior Notes Due 2005, Series B
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising
authority to which it is subject.
Name Address
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust
powers. Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the Trustee, describe each
such affiliation.
None.
Item 3.-15. Not Applicable
Item 16. List of Exhibits.
Exhibit 1 - Restated Organization Certificate of Bankers
Trust Company dated August 7, 1990, Certificate
of Amendment of the Organization Certificate of
Bankers Trust Company dated June 21, 1995 -
Incorporated herein by reference to Exhibit 1
filed with Form T-1 Statement, Registration No.
33-65171, Certificate of Amendment of the
Organization Certificate of Bankers Trust Company
dated March 20, 1996, incorporate by referenced
to Exhibit 1 filed with Form T-1 Statement,
Registration No. 333-25843 and Certificate of
Amendment of the Organization Certificate of
Bankers Trust Company dated June 19, 1997, copy
attached.
Exhibit 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2
filed with Form T-1 Statement, Registration No.
33-21047.
Exhibit 3 - Authorization of the Trustee to exercise
corporate trust powers Incorporated herein by
reference to Exhibit 2 filed with Form T-1
Statement, Registration No. 33-21047.
Exhibit 4 - Existing By-Laws of Bankers Trust Company, as
amended on November 18, 1997. Copy attached.
-2-
<PAGE>
Exhibit 5 - Not applicable.
Exhibit 6 - Consent of Bankers Trust Company required by
Section 321(b) of the Act. Incorporated herein by
reference to Exhibit 4 filed with Form T-1
Statement, Registration No. 22-18864.
Exhibit 7 - The latest report of condition of Bankers Trust
Company dated as of June 30, 1998. Copy attached.
Exhibit 8 - Not Applicable.
Exhibit 9 - Not Applicable.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 23rd day
of September, 1998.
BANKERS TRUST COMPANY
By: /s/ Susan Johnson
------------------------------
Susan Johnson
Assistant Vice President
-4-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 23rd day
of September, 1998.
BANKERS TRUST COMPANY
By: /s/ Susan Johnson
------------------------------
Susan Johnson
Assistant Vice President
-5-
<PAGE>
State of New York,
Banking Department
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section
8005 of the Banking Law," dated June 19, 1997, providing for an increase in
authorized capital stock from $1,601,666,670 consisting of 100,166,667 shares
with a par value of $10 each designated as Common Stock and 600 shares with a
par value of $1,000,000 each designated as Series Preferred Stock to
$2,001,666,670 consisting of 100,166,667 shares with a par value of $10 each
designated as Common Stock and 1,000 shares with a par value of $1,000,000 each
designated as Series Preferred Stock.
Witness, my hand and official seal of the Banking Department at the City of New
York, this 27th day of June in the Year of our Lord one thousand nine hundred
and ninety-seven.
Manuel Kursky
------------------------------
Deputy Superintendent of Banks
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Six Hundred and One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,601,666,670), divided into
One Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred
Sixty-Seven (100,166,667) shares with a par value of $10 each
designated as Common Stock and 600 shares with a par value of One
Million Dollars ($1,000,000) each designated as Series Preferred
Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is Two Billion One Million, Six Hundred Sixty-Six Thousand, Six
Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred
Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 1000 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
<PAGE>
5. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this
19th day of June, 1997.
James T. Byrne, Jr.
-------------------
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
--------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an
Assistant Secretary of Bankers Trust Company, the corporation described in the
foregoing certificate; that she has read the foregoing certificate and knows the
contents thereof, and that the statements herein contained are true.
Lea Lahtinen
------------
Lea Lahtinen
Sworn to before me this 19th day of June, 1997.
Sandra L. West
--------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 1998
<PAGE>
BY-LAWS
NOVEMBER 18, 1997
Bankers Trust Company
New York
<PAGE>
BY-LAWS
of
Bankers Trust Company
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of this Company shall be held
at the office of the Company in the Borough of Manhattan, City of New York, on
the third Tuesday in January of each year, for the election of directors and
such other business as may properly come before said meeting.
SECTION 2. Special meetings of stockholders other than those regulated by
statute may be called at any time by a majority of the directors. It shall be
the duty of the Chairman of the Board, the Chief Executive Officer or the
President to call such meetings whenever requested in writing to do so by
stockholders owning a majority of the capital stock.
SECTION 3. At all meetings of stockholders, there shall be present, either in
person or by proxy, stockholders owning a majority of the capital stock of the
Company, in order to constitute a quorum, except at special elections of
directors, as provided by law, but less than a quorum shall have power to
adjourn any meeting.
SECTION 4. The Chairman of the Board or, in his absence, the Chief Executive
Officer or, in his absence, the President or, in their absence, the senior
officer present, shall preside at meetings of the stockholders and shall direct
the proceedings and the order of business. The Secretary shall act as secretary
of such meetings and record the proceedings.
ARTICLE II
DIRECTORS
SECTION 1. The affairs of the Company shall be managed and its corporate powers
exercised by a Board of Directors consisting of such number of directors, but
not less than ten nor more than twenty-five, as may from time to time be fixed
by resolution adopted by a majority of the directors then in office, or by the
stockholders. In the event of any increase in the number of directors,
additional directors may be elected within the limitations so fixed, either by
the stockholders or within the limitations imposed by law, by a majority of
directors then in office. One-third of the number of directors, as fixed from
time to time, shall constitute a quorum. Any one or more members of the Board of
Directors or any Committee thereof may participate in a meeting of the Board of
Directors or Committee thereof by means of a conference telephone or similar
communications equipment which
<PAGE>
allows all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at such a
meeting.
All directors hereafter elected shall hold office until the next annual meeting
of the stockholders and until their successors are elected and have qualified.
No person who shall have attained age 72 shall be eligible to be elected or
re-elected a director. Such director may, however, remain a director of the
Company until the next annual meeting of the stockholders of Bankers Trust New
York Corporation (the Company's parent) so that such director's retirement will
coincide with the retirement date from Bankers Trust New York Corporation.
No Officer-Director who shall have attained age 65, or earlier relinquishes his
responsibilities and title, shall be eligible to serve as a director.
SECTION 2. Vacancies not exceeding one-third of the whole number of the Board of
Directors may be filled by the affirmative vote of a majority of the directors
then in office, and the directors so elected shall hold office for the balance
of the unexpired term.
SECTION 3. The Chairman of the Board shall preside at meetings of the Board of
Directors. In his absence, the Chief Executive Officer or, in his absence, such
other director as the Board of Directors from time to time may designate shall
preside at such meetings.
SECTION 4. The Board of Directors may adopt such Rules and Regulations for the
conduct of its meetings and the management of the affairs of the Company as it
may deem proper, not inconsistent with the laws of the State of New York, or
these By-Laws, and all officers and employees shall strictly adhere to, and be
bound by, such Rules and Regulations.
SECTION 5. Regular meetings of the Board of Directors shall be held from time to
time on the third Tuesday of the month. If the day appointed for holding such
regular meetings shall be a legal holiday, the regular meeting to be held on
such day shall be held on the next business day thereafter. Special meetings of
the Board of Directors may be called upon at least two day's notice whenever it
may be deemed proper by the Chairman of the Board or, the Chief Executive
Officer or, in their absence, by such other director as the Board of Directors
may have designated pursuant to Section 3 of this Article, and shall be called
upon like notice whenever any three of the directors so request in writing.
SECTION 6. The compensation of directors as such or as members of committees
shall be fixed from time to time by resolution of the Board of Directors.
<PAGE>
ARTICLE III
COMMITTEES
SECTION 1. There shall be an Executive Committee of the Board consisting of not
less than five directors who shall be appointed annually by the Board of
Directors. The Chairman of the Board shall preside at meetings of the Executive
Committee. In his absence, the Chief Executive Officer or, in his absence, such
other member of the Committee as the Committee from time to time may designate
shall preside at such meetings.
The Executive Committee shall possess and exercise to the extent permitted by
law all of the powers of the Board of Directors, except when the latter is in
session, and shall keep minutes of its proceedings, which shall be presented to
the Board of Directors at its next subsequent meeting. All acts done and powers
and authority conferred by the Executive Committee from time to time shall be
and be deemed to be, and may be certified as being, the act and under the
authority of the Board of Directors.
A majority of the Committee shall constitute a quorum, but the Committee may act
only by the concurrent vote of not less than one-third of its members, at least
one of whom must be a director other than an officer. Any one or more directors,
even though not members of the Executive Committee, may attend any meeting of
the Committee, and the member or members of the Committee present, even though
less than a quorum, may designate any one or more of such directors as a
substitute or substitutes for any absent member or members of the Committee, and
each such substitute or substitutes shall be counted for quorum, voting, and all
other purposes as a member or members of the Committee.
SECTION 2. There shall be an Audit Committee appointed annually by resolution
adopted by a majority of the entire Board of Directors which shall consist of
such number of directors, who are not also officers of the Company, as may from
time to time be fixed by resolution adopted by the Board of Directors. The
Chairman shall be designated by the Board of Directors, who shall also from time
to time fix a quorum for meetings of the Committee. Such Committee shall conduct
the annual directors' examinations of the Company as required by the New York
State Banking Law; shall review the reports of all examinations made of the
Company by public authorities and report thereon to the Board of Directors; and
shall report to the Board of Directors such other matters as it deems advisable
with respect to the Company, its various departments and the conduct of its
operations.
In the performance of its duties, the Audit Committee may employ or retain, from
time to time, expert assistants, independent of the officers or personnel of the
Company, to make studies of the Company's assets and liabilities as the
Committee may request and to make an examination of the accounting and auditing
methods of the Company and its system of internal protective controls to the
extent considered necessary or advisable in order to determine that the
operations of the Company, including its fiduciary departments, are being
audited by the General Auditor in such a manner as to provide prudent and
adequate protection. The Committee also may direct the General Auditor to make
such investigation as it
<PAGE>
deems necessary or advisable with respect to the Company, its various
departments and the conduct of its operations. The Committee shall hold regular
quarterly meetings and during the intervals thereof shall meet at other times on
call of the Chairman.
SECTION 3. The Board of Directors shall have the power to appoint any other
Committees as may seem necessary, and from time to time to suspend or continue
the powers and duties of such Committees. Each Committee appointed pursuant to
this Article shall serve at the pleasure of the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. The Board of Directors shall elect from among their number a Chairman
of the Board and a Chief Executive Officer; and shall also elect a President,
and may also elect a Senior Vice Chairman, one or more Vice Chairmen, one or
more Executive Vice Presidents, one or more Senior Managing Directors, one or
more Managing Directors, one or more Senior Vice Presidents, one or more
Principals, one or more Vice Presidents, one or more General Managers, a
Secretary, a Controller, a Treasurer, a General Counsel, one or more Associate
General Counsels, a General Auditor, a General Credit Auditor, and one or more
Deputy Auditors, who need not be directors. The officers of the corporation may
also include such other officers or assistant officers as shall from time to
time be elected or appointed by the Board. The Chairman of the Board or the
Chief Executive Officer or, in their absence, the President, the Senior Vice
Chairman or any Vice Chairman, may from time to time appoint assistant officers.
All officers elected or appointed by the Board of Directors shall hold their
respective offices during the pleasure of the Board of Directors, and all
assistant officers shall hold office at the pleasure of the Board or the
Chairman of the Board or the Chief Executive Officer or, in their absence, the
President, the Senior Vice Chairman or any Vice Chairman. The Board of Directors
may require any and all officers and employees to give security for the faithful
performance of their duties.
SECTION 2. The Board of Directors shall designate the Chief Executive Officer of
the Company who may also hold the additional title of Chairman of the Board,
President, Senior Vice Chairman or Vice Chairman and such person shall have,
subject to the supervision and direction of the Board of Directors or the
Executive Committee, all of the powers vested in such Chief Executive Officer by
law or by these By-Laws, or which usually attach or pertain to such office. The
other officers shall have, subject to the supervision and direction of the Board
of Directors or the Executive Committee or the Chairman of the Board or, the
Chief Executive Officer, the powers vested by law or by these By-Laws in them as
holders of their respective offices and, in addition, shall perform such other
duties as shall be assigned to them by the Board of Directors or the Executive
Committee or the Chairman of the Board or the Chief Executive Officer.
The General Auditor shall be responsible, through the Audit Committee, to the
Board of Directors for the determination of the program of the internal audit
function and the evaluation of the adequacy of the system of internal controls.
Subject to the Board of Directors, the General Auditor shall have and may
exercise
<PAGE>
all the powers and shall perform all the duties usual to such office
and shall have such other powers as may be prescribed or assigned to him from
time to time by the Board of Directors or vested in him by law or by these
By-Laws. He shall perform such other duties and shall make such investigations,
examinations and reports as may be prescribed or required by the Audit
Committee. The General Auditor shall have unrestricted access to all records and
premises of the Company and shall delegate such authority to his subordinates.
He shall have the duty to report to the Audit Committee on all matters
concerning the internal audit program and the adequacy of the system of internal
controls of the Company which he deems advisable or which the Audit Committee
may request. Additionally, the General Auditor shall have the duty of reporting
independently of all officers of the Company to the Audit Committee at least
quarterly on any matters concerning the internal audit program and the adequacy
of the system of internal controls of the Company that should be brought to the
attention of the directors except those matters responsibility for which has
been vested in the General Credit Auditor. Should the General Auditor deem any
matter to be of special immediate importance, he shall report thereon forthwith
to the Audit Committee. The General Auditor shall report to the Chief Financial
Officer only for administrative purposes.
The General Credit Auditor shall be responsible to the Chief Executive Officer
and, through the Audit Committee, to the Board of Directors for the systems of
internal credit audit, shall perform such other duties as the Chief Executive
Officer may prescribe, and shall make such examinations and reports as may be
required by the Audit Committee. The General Credit Auditor shall have
unrestricted access to all records and may delegate such authority to
subordinates.
SECTION 3. The compensation of all officers shall be fixed under such plan or
plans of position evaluation and salary administration as shall be approved from
time to time by resolution of the Board of Directors.
SECTION 4. The Board of Directors, the Executive Committee, the Chairman of the
Board, the Chief Executive Officer or any person authorized for this purpose by
the Chief Executive Officer, shall appoint or engage all other employees and
agents and fix their compensation. The employment of all such employees and
agents shall continue during the pleasure of the Board of Directors or the
Executive Committee or the Chairman of the Board or the Chief Executive Officer
or any such authorized person; and the Board of Directors, the Executive
Committee, the Chairman of the Board, the Chief Executive Officer or any such
authorized person may discharge any such employees and agents at will.
<PAGE>
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 1. The Company shall, to the fullest extent permitted by Section 7018 of
the New York Banking Law, indemnify any person who is or was made, or threatened
to be made, a party to an action or proceeding, whether civil or criminal,
whether involving any actual or alleged breach of duty, neglect or error, any
accountability, or any actual or alleged misstatement, misleading statement or
other act or omission and whether brought or threatened in any court or
administrative or legislative body or agency, including an action by or in the
right of the Company to procure a judgment in its favor and an action by or in
the right of any other corporation of any type or kind, domestic or foreign, or
any partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the Company is servicing or served
in any capacity at the request of the Company by reason of the fact that he, his
testator or intestate, is or was a director or officer of the Company, or is
serving or served such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity, against judgments,
fines, amounts paid in settlement, and costs, charges and expenses, including
attorneys' fees, or any appeal therein; provided, however, that no
indemnification shall be provided to any such person if a judgment or other
final adjudication adverse to the director or officer establishes that (i) his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 2. The Company may indemnify any other person to whom the Company is
permitted to provide indemnification or the advancement of expenses by
applicable law, whether pursuant to rights granted pursuant to, or provided by,
the New York Banking Law or other rights created by (i) a resolution of
stockholders, (ii) a resolution of directors, or (iii) an agreement providing
for such indemnification, it being expressly intended that these By-Laws
authorize the creation of other rights in any such manner.
SECTION 3. The Company shall, from time to time, reimburse or advance to any
person referred to in Section 1 the funds necessary for payment of expenses,
including attorneys' fees, incurred in connection with any action or proceeding
referred to in Section 1, upon receipt of a written undertaking by or on behalf
of such person to repay such amount(s) if a judgment or other final adjudication
adverse to the director or officer establishes that (i) his acts were committed
in bad faith or were the result of active and deliberate dishonesty and, in
either case, were material to the cause of action so adjudicated, or (ii) he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled.
SECTION 4. Any director or officer of the Company serving (i) another
corporation, of which a majority of the shares entitled to vote in the election
of its directors is held by the Company, or (ii) any employee benefit plan of
the Company or any corporation referred to in clause (i) in any capacity shall
be deemed to be doing so
<PAGE>
at the request of the Company. In all other cases, the provisions of this
Article V will apply (i) only if the person serving another corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise so
served at the specific request of the Company, evidenced by a written
communication signed by the Chairman of the Board, the Chief Executive Officer
or the President, and (ii) only if and to the extent that, after making such
efforts as the Chairman of the Board, the Chief Executive Officer or the
President shall deem adequate in the circumstances, such person shall be unable
to obtain indemnification from such other enterprise or its insurer.
SECTION 5. Any person entitled to be indemnified or to the reimbursement or
advancement of expenses as a matter of right pursuant to this Article V may
elect to have the right to indemnification (or advancement of expenses)
interpreted on the basis of the applicable law in effect at the time of
occurrence of the event or events giving rise to the action or proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time indemnification is sought.
SECTION 6. The right to be indemnified or to the reimbursement or advancement of
expense pursuant to this Article V (i) is a contract right pursuant to which the
person entitled thereto may bring suit as if the provisions hereof were set
forth in a separate written contract between the Company and the director or
officer, (ii) is intended to be retroactive and shall be available with respect
to events occurring prior to the adoption hereof, and (iii) shall continue to
exist after the rescission or restrictive modification hereof with respect to
events occurring prior thereto.
SECTION 7. If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the Company
within thirty days after a written claim has been received by the Company, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled also to be paid the expenses of prosecuting such
claim. Neither the failure of the Company (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of or
reimbursement or advancement of expenses to the claimant is proper in the
circumstance, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant is
not entitled to indemnification or to the reimbursement or advancement of
expenses, shall be a defense to the action or create a presumption that the
claimant is not so entitled.
SECTION 8. A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Section 1 shall be entitled to indemnification only as provided in Sections 1
and 3, notwithstanding any provision of the New York Banking Law to the
contrary.
<PAGE>
ARTICLE VI
SEAL
SECTION 1. The Board of Directors shall provide a seal for the Company, the
counterpart dies of which shall be in the charge of the Secretary of the Company
and such officers as the Chairman of the Board, the Chief Executive Officer or
the Secretary may from time to time direct in writing, to be affixed to
certificates of stock and other documents in accordance with the directions of
the Board of Directors or the Executive Committee.
SECTION 2. The Board of Directors may provide, in proper cases on a specified
occasion and for a specified transaction or transactions, for the use of a
printed or engraved facsimile seal of the Company.
ARTICLE VII
CAPITAL STOCK
SECTION 1. Registration of transfer of shares shall only be made upon the books
of the Company by the registered holder in person, or by power of attorney, duly
executed, witnessed and filed with the Secretary or other proper officer of the
Company, on the surrender of the certificate or certificates of such shares
properly assigned for transfer.
ARTICLE VIII
CONSTRUCTION
SECTION 1. The masculine gender, when appearing in these By-Laws, shall be
deemed to include the feminine gender.
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or added to by the Board of
Directors at any meeting, or by the stockholders at any annual or special
meeting, provided notice thereof has been given.
<PAGE>
I, Susan Johnson, Assistant Vice President of Bankers Trust Company, New York,
New York, hereby certify that the foregoing is a complete, true and correct copy
of the By-Laws of Bankers Trust Company, and that the same are in full force and
effect at this date.
/s/ Susan Johnson
--------------------------
ASSISTANT VICE PRESIDENT
DATED: September 23, 1998
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 06/30/98 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
______________
|__C400________|
___________________________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------------|
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1) ......................... | 0081 1,868,000 |1.a.
b. Interest-bearing balances(2) .................................................. | 0071 2,041,000 |1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) .................... | 1754 0 |2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)................... | 1773 7,419,000 |2.b.
3. Federal funds sold and securities purchased under agreements to resell............ | 1350 41,837,000 |3.
4. Loans and lease financing receivables: | ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 20,707,000 | ////////////////// |4.a.
b. LESS: Allowance for loan and lease losses.....................RCFD 3123 629,000 | ////////////////// |4.b.
c. LESS: Allocated transfer risk reserve ........................RCFD 3128 0 | ////////////////// |4.c.
d. Loans and leases, net of unearned income, | ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c) ............................ | 2125 20,078,000 |4.d.
5. Trading Assets (from schedule RC-D) ............................................... | 3545 49,665,000 |5.
6. Premises and fixed assets (including capitalized leases) .......................... | 2145 848,000 |6.
7. Other real estate owned (from Schedule RC-M) ...................................... | 2150 180,000 |7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) | 2130 92,000 |8.
9. Customers' liability to this bank on acceptances outstanding ...................... | 2155 512,000 |9.
10. Intangible assets (from Schedule RC-M) ............................................ | 2143 270,000 |10.
11. Other assets (from Schedule RC-F) ................................................. | 2160 6,442,000 |11.
12. Total assets (sum of items 1 through 11) .......................................... | 2170 131,252,000 |12.
</TABLE>
- --------------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 06/30/98 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
Schedule RC--Continued _______________________________
Dollar Amounts in Thousands | //////// Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------|
LIABILITIES | ////////////////// |
13. Deposits: | ////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) | RCON 2200 26,791,000 |13.a.
(1) Noninterest-bearing(1) .........................RCON 6631 3,362,000......... | ////////////////// |13.a.(1)
(2) Interest-bearing ...............................RCON 6636 3,429,000......... | ////////////////// |13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E | ////////////////// |
part II) | RCFN 2200 22,089,000 |13.b.
(1) Noninterest-bearing ...........................RCFN 6631 1,810,000......... | ////////////////// |13.b.(1)
(2) Interest-bearing ..............................RCFN 6636 20,279,000........ | ////////////////// |13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase | RCFD 2800 19,274,000 |14.
15. a. Demand notes issued to the U.S. Treasury ........................................ | RCON 2840 0 |15.a.
b. Trading liabilities (from Schedule RC-D)......................................... | RCFD 3548 30,729,000 |15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under | |
capitalized leases): | ////////////////// |
a. With a remaining maturity of one year or less ................................... | RCFD 2332 7,891,000 |16.a.
b. With a remaining maturity of more than one year through three years.............. | A547 3,576,000 |16.b.
c. With a remaining maturity of more than three years............................... | A548 2,872,000 |16.c
17. Not Applicable. | ////////////////// |17.
18. Bank's liability on acceptances executed and outstanding ........................... | RCFD 2920 512,000 |18.
19. Subordinated notes and debentures (2)............................................... | RCFD 3200 1,534,000 |19.
20. Other liabilities (from Schedule RC-G) ............................................. | RCFD 2930 9,202,000 |20.
21. Total liabilities (sum of items 13 through 20) ..................................... | RCFD 2948 124,470,000 |21.
22. Not Applicable | ////////////////// |
| ////////////////// |22.
EQUITY CAPITAL | ////////////////// |
23. Perpetual preferred stock and related surplus ...................................... | RCFD 3838 1,000,000 |23.
24. Common stock ....................................................................... | RCFD 3230 2,001,000 |24.
25. Surplus (exclude all surplus related to preferred stock) ........................... | RCFD 3839 540,000 |25.
26. a. Undivided profits and capital reserves .......................................... | RCFD 3632 3,693,000 |26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities .......... | RCFD 8434 (71,000) |26.b.
27. Cumulative foreign currency translation adjustments ................................ | RCFD 3284 (381,000) |27.
28. Total equity capital (sum of items 23 through 27) .................................. | RCFD 3210 6,782,000 |28.
29. Total liabilities and equity capital (sum of items 21 and 28)....................... | RCFD 3300 131,252,000 |29
---------------------------------
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the
most comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1997 ............................................ | RCFD 6724 N/A | M.1
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company external auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards by
a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
- ----------
(1) Including total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
<PAGE>
LETTER OF TRANSMITTAL
for
11% Senior Notes due 2005
of
Concord Camera Corp.
Pursuant to the Exchange Offer in Respect of
All of their Outstanding 11% Senior Notes due 2005
for
11% Senior Notes due 2005, Series B
Pursuant to the Prospectus Dated , 1998
-------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED. TENDERS OF OLD NOTES MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE BUSINESS DAY
PRIOR TO THE EXPIRATION DATE.
-------------------------------------------------------------------------------
To: Bankers Trust Company, Exchange Agent
By Registered, Certified Mail or
Overnight Courier: BT Services Tennessee, Inc.
Reorganization Unit
648 Grassmere Park Road
Nashville, Tennessee 37211
By Hand: Bankers Trust Company
Receipt and Delivery Window
123 Washington Street
First Floor
New York, New York 10006
By Facsimile: (615) 835-3572
Confirm by Telephone: (615) 835-3701
(800) 735-7777 Customer Service
Delivery of this Letter of Transmittal to an address, or transmission via
telegram, telex or facsimile, other than as set forth above will not constitute
a valid delivery. The instructions contained herein should be read carefully
before this Letter of Transmittal is completed.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES
PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OLD
NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
By execution hereof, the undersigned acknowledges receipt of the Prospectus
(the "Prospectus"), dated , 1998, of Concord Camera Corp. (the "Issuer"), which,
together with this Letter of Transmittal and the Instructions hereto (the
"Letter of Transmittal"), constitute the Issuer's offer (the "Exchange Offer")
to exchange $1,000 principal amount of its 11% Senior Notes due 2005, Series B
(the "New Notes") that have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement of which
the Prospectus constitutes a part, for each $1,000 principal amount of its
outstanding 11% Senior Notes due 2005 (the "Old Notes"), upon the terms and
subject to the conditions set forth in the Prospectus.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer and to
the best of the Company's information and belief, each person participating in
the Exchange Offer is acquiring the New Notes in its ordinary course of business
and has no arrangement or understanding with any person to
-1-
<PAGE>
participate in the distribution of the New Notes to be received in the Exchange
Offer.
This Letter of Transmittal is to be used by Holders if: (i) certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by Holders; (ii) tender of Old Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company ("DTC")
pursuant to the procedures set forth in the Prospectus under "The Exchange
Offer-Procedures for Tendering Old Notes" by any financial institution that is a
participant in DTC and whose name appears on a security position listing as the
owner of Old Notes (such participants, acting on behalf of Holders, are referred
to herein, together with such Holders, as "Acting Holders"); or (iii) tender of
Old Notes is to be made according to the guaranteed delivery procedures set
forth in the Prospectus under "The Exchange Offer-Procedures for Tendering Old
Notes." Delivery of documents to DTC does not constitute delivery to the
Exchange Agent.
-2-
<PAGE>
The term "Holder" with respect to the Exchange Offer means any person: (i)
in whose name Old Notes are registered on the books of the Issuer or any other
person who has obtained a properly completed bond power from the registered
Holder or (ii) whose Old Notes are held of record by DTC who desires to deliver
such Old Notes by book entry transfer at DTC.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
The instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 8 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES
MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
-3-
<PAGE>
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, list the certificate numbers and
principal amounts on a separately executed schedule and affix the schedule to
this Letter of Transmittal. Tenders of Old Notes will be accepted only in
principal amounts equal to $1,000 or integral multiples thereof.
<TABLE>
<CAPTION>
|------------------------------------------------------------------------------------------------------------------------|
| DESCRIPTION OF OLD NOTES |
|------------------------------------------------------------------------------------------------------------------------|
|------------------------------------------------------------------------------|-----------------------------------------|
| | Certificate Aggregate |
| | Number(s)* Principal |
| Name(s) and Address(es) of Holder(s) | (Attach signed Amount |
| (Please fill in, if blank) | list if Tendered (if less |
| | necessary) than all)** |
|------------------------------------------------------------------------------|-----------------------------------------|
|<S> <C> <C>
|------------------------------------------------------------------------------|---------------------|-------------------|
| | | |
| |---------------------|-------------------|
| | | |
| |---------------------|-------------------|
| | | |
| |---------------------|-------------------|
| | | |
| |---------------------|-------------------|
| | | |
| |---------------------|-------------------|
| | | |
| |---------------------|-------------------|
| | | |
| |---------------------|-------------------|
| | | |
| |---------------------|-------------------|
| | | |
| |---------------------|-------------------|
| | | |
| |---------------------|-------------------|
| | | |
| |---------------------|-------------------|
| | | |
|------------------------------------------------------------------------------|---------------------|-------------------|
| TOTAL PRINCIPAL AMOUNT OF OLD NOTES TENDERED | |
|----------------------------------------------------------------------------------------------------|-------------------|
| * Need not be completed by Holders tendering by book-entry transfer. |
| ** Need not be completed by Holders who wish to tender with respect to all Old Notes listed. See Instruction 2. |
|------------------------------------------------------------------------------------------------------------------------|
</TABLE>
-4-
<PAGE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY DTC TO THE EXCHANGE
AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ____________________________________________
DTC Book-Entry Account No.: _______________________________________________
Transaction Code No.: _____________________________________________________
If Holders desire to tender Old Notes pursuant to the Exchange Offer and
(i) certificates representing such Old Notes are not lost but are not
immediately available, (ii) time will not permit this Letter of Transmittal,
certificates representing such Old Notes or other required documents to reach
the Exchange Agent prior to the Expiration Date or (iii) the procedures for
book-entry transfer cannot be completed prior to the Expiration Date, such
Holders may effect a tender of such Old Notes in accordance with the guaranteed
delivery procedures set forth in the Prospectus under "The Exchange
Offer-Procedures for Tendering Old Notes."
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Holder(s) of Old Notes: ________________________________________
Window Ticket No. (if any): _______________________________________________
Date of Execution of Notice of Guaranteed Delivery: _______________________
Name of Eligible Institution that Guaranteed Delivery: ____________________
DTC Book-Entry Account No.: _______________________________________________
If Delivered by Book-Entry Transfer,_______________________________________
Name of Tendering Institution: ____________________________________________
Transaction Code No.: _____________________________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _____________________________________________________________________
Address: __________________________________________________________________
________________________________________________________________________________
Ladies and Gentlemen:
Subject to the terms of the Exchange Offer, the undersigned hereby tenders
to the Issuer the principal amount of Old Notes indicated above. Subject to and
effective upon the acceptance for exchange of the principal amount of Old Notes
tendered in accordance with this Letter of Transmittal, the undersigned sells,
assigns and transfers to, or upon the order of, the Issuer all right, title and
interest in and to the Old Notes tendered hereby. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent its agent and
attorney-in-fact (with full knowledge that the Exchange Agent also acts as the
agent of the Issuer and as Trustee under the Indenture for the Old Notes and the
New Notes) with respect to the tendered Old Notes with full power of
substitution to (i) deliver certificates for such Old Notes to the Issuer, or
transfer ownership of such Old Notes on the account books maintained by DTC,
together, in either such case, with all accompanying evidences of transfer and
authenticity to, or upon the order of, the Issuer and (ii) present such Old
Notes for transfer on the books of the Issuer and receive all benefits and
otherwise exercise all rights of beneficial ownership of such Old Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim, when the same are acquired by the Issuer. The
undersigned also acknowledges that this Exchange Offer is being made in reliance
upon an interpretation by the staff of the Securities and Exchange Commission
that the New Notes issued in exchange for the Old Notes pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred by holders
thereof (other than any such holder that is an "affiliate" of the Issuer within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to participate in
the distribution of such New Notes. The undersigned acknowledges that if he or
she is participating in the Exchange Offer for the purpose of distributing the
New Notes, the undersigned must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with
-5-
<PAGE>
a secondary resale transaction. If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and does not intend to engage
in, a distribution of the New Notes. If the undersigned is a broker-dealer that
will receive New Notes for its own account in exchange for Old Notes, the
undersigned represents that such Old Notes were acquired as a result of
market-making activities or other trading activities and acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
The undersigned represents that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of such Holder's
business, (ii) such Holder has no arrangements with any person to participate in
the distribution of such New Notes and (iii) such Holder is not an "affiliate,"
as defined under Rule 405 of the Securities Act, of the Issuer or, if such
Holder is an affiliate, that such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuer to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered
hereby.
For purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted validly tendered Old Notes when, as and if the Issuer has given oral or
written notice thereof to the Exchange Agent. If any tendered Old Notes are not
accepted for exchange pursuant to the Exchange Offer for any reason,
certificates for any such unaccepted Old Notes will be returned (except as noted
below with respect to tenders through DTC), without expense, to the undersigned
at the address shown below or at a different address shown below or at a
different address as may be indicated under "Special Issuance Instructions" as
promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation under this Letter of Transmittal shall be
binding upon the undersigned's heirs, personal representatives, successors and
assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer-Procedures for
Tendering Old Notes" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and the Issuer upon the
terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and return any Old Notes not tendered or not
exchanged, in the name(s) of the undersigned (or in either such event in the
case of Old Notes tendered by DTC, by credit to the account at DTC). Similarly,
unless otherwise indicated under "Special Delivery Instructions," please send
the certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange and any certificates for Old Notes not tendered or not
exchanged (and accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signatures, unless, in either event,
tender is being made through DTC. In the event that both "Special Issuance
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange and return any Old Notes not tendered or not exchanged in
the name(s) of, and send said certificates to, the person(s) so indicated. The
undersigned recognizes that the Issuer has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered holder(s) thereof if the Issuer
does not accept for exchange any of the Old Notes so tendered.
-6-
<PAGE>
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(To Be Completed by All Tendering Holders of Old Notes Regardless
of Whether Old Notes Are Being Physically Delivered Herewith)
This Letter of Transmittal must be signed by the Holder(s) of Old Notes
exactly as their name(s) appear(s) on certificate(s) for Old Notes or, if
tendered by a participant in DTC, exactly as such participant's name appears on
a security position listing as the owner of Old Notes, or by person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted with this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer or other person
acting in a fiduciary or representative capacity, such person must set forth his
or her full title below under "Capacity" and submit evidence satisfactory to the
Issuer of such person's authority to so act. See Instruction 3 herein.
If the signature appearing below is not of the registered Holder(s) of the
Old Notes, then the registered Holder(s) must sign a valid proxy.
X _______________________________ Date: ____________________________
X _______________________________ Date: ____________________________
Signature(s) of Holder(s) or
Authorized Signatory
Name(s): ________________________________ Address ___________________________
________________________________ ____________________________
(Please Print) (Including Zip Code)
Capacity: _______________________________ Area Code and Telephone No.: _______
Social Security No.: ______________________
SIGNATURE GUARANTEE (See Instruction 3 herein)
Certain Signatures Must Be Guaranteed by an Eligible Institution
(Name of Eligible Institution Guaranteeing Signatures)
(Address(including zip code) and Telephone Number (including area code) of Firm)
(Authorized Signature)
(Printed Name)
(Title)
Date: ____________________
- --------------------------------------------------------------------------------
-7-
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4 herein)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered are to be issued in the name of, or the New Notes issued pursuant
to the Exchange Offer are to be issued to the order of, someone other than the
person or persons whose signature(s) appear(s) within this Letter of Transmittal
or issued to an address different from that shown in the box entitled
"Description of Old Notes" within this Letter of Transmittal, or if Old Notes
tendered by book-entry transfer that are not accepted for purchase are to be
credited to an account maintained at DTC.
Name: ________________________________________________
(Please Print)
Address: _____________________________________________
(Please Print)
______________________________________________________
Zip Code
______________________________________________________
Taxpayer Identification or Social Security Number
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4 herein)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered or not accepted for purchase or the New Notes issued pursuant to
the Exchange Offer are to be sent to someone other than the person or persons
whose signature(s) appear(s) within this Letter of Transmittal or to an address
different from that shown in the box entitled "Description of Old Notes" within
this Letter of Transmittal.
Name: _______________________________________________
(Please Print)
Address: ____________________________________________
(Please Print)
_____________________________________________________
Zip Code
_____________________________________________________
Taxpayer Identification or Social Security Number
- --------------------------------------------------------------------------------
-8-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions
of the Exchange Offer and the Solicitation
1. Delivery of this Letter of Transmittal and Old Notes. The certificates for
the tendered Old Notes (or a confirmation of a book-entry into the Exchange
Agent's account at DTC of all Old Notes delivered electronically), as well as a
properly completed and duly executed copy of this Letter of Transmittal or
facsimile hereof and any other documents required by this Letter of Transmittal
must be received by the Exchange Agent at its address set forth herein prior to
5:00 p.m., New York City time, on the Expiration Date. The method of delivery of
the tendered Old Notes, this Letter of Transmittal and all other required
documents to the Exchange Agent is at the election and risk of the Holder and,
except as otherwise provided below, the delivery will be deemed made only when
actually received by the Exchange Agent. Instead of delivery by mail, it is
recommended that the Holder use an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. No Letter of
Transmittal or Old Notes should be sent to the Issuer.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date must tender their Old Notes and follow the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedures:
(i) such tender must be made by or through an Eligible Institution; (ii) prior
to the Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder of the Old Notes, the certificate number or numbers of
such Old Notes and the principal amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within five business days
after the Expiration Date, this Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes (or a confirmation
of electronic delivery of book-entry delivery into the Exchange Agent's account
at DTC) and any of the required documents will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) such properly completed and
executed Letter of Transmittal (or facsimile hereof), as well as all other
documents required by this Letter of Transmittal and the certificate(s)
representing all tendered Old Notes in proper form for transfer (or a
confirmation of electronic mail delivery of book-entry delivery into the
Exchange Agent's account at DTC), must be received by the Exchange Agent within
five business days after the Expiration Date, all as provided in the Prospectus
under the caption "Guaranteed Delivery Procedures." Any Holder of Old Notes who
wishes to tender his Old Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery prior to 5:00 p.m., New York City time, on the Expiration
Date.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Issuer in its sole discretion, which determination will be final and
binding. The Issuer reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Issuer's acceptance of which would,
in the opinion of counsel for the Issuer, be unlawful. The Issuer also reserves
the right to waive any irregularities or conditions of tender as to particular
Old Notes. The Issuer's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in this Letter of Transmittal) will
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Issuer shall determine. Neither the Issuer, the Exchange Agent nor
any other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Notes, nor shall any of them incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost by the Exchange Agent to the
tendering Holders of Old Notes, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
-9-
<PAGE>
2. Partial Tenders. Tenders of Old Notes will be accepted in all
denominations of $1,000 and integral multiples in excess thereof. If less than
the entire principal amount of any Old Notes is tendered, the tendering Holders
should fill in the principal amount tendered in the third column of the chart
entitled "Description of Old Notes." The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes is not
tendered, Old Notes for the principal amount of Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire principal amount of all Old Notes is not tendered, Old Notes for
the principal amount of Old Notes not tendered and a certificate or certificates
representing New Notes issued in exchange of any Old Notes accepted will be sent
to the Holder at his or her registered address, unless a different address is
provided in the appropriate box on this Letter of Transmittal or unless tender
is made through DTC, promptly after the Old Notes are accepted for exchange.
3. Signatures on the Letter of Transmittal; Bond Powers and Endorsements;
Guarantee of Signatures. If this Letter of Transmittal (or facsimile hereof) is
signed by the registered Holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder(s) of Old Notes tendered and the certificate(s) for New Notes
issued in exchange therefor is to be issued (or any untendered principal amount
of Old Notes is to be reissued) to the registered Holder, such Holder need not
and should not endorse any tendered Old Note, nor provide a separate bond power.
In any other case, such Holder must either properly endorse the Old Notes
tendered or transmit a properly completed separate bond power with this Letter
of Transmittal, with the signatures on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder(s) of any Old Notes listed, such Old Notes must
be endorsed or accompanied by appropriate bond powers signed as the name of the
registered Holder(s) appears on the Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and
unless waived by the Issuer, evidence satisfactory to the Issuer of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 3 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal (or facsimile hereof) must be
guaranteed by an Eligible Institution unless the Old Notes tendered pursuant
thereto are tendered (i) by a registered Holder (including any participant in
DTC whose name appears on a security position listing as the owner of Old Notes)
who has not completed the box set forth herein entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" or (ii) for
the account of an Eligible Institution.
4. Special Issuance and Delivery Instructions. Tendering Holders should
indicate, in the applicable spaces, the name and address to which New Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of the
person signing this Letter of Transmittal (or in the case of tender of the Old
Notes through DTC, if different from DTC). In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
5. Transfer Taxes. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered Holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or any other person) will be payable
by the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
-10-
<PAGE>
6. Waiver of Conditions. The Issuer reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Old Notes tendered.
7. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instruction.
8. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address specified in
the Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Exchange Offer.
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<CAPTION>
|-----------------------------------------------|---------------------------|--------------------------------------------|
| Certificate Surrendered | Old Notes Tendered | Old Notes Accepted |
|-----------------------------------------------|---------------------------|--------------------------------------------|
<S> <C> <C>
|-----------------------------------------------|---------------------------|--------------------------------------------|
| | | |
|-----------------------------------------------|---------------------------|--------------------------------------------|
| | | |
|-----------------------------------------------|---------------------------|--------------------------------------------|
| | | |
|-----------------------------------------------|---------------------------|--------------------------------------------|
| | | |
|-----------------------------------------------|---------------------------|--------------------------------------------|
| Delivery Prepared by Checked by Date |
|------------------------------------------------------------------------------------------------------------------------|
</TABLE>
-11-
